Paul Baumann: The report in front of you sets out, as always, the latest financial performance
data for the commissioning system, on this occasion, up to the end of the third quarter,
and indeed, our forecast for the financial year which ends in a slightly worrying seven
weeks’ time. As we have reflected before, this was a year of considerable challenges
for the NHS as a whole, with CCGs in particular facing an uphill struggle to make ends meet
while creating the lion’s share of the £800 million system reserve we needed to set aside
at the beginning of the year to cover risks across the commissioning and provider sectors.
Board members will of course recall that there was no separate funding for this in the Spending
Review, so they have to stretch their efficiency programmes to create the required headroom
for that reserve.
In that context, I am pleased to be able to report that the year-to-date position has
improved to within 0.1% of budget overall, but the core forecast for the commissioning
sector as a whole before the positive impact of releasing the £800 million reserve remains
at an effective break-even, and the risks to the delivery of that break-even position
have reduced steadily from over £0.5 billion at quarter one to nearly £300 million at
the half-year point, and £148 million in the quarter-three report you have in front
of you. We do still have a way to go if we are going to identify sufficient mitigations
to be confident about meeting our objective, but we are heading in the right direction.
Appendix two shows you some more detail on the broadly balanced core forecast position
I have just indicated. Despite a £538 million increase in their delivery of efficiencies
compared to last year, CCGs are showing year-to-date overspends averaging 0.8% and affecting 98
CCGs, a similar number to the report I gave you in month seven. Some of these organisations
are still expected to recover their positions in the final months of the year as a result
of the turnaround actions they have been taking, with support from the local NHS England teams,
but we do still anticipate that at least 70 CCGs, a third of the sector, will finish the
year with overspends.
You can see that specialised commissioning is expecting to balance its books by the end
of the year, despite significant ongoing challenges, particularly in the South region, and I think
we just need to acknowledge the significant turnaround that has taken place in the specialised
commissioning control of the business, and ensuring that they live within their means
in an area which is characterised by growing demands and, indeed, volatility of demand.
We have high levels of confidence in that forecast, mainly because some of the cost
risks that we anticipated in central specialised commissioning budgets are not yet materialising
to the extent expected.
There are small underspends, as you can see, in the other direct commissioning budgets,
but the big action is in the central budgets, where we are continuing to seek reductions
and savings as an offset to the challenges in the CCG sector. We have increased that
by £80 million to a total of £363 million since we last met, and we are continuing to
freeze underspends as they occur. The oddities of Treasury accounting are reflected in the
adjustments towards the bottom of the table. These have improved slightly since month seven,
as CCGs in particular have refined their estimates of provision movements, leaving us with a
bottom line of a £5 million underspend, which, you might like to know, is equivalent roughly
to 25 minutes of NHS expenditure, just to give you a sense of the relevance of a £5
million landing strip.
I have set out at paragraphs 12 and 13 our risk assessment against that position, largely
consisting of the CCG risks outlined earlier, most of which, I have to say, seem likely
to materialise, so our success in meeting our financial objectives for the year depends
largely on our ability to find additional mitigations elsewhere. Either way, we will
deliver a substantial contribution to financial balance across the health sector when the
£800 million risk reserve is brought into play. In that context, I do have to say that,
as I indicated in December, it does look very likely, if not certain, that the £800 million
reserve regrettably will need to be released to commissioners’ bottom lines to secure
overall financial balance, rather than being available for investment.
I commend the report to the Board, and, as always, look forward to your questions and suggestions.
Noel Gordon: It is just worth recording that
we in the Commissioning Committee when through this in great detail yesterday.
Malcolm Grant: Not all the Board are on the Commissioning Committee, but those who are
on it had a very good presentation and a very good discussion yesterday, so on that basis,
Paul, I think we can excuse you from further service this morning.
Simon Stevens: Just one thing that we drew out of the Commissioning Committee, given that
Paul was not there for that part of the conversation. Despite the £100 million-plus risk that is
still there, we think we are on track for a balanced budget, with £800 million of managed
underspend to provide cover for the trust position, as Paul said, but that £800 million
is obviously dependent on CCGs not using any of their 1% or increasing their overspend
in support of their local providers. To the extent that they do that, then that is money
that is coming off the £800 million which is needed for the provider sector nationally,
so it is not a sensible thing to do, given that we need that £800 million to help the
trust position nationally, and I think that is just something that we need to make sure
is understood right through the system.