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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