Published: 06/01/2005, Volume II5, No. 5937 Page 3

The NHS is deep in the red, and the usual claim that it will all sort itself out by the end of the financial year no longer washes - for two reasons.

First, as HSJ's exclusive survey of strategic health authorities shows, the problem is much greater than the normal shortfall at this time of year (see news, pages 12-15). The total deficit is nearly£500m and almost half of SHAs are upfront enough to project a deficit at year end throughout their health economies.

Even the most optimistic estimate puts the total shortfall at more than£200m.

Second, trusts are much less free than in previous years to juggle numbers on the balance sheet, sacrificing long-term planning for hitting short-term targets. In other words, the fudge factor has diminished.

The effects are predictable: many trusts have reduced or closed services - or are considering doing so. Others are delaying the introduction of planned improvements.

Recruitment, in particular, is being squeezed, and it is not surprising that a British Medical Association survey this week found that a quarter of trusts have frozen some vacant consultant posts.

How well are trust boards performing in scrutinising financial affairs? The debacle at Royal Wolverhampton Hospitals trust turns up the heat. As we report this week (see news, page 7), the trust's non-executive directors have been removed after a SHAcommissioned report criticised its management of capital-revenue transfers.

These are fundamental tasks that no board should be falling down on. And yet as our Good Management section (see pages 24-27) shows, there is too little managerial understanding of, and action on, what makes boards work well. As the end of the financial year approaches and the queue for foundation status grows, the next few months will see hard questions being asked of many boards.

But if the only answer is 'sack the lot', it will achieve little. Indeed it is likely to discourage the very people best equipped to handle the increasing demands of financial and corporate governance from serving as non-execs.