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Mounting deficits, worsening performance and declining staff morale leave the NHS facing its biggest challenges for many years, warns the latest quarterly monitoring report from The King's Fund.

It now seems certain that hospitals and other NHS providers in England overspent their budgets in 2014/15 by more than £800 million. This is despite nearly £900 million being provided by the Treasury or switched from capital budgets to plug the growing black hole in NHS finances. According to the regular survey undertaken for the report, almost 60 per cent of trust finance directors said that they were dependent on additional financial support or had drawn down their reserves in 2014/15.

The financial outlook for 2015/16 is even gloomier, with two-thirds of hospitals concerned about staying within budget over the next year. Although commissioners are more optimistic, 40 per cent of finance leads from clinical commissioning groups are also concerned about whether they will be able to balance the books in 2015/16.

Other key findings from this quarter’s survey of NHS provider finance directors and CCG finance leads include:

• for the third consecutive quarter, staff morale tops the list of concerns raised by trust finance directors
• fewer than half (45 per cent) of trusts feel confident that they will achieve the productivity targets for 2015/16 
• 90 per cent of trust financial directors and 85 per cent of commissioners are concerned about the financial state of their local health economies 
• there is a mismatch in expectations about demand for services between providers and commissioners; for example, 80 per cent of trusts expect emergency admissions to rise this year, while 60 per cent of CCGs expect them to fall
• around three quarters (75 per cent) of trusts and two thirds (68 per cent) of CCGs think there is a high or very high risk of failing to achieve the productivity gains over the next five years outlined by the NHS five year forward view.

NHS performance continues to deteriorate, with key targets being missed with increasing regularity. The latest data show:

• performance against target waiting times for A&E is at its worst level since 2003, with 8.2 per cent (more than 440,950 patients) waiting longer than four hours in A&E departments in the final quarter of 2014/15
• the number of delayed transfers of care has risen by over 20 per cent compared to the same quarter last year and is now at its highest level since 2008 
• in February 2015 the proportion of inpatients waiting longer than 18 weeks for treatment rose to 13 per cent, the highest level since this target was introduced; however, the number of people still waiting for treatment after 18 weeks dropped, suggesting the policy of allowing a ‘managed breach’ of the targets is having an impact.

Commenting on the report, Richard Murray, Director of Policy at The King's Fund, said: ‘The health service enters the new financial year facing some of the biggest financial and performance challenges in its recent history. If last year was the most difficult for some time, this year promises to be much worse, with little confidence that the alarming deterioration in NHS finances can be arrested.

‘Looking further ahead, while there is still significant scope to improve productivity in the NHS, efficiencies are becoming harder to generate and there is considerable scepticism that the £22 billion in productivity improvements outlined in the NHS five year forward view can be achieved.’

Notes to editors: 

How is the NHS performing? is the latest of The King’s Fund’s quarterly monitoring reports. It covers the quarter from January to April (although time lags in the publication of data mean that reporting on some performance indicators covers different periods).

For further information or to request an interview, please contact the Press and Public Affairs team on 020 7307 2585 (07584 146 035 if calling out of hours). Note on support given to providers: In 2014/15 NHS providers have received significant financial support from national bodies. This has included £640 million taken out of capital spending and switched into revenue and a further £250 million provided by the Treasury. Whether the health budget overall will overspend depends on any further increases in CCG underspends (currently forecast to be around £135 million (NHS England 2015c)) and performance against the other health budgets managed by the Department of Health and other national bodies.

This quarter’s survey of NHS finance directors and CCG finance leads was carried out from 26 February to 12 March 2015. Of 257 NHS trust finance directors contacted, 93 responded. We also contacted 187 CCG finance leads, of whom 40 responded.

The King's Fund is an independent charity working to improve health and health care in England. We help to shape policy and practice through research and analysis; develop individuals, teams and organisations; promote understanding of the health and social care system; and bring people together to learn, share knowledge and debate. Our vision is that the best possible care is available to all