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NHS: Deficit

Volume 688: debated on Monday 8 January 2007

asked Her Majesty's Government:

What is the cash operating deficit currently forecast for the National Health Service in the current fiscal year; and what is (a) the level of any provisions or contingencies which may have been released in the calculation of this figure; (b) the origin, as to purpose and timing, of their creation of any such contingencies and provisions; whether any new contingencies and provisions have been created during the current fiscal year; whether any remaining contingencies and provisions outstanding from prior years or earlier creations within the present fiscal year have yet to be released into the forecast deficit; what is the cost of any redundancy or rationalisation programme which may have been incurred in the current fiscal year and the value of any revenue released which has been assumed to benefit the current fiscal year as a result; and what are the cost and consequences projected for any further redundancy programme to be implemented in the current fiscal year. [HL858]

As reported in the National Health Service financial performance report for quarter two of 2006-07, the NHS as a whole is forecasting a £94 million net deficit, after the application of a £350 million contingency established by strategic health authorities. We believe that the NHS overall remains broadly on track to deliver net financial balance by the end of 2006-07 and continues to perform well against key service targets.

The contingency in 2006-07 has not been created from new funding provided by the department. As part of their management of the £5.5 billion central budget bundle distributed to them for the NHS, SHAs have established a level of contingency which currently stands at £350 million. This contingency is a prudent approach by SHAs to manage financial risk in the NHS while ensuring that services to patients are delivered.

There are a number of factors, not yet included in the NHS forecasts, which may have beneficial impact on the forecast outturn position. The most significant is the potential benefit arising from the lower reimbursement cost of generic medicines.

There will be redundancies resulting from the strategic health authority and primary care trust reorganisation which will release £250 million to front line services. The full benefit of the £250 million saving will happen in 2008-09 when all of the costs have been paid.

The cost of redundancies in the NHS is not collected centrally.