This week the NHS was told part of the price it will have to pay for the collapse of the economy, as it bid a fond farewell to £1bn of its £1.8bn surplus.

The money is not actually being taken away, but the effect is the same. The NHS operating framework for 2009-10, which sets out how the NHS will deliver the next stage review, reveals the service will only be allowed to spend£800m of its surplus over the next two years; the remainder will be thrown back in the pot for the next comprehensive spending review.

Last year's operating framework was criticised for sinking into retentive levels of detail. This year its authors have lifted the prose with rhetorical flourishes straight out of the New Labour handbook of public service reform.

Just in case anyone had not got the message, managers have been warned they face a "huge leadership challenge" over the coming two years. "Traditional methods of management will simply not deliver the degree of ambition we have set ourselves," we are told.

One of next year's main challenges will be to go "further and deeper" in making efficiencies.

Acute test

As expected, hospitals face the toughest test. The parsimonious increase in the tariff is bad enough, but the general move towards more care taking place in the community, coupled with minimal opportunities for increasing the volume of work as the efforts to beat the 18-week referral to treatment target come to an end, mean efficiency savings are the only substantive option.

As director general for finance and performance David Flory spelt out to finance directors last week, the NHS will have to deliver efficiency and productivity like it has never done before.

This will be far tougher than previous financial droughts. Quality, safety, competition, tighter regulation, targets and public expectations lock trusts in to delivering better for less. Rationing provision or dropping standards are not options.


In the detail of the operating framework, "target" can be seen transforming chameleon-like into "standard", a wheeze already adopted by the Conservative health team to square their anti-targets rhetoric with the reality of running the NHS. So the national target for halving MRSA levels across the NHS becomes a standard for each organisation - leaving a rump of poor performers exposed.

But despite the sophistry around infections, the framework generally honours the pledge to avoid new targets. On reductions in mixed-sex accommodation, for example, it pushes PCTs to secure "substantial" improvements, but stops short of nailing them down with a number.

Instructions to improve GP access, increase public awareness of choice and use contracts to improve service quality are already part of the day job.

Funding allocations

The realities of meeting the needs of the ageing population have finally caught up with the PCT funding allocations. After much wrangling over the needs of age versus poverty, some deprived inner city areas hitherto deemed "underfunded" by the DH now have to cope with the stigma of being regarded as "overfunded".

The practical implications of this for now are minimal, but in years to come deprived areas face the prospect of funding cuts as allocations are pushed towards the DH need target for each PCT.

A Tory government may well embrace this change with gusto; it amounts to moving funds from some safe Labour seats to a few Conservative ones.

The change accentuates the need for PCTs to draw more on the resources of partners such as schools and local government to tackle health inequalities.

Surplus loss

So, much of the operating framework is in line with expectations but the loss of the£1bn of surplus is a bitter blow.

NHS staff sweated hard to turn round deficits and build up surpluses as a war chest for future service improvements.

Under the circumstances of a collapsing economy the loss is perhaps a price which has to be paid. But unless the DH secures guarantees from the Treasury about the treatment of surpluses under the next comprehensive spending review, the central pillar of NHS financial stability will have been demolished.