30 May 2008
NHS leaders and experts have defended an apparent end-of-year spending bonanza, without which the health service's surplus for 2007/08 could have vastly outstripped the £1.8bn figure set by the Department of Health.
Anecdotal reports have suggested that NHS bodies spent money rapidly at the end of the past financial year, with some pre-paying suppliers for goods needed in 2008/09.
The DoH set 'control totals', against which trusts were expected to avoid over- or under-spending. The apparent spending spree has come amid fears that if the NHS generated too big a surplus, the increasingly cash-strapped government would try to claw back the money.
John Appleby, chief economist at the King's Fund think-tank, said NHS organisations could be tempted into year-end spending splurges because of the Treasury's earlier clawback of £2bn from underspent capital budgets.
'The Treasury may say “if you don't spend it, we'll have it back”. There is that worry,' he said. 'I think what the NHS needs is a bit more stability in financial policy. We've had a few turbulent years.'
He added that he had heard anecdotal evidence of PCTs 'holding back on spending because the DoH set targets not just to pay back the previous year's deficits but also to end
up with the £1.8bn target'.
'As you get towards the end of the year, it gets harder to spend sensibly,' he said. This made it easier to spend in a hurry on things that were needed in the coming year – 'not an ideal situation'.
Chris Calkin, chair of the Healthcare Financial Management Association and finance director at University Hospital of North Staffordshire NHS Trust, acknowledged that without the spending spree, the overall NHS surplus could have been higher. 'I'm aware that organisations have been having to manage [their surpluses] down to control totals – which gives an indication that the surplus would have been higher,' he told Public Finance.
'The Department of Health had made it very clear they would establish a control total in around August last year and that would not be exceeded. That was a new thing. That's one of the things that's created this year's [spending] pressures.'
But Calkin said the NHS had also been wrestling with other DoH stipulations and an uncertainty over future finance.
'The DoH made each primary care trust start the year with a 0.5% contingency,' he said. This measure, taken in response to the public and political storm over previous years' NHS deficits 'turned out to be over-prudent' while changes to the funding formula for PCTs had been delayed.
NHS Confederation deputy policy director Jo Webber told PF it did not surprise her, but questioned whether this made 2007/08 different to any other year. 'It is a bit of a feature of the end of the NHS financial year in that people have always looked at where there's any spare money around and what they need to invest in.'
A DoH spokesman said NHS trusts were subject to 'a full audit at the end of the year'.
PFmay2008
