21 April 2006
NHS organisations reporting deficits in their final accounts for 2005/06 will be penalised by a sum equivalent to 110% of their overspend, Public Finance has learnt.
The NHS is forecasting a gross deficit of £816m. If that proves accurate, NHS bodies will be docked £897.6m from their planned £58.7bn revenue allocations for the financial year 2006/07.
The subtraction of almost £900m will put an even tighter squeeze on NHS organisations as they attempt to implement the aspirations of the recent health white paper and deal with underlying deficits that are causing an increasing number of job cuts.
The Department of Health has held back 100% of each strategic health authority's overspend each year since resource accounting and budgeting was introduced in 2001/02.
The regime has been criticised by penalised bodies as implementing a 'double whammy', because organisations with overspend problems not only have to cope within a further restricted budget, but must also still report their deficit in their accounts.
The DoH confirmed it will now charge SHAs an additional 10% of the value of their overspends, under a new NHS bank 'incentive scheme'. A spokesman said the RAB element of the cut was a 'principle' that emanated from Treasury rules. He added that SHAs with surpluses would stand to be 'rewarded' by up to 20%.
David Janner-Klausner of the Democratic Health Network think-tank told PF that the charges were 'a blunt instrument as they seem to take no account of the circumstances that have given rise to the surplus or deficit, nor the impact of penalty or reward on serving health needs'.
Prime Minister Tony Blair this week warned in a speech to the New Health Network think-tank that the reforms had reached 'crunch point', but added: 'The reforms expose the deficits, they do not create them. Our reforms are… closing off the hiding places for poor financial management.'
In the Commons on April 18, Health Secretary Patricia Hewitt admitted that NHS redundancies were 'very worrying' for staff, but said reports of thousands of job losses were 'nonsensical', adding that 'very few hospitals indeed will need to consider redundancies'.
PFapr2006
