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Exclusive: Nearly £3bn returned to Treasury

The Department of Health has returned nearly £3bn of its funding to the Treasury over the past two years, despite facing its tightest financial settlement for five decades.

A Treasury spokesman this week confirmed to HSJ the department had handed back around £1bn of the funding it was allocated for health spending in 2011-12. Just £316m of the £1.4bn that the DH left unspent last financial year has been carried over for it to use in 2012-13.

The final sum clawed back from last year’s health allocation is double the £500m estimate that was published in chancellor George Osborne’s March Budget.

The spokesman also confirmed that the DH recorded a £1.9bn underspend in 2010-11 - but made no use in that year of the “budget exchange” scheme which allows government departments to carry over some unspent funds for use in future years.

This means at least £2.9bn of DH funding has been clawed back by the Treasury in the past two years. This is despite the NHS facing a funding settlement for 2011-12 to 2014-15 that is likely to mean its “tightest four-year period in the last 50 years”, according to think tanks the Nuffield Trust and the Institute for Fiscal Studies.

Nuffield Trust chief economist Anita Charlesworth suggested the DH needed to rethink its approach to financial risk management.

“The department’s system for managing risk essentially requires organisations through the system to plan for surpluses, leading to aggregate underspends,” she said.

“They don’t have the mechanisms in place to then reinvest that money, because they have limited access to the budget exchange scheme.”

But, knowing that the DH had limited use of the budget exchange, she asked: “Should they not manage financial risk differently, to make sure allocations intended for the NHS are invested in new models of care that will help NHS financial sustainability in the medium term?”

She suggested that some of the clawed-back funds could usefully have gone to primary and social care services. These services had been “particularly squeezed” in the current austerity drive but were central to NHS plans to make efficiency gains by shifting care out of hospitals.

Although part of the funding the DH returned to the Treasury was money previously earmarked for capital investments such as buildings or equipment, the bulk of it came from the department’s “revenue departmental expenditure limit” - its budget for the recurrent costs of providing public services, such as wages.

According to the Treasury spokesman, the DH’s 2010-11 underspend was comprised of £1.2bn in revenue funds and £700m capital funds. The 2011-12 underspend was around £866m revenue funds and £577m capital funds, he added.

A Department of Health spokesman said: “The amount spent on frontline services in 2011-12 increased by £3.4bn and we have reduced inefficient spending, saving over £1.5bn on bureaucracy and IT.

“We have rolled over £316m from 2011-12 to 2012-13 through the budget exchange - some of this has been used to fund vital projects across the NHS to benefit patients.”

Readers' comments (23)

  • Astonishing

    No doubt greeted with disbelief by those managers and staff dealing with the consequences opf underfunding.

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  • "I see through the smoke and mirrors cloud very darkly"! Like unto God the Treasury giveth and the Treasury taketh away...it was ever thus.

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  • 'some of this (retained underspend) has been used to fund vital projects across the NHS to benefit patients.”
    And the rest.....??
    At first sight, the above quote is almost as astonishing as the Treasury claw back, or am I misunderstanding something?

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  • Frankly this is an utter disgrace; with so much funding being taken out of the system there is little or nothing left to invest in creating the new services necessary to ensure that the 'efficiency programme' doesn't simply turn into a massive cut in services.

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  • The whole issue is highly offensive.

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  • conspiracy or cock up?
    who will tell us?
    In the old days there was always a reservoir of projects funded by non -recurring funds allocations to mop up any underspends- Does that happen now?
    Could no one think of a way of investing in ways of making the NHS more efficient?

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  • why isn't it considered for uses such as backlog maintenance, or perhaps even buying out PFI arrangements - and the year on year savings that would result in!

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  • An insult to all of us who work in the health service. On a frequent basis we are begging with commissioners for comparatively piddling amounts of cash needed. We are just about to embark on cost sutting exercises which will surly lead to a failur of the 4 houlr targer. Everything else has been said. This is obsene

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  • You couldn't make it up

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  • This was hidden in the small print in the Budget, more details here http://tinyurl.com/c37djpu so all the flexibilities we'd had in years gone by have been removed.

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  • NHS finances have always had the feel of Alice in Wonderland. Which is why the universal, unquestioned drive to divide everything into 'business units' is so barmy. The NHS is not a business in the conventional sense, so business principles applied elsewhere are inappropriate and often result in perverse behaviour. Does that stop each new generation of health ministers? No, we spend billions educating them, then they lose power or get re-shuffled.............

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  • There seems to be money to waste in some parts of the NHS, commissioning reorganisation as an example. Then there are closures of for example, in-patient facilities for people with mental health needs with the suggestion that treatment at home is some great alternative, or denying life saving or prolonging treatment. This is truly offensive. What are the armies of accountants/managers doing if they can't usefully use the resources made available for patient care.

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  • Anon 3:57pm,
    I'll tell you what the army of accountants and managers are doing in our trust. The accountants are tyring to work out if it is at all possible that we won't run out of cash in late December, and how to break the news of a substantial 8 figure year end deficiet. The Managers are busy spending money like it is going out of fashion in the vain hope of hitting A&E and cancer targets. The CCG/PCT/SHA/LAT/NCB keep telling us they are going to punish us severley if we don't hit all targets and balance the books. Meanwhile we read a story about billions not being used. Enough to make you weep.

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  • what a disgrace, with care being rationed across the country

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  • What an utterly lame comment from DH. There is obviously no explanation of how this happened (twice).

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  • And there's me trying to sell QIPP by stating 'QIPP isn't about returning money to the Treasury, it's to create the headroom for investment, using the money differently within the NHS.' Silly me.

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  • Why encourage a failure regime by bailing out lossmaking NHS organisations with the surplus funds. Why not return it as an income premium.

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  • Perhaps the DH just need some inspiration to fuel a shopping spree? Here are some handpicked best buys: For a mere 1.095billion, the DH could sponsor the NHS Litigation Authority for a year - helping them settle clinical negligence claims arising from shoddy care. A mere 51million more and the DH could also settle a years' worth of non-clinical negligence claims. What a bargain. Or perhaps the DH would like to pour a few more pennies into the ever-ballooning budget for the highly wasteful and hugely disruptive reorganisation (I hear 1.6billion will cover it). All a bit pricey? Fear not. At the lower end of the market the DH could spend 7million on a shambolic public consultation to find out that people don't want their local A&E's closed (although it should be noted that there will almost inevitably need to be another 7million spent on letting people know what they said. But whilst we are buying.....?). Wrapping things up, and in the spirit of true unionism, the DH could always give out a few overly generous "exit packages" to some of NHS Scotland's finest. A miniscule 21million should do. All of these exceptional buys offer real value and would doubtless make a valuable addition to some of the now "vintage" fashions of the past - PFI's, unworkable computer systems and quangos (okay, almost vintage). Of course, none of these things will tackle the 8% annual increase in patient complaints- but come on, just because the public pay for the system, it doesn't mean they should get a real say in what is bought. Right?

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  • This is purely and simply about the inaccuracy of plans - from the NHS, ALBs and of course DH central spending. The NHS - by far - spend the most therefore they must have contributed the most to the underspends...

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  • When people are waiting 2 hours (often in the street) after ringing 999 for an emergency ambulance; when hospital wards are consistently running short of staff (with all the stress and patient safety issues that creates) and when we are constantly being told the NHS can longer afford this ,that or the other then frankly to be told something like this is highly offensive. If this money were really to be reinvested into front line services then perhaps it would be acceptable. But is it? Really? No probably not...it will probably go back into the general 'deficit' pot. No one would argue that services should be cost effective and provide the best value for money, but this is scandalous.

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