The financial pressure on GP practices is building. It doesn’t matter how comfortable things have been in the past, all practices are finding life uncomfortable right now and the signs are pointing to this only getting worse.

The reasons for this are well known. The national contract has been imposed for the last two years with a settlement considerably below the rate of inflation. This effectively placed a productivity requirement on practices, as the rate of growth of income didn’t match the rate of growth of expenditure. At the same time, demand has continued to rise and practices have had to adapt to meet the new access requirements.

Now we’re learning that the offer for next year is 1.9% (although, to be fair, we haven’t seen the details of this), while inflation is currently running at over 5%. Add in the rise to the National Living Wage and you don’t need a crystal ball to work out that the productivity requirement (NHS speak for ‘financial gap’) will once again be significant for practices next year.

NHS trusts work out their gap each year. They set the total rise in the predicted expenditure costs against the rise in income and identify what level of cost improvement they need in the year to break even. Of course, if they fail to deliver these cost improvements, they simply report a deficit and argue for more funding the following year (which is why expenditure in acute trusts has grown so significantly over the years), whereas for practices, it affects the profitability of the practices and directly impacts partner drawings.

Given the very real consequences of overspending for practices, financial planning is essential – even more so when the fiscal environment is so hostile. In the latest Practice Index and Ockham Health podcast, I discuss this with Kay Keane and Claire Houston, and consider what actions practices can take.

There are, of course, no easy options. As 70% of practice expenditure is on staff then inevitably when things are tough, practices have to look at staffing. This is why we’re increasingly hearing stories about practices reducing their locum expenditure to the point where in some places GP locums are really struggling to find work, and even of practices laying off salaried GPs and relying on the (cheaper) additional roles that are now in general practice instead.

As a result, we’re in the crazy situation where there aren’t enough GPs (even by NHS England’s own estimate, we’re 6,000 GPs short), but practices can’t afford to use the ones we do have because the funding to practices has been cut so much. This is why the GPC has been arguing that the strings around the ARRS funding should be loosened so that it can be used for GPs, but so far it seems those requests have been falling on deaf ears.

The situation doesn’t feel tenable. We’ll most likely see the full extent of the contract offer at the beginning of March, as the GPC has promised a referendum on it. If it’s as bad as the headlines suggest, it may well be that general practice is given no other choice than to take industrial action. In the meantime, practices will need to start their financial planning for next year early to give themselves as long as possible to make any necessary changes.