The King's Fund responds to written statement from Health Secretary on NHS financial forecast

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Commenting on the publication of financial forecasts for NHS organisations by the Health Secretary, The King's Fund Chief Economist John Appleby said:

'The increased level of deficits forecast for NHS organisations this year, announced today by Health Secretary Patricia Hewitt, is worrying - but not surprising. It is essential that the government does not respond in an ad hoc way but instead introduces a system of support to enable NHS trusts and others to respond to emerging financial problems flexibly. If deficits become persistent, the system should also help them implement a re-structuring plan to restore financial balance and protect patient care. (See note 3 to editors.)

'Deficits are not necessarily the product of poor financial management. Of the extra cash going into the NHS this year, The King's Fund estimates that around three quarters has been absorbed by cost pressures - especially from increased pay, clinical negligence payments, and dealing with the EU working times directive. But the NHS still has to meet tough targets.

'The deficit figures highlight the need for the NHS to design and implement a serious 'financial distress' regime that can tackle financial problems as they emerge to avoid piecemeal cuts in patient services. The Secretary of State's announcement of the use of 'turnaround teams' to tackle financial problems may be part of such a regime - but should be a last, not a first, resort.

'While The King's Fund welcomes more transparency around the finances of the NHS, we would urge the Secretary of State to go further and compile and publish much more detailed analyses to answer the basic question: where’s the money gone? Recent reports from the Department of Health on this are sketchy and incomplete at best and do not pinpoint the cost pressures the NHS faces.

'And we need more detail on how the deficit figures are arrived at, for example, how much support NHS trusts have been promised from strategic health authorities or the NHS Bank.'

Notes to editors

  1. For further information or interviews, please contact the King's Fund media and public relations office on 020 7307 2585, 020 7307 2632 or 020 7307 2581. An ISDN line is available for interviews on 020 7637 0185.
  2. The King's Fund is an independent charitable foundation working for better health, especially in London. We carry out research, policy analysis and development activities, working on our own, in partnerships, and through funding. We are a major resource to people working in health and social care, offering leadership development programmes; seminars and workshops; publications; information and library services; and conference and meeting facilities.
  3. The King's Fund will launch two reports on Wednesday 7 December: How should we deal with hospital failure? Facing the challenges of the new NHS market, by Dr Keith Palmer, and Regulating Health Care: The way forward, by Dr Jennifer Dixon.
  4. These are the latest reports in the King's Fund's programme of work examining the new NHS Market - NHS Market Futures. Other papers in the series address critical issues such as the future of primary care and commissioning. The series will make an important contribution to the debate about the direction in which the NHS is now moving.