30 March 2007
Overspending NHS trusts will no longer face deductions from their resource allocations as the Department of Health has moved to change the rule two days before the end of the financial year.
The reform comes three months after the DoH said it wanted to end the application of that element of the resource accounting and budgeting regime, but did not think it would be prudent, as the NHS neither had the funds nor the financial discipline to do so.
But the rule's demise was announced in a written statement to Parliament by Health Secretary Patricia Hewitt on March 28.
Hewitt said: 'The NHS financial position has shown a massive improvement since last year. A deficit of £547m has been transformed into a small surplus… This improved performance of the NHS overall means that we are now confident that we can move trusts out of the Rab regime.'
Last summer the Audit Commission found that so-called 'double whammy' Rab deductions were not consistent with the rest of the NHS trust financial regime.
Trusts are legally bound to break even over three to five years by balancing out overspends with surpluses. Yet Rab deductions meant they had to do that within a reduced income — an impossible task for some of the most indebted.
The end of Rab does not change the NHS's most recent financial forecast, as the £13m anticipated surplus already assumed that a DoH 'contingency fund' of £450m — hewn in part from training and public health funds — would be transferred to the NHS. That formally happened on March 28.
Hewitt explained that shares of the £450m would be distributed to strategic health authorities and the 'first call' on those funds would go to the 28 NHS trusts hit by £178m of Rab deductions at the start of 2006/07.
The return of that £178m would bring seven trusts out of deficit. Four will now report larger surpluses, but 12 will continue to forecast deficits totalling £87m. Rab deductions will continue to be applied to SHAs and primary care trusts.
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