NHS Cutbacks Leave £500m Unspent

The NHS has underspent by half a billion pounds as a result of the aggressive cuts imposed by the health secretary, Patricia Hewitt, a Guardian analysis of health authority figures has revealed.

The size of the underspend caused fury among health union leaders yesterday, who said it was generated by an unnecessarily harsh squeeze on spending during the winter months when many NHS trusts economised by closing wards, axing jobs and delaying operations until the start of the new financial year in April.

The cuts included the loss of 22,300 jobs, mainly through local recruitment freezes, and 1,446 compulsory redundancies, mostly among non-clinical staff.

The department is due to announce provisional results for 2006-7 next month, but the magnitude of the underspend in England can be calculated from information provided by the strategic health authorities.

The biggest surplus was in the north-west, where the NHS ended the financial year with £161m in spare cash. Other surpluses included £116m in Yorkshire and Humberside, £92m in London and £73m in the north-east. The only deficits came in the eastern region, which overspent by £152m, and the south-east coast, which was nearly £55m in the red.

The total underspend is estimated at £456.8m, without taking into account NHS foundation trusts. When their results are declared the surplus could top £500m.

The health unions were yesterday shocked by the size of the underspend and claimed it was evidence that the NHS could afford the 2.5% pay rise that an independent review body proposed for nurses, midwives and other healthcare staff. Gordon Brown, the chancellor, has said 2.5% is unaffordable and postponed part of the increase until November, saving the exchequer about £60m in 2007-8.

The Royal College of Nursing and Unison, the public service union, are preparing to ballot on industrial action to force the government to pay 2.5% from April 1.

In many parts of England, primary care trusts cut spending during the final months of the financial year by ordering hospitals not to treat patients too quickly. A five-month minimum wait was introduced in some areas.

The health service overspent by £547m in 2005-6. Half-year accounts filed at the end of October showed NHS trusts were forecasting a £443m overspend in 2006-7. This was more than a central contingency reserve that had been set aside to stop the service going into the red.

Ms Hewitt called for further economies. She even asked underspending trusts to spend even less in the hope that their surpluses would compensate for overspending elsewhere.

When the third quarter accounts appeared in February, it looked as if the NHS had done just enough to escape another deficit. Richard Douglas, the director general for finance, said the service was heading for a £13m surplus.

The health secretary had threatened to resign if the NHS in England made another deficit in 2006-7 and this political risk may have encouraged her officials to err on the safe side.

The Department of Health refused to comment on the surplus before publishing the official figures next month. “Any surplus will not be wasted,” a spokesman said. “It will be invested in future services for patients. Trying to balance the books perfectly is like landing a jumbo jet on a postage stamp. It’s hard to come in bang on zero. Two years ago the health secretary asked NHS organisations to eliminate the deficits. They all responded, but a minority of trusts will take a bit longer to turn around. It was a tremendous effort.”

Karen Jennings, the head of health at Unison, said the surplus would make staff really angry, “particularly in the light of how they have been treated over the pay review”.

Gill Morgan, the chief executive of the NHS Confederation which represents managers and trusts, said a half-billion pound surplus amounted to less than 1% of the health service’s £75bn turnover. “This shows how hard everyone worked for the collective good of the NHS. We need a debate about whether the service should be allowed a variation of plus or minus 1% as long as we achieve balance over three years, ” she said.

Sam Everington, the acting chairman of the British Medical Association, said: “If these figures are right, we know that some trusts must have unnecessarily cut back on services to patients such as reducing operating lists and clinics, closing wards, cutting education and training budgets, and making staff redundant. All of these things will have impacted adversely on patient care.”

Janet Davies, executive director of the Royal College of Nursing, said the past financial year had been a painful and difficult one for nurses and other health workers: “At the very least the government should deliver the £60m needed to honour this year’s pay award in full, and reinstate lost nursing posts to employ all the newly qualified nurses without jobs.”

The Guardian’s analysis of surpluses and deficits was based on information in health authority board papers. Financial reports have not yet gone to the board in London and east of England, whose data was supplied by officials.