NHS tech budget slashed by £300m to plug deficits

The National Health Service (NHS) is undergoing a significant financial upheaval, with more than £300 million being cut from its central technology budgets. This drastic measure is being taken to fill local financial gaps at trusts and commissioners, a decision that has sparked widespread concern and debate.

The Treasury's recent refusal to grant NHS England a £1bn bailout for covering the costs of industrial action this year has exacerbated the situation, reallocating just £100 million. This shortfall has compelled NHS England and the Department of Health and Social Care to resort to raiding capital and technology budgets and scaling back efforts to tackle waiting lists.

The extent of these internal budget raids and their division between NHS England and the Department of Health and Social Care remains unclear. However, it is understood that technology budgets are being cut by approximately £350 million. The total funding for "frontline digitisation" is believed to be around £1.9 billion.

This reduction has particularly affected allocations for electronic patient records, as reported by Digital Health. Support is now being "prioritised" towards trusts lacking such systems, potentially withdrawing support from efforts to extend or optimise existing electronic patient records.

Integrated Care Systems have been allowed to repurpose "sensible" underspends from previously ringfenced areas, including dentistry. However, a briefing seen by HSJ indicates that "underspends against technology programmes including electronic patient records will not be available for local reuse".

This situation has led to significant uncertainty and frustration among trust chief information officers, who find it increasingly challenging to plan digital investments due to the unpredictability of funding. Rory Deighton, director of the NHS Confederation’s Acute Network, has expressed extreme frustration at the short notice reworking of budgets ahead of winter. He highlights that many cuts will come from vulnerable areas like dental underspend, undermining leaders’ efforts to transform services.

The cuts to digital budgets are particularly frustrating, as they come at a time when the government is focusing on productivity. Deighton argues that cutting the innovation and investment that can make services more productive is counterintuitive. He also points out that continually raiding capital budgets to plug holes elsewhere is short-sighted and hampers productivity.

Health leaders have ambitious plans to embed technology further, making these cuts significantly disappointing. The NHS's ineffective and outdated IT systems, which often cannot communicate across different care settings, result in duplication of effort and waste of staff time. Cutting tech funding will likely exacerbate these issues.

In a related development, health systems are still struggling to meet their financial plans despite the raiding of hundreds of millions from investment budgets. Senior leaders in most regions have reported that the cash falls short of their existing financial gaps.

Earlier this month, NHS England announced that £800 million would be made available to integrated care systems to offset the additional cost of strikes, primarily by shifting money from tech and capital budgets. However, integrated care systems reported a combined deficit of £1.5 billion, worse than planned, in the six months to October, implying a gap of several hundred million pounds unless systems can report substantial surpluses for the year's second half.

Integrated care systems have been ordered to submit new plans detailing how they will recover their positions. Senior sources in all seven regions have indicated that more than half of their systems would still fail to deliver breakeven despite the funding transfers.

Systems in the most financial trouble have been asked to present "unpalatable" options for further savings. Some local sources have identified a set of "nuclear options" to balance the books, but these would be catastrophic for quality of care and nearly impossible to deliver.

NHS England has suggested changes to the rules around elective recovery funding and budget flexibilities, alongside the £800 million, to help systems deliver their plans. However, several local sources have expressed doubt about the likelihood of this assistance. Siva Anandaciva of the King’s Fund mentioned that NHS England would likely have to take painful measures to ensure it stays within its budget. He also noted that the government would have a last opportunity in February, through a process known as the supplementary estimates, to top up departmental budgets to avoid a politically embarrassing overspend.

The Nuffield Trust recently stated that NHS England would almost certainly need to seek additional funding if there is further industrial action. Sarah Walter, director of the NHS Confederation’s Integrated Care System network, commented that cutting crucial budgets to plug the deficit left by industrial action may improve integrated care systems' financial positions in the short term but risks undermining the NHS’s financial sustainability in the longer term. An NHS England spokesman stated they are working with systems to develop and implement new plans for the remainder of this financial year within the available resources.

For more detailed information, please refer to the original articles on HSJ: Exclusive: National tech budget slashed by £300m to plug deficits and ICSs told to prepare ‘nuclear’ service cuts as NHSE plays ‘hardball’.