The decentralising of financial control under the NHS reforms poses a risk that agencies could hold too much funding back from frontline care and force organisations “into failure”, Sir David Nicholson has warned.

The NHS chief executive, also NHS Commissioning Board chief executive, was giving evidence to the Commons public accounts committee - alongside Department of Health permanent secretary Una O’Brien and Monitor chief executive David Bennett - on Tuesday.

Sir David said those three bodies were working together to avoid creating “risk pools” so large that they reduce money available for services. The pools are sums held back to fund unforeseen financial problems.

He said it was “really important” not to “get to a place” where “I lop half a billion off the commissioning budget so I can manage my risk”, at the same time as Monitor builds a “huge risk pool”, and more money is held back by the DH.

“Before you know it you’ve got £2bn or whatever the figure is [held back], and you end up forcing organisations into failure,” he continued. “You can absolutely see how that could happen. That’s why we’re working now under the leadership of the department to work out a way in which we can minimise that.”

Sir David suggested this could lead to the different bodies holding funds “jointly, or together” or at least identifying “jointly across the whole system how much we can keep”, to ensure that the total sum was not “the debilitating amount that it could easily be if we all went off on our own to do it”.

He also told the committee that clinical commissioning groups would need to show the commissioning board they had financial risk-sharing arrangements in place with their neighbours in order to be authorised.

In the CCG authorisation process, he explained, CCGs would have to demonstrate “what their collaborative arrangements are with other CCGs in the area”. Part of that would be showing “how they’re going to risk share among themselves”.

He said that was necessary, “because there’s no doubt that, for one CCG, if you had a particularly complex patient which cost a huge amount of money that would distort [your] expenditure”.

The committee hearing was held to take evidence on the NHS’s financial resilience.

Asked about the impact of the private finance initiative on foundation trust finances, Mr Bennett said of the 11 FTs currently in financial difficulty only one – Peterborough and Stamford – was in that position due to PFI commitments. But he added: “Of the 13 we’re [currently] looking at to see if there are problems there, one of them again has a PFI issue, which is Sherwood Forest [Hospitals]”.

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