Acute political embarrassment afflicted Prime Minister Blair and his then Secretary of State for Health Patricia Hewitt when the NHS went into deficit in 2006. By contrast, recent figures from the Department of Health show that the NHS is on course for a financial surplus.
Back in 2006, the NHS had experienced an unprecedented period of real growth in funding since 2002. Sadly but predictably,1 the government spent over 40% of the £50 billion in extra funding over the 2002-2006 period on pay and price increases with only modest improvements in productivity.2 Another substantial tranche of additional expenditure bought additions to the workforce to levels exceeding those set out in the National Plan.3
These problems of affluence were driven by a regulatory regime where the costing of new policy wheezes was generally noticeable by its absence. The mandarins in the Department of Health and their political masters assumed that National Service Frameworks, the 18-week target for electives, the provision of statins at a cost nearing £1billion and the regulatory agencies themselves could be funded out of the “magic pot” of generous additional NHS funding.
In the real NHS of everyday primary and secondary care, job tenure and career progression depended on fulfilling government performance targets. Expenditure control became diluted and deficits emerged. The expenditure brakes were consequently applied vigorously. As the brakes were applied complementary budgets, in particular those to fund education and career training, were plundered.
The political distress caused by the deficits has led to greater conservatism in the use of NHS allocations. The NHS budget in the UK now exceeds £100 billion and the nice issue is how much of that should be retained at the centre to bail out inevitable mistakes by some of the constituent parts of the NHS.
The Department of Health currently has a surplus of £1.8 billion, a relatively small percentage of the total NHS budget. Strategic Health Authorities have been instructed to maintain these surpluses. Is this prudent contingency planning? Or is it a fund to finance the planned and un-evidence based reforms of Darzi?4 The DH refuses to reveal to taxpayers the purpose of this hoarding.
There is also the nice issue of a “surplus” (better known as profit) of £1.3 billion squirreled away into banks by NHS Foundation Trusts.
The terms of reference of Foundation Trusts require them to be commercial and generate surpluses. These surpluses are to fund service developments and over the medium term to repay capital development paid for initially by borrowing from the private sector. With hospital tariffs fluctuating according to the whims and fancies of Whitehall, private sector borrowing is hazardous and minimal.
However a few Foundation Trusts are trading at a considerable profit and accumulating considerable bank deposits. In part this is defensible and prudent. The Foundation Trust regulatory regime requires stable financial performance over three-year planning periods and some surpluses are an essential insurance against short-term fluctuations in trading fortunes.
The surpluses of the DH and the Foundation Trusts are modest in relation to the total NHS budget. However there is a surprising lack of transparency about these hoards. Perhaps it is time for the hoarders to be more accountable for them?
- Maynard, A and Sheldon, T, Funding for the national Health Service, Lancet, 576,360, August 17,2002
- Wanless, D, Appleby, J, Harrison, A and Patel, D, Our Future Health Secured? : a review of NHS funding and performance, Kings Fund, London, September 2007.
- House of Commons, Workforce Planning, Fourth report of session 2006-7, HC 171,
- Roland, M, Assessing the options available to Lord Darzi, British Medical Journal, 625-6,336, March 2008.