Trusts turn to ‘aggressive accounting’ and large covid cash reserves to balance books

NHS trusts will draw on billions of pounds of cash reserves built up during the pandemic to help fund their costs this year, while using aggressive accounting treatments to stop the spending hitting the bottom line.

HSJ analysis reveals trusts’ balance sheets are in a far stronger position than before the pandemic, with cash levels reaching around £18bn – three times higher than in March 2020.

There have been increasing concerns around the financial outlook for the health service, with funding levels falling in real terms due to spiralling inflation.

NHS England has warned of service cuts being needed to balance the accounts, while local leaders have warned of “impossible choices” after being told to deliver “cost improvement plans” of around 5 per cent.

However, sources said the strong cash position offers significant headroom to avoid service cuts in the short term, by using the cash reserves built up during covid. But to avoid this impacting on the reported bottom line in the NHS accounts, which would risk a budget breach, they will deploy accounting treatments which reduce reported expenditure.

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Source: HSJ, 12 September 2022