NHS facing £2bn deficit and 'worst financial crisis in a generation'

The NHS overspent by £930m in three months this year and is on course for an annual deficit of at least £2bn, in what regulators described as its worst financial crisis in a generation.

Hospitals are spending more than their budgets as they struggle to cope with what one NHS leader called a “triple whammy” of growing demand for care, £2bn of unexpected staff costs and the service’s finances being the tightest for years.

The NHS is missing many waiting time targets, medical services regulators revealed on Friday. The increasing difficulty of recruiting and retaining enough personnel to staff every ward has led to a soaring bill for agency and other temporary employees.

Separate reports published on Friday from the two bodies that oversee foundation trust (FTs) and non-foundation trust hospitals in England reveal a massive recent deterioration in the NHS’s finances.

The 151 FTs regulated by Monitor recorded a collective deficit of £445m between the start of April and the end of June this year, and expect to end 2015-16 as a whole £1bn in the red.

The 90 NHS trusts supervised by the NHS Trust Development Authority (TDA) fared even worse, accumulating a combined deficit of £485m – £73m worse than expected – with 80% of its hospitals overspending in those three months. They spent more than £380m on agency and contract staff in response to understaffing.

Monitor’s report says: “The current level of deficit is not affordable.”

It details how many foundation trusts are failing to meet NHS waiting times for A&E care, cancer treatment, non-urgent operations in hospital and vital diagnostic tests.

Monitor said hospitals had to “continue to improve how they operate, including making radical changes to how care is delivered, if they are to counter the intense pressures they’re under from an increased demand for care and a worst-in-a-generation financial position”.

Dr David Bennett, Monitor’s outgoing chief executive, said: “The NHS simply can no longer afford operationally and financially to deliver the substantial efficiency gains required to ensure patients get the services they need.”

The Observer revealed last Sunday that Monitor and the TDA had been “leaned on” by Whitehall officials to delay publication of Friday’s reports until this week’s Conservative party conference was over.

Jeremy Hunt, the health secretary, has ordered hospitals to reduce their spending on both temporary staff and management consultants in an attempt to cut costs. But privately NHS bosses say persistent understaffing and the need to provide good quality care because of the toughened NHS inspection regime raise doubts that the bill for agency staff can be cut.

Last week Monitor appointed Jim Mackey, the chief executive of Northumbria Healthcare NHS foundation trust, to be the chief executive of a new body called NHS Improvement – formed by a merger between it and the TDA – that will try to crack down on overspending.

Chris Hopson, the chief executive of NHS Providers, which represents trusts, said: “These results are not a surprise. Providers have been flagging their rapidly deteriorating financial position for more than two years now.

“NHS trusts and foundation trusts are doing everything they possibly can to avoid financial deficits, but they are experiencing a triple whammy: rapidly rising patient demand, an extra £2bn unfunded staff cost they have been required to add, and the deepest and longest funding squeeze in NHS history, despite the NHS ringfence.”

The likelihood of a £2bn year-end deficit will put pressure on George Osborne, the chancellor, to give the NHS emergency funding in his spending review next month.