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Exclusive: Treasury claws back £0.5bn from health budget

The Treasury has clawed back half a billion pounds that was allocated for health spending this year, prompting fears that the punishing NHS savings drive will go towards “general deficit reduction”.

Figures published in this week’s Budget show that the Department of Health underspent its allocated funding by £900m this year. While £400m will be rolled over for the department to spend in 2012-13, the remaining £500m has been returned to the Treasury.

Nuffield Trust chief economist Anita Charlesworth told HSJ: “Although a number of NHS trusts are in deficit, the NHS is projecting a healthy surplus and the health budget as a whole is forecast to underspend by £900m this year.

“The argument for front-loading efficiency plans was to generate money to reinvest in transforming services so that they would be sustainable in later years as the impact of constrained funding started to bite. 

“Instead it seems that £500m of the savings are not going to be reinvested in new models of service delivery but will instead be channeled towards central government deficit reduction.”

A DH spokeswoman said: “The majority of the underspend is from the capital budget - mainly from savings on IT systems and better management of budgets.  We have already taken advantage of HM Treasury’s Budget Exchange Scheme and transferred the maximum amount of the capital budget into 2012-13.”

Readers' comments (9)

  • And this is just after the fanfare of Cameron announcing his splendid generosity in allocating £330m for capital schemes over the next two years. They give with one hand and take back a lot more with the other.

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  • what's the story here?

    It's pretty usual for underspends on capital projects to be returned - there certainly shouln't be an assumption that these will be converted into additional revenues for general expenditure.

    In this case, part of the underspend has been returned, and part has been carried forward. How exactly is this different to previous years and if it's not, aren't the headlines / volume of noice created by them this just mischief making by the HSJ?

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  • Hi Anon 10:39. Thanks for your questions. To clarify, £400m of the £500m clawed back comes from the capital allocation; the remaining £100m comes from the resource allocation, or current expenditure.
    There's no mischief here. We're reporting what happened to the DH budget, and the views of a respected health economist about that, as we have done in the past (http://www.hsj.co.uk/news/finance/treasury-confirms-55bn-nhs-underspends-are-lost/5020835.article).
    There is also no assumption that capital underspends should be converted into revenues for general expenditure. It is worth noting, however, that they can at least in principle be reallocated for other capital projects: http://www.hsj.co.uk/news/finance/exclusive-trusts-given-days-to-apply-for-300m-capital-fund/5039891.article.
    The suggestion reported here is that what makes 2011-12 different to previous years is that it is the first year of a 4-year efficiency savings programme, and that the assertion of the DH was that "every penny" of those savings would be available for reinvestment in healthcare: http://www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/documents/digitalasset/dh_120693.pdf.
    In that context it is surely a legitimate question, at least, to ask why some of the money saved this year will not be available.

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  • ^^^Anon 10.39am

    The story is that the best part of £1billion never made it to delivering patient care in 2011/12. In a year of huge cuts, savings have not been reinvested into anything but a big black hole.

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  • 10.39 Anon
    Nothing really much to add to Crispin's excellent answer and rebuttal to your comments other than to recommend you take a brief skim through the last 18 months or so of health coverage in the HSJ and elsewhere that you clearly seem to have missed.

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  • The real stroy here is that front line services are being heavily squeezed through tariff reductions whilst the DoH and PCTs have sat on too many reserves. The spending panic of the last month or so came too late to hide the surplus. It is a shame that the money was not in tariff in the first place as the result has reduced the quality of services and will lead to provider failure in many parts...

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  • Do we think some civil servant in the treasury has done the maths to ensure that this year's budget - net of the clawback - still goes up year on year in real terms?

    I seem to recall it was pretty tight given inflation had risen.

    If not, there will be much political hay to be made from broken promises (although that particular ship has well and truly sailed over Tuition fees and no top down NHS reorganisation, so it may be that nobody in power is bothered about such things any more)

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  • Anon 10:39 - The difference is that the Government has made a big thing over real terms increases for the NHS, and as pointed out above, that savings would be reinvested in health.

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  • The painful cutabscks made can't go on for ever....it will bite quality/safety....we really need every penny the NHS saves from painful cutbacks to be reinvested!

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