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Last Updated: Thursday, 1 December 2005, 14:59 GMT
620m deficit predicted for NHS
The deficit is likely to be bigger than last year
The NHS in England could be heading for a deficit of about 620m for 2005-06, according to government figures.

Health Secretary Patricia Hewitt said the figures were being published for the first time to improve transparency.

She stressed inefficiency and poor financial management were unacceptable, and said teams of experts would be sent into struggling NHS organisations.

Opposition parties said the NHS faced a financial crisis, despite record funding of 76.4bn this year.

I want to make it clear that inefficiency and poor financial management are not acceptable
Patricia Hewitt

Mrs Hewitt stressed that most were managing their budgets successfully.

She also fully expected that the final deficit would be considerably smaller than current forecasts.

In a written statement, she said: "I have made the decision to publish the data because I want to make it clear that inefficiency and poor financial management are not acceptable."

The Health Secretary said that the equivalent forecast for last year predicted a 499m deficit.

In the end, the final audited figure for 2004/05 was less than half this amount at 219m.

She also emphasised that the estimated shortfall amounted to less than 1% of total NHS funding, and that two thirds was due to just 37, or 7%, of organisations.

Need to balance books

Underlining the need for NHS bodies to balance their books, she warned: "We therefore expect - and indeed intend to ensure - that the position at the end of this year will be significantly better than these mid-year forecasts."

The government's market-driven reforms are creating massive instability in the NHS
Steve Webb

Mrs Hewitt said the new turnaround teams would be sent to local health bodies that faced the biggest challenges.

"These teams will be experienced in resolving financial problems and managing NHS organisations.

"They will focus on ensuring the organisations deliver the efficiency and quality improvements needed to achieve both financial balance and better care for patients."

Earlier the Health Select Committee was told new contracts for consultants and GPs had cost the NHS almost 400m more than initially anticipated.

Agenda for Change - a package of new pay arrangements for other NHS staff - was also well over budget.

Compound effect

Sir Nigel Crisp, NHS chief executive, told the Health Select Committee that around 30% of the service's organisations were responsible for the deficit - roughly the same distribution as last year.

He said some organisations were struggling with the compound effect of previous overspends.

Richard Douglas, NHS director of finance, told the committee said NHS organisations always tended to be pessimistic about their projected level of overspend for the year.

Shadow Health Secretary Andrew Lansley said if the budgets of those organisations with a surplus was excluded the gross projected deficit was 948m.

He said: "Why, when the government is spending unprecedented amounts of money on the NHS are more hospitals and trusts in deficit?

"Why are services threatened and jobs being lost? Much of the money has been swallowed up in bureaucracy.

"Since 2000, an extra 1.6 billion (in real terms) has been spent on NHS administration staff.

"Patients will bear the brunt of this financial mismanagement as frontline services are cut to balance the books."


Steve Webb, for the Liberal Democrats, said the NHS was facing a financial crisis.

"The government's market-driven reforms are creating massive instability in the NHS.

"Many hospitals are being forced to make drastic and swingeing cuts.

"The roller coaster of NHS trust finances makes it impossible for hospital bosses to plan effectively. This is really no way to run the NHS."

John Appleby, of the independent think tank the King's Fund, said cash had been soaked up by increased pay demands, clinical negligence payments, and dealing with the EU working times directive.

He said: "It is essential that the government does not respond in an ad hoc way but instead introduces a system of support to enable NHS trusts and others to respond to emerging financial problems flexibly."

Jo Webber, of the NHS Confederation, which represents trusts and other NHS organisations, stressed that the deficit was only a tiny fraction of the overall budget.

She said: "We should not lose sight of the fact that NHS organisations and their staff are delivering real improvements in patient care - and most are doing that within budget."

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