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Last Updated: Tuesday, 20 February 2007, 14:07 GMT
Q&A: NHS deficits
Money generic
One in three trusts are facing a deficit this year
Hospitals are gradually racking up bigger debts, but overall the health service is likely to achieve balance.

A look at how the figures break down.

Is the NHS facing a surplus or deficit?

Latest figures, from three-quarters of the way through the 2006-7 financial year, show that the NHS is likely to register a small 13m surplus.

But this is not the picture many patients will recognise amid stories of hospitals delaying operations and laying off staff.

The surplus has only been achieved as regional health bosses have built up a contingency fund of 450m from savings made to budgets such as training and public health and held back 1.1bn of extra funding.

Overall, hospitals and primary care trusts are expecting a gross deficit of 1.3bn - over 150m more than they were predicting three months ago.

What is this contingency fund?

At the start of the year, the Department of Health gave regional bodies known as strategic health authorities, which oversee hospitals and primary care trusts, responsibility for a host of central budgets.

These include training and public health and it is from these sources that regional health managers have found savings.

Unions have complained training places are being cut, but NHS bosses say they have enough people in training to meet demand in the short-term.

The savings identified, which now stand at 450m, up 100m in three months, will be used to off-set deficits at the end of the year.

What about top-slicing?

The NHS budget has increased by 5.4bn this year, but not all the money primary care trusts, which control local funds, were originally expecting is being passed on.

Over 1bn was kept back to allow NHS bosses to cover any deficits that arose during the year.

It is now expected only 800m of this will be needed to bail out those trusts falling into the red.

The government says this money is still being spent in the NHS, but critics argue that it is not going on expanding and improving services in the way in which the public imagines.

Why are health bosses holding money back and building up reserves?

It gives the system a bit of slack to help off-set the deficits. In the past, the NHS overall has lost money the following year because the books have not been balanced.

While some trusts may face their own individual recriminations next year, overall the health service should received the full increase in budget - over 9% in cash terms.

NHS bosses say this in turn will mean the financial picture should improve next year.

Health service accountants are also under orders from Health Secretary Patricia Hewitt to break even.

What is the impact on services?

Despite the overall surplus, the government is still facing criticism for the cuts hospitals are having to make.

Compulsory redundancies are likely to hit almost 1,500, although unions point out many more posts will be lost through voluntary redundancies and recruitment freezes.

The financial climate is also having an impact on treatment, with a BBC poll showing this month a quarter of trusts were asking patients to wait longer for hospital care.

But ministers point out that waiting times are now the shortest on record after years of extra investment and strict targets.

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