16 December 2005
Health minister Lord Warner stunned delegates at the Healthcare Financial Management Association annual conference by blaming the health service's financial problems on managers.
Delivering an uncompromising message to the assembled accountants at the London conference on December 7–9, the minister insisted that poor management in a minority of organisations was undermining public confidence in NHS financial management as a whole.
When one delegate suggested that much of the overspends in the service over this year and last were due to the high cost of nationally negotiated pay contracts, such as Agenda for Change, the minister hit back strongly.
'I have heard the stories about Agenda for Change, the consultant contract, etc, but although they were nationally negotiated arrangements they were locally implemented.
'Agenda for Change and the consultant contract were implemented differently in different places.'
He added that Agenda for Change was a good example of this, because there were different approaches to arrangements so that the cost varied between trusts. 'You can't get away from the fact that it's people's responsibility locally to manage services.'
He added that the government would not bail out trusts that fell into deficit.
'This year we have recognised that some health communities will not break even but any overspend will have to be paid back next year. The department will provide guidance and support for recovery but there will be no extra money,' he said.
Traditionally, overspends in some organisations have been balanced by loans from other bodies with surpluses.
But Lord Warner said this practice often meant areas with greater needs were subsidising those with fewer health needs.
'People locally have to face up to their responsibilities and not rely on spending other people's money – it's not fair to move money around the system to hide deficits when initially the money was allocated according to health needs.'
All managers, not just finance staff, were responsible for reducing the deficit and should work with clinicians to cut costs.
'Deficits are not acceptable and will not be covered up. As we move into 2006/07, the NHS must return to balance and those organisations in deficit must improve their efficiency urgently,' he added.
Warner spells out turnaround teams' work
The initial work of the KPMG turnaround teams sent in to overspending NHS organisations last week will be completed by Christmas, Lord Warner told the conference.
The two-week exercise began on December 9 with initial interviews with strategic health authority managers who oversee around 50 trusts that have the worst deficits.
Commercial and NHS experts will then interview managers at local and strategic health authority level to identify the key problems that need to be addressed. Then, in early January, teams will launch more detailed analyses of trusts' problems, together with solutions.
'The teams will support organisations, and chief executives will remain accountable for the financial performance of their organisation. Turnaround teams will be needed for around 18 months, at which time we expect the NHS to have returned to financial balance,' Lord Warner said.
'I don't expect the turnaround teams and local management to solve the problems before Christmas but they will have time to get started and begin the process of identifying areas to work on.
'Clearly, we would like to see some results this financial year and we'd expect the NHS financial position to be no worse than at the start of the year,' he added.
He also insisted that the teams would not try to restore financial balance by abandoning key targets, such as those on waiting times.
NHS finance director Richard Douglas added that organisations with the most serious financial difficulties had to be treated differently and that was why they had been targeted with turnaround teams.
Plan for a surplus, Douglas tells health staff
NHS bodies must plan for a surplus or keep a contingency fund to prevent in-year financial pressures forcing them into the red, NHS finance director Richard Douglas told the conference.
The restoration of financial balance would start with the annual financial planning process, he said.
'It doesn't matter if you are getting 9% or 1% growth, if you are placing demands that are equal to resource growth it only takes a marginal slip to move into overspend,' he said.
'We have created a system that targets break even, almost to the penny, so it's inevitable that it risks deficit. A small miscalculation, an unexpected pressure, will move you to the other side of the break-even line.
He added that bodies needed to plan for a surplus to deal with risk, rather than 'to break even with risk overlaid on top of that'.
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