1. Understanding Finance; avoiding crisis Foundation Trust Governors Richard Douglas, DG, Department of Health

2. financial context the things to think about the role of governors Q&A 2 Agenda

3. Population changes The NHS faces similar challenges to other health services around the globe 3 Rising expectations and treatment costs Funding pressures

4. our population is getting older Proportion of total population by age group Source: ONS population projections

5. Source: Department of Health projections (2008 based) Number of people with three or more long-term conditions Based on projections: The number of people with three or more LTCs has increased by over 50% in the last decade Number of people with LTCs is projected to increase 20% by 2018 0.0m 0.5m 1.0m 1.5m 2.0m 2.5m 3.0m 3.5m 2000200120022003200420052006200720082009201020112012201320142015201620172018 Number of people Projections 2012 people are developing more complex needs

6. the NHS has coped by spending more and more money Real terms health spending 1949-50 to 2010-11 Sources: Graph – IFS. Office for Budget Responsibility, Fiscal Sustainability Report, July 2011 1.9% p.a4.6% p.a4.4% p.a2.9% p.a 3.7% p.a 7.1% p.a

7. but is now facing the toughest financial challenge in its history 7 Source: Office of Budget Responsibility Spending review years: 2011/12 to 2014/15 Total change (%, real terms) Average change (%, real terms) 2015/16 (%, real terms) 2016/17 (%, real terms) Total managed expenditure-3.2-0.8-0.8 of which: Annually managed expenditure (1)5.91.42.21.2 Departmental expenditure limits (2)-10.9-2.8-4.2-3 (1) Includes debt interest payments, benefits etc (2) Includes most discretionary public spending The current Spending Review was tough And it’s not likely to get any easier DH funding is constrained by two factors: Reduction in total public sector current expenditure as a percentage of GDP; and Increase in the proportion of annually managed expenditure (e.g. Welfare, Debt financing), and so not available to Health and other departments

8. Avoiding crisis: what are the things to think about – personal perspective It’s never just finance Things don’t suddenly happen overnight Periods of major change are periods of highest risk Finance is too important to be left to the Finance Director If something looks too good to be true it usually is Confrontational relationships usually end in problems.

9. Avoiding crisis – the role of governors You are not financial analysts nor expected to be experts on the NHS financial regime But you have key role and responsibilities – Holding the non-executives to account – Appointment and removal of non-executives – Consultation on Forward Plan – Decisions on significant transactions – Receiving the annual report and accounts Get the right information and ask the right questions 9