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NHS Finance and Performance

Volume 468: debated on Thursday 29 November 2007

At the end of 2005-06, the NHS had a net deficit of £547 million, with 123 (33 per cent.) organisations building up a total gross deficit of £1.3 billion. Today I am pleased to say that we have turned that position around completely.

Financial projections at the end of September 2007 show that the NHS is forecasting a healthy £1.8 billion surplus for 2007-08, with only 25 trusts forecasting a deficit. This is a dramatic improvement and a testament to the efforts of NHS staff over the last year and a half.

This level of surplus—which is only about 2 per cent. of the overall NHS budget—shows sensible financial management. The NHS should not merely be aiming to breakeven year-to-year, it should be planning for a surplus so that it can make long-term investment decisions, such as public health investments and shifting appropriate care out of hospital and closer to people’s homes.

The Chief Executive of the Audit Commission, Steve Hundred, said last month

“The NHS is no longer in deficit, which is good news for patients and for taxpayers, Managing money well goes hand-in-hand with providing better patient care. Trusts that fail to manage their money well are unlikely to be doing their best for patients”. (Audit Commission, Press Notice, 23 October)

But, while this is good news in overall terms, we are not resting on our laurels. We are working with strategic health authorities to support a handful of financially challenged trusts, which need intensive effort to get out of deficit. Our aim is that all NHS organisations should be out of in year deficit by the end of next year.

This financial turnaround and surplus have been achieved at the same time that the NHS has maintained or improved performance on key indicators of patient care. We will be publishing a report tomorrow that shows:

waiting times are down to an all time low and the NHS is on course to deliver the 18-week target;

cancer waits are down;

the excellent level of A&E performance has been maintained, even during periods of extra pressure;

latest data show continued progress towards halving rates of MRSA, a problem in health systems across the developed world; and

early signs of promise on Clostridium difficile, with latest quarterly figures showing a fall in numbers for the first time.

The financial improvement has not been at the expense then of patient care. In fact, the independent Healthcare Commission’s last survey of recent hospital inpatients showed 92 per cent. rated their care as good, very good or excellent.

These results have been achieved, in part, by introducing a stronger, fairer and more transparent NHS financial regime, coupled with a renewed emphasis on performance management, but more importantly by NHS organisations taking action to increase productivity such as:

increasing the use of day surgery and minimally invasive techniques;

by providing support for people with long-term conditions and reducing unnecessary emergency bed days; and,

reducing the use of agency staff.

The comprehensive spending review settlement gave health a very good increase of 4.0 per cent. in real terms, but even this means the NHS will need to plan for a slowdown on the recent unprecedented levels of investment. The surplus gives the NHS flexibility to respond to fluctuations in demand and enables organisations to commit future growth on improving services for patients.

It must be emphasised that this surplus is not being held at the centre. It remains with the NHS so they can use it to invest in improving the quality of patient care next year and in future years.

Through the rest of this financial year the NHS will use the surplus to accelerate improvements. For example, the strategic health authorities have between them agreed investments of £57 million in a programme of deep cleaning for hospitals to help deliver a better patient experience.

The NHS will also have the capacity to accelerate progress in the numbers of patients treated within 18 weeks of referral to a specialist. For example, £22 million has been made available in NHS South Central and is already producing more clinics, diagnostic facilities and operating theatre sessions.

While in the north-west £35 million will be made available to support a broad range of public health initiatives. A large amount of this resource will be targeted at educational programmes. And in the East Midlands £7 million has been made available to improve GP access and premises along with a further £5 million to reduce health inequalities.

In conclusion, NHS performance at quarter 2 shows encouraging progress being made in delivering our promises to patients and the wider public and the forecast surplus is a reassuring sign that the NHS is restored to financial health and will enable investment in improving the quality of patient care. Tables have been placed in the Library.