Treasury forced to top up £116.3bn budget when it became clear Jeremy Hunt’s department would not balance its books

George Osborne has been forced to give the Department of Health an emergency bailout to stop it busting its budget for this year, in a further sign of the intense pressures on NHS finances.



The Treasury has given the DH an extra £205m on top of the £116.3bn it was originally allocated in its 2015-16 budget. It handed over the money when it became clear that, in a serious breach of Whitehall protocol, health secretary Jeremy Hunt’s department would be unable to balance its books by the end of March.

The DH was on course to overshoot before the Treasury’s intervention, even though its budget had already increased by £3.1bn compared with last year. It is the second year in a row in which Whitehall’s biggest spending department has needed extra Treasury cash to pay its bills during a financial year. The powerful Commons public accounts committee may now examine the overspend.

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The Treasury disclosed the move when it published its spring supplementary estimates on Wednesday. The DH insisted the £205m was “a small addition” to its budget and a “minor” change to its funding – less than the NHS spends in a day.

The Guardian revealed last week that the department’s financial woes were so serious that it was talking to the Treasury about receiving an in-year budget boost.

The huge deficits being run up by hospitals in England has also compelled the DH to move £950m from its capital budget, which is used for building and repairing hospitals, into its revenue budget, which pays for the running of the NHS.

The two unexpected movements of cash mean the DH will now spend £1.2bn more than planned doing what it can to help NHS services, which are coming under increasing pressure, mainly linked to the growing demands of an ageing population.

“Just two months after the spending review, the chancellor has had to dig into his own pockets for more NHS funding for the second year running. This is an indication of the dire state of NHS finances halfway through its decade of austerity,” said Anita Charlesworth, the director of research and economics at the Health Foundation thinktank.

Sally Gainsbury, the senior policy analyst at the Nuffield Trust thinktank, said: “The Department of Health breaching its departmental expenditure limit is Whitehall tech speak for what NHS patients and staff have known for months – that demand for NHS care is growing faster than its budget.”

While the number of patients attending hospital as an emergency is growing by 3.6% a year, hospitals are only receiving 1% more money a year to treat them, Gainsbury said.

The £205m will come out of hospitals’ budget for 2016-17. “It’s not free money,” said Prof John Appleby, the chief economist at the King’s Fund.

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The likelihood of hospitals’ collective deficit for 2015-16 being more than the £1.8bn Hunt is seeking means there is “a possibility” that the DH may yet exceed its new budget this year, even after the cash injection, he added.

“If that happens that will be very serious for the DH’s permanent secretary, and its head of finance and also for the minister,” said Appleby.

The DH said the extra funding had become necessary because a deal that sees the drugs industry return a certain amount of profit back to the NHS above an agreed level had realised less money than expected.

Labour’s Heidi Alexander, the shadow health secretary, said: “This is just further proof that Jeremy Hunt has completely lost control of the NHS’s finances.

“Despite this emergency bailout, it is becoming increasingly clear that patients are going to bear the brunt of this government’s incompetence.

“Hospitals are being told to cut staff, services are at risk of closure and money to make essential repairs to buildings and buy new equipment is being used to plug holes in hospital deficits.”