The Treasury has not yet returned the £1.5bn NHS underspend from 2008-09, according to accounts released by the Department of Health.

The DH says the full £1.5bn was reallocated to primary care trusts and strategic health authorities in 2009-10. However the accounts - published last week - show the department was only able to do this by overspending £540m on its own central budgets and relying on other NHS organisations to under spend.

This move was necessary as the Treasury did not allow the DH to access the revenue surplus it had accumulated in the Treasury’s account.

By the end of March 2010, the DH’s accumulated unspent surplus with the Treasury stood at £3.7bn, the largest surplus of any spending department.

The DH’s accounts said Treasury rules stated departments could only access prior year underspends “on the basis of realism and need”. As other parts of the NHS were underspending in 2009-10 there was no case to return the surplus.

NHS Confederation acting chief executive Nigel Edwards said the fact the Treasury had not yet returned the £1.5bn NHS underspend was “disappointing, but not surprising”.

Referring to the growing constraints on public spending he said: “That surplus was generated in a different world.”

In a statement to HSJ, the department admitted the potential release of the surplus was part of negotiations with the Treasury over the public spending review which will be announced on 20 October.

A spokeswoman said: “Discussions between the DH and Treasury on future funding are ongoing as part of the spending review. The settlement will include detail on technical issues including end year flexibility [the mechanism for access to departmental underspends].”

She added the department’s understanding was that the “real terms” increase the government has pledged to the NHS from April 2011 would be based on its reported planned spending for 2010-11 of £101.5bn, rather than its actual spending this year.

Spending of £101.5bn in 2010-11 would represent a 2.7 per cent cash increase on the NHS’s actual £98.8bn spending in 2009-10.

The 2009-10 NHS operating framework said £800m of the £1.5bn underspend from 2008-09 should be spent by the end of 2010-11. The NHS finished 2009-10 with a surplus close to its plan of £1.4bn, implying a further £700m of the surplus will be spent this current financial year.

NHS revenue and capital budgets are accounted for separately.

The NHS’s capital budget for 2009-10 was also underspent - by £203m, or 3.8 per cent. In contrast, the capital underspend in 2008-09 was £541m or 11 per cent.

The DH’s accounts also show that in 2009-10 £13.2m was paid or agreed to be paid in compensation to private companies whose contracts to run independent sector treatment centres were either cancelled or scaled back.

The department expects to make a further £10.8m in compensation payments to cover the cancelled private finance initiative deal at University Hospitals Leicester Trust. The scheme was cancelled in 2007 but the DH only started assessing the costs of the bid earlier this year.