Crisis, what crisis?

24 Feb 12
Noel Plumridge

The first signs came just before Christmas, when the Department of Health invited bids for a new £300m capital fund. Applications by January 12, please, for projects worth £5m or more, to commence by March.

Had ministers spotted, rather late in the day, potential embarrassment ahead? Were we returning to a discredited style of financial management: quick, get spending? It seemed radically at odds with NHS miserablism. And some wondered: where might the money be coming from?

Stephen Dorrell, who chairs the Commons health select committee, has consistently argued that the government’s priority is to improve productivity rather than reorganise the NHS. The committee soon made its views on the DoH memo known.  ‘At a time when all NHS bodies are being required to make efficiencies and need to plan strategically to reshape services,’ it stated on January 24, ‘it is unhelpful for the Department of Health to require them to make bids for capital funding to such short deadlines and without adequate preparation.’

Meanwhile, on January 12, came news of an extra £185m for the NHS Litigation Authority to help cover the rising cost of legal claims and fees against NHS providers. The mounting cost of medical negligence claims is widely acknowledged. Settlements now cost the NHS nearly £900m each year, having trebled since 2000/01. The government has made additional funds available to help claimants receive compensation ‘in a timely way.’ A laudable decision. Yet, once again, the move seemed to contradict official rhetoric about an NHS struggling to deliver heroic savings.

And then, on February 3, the DoH announced a £1.5bn bailout fund for hospitals burdened with debts under the Private Finance Initiative. Seven troubled hospital trusts have access to the fund: Barking, Havering and Redbridge; Dartford and Gravesham; Maidstone and Tunbridge Wells; North Cumbria; Peterborough and Stamford; St Helens and Knowsley; and South London. (One of the seven, North Cumbria, could be on its way to being renationalised).

Without such funds, it is suggested, six of the trusts cannot ever become viable foundation trusts. There are strings attached. The subsidy will be paid over the remaining life of the PFI contracts – between 16 and 29 years – so the cash outlay is relatively small. And yet… where has the money come from?

In December, the DoH forecast what it called a ‘healthy’ aggregate surplus of £1.22bn for 2011/12. This excludes foundation trusts, and is broadly consistent with a budget that envisaged large central reserves to pay for ‘costs of change’.

But spending on ‘change’ appears sluggish. Privately, trust finance directors blame it on the paralysis that is engulfing many primary care trusts as the provisions, legally binding or not, in the  Secretary  of Health Andrew Lansley’s Health and Social Care Bill are implemented. The culprit, as so often, is slippage. The large budget from the cancelled ‘Connecting for Health’ IT project may have come in handy too.

One cannot escape the conclusion that the Department of Health has an unexpected embarrassment of riches in 2011/12; wealth that sits uncomfortably alongside hospital job cuts, commissioner rationing and a target of £20bn savings by 2015.

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