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Last Updated: Wednesday, 13 December 2006, 01:06 GMT
'NHS-wide faults' led to deficits
Medical staff with patient
Staff pay is one of the factors which has led to the NHS' deficit
Mismanagement at all levels of the NHS in England has led to the current multimillion pound deficit, a committee of MPs has found.

The Commons health select committee said existing deficits were made worse by the cost of new staff pay deals and the expense of meeting NHS targets.

But it added local financial mismanagement was also a factor. Last year's NHS deficit was 547m.

The government said it had increased NHS spending since it came to power.

Shifting targets

The committee said historic deficits, long hidden, were revealed when the government changed the rules so trusts could not underspend their capital budget to subsidise current spending.

The most basic errors have been made
Health select committee

But it said the government fuelled the problem by agreeing to new pay deals for doctors and nurses using estimates of the cost which were "hopelessly unrealistic".

And far more staff have come in to the NHS than were proposed by the government.

In addition, meeting national targets such as the requirement that no patient should wait more than four hours in A&E had been costly.

Changing targets at short notice also placed unnecessary financial costs on trusts, the report said.

It attacked short-term measures being used by the government to address deficits.

And it said raiding staff training budgets was "unacceptable", and warned such cuts were affecting staff morale and could damage the quality of the workforce.

Trusts criticised

MPs also warned other "soft targets" such as mental and public health service budgets should not be raided to ease trusts' deficits.

And they said the creation of a new contingency fund to help out failing trusts and top-slicing primary care trusts' (PCTs) budgets should only be temporary measures.

However, the committee also said trusts should shoulder some of the blame for the current situation.

It is a shame that the Health Select Committee has taken the easy route of blaming NHS managers for all the financial problems in the NHS
Dr Gill Morgan, NHS Confederation

It cited one hospital trust which recruited staff without knowing if it could afford to pay them, and a primary care trust which had failed to recruit key finance staff.

The report said: "The most basic errors have been made; there are too many examples of poor financial information, inadequate monitoring and an absence of financial control."

It said the NHS may well be in balance as a whole by the end of this financial year, but warned trusts with the highest deficits were unlikely to be in the black within the next five years.

The MPs say the government should change the NHS's accounting system, which both reduces a trust's income by the amount of its deficit while also asking it to repay the sum owed.

More funding

Kevin Barron, chairman of the committee, said: "I hope the rush for balancing all NHS budgets does not mean further top-slicing next year, particularly in areas of high health inequalities."

Both the British Medical Association and the Royal College of Nursing condemned the decision to raid training budgets.

And Professor Stephen West, who is on the Council of Deans and Heads of UK Health and Nursing Professions, said: "The universities and statutory bodies were advised that this was a one-year blip where they needed to make some significant reductions.

"Unfortunately it would appear that this was not, and that in order to balance the books there is going to have to be a two or three-year period of reductions in education and training."

I hope the rush for balancing all NHS budgets does not mean further top-slicing next year
Kevin Barron, Health Select Committee chairman

However Dr Gill Morgan, chief executive of the NHS Confederation which represents managers, said: "It is a shame that the health select committee has taken the easy route of blaming NHS managers for all the financial problems in the NHS."

Health Secretary Patricia Hewitt said the NHS budget had doubled since 1997 and would almost triple by 2008, when UK healthcare spending would reach the European average.

"As a result of this investment, backed by reform, the NHS has cut waiting times, built new hospitals and surgeries, paid for more doctors and nurses to work and train, and improved access to healthcare for millions of people.

But she said a small number of trusts had built up deficits "due to overspending and inefficient use of their funding".

Shadow health secretary Andrew Lansley warned financial problems were leading to cutbacks when reform should have led to service improvements.

Sandra Gidley, Liberal Democrat health spokeswoman, said targeting "soft targets" such as staff training and mental health services was a "false economy", the effects of which would be felt for years to come.




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