NHS Deficit Doubles to over £500m

The NHS deficit has reached £512m – more than double the amount last year. The unaudited figure for the 2005-6 financial year is £100m less than mid-year forecasts, prompting ministers to say the crisis had stabilised.

Overall, nearly a third of the 566 NHS organisations failed to break-even with a hardcore group of 63 responsible for 70% of the deficits. Over 12,000 jobs have been cut, wards closed and operations delayed as NHS trusts have struggled with finances.

The deficit would have topped £1bn if it was not for a huge surplus registered by regional bodies known as strategic health authorities (SHAs).

SHAs are largely management organisations, but do handle the NHS training and education budget which has been cut by up to 10% in some places. And a joint report by the Audit Commission and National Audit Office into NHS finances warned unaudited accounts can underestimate the true deficit.

Health Secretary Patricia Hewitt said: “The NHS is now stabilising this financial problem while counting to improve services for patients.” And she added that while job cuts were being announced in the overwhelming number of cases they would not lead to redundancies.

The NHS annual report, also released along with the finances, showed waiting times and deaths from cancer and heart disease failing. In December, the government published mid-year forecasts showing the NHS was heading for a £620m deficit.

At the time, Ms Hewitt said she expected to get it down to about £250m by the end of the financial year and zero 12 months later.

She subsequently admitted the £250m mark would be missed, but still maintained the NHS would break even by the end of 2006-7. She also announced financial figures would be published quarterly instead of half-yearly.

Why are deficits in the news? 

The £512m figures compares to £221m a year ago and a small surplus the year previously. It represents just 0.8% of the NHS budget, but comes after NHS funding has doubled since Labour came to power.

Most of the worst deficits are concentrated in the east and south east of England. But the government dismissed claims regional factors were the cause of the problems. Instead, Ms Hewitt has pointed the finger of blame at bad management. She has already sent financial hit squads into the worst performing trusts.

Gill Morgan, chief executive of the NHS Confederation, which represents health managers, said: “It is all too easy to blame individual managers, but the financial problems often relate to systemic issues.” {mospagebreak}

And doctors’ leaders have blamed political interference and bad policies for the problems.

Paul Miller, chairman of the British Medical Association’s consultants committee, said the involvement of the private sector and use of management consultants were wasting vast sums of money.

“Yes, bad management is a problem in some places, but the biggest cause is the interference from government. Something is going badly wrong and it is demoralising for staff.”

Shadow Health Secretary Andrew Lansley said the huge SHA surplus was masking the extent of the problems. He said nurses and doctors would no longer have posts to go on to when they finished their training as they were cutting their budgets by 10% to bail out other parts of the health services.

He also said the government had underestimated the cost of new contracts for GPs, hospital doctors and nurses, adding: “Policy is failing.”

Liberal Democrat health spokesman Steve Webb added the government had shown “incredible mismanagement” after spending huge sums on the NHS and ending up with one of the worst deficits for years.

    Hillingdon PCT (London) – 12.8% (£36.5m in cash terms)
    Chelmsford PCT – 11% (£13.1m)
    North Norfolk PCT – 10.4% (£12.2m)
    Cambrigde City PCT – 9.8% (£13.7m)
    Hertsmere PCT (Herts) – 9.2% (£9.4m)
    Surrey and Sussex NHS Trust – 25.5% (£40.8m in cash terms)
    Queen Mary’s Sidcup NHS Trust (London) – 22% (£19.7m)
    South Warwickshire General Hospitals NHS Trust – 16.3% (£13.8m)
    Queen Elizabeth Hospital NHS Trust (London) – 14.4% (£19.2m)
    The Royal West Sussex NHS Trust – 13.6% (£13.4m)