Noel Plumridge: savings are not surpluses

The NHS has followed suit. Its final accounts for 2010-11 reveal the scale of cash holdings salted away across the system.

Last year the combined year-end surplus of primary care trusts and strategic health authorities was £1.375bn. Let’s put that another way. Nearly £1.4bn of NHS funding was held back in 2010-11 and kept in reserve in readiness for tighter times ahead.

Fellow HSJ columnist Sally Gainsbury has already observed here how the resulting lower level of NHS spending in 2010-11 gives ministers a conveniently low baseline from which to measure future “growth”. Note also how this amount is curiously similar to estimated redundancy and early retirement cost arising from the abolition of PCTs and SHAs. And don’t forget the need to reduce PCT deficits, for fear cautious GPs will drag their heels before the handover.

Withholding this £1.4bn may have been prudent, but please don’t call it a “surplus”. There’s no improved productivity to justify a glow of pride, any more than with current PCT savings achieved from rationing so-called low value treatments. Commissioners don’t achieve surpluses; they just decide not to spend.

Foundation trusts are required to make trading surpluses, and do so. In 2010-11 they reported a total surplus of £406m. But the really significant figure is their accumulated cash reserve, which at the end of March stood at £3.3bn.

Considering the heroic savings providers are making, that’s a lot of government money going unused. Yes, some is earmarked for capital investment. But one reason the reserve has grown so high (£923m above plan) is boards’ reluctance to spend on asset renewal.

Capital spending plans were underspent by £404m in 2010-11.

Is the multiplicity of reserves we’ve created under the banner of “organisational resilience” truly necessary? Especially since, in the interests of competition, we’ve also ensured any genuinely cash impoverished provider won’t have ready access to them.