The NHS is predicted to make a£13m surplus this financial year, according to the latest Department of Health forecasts.
Top-slicing of primary care trust funds and strategic health authority savings have ensured that£1.3bn of deficits within the service will be balanced out, enabling the health service to hit its priority of balancing the books this financial year.
Figures from the third quarter of this financial year, published on Tuesday, show that although the predicted level of deficit rose in the third quarter of the year, from£1.18bn at six months to the current level of£1.32bn, the NHS is expected to overturn last year's deficit of£547m and return a small surplus.
Primary care trusts show the biggest forecast deficits at£793m, with 47 per cent of PCTs now predicting a deficit, compared with 29 per cent at six months.
SHAs have top-sliced PCT funding to the tune of£1.14bn to help balance books elsewhere, and commentators have criticised the NHS for creating unnecessary deficits.
King's Fund chief executive Niall Dickson pointed out that top-slicing PCT budgets had driven some trusts into the red.
'By holding back around£1.6bn from PCT and other budgets this year the NHS will achieve its goal of making a net surplus,' he said. 'But partly because of these tactics, nearly half of all PCTs and a third of acute trusts forecast a deficit by the end of this year, an increase on last year.'
But NHS chief executive David Nicholson said he hoped some of the deficits could be reduced in the final quarter of this year by repaying a significant chunk of the top-slicing budget. He said SHAs should collectively be able to repay at least£300m, reducing the predicted overall PCT deficit to below£500m.
The other controversial method that will help the NHS break even is the£450m of savings made by strategic health authorities from central NHS programme budgets.
This has included money earmarked for training budgets and public health work. Doctors and nurses' organisations have accused the NHS of storing up workforce problems for the future by making short-term savings.
BMA junior doctors committee chair Dr Jo Hilborne said: 'Doctors are being told that they can't go on essential courses because their trusts can't afford it. If they carry on adopting this shortsighted approach there's a risk of long-term compromise to patient care.'
Mr Nicholson accepted that a significant proportion of the SHAs' contingency fund had come from training budgets, but he said the funding for these budgets had risen by 50 per cent over the past five years and he was confident that 'we are producing enough people'.
There had been hopes that if the NHS broke even this year, it would prompt the end of resource accounting and budgeting, which effectively punishes in-deficit trusts twice. Mr Nicholson accepted that the RAB system had an effect on PCT deficits but he said no decision had been taken on whether to scrap it.
NHS Confederation chief executive Dr Gill Morgan said getting rid of the RAB system was key to resolving historic deficits. 'The confederation and the Audit Commission have called for the removal of RAB from the deficits calculation to give a fairer picture of trusts' financial circumstances,' she said.
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Counting the cost of redundancies
This year has seen the number of compulsory redundancies in the NHS increase from an average of 200-300 to 1,446.
Cash-strapped trusts have been forced to make redundancies in some cases, but NHS chief executive David Nicholson said many of the compulsory redundancies had arisen out of last year's reconfiguration of primary care trusts.
Seventy-nine per cent of the redundancies related to non-clinical staff, but.the NHS offered no figures on what proportion resulted from reconfigurations.
Mr Nicholson said: 'We don't want to speculate on how many jobs may or may not have gone due to the reconfiguration. We don't have those figures.'
Redundancy costs will come from this year's budget but Mr Nicholson said he did not have figures for how much redundancy payments had cost acute trusts and PCTs.