Control totals and financial planning
This survey was circulated to the finance and commercial directors across NHS trusts and foundation trusts in England in February 2017. It received responses from 99 providers, equal to 42% of the provider sector.
It asked questions concerning how financial plans are progressing for the next financial year, what the financial outlook is, and how providers have responded to the issues related to control totals.
The results of the survey clearly indicate that the provider sector has been set an unprecedentedly challenging financial task for 2017/18.
The results of the survey clearly indicate that the provider sector has been set an unprecedentedly challenging financial task for 2017/18. Control total savings targets are far larger than those outlined in the national tariff, and represent a ratcheting up of the already challenging savings required in 2016/17
On top of this, non-recurrent savings made this year mean that those targets are even more difficult to reach. Finally, some of the difficulties of moving towards ever greater financial collaboration within sustainability and transformation plans (STPs) are also clearly demonstrated.
Providers highlight concerns around governance and financial regulation in signing up to system control totals, in particular the issue that while providers are expected to collaborate at a local health economy level, they are still held to account and regulated as standalone institutions.
Approaching the end of 2016/17: most providers are on plan, but are approaching an unsustainable position next year
- Most providers are on track for this financial year. The majority of respondents (73%) are currently forecasting that their 2016/17 year-end position will be above or on plan.
- However, this year is hugely reliant on approximately £1bn of non-recurrent savings, capital revenue transfers, balance sheet and accounting adjustments, which are one-off measures and therefore unsustainable in the longer term. Two thirds of respondents indicated they would be very or quite reliant on these one-off measures to reach their year-end position.
- The total figure for these types of savings for the 99 providers surveyed was £340m. Using our modelling to expand this to the whole sector, the total of one-off savings is likely to amount to approximately £1bn, or larger than the total aggregate deficit figure for the financial year 2016/17.
Looking ahead to 2017/18: a gradually improving aggregate financial position, but little flexibility and confidence among providers
- Just over half, 56% of respondents, are forecasting a surplus for the end of 2017/18
- In 2017/18 they will need to be less reliant on non-recurrent savings than 2016/17: just 19% of the sector say their position will be very reliant on these savings next financial year.
- Only 19% are confident of hitting their control totals savings targets next year.
Control totals: a gap between those who signed and those who didn’t, and a lack of confidence in their ability to support system change
- Providers who did not sign up to 2017/18 control totals were asked to deliver much more stretching savings targets. 70% of providers signed up to control totals, and 30% did not: the savings targets proposed to the 30% who did not sign were a (median) average 6.4% of annual revenue, while those who did sign, signed up to a (median) average savings target of 4.2% of revenue.
- The move towards system wide strategic planning is being undermined by the institutional focus of financial oversight. The option for 2017/18 where local CCGs and providers combine their savings targets to have one aggregate figure or “system control total” was unlikely to have a high take up rate according to our survey respondents. Just 10% of providers thought it likely they would be part of system control totals, compared to 67% who thought it was unlikely. The main reason cited was trusts being held first and foremost to account for their own financial performance through the current system of oversight.
Download the full survey report below.