NHS underspends by £1.8bn
- Published: 22 November 2007 09:00
- Author: Sally Gainsbury
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- Last Updated: 26 November 2007 14:24
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The NHS is heading for a record £1.8bn underspend this financial year, HSJ can reveal.
The total surplus will be almost 2 per cent of the NHS budget. It is understood to be causing embarrassment at the Department of Health amid concerns that it will be accused of presiding over a 'bust and boom' health economy, coming just two years after the NHS was more than £500m in the red.
Part of the massive surplus is made up of £729m 'topsliced' from primary care trust allocations by strategic health authorities, according to figures placed in the House of Commons library.
"A £1.8bn projected underspend for this financial year would be more than three times the £510m underspend for 2006-07"
An inspection of board documents by HSJ shows that, by September this year, the SHAs were forecasting an annual underspend of £1.5bn in total (see table below).
But since then SHAs are thought to have identified a further £300m in surpluses.
An underspend of this size at this time is particularly difficult for the DoH as it recently told the NHS pay review body that staff should get pay rises next year of no more than 2 per cent.
A senior source close to the DoH told HSJ: 'It doesn't look good. The £1.8bn net surplus is a conservative estimate. There will be a lot of pressure on SHAs over the next few weeks to manage the situation closely and to bring the underspend down.'
NHS Confederation policy director Nigel Edwards said: 'There's a lot of anxiety that these overspends will now be clawed back. In some cases PCTs have run up surpluses to fulfil strategic plans but there are now a number of rumours that the Treasury will claw these back.'
A £1.8bn projected underspend for this financial year would be more than three times the £510m underspend for 2006-07. That followed a £547m overspend in 2005-06. King's Fund chief economist John Appleby said: 'An underspend by that amount will be seen as just as bad as an overspend. Parliament does not approve of large NHS underspends as it commits those resources for health spending, not to just sit there.'
But David Stout, director of the NHS Confederation PCT Network, was more sympathetic. It was useful for NHS organisations to underspend, especially given the slow-down in resources, he said.
'There's never been an agreed figure for the underspend. The DoH has asked SHAs to manage the situation quite closely. It will be sensitive about too big an underspend having taken severe measures last year and there's a public expectation that the NHS will land the jumbo jet on the postage stamp and get a precise figure each year.'
Speaking at the King's Fund last week - before the size of the underspend was revealed - NHS chief executive David Nicholson said it was important that NHS organisations made a surplus in order to support financial planning and service development.
However, he added: 'We don't want to go from bust to boom or for people to use the surplus to avoid making difficult decisions.'
A senior source at one SHA told HSJ it had experienced problems persuading PCTs to spend more money. 'PCTs have been in turnaround mode for two years. We keep telling them there must be more things they can spend their money on but they are being too careful.'
He said it was particularly frustrating as PCTs had more work to do to reach the 18-week target, yet were hesitant to commit more funds to achieve it.
Projected surpluses
SHA | Topsliced from PCTs | Total predicted surplus |
| London | £268m | £135m |
| Yorkshire and the Humber | £85m | £280m |
| West Midlands | £74m | £102m |
| South Central | £68m | £80m |
| South East Coast | £58m | £60m |
| East of England | £57m | £46m |
| South West | £46m | £149m |
| East Midlands | £38m | £114m |
| North East | £26m | £142m |
| North West | £9m | £350m |
| Totals | £729m | *£1,458m |
Sources: House of Commons library Nov 07 (topslices); SHA board papers, Sept-Nov 2007
*Based on data to September, estimates since risen
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