Kings Fund - NHS finances in better shape but action needed now to prepare for leaner years from 2011 - 21 May 09

Source

Commenting in response to the Public Accounts Select Committee report into financial management in the NHS, which highlighted the service had a £1.7 billion surplus at the end of 2007/8, The King’s Fund’s Chief Executive Niall Dickson said:
‘Delivering a £1.7 billion underspend in a £100 billion service is not ideal, but we should remember that only three or four years ago the NHS was overspending and in serious financial trouble. The finances of the health service are now in much better shape and this will be crucial as the NHS will have to prepare at best for very low or zero growth in funding from 2011 onwards. However, there remain hotspots, mainly in London, where some health organisations are still in significant debt. This is a concern.
‘The Public Accounts Committee is right that the quality of care patients receive should not suffer as a result of local NHS trusts building up large surpluses. Almost half of the £1.7 billion NHS surplus – £800 million – will be re-invested into frontline services between now and the end of 2010/11, but it is unclear what will happen with the remaining surplus. And this does not take into account the substantial surpluses that have been built up by autonomous foundation trusts.
'However, it is only right that extra money is set aside now as the financial prospects for the health service after 2011 look very serious indeed.’

He added: ‘The challenge now facing the NHS is clear: managers and clinicians will have to organise the services they provide more efficiently and productively so that they deliver more care for less money. All this will happen at a point when demand on health care services is rising: the number of older people and those with chronic disease, the most intensive users of the NHS, is growing rapidly. This makes the next two years a critical time for the NHS but it has an opportunity up until 2011, with a relatively benign financial environment magnified by reductions in inflation, to get this right.
‘Above all, as the NHS strives for greater efficiencies, it must learn from the inquiries into both Maidstone and Mid Staffordshire trusts to ensure local services do not lose sight of the quality of care their patients receive.’

Main - Public Accounts Committee

web site - www.publications.parliament.uk/pa/cm/cmpubacc.htm
PDF Copy of document...
http://www.publications.parliament.uk/pa/cm200809/cmselect/cmpubacc/225/225.pdf

Summary
The Department of Health (the Department) and the NHS achieved a surplus of £1,674 million in 2007–08, representing almost 2% of total available resources and the equivalent of about one week’s funding for the whole NHS. The surplus was significantly higher than the original forecast of £916 million and more than three times that recorded in 2006–07 (£515 million). In 2006–07, the surplus was concentrated in the Strategic Health
Authorities, which are administrative bodies, with the Primary Care Trust and NHS Trust sectors remaining in deficit. All sectors are now in surplus and the quality of financial management at individual NHS organisations improved during 2007–08. The Healthcare Commission also reported that the quality of services provided by the NHS improved over the year.

The surplus of £1.67 billion represents funding that was made available by Parliament for healthcare in 2007–08, but which was not used. Whilst some contingency planning is sensible, there is a real risk that patients lose out because the NHS is not spending its allocated funding on treating them. The Department has committed itself to making the surplus available to the NHS for spending in future years, and it should mean that the NHS
has the financial headroom and associated flexibility to respond to future financial pressures or changing priorities. The Department, however, needs to make sure that this is done in a way which does not unnecessarily delay treatment for those who need it most.

There are some long-standing financial problems that affect a minority of trusts which remain in deficit, and some regional variations in financial performance persist. With a decade of high funding growth, there is no reason why any NHS organisation should not be able to balance its books.

During a period of economic uncertainty when resources are severely stretched it is more important than ever that the NHS can demonstrate value for money and continuous improvements in productivity. The Department intends that the NHS should generate £15 billion in efficiency savings over the next three years. It will be important that these are achieved and are sufficiently robust to withstand external scrutiny, while at the same time not having any detrimental effect on patient care.

Going forward the Department and NHS face a number of challenges, including changes to the financial reporting framework and timetable, and further system reforms under which a quality element will be introduced into how NHS organisations are funded. The surplus generated and better financial management should, if maintained, help deal with the financial implications of meeting these challenges.

On the basis of a report by the Comptroller and Auditor General,1 we examined the Department of Health and Monitor, the independent regulator of NHS Foundation Trusts, on the financial performance of the NHS and NHS Foundation Trusts, how the surplus was achieved and its impact, as well as the financial challenges facing the NHS in the future.

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