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Last Updated: Wednesday, 6 June 2007, 11:55 GMT 12:55 UK
Do the NHS accounts add up?
By Nick Triggle
Health reporter, BBC News

Patricia Hewitt
The health secretary put her job on the line over deficits
The government has kept its promise to rid the NHS of its debt, but that does not tell the full story.

A year ago, the NHS was posting a deficit in excess of 500m.

That has been turned into a surplus of almost exactly the same amount. But at what cost?

To break even, hospitals have had to shed jobs - 17,000 over the course of a year, according to the NHS Information Centre.

And in the final months of the 2006-07 financial year, NHS trusts began delaying operations so that they would not appear on the balance sheet.

These tactics have left health unions furious, with the British Medical Association accusing the government of "decimating hospitals".

But such measures have not been enough on their own to wipe the slate clean.

Instead, at the beginning of the year NHS chiefs, with the agreement of ministers, began building up reserves to cover any shortfall.

The safety net was essential as Health Secretary Patricia Hewitt had put her job on the line over getting the health service out of the red.

The NHS under spent its budget of over 70bn by 510m
Nearly a fifth of trusts ran up debts of 911m
Balance was only achieved thanks to surpluses in other trusts and reserves built up at regional and national levels
Regional health bosses create a contingency fund of 450m by cutting training and public health budgets
Nearly 2bn was taken form the NHS budget before it was shared out to trusts to pay off previous deficits and create a safety net for 2006-7

Regional health bosses working for the 10 strategic health authorities, which oversee NHS trusts, were told to make savings on central budgets.

About 10% was shaved off the 3.7bn training budget and cuts were also made to public health spending, giving the health bosses a contingency fund of 450m.

On top of that, a third of the extra 5.4bn the NHS was due in 2006-7 was held back.

Nearly 700m of the 1.8bn top-slice was used to pay off debts from previous years, with the remainder kept to bail-out the health service in 2006-7.

Within months, NHS accountants were admitting that too much had been held back.

And so in the final weeks of the financial year millions of pounds was pumped back into the NHS, helping to create the surplus which seemed so unlikely this time last year.

The government says the public should not be worried about this as the NHS is still getting the cash.


But not everyone shares that view.

Professor John Appleby, chief economist at the King's Fund health think-tank, believes the 911m gross deficit - the total debts run up without the surpluses taken into account - is worrying.

You can't run a hospital on performance targets and budgets
Topsy Turvy, England

Nearly a fifth of hospitals and PCTs, which are the parts of the health service responsible for care, finished the year in the red.

Professor Appleby said: "This shows that there are still quite a few trusts with big deficit problems, these have not been solved."

He also raised concern about the practice of holding back extra money the NHS was due.

This means those trusts were financially secure have not been able to expand services as much as they would have liked.

You could argue the money is in the system, but the public is entitled to expect better management than this
Professor John Appleby, of the King's Fund

The Royal College of Nursing agrees services have been hampered, describing it as "stop-go economics".

However, regardless of the rights and wrongs of the steps taken, it is generally agreed the NHS is now on a better footing than it was.

The achievement of balancing the books means no deficit has been carried forward into this financial year.

Birmingham University's Professor Chris Ham, a former Department of Health adviser, said the government had taken "desperate" measures but believes they were justified in the circumstances.

But he points out that the NHS has not seen the last of the cuts as from 2008 the health service will stop getting the large rises in its budget it has got used to.

"That in itself will lead to more cuts and efficiency drives."

The journey, as NHS chief executive David Nicholson admitted as he published the accounts, "is not finished".

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