So the deficit is smaller than the critics suggested, but NHS acting chief executive Sir Ian Carruthers admits the service is not where he wants it to be. And he tells Nick Edwards that the longer trusts leave it to get back on track financially, the harder it will be

When Sir Nigel Crisp presented the last six monthly progress report on the NHS in December, it was immediately torpedoed by the emerging scale of the service’s deficit. Impressive progress on waiting times was lost amid the explosions and its author never really recovered. People had simply stopped believing in him.

Six months on, no-one could doubt that acting chief executive

Sir Ian Carruthers’ first report would focus on money. The finance chapter is only a few pages long but the facts are simple - a deficit for 2005-06 of£512m, down from£623m at the end of 2005. Although that is well above the£200m his predecessor promised at the beginning of the financial year, ironically it will be seen as a relative success.

Sir Ian is not the crowing type - too careful in thought and speech - and in reality there is not a huge amount to crow about. For a start, most people will assume the figures have been improved courtesy of central cuts (remember the last time you saw Department of Health-funded public health campaigns?).

The real struggle has yet to come. Although the DoH now accepts that not all trusts will get to balance by the end of the year, even its new target of achieving in-month balance will be difficult for some.

Sir Ian says: ‘It would have been much better obviously if the debt had been lower but, given the projections that others had been making - anything up to£1bn - this demonstrates that we are making inroads. Although we never said it would be greater than£623m, many others inferred that it would be. It is an improvement, but there is no complacency because it will be a lot of hard work to get where we need to be.

‘In the last six months, the NHS has done everything it can to pull back the mid-year position, although there is still a long way to go. We are some way off where we want to be.’

The report is fairly brisk about what is not to blame, such as regional funding disparities or expensive quality drives. There does seem to be tacit acknowledgement that resource account budgeting (RAB) is a problem, but Sir Ian says: ‘RAB applies to all government departments ? it’s only a problem for NHS when we overspend.’ And that brings him on to some stern words for managers.

‘It shows that if you have a big deficit, unless you take early action to prevent it or handle it at an early stage, it becomes increasingly more difficult. That’s the reason we want to impress upon everyone that now is the time to handle difficult issues - the position can be turned round, but it gets more difficult the more you leave it. Intervene early. Where that hasn’t been the case it becomes increasingly difficult, hence the present situation.’

Are historical deficits too often an excuse for inaction? ‘Financial problems are symptoms of the management decisions that have created them. It’s not surprising that when times are hard, people get to the point where they think it’s impossible. I’m sure that has been the case, but that is unacceptable because our job is to make a difference within the resources available.’

Trusts that continued to recruit even when their financial problems were plain are a particular example. When Sir Ian hosted a ‘turnaround’ meeting for the prime minister at Number 10 two months ago, he could not hide his disgruntlement for trusts that have closed their eyes to their problems. It is a theme to which the prime minister has since returned ? the ‘myth’ that public sector values can be evoked as an excuse for unsynchronised and muddy business processes.

Now Sir Ian says: ‘In most areas, there is correlation between how trusts deal with the workforce in terms of recruitment, how they deal with activity and the financial position. A number of trusts have been in the position where, despite problems, they have continued recruiting. That highlights for me that there isn’t sound and effective internal management processes. To me it is inconceivable that an organisation in difficulty is going to continue recruiting and growing to a level that it knows it cannot afford.’

With turnaround, has this unsound practice been stopped?

‘I wish I could be confident, but across 600 organisations there is bound to be some variability ? but I would hope that very few are still in that position. In a well-run organisation these connections would be being made.’

That will, he says, be the key to achieving the target of in-month balance and a start to paying off any debt. Is there a danger that trusts will pay lip service, gaming their numbers to ensure apparent balance in month 12? That would certainly be the suspicion if ‘success’ came right at the end. Sir Ian says: ‘We would of course want monthly run rate as soon as possible. It’s the only thing that makes the difference in the end.’ He says local delivery plans will contain commitments on this. He also says that the ‘vast majority’ of the 31 per cent of organisations in debt are in monthly balance.

Some at least will be achieving that by stalling on initiatives such as the 18-week target. Sir Ian may say it should be ‘given top priority’, but there can only be one priority on top and money is sat there fair and square for the moment.

However, Sir Ian maintains: ‘We need to make inroads. It is not sufficient to say because of financial problems we can’t, because I think that is the case in some ? but very few ? areas. When you look at the financial positions in the majority of the country, organisations are in financial balance. And making no progress is not an option for any organisation.’

Quite how big the challenge will be is still unclear for many trusts due to invisible diagnostic waits. They will not be invisible for much longer - the DoH plans to publish figures before the summer.

Foundation regulator Monitor is not afraid to ruffle feathers, whether in the Audit Commission, the Healthcare Commission or individual organisations. Chair Bill Moyes will have known that his assertion that only half of acute and mental health trusts will meet the 2008 deadline for foundation status will have annoyed the DoH. As would his strongly held belief that Monitor has the best people to change that future.

Sir Ian is typically sanguine, but also firm that the game has not been lost yet - and it’s the DoH’s game to play. The diagnostic process will be finished by 30 June and will be followed by a DoH paper ‘mapping the position’. He says he will wait for that paper before commenting on Monitor’s gloominess, but stresses ‘we are very keen to make sure that the numbers quoted can be enhanced. Foundations remain a top priority and we would hope there will be more than 70.’

Sir Ian is expected to see out most if not all the rest of 2006 before taking over the new South West SHA. He is non-committal on the subject of the newly split chief executive’s role advertised in HSJ last week. He repeats the argument about the different skill sets of the chief executive and permanent secretary role and ‘the difficulty of finding those skills in one individual’ without saying what has changed since Sir Nigel’s days.