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Osborne warned on health funding

Published 03/07/2015

George Osborne has been warned of the potential consequences of under-resourcing the NHS ahead of the Budget
George Osborne has been warned of the potential consequences of under-resourcing the NHS ahead of the Budget

If the Chancellor does not announce additional NHS funding in next week's Budget, "the Government must face the consequences", an influential think tank has warned.

The King's Fund said that without further cash, the "growing black hole in NHS finances" means that either patient care will suffer or the Department of Health will overspend its budget this year.

The health think tank and charity said even the most prestigious and well-run hospitals are forecasting deficits, with nine out of 10 hospital trusts expecting to be in the red, up from 21% at the same time last year.

The King's Fund has previously warned that this year will be the most challenging in the recent history of the NHS, and its pre-Budget report said that while the Government's pledge to provide £8 billion a year in additional funding by 2020 is "welcome", it is the bare minimum needed to maintain standards of care and will not pay for new staff or the fellow pledge to implement seven day working across the NHS.

It said that last year, NHS providers, which include acute hospitals, mental health and community services, overspent their budgets by £823 million, including a deficit of £349 million among foundation trusts - the first time the sector has recorded an overspend.

The report said that while the end of year accounts have not yet been published, underspends in other areas are likely to mean that the NHS as a whole narrowly avoided ending 2014/15 in the red.

But it warned that this is unlikely to be the case by the end of this financial year.

An increase in staff in the light of the Mid Staffs scandal, which saw agency staff bills cost the NHS £3.3 billion last year, is one of the main reasons for the health service's financial woes, along with the funding squeeze.

While funding has increased by an average of 0.8% a year in real terms, the report said it is much lower than the 3-4% estimated to be needed to keep pace with demand.

Year-on-year reductions in tariffs (the prices paid to NHS providers for treatment) is also contributing to the problem.

The report added that real-terms spendings cuts in the social care system, which is "also under sustained and growing pressure", also risk exacerbating pressures on the NHS.

Richard Murray, director of policy at the King's Fund, said: "Last year's deficit among NHS providers was unprecedented, but this year is shaping up to be much worse.

"If the Chancellor does not find additional funding in the Budget, the Government must face the consequences - either patient care will suffer or the Department of Health will overspend its budget this year.

"NHS leaders have signalled a stronger focus on financial control and there is still significant scope to increase productivity in the NHS, but this will not be enough to close the black hole in NHS finances."

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