The Pharmaceutical Journal
Vol 276 No 7404 p669
10 June 2006

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Over a quarter of NHS bodies in England now running annual deficits

One in four NHS bodies in England are now over-budget, a joint report published this week by the National Audit Office and the Audit Commission has revealed.

In 2004–05, 28 per cent of NHS bodies (171 out of 615) recorded a deficit or overspend, up from 18 per cent (106 of 600) in 2003–04. This is reflected in an aggregate annual deficit of £251.2m across the NHS.

In his first report to the NHS, also issued this week, Sir Ian Carruthers, acting chief executive of the NHS, acknowledges that there is a “financial blot”, but argues that the NHS’s finances are starting to stabilise.

“There is a financial blot on the landscape, but we should put it in perspective. The unaudited deficit for 2005–06, just over £500m, represented less than 1 per cent of the annual NHS budget,” he says in the report.

“Contrary to what our critics claim, reform is not the reason for the overspend or the jobs losses, it is the solution,” he adds. “The reforms are producing greater financial transparency — in some cases uncovering problems hidden for years — and providing incentives to ensure that the NHS can return to financial balance.”

However, the National Audit Office and Audit Commission report argues that cumulative deficits pose considerable problems. For instance, 26 per cent of NHS trusts showed annual deficits, but trusts as a whole have more than doubled their cumulative deficit — the total cumulative deficit across NHS trusts was £598m on 31 March 2005, compared with £276m for 2003–04.

Although the Department of Health believes that such cumulative deficits should not be written off, the National Audit Office and Audit Commission argue that this stance needs to be reconsidered. “For a minority of bodies, it will not be feasible to recover their cumulative deficits without some form of assistance from the DoH,” the report says. The report also recommends that awareness of risks in delivering financial balance needs to be shared more generally with NHS staff.