28 July 2006
The Department of Health's finance director Richard Douglas has admitted to MPs that the apparent sudden deterioration in the NHS's finances is a product of changes in accountancy practice.
As Public Finance revealed last month, the combined impact of surpluses carried over under Resource Accounting and Budgeting rules and capital-to-revenue transfers between 2001/02 and 2004/05 was to disguise underlying allocation overspends of between £225m and £328m.
In 2005/06 the impact was the reverse, as Rab carry-over rules entailed a net deduction to the NHS's allocation, meaning the underlying allocation overspend was £395m rather than the reported £512m.
'The Public Finance figures are absolutely correct,' Douglas told the Commons health select committee last week. 'The position has not dramatically suddenly deteriorated – [it] has been a lot flatter.'
MP for Dartford Dr Howard Stoate reacted angrily: 'The real position has been masked from the public eye for the past five years. Rather than accepting that you have a difficulty… what has happened is that this year it looks like a real crisis and the trusts up and down the country are now having to make extremely unpalatable decisions.
'[This is] simply because your accounting system over the past five years has, very conveniently, made things look as if they were going quite smoothly. In fact, the underlying deficit now is almost exactly the same as it has been for the past five years.'
Douglas denied the department had deliberately attempted to 'mask' the deficit but said: 'If what you are saying is these problems should have been tackled earlier, I would absolutely agree with you.'
PFjul2006
