Select Committee on Public Accounts Seventeenth Report

Conclusions and Recommendations

1.  The in-year financial information produced by some NHS bodies for management and reporting purposes does not allow the Department to manage the national finances of the NHS in the most effective manner. The Department should require NHS bodies, at regular intervals during the year, to produce and interpret balance sheet information as well as robust income and expenditure and cash flow figures. All figures should show the year to date as well as the forecast position. Local NHS bodies would then be able to identify and address emerging problems promptly and Strategic Health Authorities and the Department could manage the national picture better.

2.  The Department does not have an overall picture of the impact of deficits on the NHS's capacity to deliver services, and was only able to provide us with information about the number of redundancies, closures and abandoned capital programmes after our hearing. Decisions on structuring and staffing in individual organisations are taken at a local level, but the Department should collect this information as part of its wider performance management arrangements so that decisions affecting the capacity of the NHS to deliver its objectives are properly informed.

3.  There is a lack of financial management expertise in the NHS, and a need to strengthen communication between those responsible for the finances and for the delivery of local health services. Measures to bring about financial balance need to stem from a partnership between financial managers and clinicians to enhance both the efficiency and the effectiveness of healthcare. The Department should identify models of successful joint working between financial and clinical management, and promote them across the NHS.

4.  Errors in the costing of the Agenda for Change pay initiative, General Practitioner and consultants contracts meant that in 2005-06 individual NHS bodies were required to fund a £560 million shortfall in resources to pay for these central initiatives. The Department of Health should analyse the original costings to determine where lessons can be learnt so that local NHS organisations are not required to meet the ongoing cost of these schemes without sufficient funding.

5.  Decisions by Strategic Health Authorities on whether deficits incurred by NHS bodies should be repaid in the next financial year, and on the amount of financial support for NHS bodies in deficit, are not being applied consistently across the NHS. And while Strategic Authorities need some flexibility to take account of local circumstances, the Department should give a lead in determining the tolerable range of variation in financial regime. The accounts of NHS bodies should be enhanced to clarify the various sources of income, including financial support, which those bodies receive, to give a more transparent picture of their financial performance.

6.  The arrangements for disseminating best practice arising from the work of turnaround teams are not sufficiently robust to maximise the impact such findings can have. The Department should set up a formal process for sharing turnaround reports both internally and publicly, allowing all NHS bodies to consider whether they too could achieve efficiency savings by adopting the actions identified. The Department should also establish a failure regime setting out the consequences of falling into significant deficit and formalising the required recovery procedures.

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Prepared 20 March 2007