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Summary
The Department of Health (the 'Department') and the NHS achieved a surplus of £515 million in 2006-07, representing 0.6% of total available resources. Following two years of rising deficits, the Department, working with the NHS, has done well in restoring overall financial balance.
While the national picture is one of financial surplus there remain variations in financial performance. The surplus is concentrated in Strategic Health Authorities, whilst overall Primary Care Trusts and NHS Trusts remain in deficit Of the 372 NHS organisations, 82 recorded a deficit of £917 million, with 80% of this being reported by just 10% of NHS organisations. There are also regional variations, with the East of England Strategic Health Authority area having a deficit of £153 million and the North West achieving a £189 million surplus. Financial recovery is therefore inconsistent and more needs to be done so that all parts of the NHS achieve financial balance.
The question arises whether financial balance was achieved through sustainable improvements in NHS financial management or through tighter central control and service reductions. The Department required some allocations to be withheld from NHS organisations notably through the top-slicing of Primary Care Trust budgets and through diversion of training expenditure to support deficits. As a result, some Primary Care Trusts were unable to deliver all of the health care they might have, with some delivery against local priorities being reduced or delayed through limits on health care activity. Overall, however, the quality of service improved during the year, as rated by the Healthcare Commission.
We conclude that the return to financial balance is the result of the Department's tighter performance management of NHS finances in the way funding flowed through the NHS together with a programme of support for local organisations with particular financial difficulties. In the short term, this largely centralist approach was appropriate. For the future if the NHS is to remain in financial balance more health organisations locally need to improve their financial management. Failure to keep a tight grip on financial performance will undermine health care for patients.
On the basis of a Report by the Comptroller and Auditor General,[1] we examined the Department of Health on the financial performance of the NHS, how the financial turnaround was achieved, and the impact of this turnaround on services and the future. |
