At a headline level, the financial framework introduced in 2016/17 has contributed to some notable results.

  • A central tenant of public service budgeting and management is that the delivery structures of individual organisation stay within planned budgets. The NHS was in danger of overspending against the Department of Health’s budget, and the Department only managed to avoid a budget breach in 2015/16 due to a technical adjustment. The setting of control totals provided a means of better ensuring that overspending was contained in the short term.
  • The aggregate provider sector deficit was reduced from £2.5bn in 2015/16 to £791m in 2016/17, a £1.7bn improvement in one year which demonstrates an almost pound for pound benefit from the sustainability and transformation funding (STF). There is no doubt that this headline picture underplays the underlying financial deficit of the sector, which according to recent analysis is £3.7 bn, and overplays the underlying financial improvement since 2015/16. However, it would be wrong to underplay the achievement from providers in containing the runaway deficit position and run rate from 2015/16. In the face of all the pressures facing the provider sector in 2016/17, including constant demand increases, escalating cost pressures and workforce shortages, the return on investment from the original £1.8bn should not be underestimated. Despite this, at an underlying level, the sector still managed to improve on the deficit in 2015/16 by around £600m, and delivered £2.3bn worth of recurrent cost savings.
  • The framework attempted to incentivise all providers, irrespective of their financial position, to make a step change in efficiency. Whereas previous financial allocations, for example winter resilience funding, might have been perceived to have disproportionately rewarded either challenged or well performing providers, control totals required all providers to agree to additional financial stretch.
  • All but £4m of the £1.8bn in STF was kept within the provider sector. This was supported by national-level reporting of exactly how much of the £1.8bn was spent and where, and the publication of the methodology undermining the bonus and incentive scheme.  Although the mechanism for allocating unearned STF was far from perfect, keeping the funding within the sector is a significant achievement in improving transparency over how and where money was allocated.