The King's Fund welcomes NHS surplus but warns of worrying and persistent deficits in local areas that must be tackled

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Commenting in response to the unaudited English NHS financial results for 2006/7 published today, The King's Fund Chief Executive Niall Dickson said:

'The NHS is back in the black and that is good news for patients, staff and the image of the health service, which has suffered over the past year. We welcome today's announcement of a net financial surplus but do not underestimate how difficult the past 12 months must have been for health professionals on the front line. It is to their credit, and the credit of the NHS as a whole, that it can now face the future on a firmer financial footing.

'But today's figures cannot disguise the fact that the gross financial deficit figure facing the service is £911 million, although it is good news that this has improved from the 2005/6 figure of £1.3 billion. And while the proportion of all NHS organisations in deficit has reduced from a third in 2005/6, it is still concerning that more than a fifth of organisations (22 per cent) are responsible for the overall gross deficit now. As the government has acknowledged, there is a pressing need to address the deficit situation for the 17 most indebted NHS organisations whose future remains worryingly unresolved.

'There should also be concern that some of the surplus generated by the service was in part made possible by cuts to strategic health authority budgets that usually would have been used for public health programmes, medical education and clinical training. Although the £450 million reserve generated by these cuts is going to be returned to SHAs to spend next year, it's unclear what impact last year's cuts could have in the long term. In the future, the NHS must move away from boom and bust financial management of this kind.

'The general public may be confused that the NHS is experiencing these financial problems at a time of record funding. But the truth is that turning around persistent and underlying deficits can take time and may involve significant changes in the way local services are delivered. We are paying the price now for failing in the past to deal with these underlying problems. The new arrangements which aim to be more transparent and not allow hidden subsidies from one part of the service to another are to be welcomed. But there is still room for improvement.'

Niall Dickson added: 'With continuing demands on the service, particularly the 18-week waiting time target, and the days of massive growth in funding coming to an end in 2008, the NHS needs to strengthen its financial management and commercial rigour. Encouragingly, there are some signs that it is starting to do so. But we should be under no illusion that this is the end of the story – the issue of ensuring good financial management in the NHS must remain a priority for the foreseeable future.'

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; conferences, seminars and workshops; publications; information and library services; and conference and meeting facilities.