NHS finances in better shape but action needed now to prepare for leaner years from 2011

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Commenting in response to the Public Accounts Select Committee report into financial management in the NHS, which highlighted the service had a £1.7 billion surplus at the end of 2007/8, The King’s Fund’s Chief Executive Niall Dickson said:

'Delivering a £1.7 billion underspend in a £100 billion service is not ideal, but we should remember that only three or four years ago the NHS was overspending and in serious financial trouble. The finances of the health service are now in much better shape and this will be crucial as the NHS will have to prepare at best for very low or zero growth in funding from 2011 onwards. However, there remain hotspots, mainly in London, where some health organisations are still in significant debt. This is a concern.

'The Public Accounts Committee is right that the quality of care patients receive should not suffer as a result of local NHS trusts building up large surpluses. Almost half of the £1.7 billion NHS surplus – £800 million – will be re-invested into frontline services between now and the end of 2010/11, but it is unclear what will happen with the remaining surplus. And this does not take into account the substantial surpluses that have been built up by autonomous foundation trusts.

'However, it is only right that extra money is set aside now as the financial prospects for the health service after 2011 look very serious indeed.'

He added: 'The challenge now facing the NHS is clear: managers and clinicians will have to organise the services they provide more efficiently and productively so that they deliver more care for less money. All this will happen at a point when demand on health care services is rising: the number of older people and those with chronic disease, the most intensive users of the NHS, is growing rapidly. This makes the next two years a critical time for the NHS but it has an opportunity up until 2011, with a relatively benign financial environment magnified by reductions in inflation, to get this right.

'Above all, as the NHS strives for greater efficiencies, it must learn from the inquiries into both Maidstone and Mid Staffordshire trusts to ensure local services do not lose sight of the quality of care their patients receive.'

Notes to editors

  1. For further information or interviews, please contact The King’s Fund press and public affairs 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 has produced coverage on the Budget and what it means for the NHS now and from 2011 onwards. Some key facts include:
    • The NHS in England has enjoyed unprecedented increases in funding in recent years – today’s budget is £61 billion more than it was in 1997/8. This is equivalent to a real-terms increase of more than £34 billion.
    • The NHS will have to make additional savings of £2.3 billion in 2010/11, taking the budget from a planned £104.6 billion to £102.3 billion. Combined with efficiency savings already required of the NHS by the 2007 spending review, this £2.3 billion brings the total required efficiency savings for the NHS to £10.5 billion over this spending review period (2007/8 – 2010/11).
    • The increases in funding allocations for primary care trusts (PCTs) – which make up 80 per cent of the NHS budget – for this year and next year (2009/10 and 2010/11) will remain at 5.5 per cent. This was already set out in the Operating Framework 2009/10.
    • £800 million of the £1.8 billion surplus the NHS has carried over to the 2009/10 financial year will be reinvested in frontline services up until the end of 2010/11 (£400 million each year).
    • The average amount in real terms at which spending across the whole public sector is now forecast to grow from 2011 will be 0.7 per cent, rather than the 1.1 per cent per year anticipated in the 2008 pre-Budget report.
  3. The King’s Fund is a charity that seeks to understand how the health system in England can be improved. Using that insight, we help to shape policy, transform services and bring about behaviour change. Our work includes  research, analysis, leadership development and service improvement. We also offer a wide range of resources to help everyone working in health to share knowledge, learning and ideas.