HSJ EXCLUSIVE DoH insists books will balance by year end

Published: 06/01/2005, Volume II5, No. 5937 Page 7

The NHS is struggling to plug a£500m black hole in its finances - with parts of the country embarking on service cuts, recruitment freezes and redundancies as finance directors frantically try to achieve balance by the end of March.

An exclusive survey by HSJ has revealed that the NHS is facing its bleakest outlook for years, with half of strategic health authorities expecting their areas to be in debt at the end of the financial year.

Finance directors are forecasting that the NHS will be£225m in the red at the end of March - even though they are obliged to break even by then. The overspend is significantly larger than last year.

But a spokesperson for the Department of Health insisted the difficulties could be resolved and that health secretary John Reid expected organisations to achieve balance for the fifth year in a row.

The health economy with the greatest problems is South West London. The most recent figures show that acute and primary care trusts in this area reported an overspend of£69.2m. South East London was the only SHA which said it was unable to provide figures.

The average SHA currently holds a deficit of more than£18m. A DoH spokesperson said: 'We expect by year-end that the majority of NHS organisations and the NHS as a whole will achieve financial balance in 2004-05. It is not unusual for the NHS to be reporting deficits at this time in the financial year. Past experience has shown that the overall position has improved by year-end.' But shadow health secretary Andrew Lansley blamed the problems on the cost pressures of government-imposed targets. 'If ospitals continue to bear government imposed costs and bureaucracy, deficits will grow and frontline services will continue to suffer, ' he said.

In some trusts, cuts have already been made in an attempt to get finances back on track. Bradford Teaching Hospitals foundation trust announced in November that five wards and four operating theatres were to be closed to save money.

Leeds Teaching Hospitals trust instigated a financial recovery plan in October to try to claw back some of its predicted£16.6m end-of-year deficit. The trust has since lost around 200 beds and closed four operating theatres. Southampton University Hospitals trust was forced to embark on a significant cost-reduction scheme in 200 in an effort to save£13m-£15m. Two nurse-led units were closed and 120 beds cut, while 100 redundancies have been agreed.