I am lucky because I work with a Director of Finance who likes to make things clear and easy to understand. Last week he went through what is happening to the money for 2011/12. He wanted to help my team, well all of us really, understand where the money has gone.

He started with the positive. We have had a 2.2% increase in our 2011/12 budget compared with 2010/11. In addition there is a deflationary change to Payment by Results of which will benefit our budget by 0.92%.  This is all good news because inflation in the health system runs far higher than in the rest of the economy. So given the increase described we should be in a good place, shouldn’t we?

Unfortunately we have to take into account the pressures from population growth (0.8%) and increased prescribing costs (0.5%). Then, what the centre gives with one hand it can take away with another. We are instructed to ring fence a proportion of our funding for social care re-ablement (0.15%).  The National Specialised Commissioning Group has decided it needs more money, which in combination with the contribution we have to make to the National Cancer Fund is another dent in what we can spend locally (0.18%). Finally we have to give the Strategic Health Authority 2% of our budget to act as a “non-recurrent transformation fund.” We can get that back, probably, if we submit business cases for their approval, but we can’t use it recurrently.

In summary:
Where has the money gone?                                 Out                                   In
                                                                        %                                   %
Recurrent increase                                                                                       2.20

Used to support:   
National cancer fund and NSCG*                        0.18 
Non recurrent transformation*                          2.00 
PbR tariff inflation                                             -0.92 
National prescribing                                            0.50 
Social Services Re-ablement                                0.15 
Population growth                                              0.80 
    
Total                                                               2.71 
    
Net available                                                                      -0.51

(*top-sliced from PCT/Consortia)

In effect we have less money in 2011/12 than we had in 2012/13 to improve health and health services. To maintain quality we will need to innovate, seek productivity, and efficiency from all parts of the system (including primary care) and do as much prevention as possible, as well as deliver everything we are asked to do in the operating framework.

There are tough times ahead.

Martin McShane qualified in 1981 from University College Hospital Medical School. He trained in surgery until 1990 then switched to general practice where he spent over a decade working in a semi-rural practice on the edge of Sheffield. In a fulfilling job, with a great lifestyle, he decided to give it all up and take on a fresh challenge. He entered NHS management, full time, in 2004 as a PCT chief executive after experience in fund holding and chairmanship of both a primary care group and subsequent professional executive committee. Since 2006 he has been director of strategic planning for NHS Lincolnshire, where there are 5,600 miles of road but less than 50 miles of dual carriageway.