Published: 12/09/2002, Volume II2, No. 5822 Page 4

The NHS in England is heading for a deficit of up to£300m which could be funded by the Treasury, despite repeated Department of Health warnings that there will be no extra cash this year.

The prediction of a possible overspend comes from the Healthcare Financial Management Association, which says it would be clearly identifiable as resulting from specific cost pressures, in particular prescribing.

Although data on prescribing costs is notoriously inaccurate and can vary widely over time, estimates from around the NHS show expenditure on drugs running at up to 13 per cent over last year. This is well ahead of the large increases, averaging around 10 per cent, budgeted for in most areas.

HFMA chair John Flook told HSJ: 'The service could be between break-even and up to£300m over on projections at this stage.

'We need to put that in the context of the absolute amount the NHS spends and the rate of increase in resources we are receiving. The drivers for the overspend are positive things. It is not poor financial control.'

The total NHS budget is now£68.1bn, 10 per cent up on last financial year.

As reported in HSJ last week (news, page 4), the NHS has seen a rise in activity this year as the extra money has come through.

However, the service is facing huge cost pressures in some areas, including, in addition to prescribing costs, extra spending on agency staff, meeting the requirement to reduce junior doctors' hours and clinical negligence premiums.

The DoH has insisted that no more money will be available. A spokesman said the NHS Bank had been set up to help areas with particular problems.

He said there had also been increased investment in prescribing to reflect increased demand and the decisions of the National Institute for Clinical Excellence.

A well-placed departmental source made it clear that three-year funding allocations were designed to allow advance planning. He insisted that although money had been released later in previous years, 'there will be no extra money; it is not going to happen'.

However, a respected NHS finance source said the DoH will be able to make a good case to the Treasury for the extra funding because it can be clearly shown where the money is needed.

He said: 'In October, they [the DoH] will look at the September figures, and will take a view on this and will go to the Treasury. I can't see the chancellor, secretary of state and prime minister falling out over putting£300m into the service because of the pace of growth of prescribing.'

NHS Confederation policy director Nigel Edwards said there might be a good case for funding any shortfall, but cautioned that it would have to be a one-off that would not be replicated: 'I suppose the prescribing thing is a pressure that everyone can agree on. On the sort of budget the NHS has,£300m sounds like a lot of money, but is really marginal.'

A Treasury spokesperson said it would be up to the DoH to speak to the Treasury about the need for any extra funding, but did not rule it out: 'If there is something they feel they need to discuss with us, I am sure they will.'