Economist calls for NHS Bank to hold foundation surpluses

NHS economist Keith Palmer, who is also chair of Barts and the London trust, told the Commons health select committee last week such an initiative would be "relatively simple" to introduce. Instead of keeping the surpluses in private banks, foundation trusts could deposit them with the Department of Health in return for a commercial interest rate.

Mr Palmer told HSJ it would enable a more efficient use of total NHS funds. "It is, in essence, leakage from the system," Mr Palmer said. "My proposal is really trying to say we mustn't take these surpluses away from the foundations, but why not find a mechanism for recycling it within the NHS so you don't get such a loss of activity during that period?"

Foundation trusts earned£96m in interest in 2007-08.

Mr Palmer said the DH would not lose out by matching a commercial interest rate for foundation trust deposits.

Currently the department holds funds back to cover the deficits of overspent NHS organisations. Under Mr Palmer's model, if those deficits were covered by foundation trust surpluses, more NHS resources would be available overall.

Interest payments given to foundation trusts could be recouped from the charges already imposed on overspent NHS organisations.

Mr Palmer's proposal follows Healthcare Commission and Audit Commission criticism about the build-up of foundation surpluses.

A DH spokesperson said: "We can see no immediate benefit of such a Department of Health bank at the current time."