Cutting the NHS's net deficit to £512m was a 'creditable' performance ' but cannot be used an excuse for complacency, acting chief executive Sir Ian Carruthers told HSJ.

Cutting the NHS's net deficit to£512m was a 'creditable' performance ' but cannot be used an excuse for complacency, acting chief executive Sir Ian Carruthers told HSJ.

His chief executive's report, based on unaudited accounts for 2005-06, shows that a gross deficit of£1.28bn was partly balanced by a gross surplus of£765m. The net deficit of£512m is down from the official midyear forecast of£623m, and from the£790m forecasts produced in January.

Broken down by the new strategic health authority areas, the East of England had the largest deficit at£214m, a£70m deterioration on the previous year across that patch.

London?s deficit grew by the largest amount, from£84m to£168m.

While the report says the Department of Health is 'improving the costing of key policy changes', it also lays some blame with managers: 'It is clear that where we have financial problems, these have been allowed to build up below the surface over a number of years until they have reached a point where they become unmanageable.'

It stresses that SHAs would give trusts 'space to recover... by using local reserves to offset the reductions in income caused by overspending in 2005-06, and allow the organisations with the biggest problems to focus initially on in-year balance'.

Sir Ian reiterated the target for the NHS as a whole to be in balance by the end of the financial year.

But he pulled back from predecessor Sir Nigel Crisp's assertion that every trust would have to achieve balance by 2006-07 year-end.

What was essential, he said, was that 'every organisation with a deficit gets its monthly 'run rate' back into balance [meaning a balance between income and expenditure] and pays off debts where possible.

'I know many people will say it's not possible to do all three things at the same time, and it may well be that in organisations with very large deficits people will look at their balance over more than a year.

'But if you are not looking to achieve balance over two or less years, the chances are that you are not addressing the problem with sufficient vigour to get back to where you need to be.'

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