Health overspend set to worsen

18 Nov 99
The health service is being urged to reduce its deficit next year, even if that means postponing initiatives and cutting other services, finance managers said this week.

19 November 1999

The Healthcare Financial Management Association last week published a survey of health authorities and trusts which predicted that the English NHS would be at least £200m in the red by the end of the current financial year. The figure includes the £93m deficit which had been planned by the NHS Executive.

The outlook for next year already looks bleak. Eric Morton, HFMA chairman, said that although the 4.4% real-terms increase in funding for 2000/01 was generous, it was probably already spent.

Stephen Thornton, NHS Confederation chief executive, warned that next year's pay rises would be critical to the service's financial stability. 'There will not be enough money to deal with our unavoidable cost pressures, and to give significant pay awards to staff. Another unaffordable set of pay awards would have dire consequences.'

Morton said the HFMA was not scaremongering but wanted to highlight the problem early so that it could be tackled as soon as possible.

'Putting it in context, it is not big bucks – it's about half of 1% of the budget, so we are not talking about meltdown,' he said. 'When the government took office the overspend was about £500m and we got it down to virtually break-even.

'But now we are moving in the wrong direction. Generally, the attitude in the public sector is that you should live within your means. The health service is no different.'

The Department of Health has not contested the HFMA's figures, though Health Secretary Alan Milburn told the BBC Radio 4 Today programme that the overspend would be 'swamped' by the £300m from the tobacco levy announced in last week's pre-Budget report.

The survey, which received responses from more than 50% of health authorities and trusts, found that primary care prescribing was the biggest unforeseen cost pressure on health authorities, draining an additional £44m from their budgets.

Unsurprisingly, pay pressures of £16m were the biggest worry for trusts, with £18m needed to cover staff costs over the millennium, and the working time directive.


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