Magazine article Public Finance

Waiting for Mr Darzi

Magazine article Public Finance

Waiting for Mr Darzi

Article excerpt

On the brink of Ks sixtieth birthday, the NHS would be in danger of writing its own good news story were it not for one thing. Although it is riding the crest of unprecedented investment, with a forecast ?1.8bn in the black, and well on its way to achieving its targets, the public has yet to be convinced that Labour's reforms have made it better.

It's a conundrum that has stumped many. Three times as much will be spent on the NHS this year than in 1996/97. Waiting times have come down to such an extent that the Department of Health is confident that the service will reach its target by the end of next month. This means that at least 85% of patients will wait no longer than 18 weeks from referral by their GP to treatment.

At the same time, there has been significant progress on the biggest killers - cancer and heart disease. On February 18, the department announced that it had met its target of reducing deaths from cardiovascular disease in people under 75 by 40% - five years early.

And after the furore over health care-acquired infections late last year, the rates of both 'superbug' MRSA and C difficile are coming down.

The health service's financial standing has also improved following the 'blip' of 2005/06. Most observers agree that the English NHS's £547m deficit that year was a result of its efforts to reduce waiting times. The following year, the deficit had turned into a surplus of £515m (not counting foundation trusts) and the surplus this year is forecast to be £1.8bn - double the £916m required by the DoH.

The department wanted a surplus of £250m, plus 0.5% from each organisation for contingencies (which adds up to at least £526m). Then it expected a further £140m following the abolition of resource accounting and budgeting for NHS trusts.

So why is the NHS now expected to have around twice that figure? There are even rumours that the actual surplus is much higher but has been 'managed down' to avoid politicians' embarrassment.

The department says that some of the additional surplus has been created because NHS bodies required to put aside more than 0.5% for contingencies (because of a deficit in 2006/07, for example) have met or exceeded their cost improvement plans. In these cases, contingencies over and above the 0.5% have been returned.

Also, a national agreement on generic medicines has cut millions of pounds from PCTs' drugs bills, while successful savings plans have pushed some trusts from a forecast deficit to break-even or surplus.

There is some evidence that much of this year's surplus is being generated by primary care trusts. Some are accelerating their programmes (buying additional activity to hit their 18-week target sooner, for example) but many will be unable to spend all the money this year. To ensure they can use the cash in future years, some are banking their surplus funds with their strategic health authority.

David Stout, NHS Confederation primary care network director, says this is sensible. 'It's difficult to spend money wisely if you're trying to spend it quickly,' he says. 'If a surplus is unexpected and varies during the year, it can be quite difficult to spend it in a sensible way' He adds that it is good financial planning to hold a contingency for future years.

PCTs say they need some money set aside because they are often asked to fund services with little notice or with no knowledge of how much they will cost. Their prescribing expenditure appears to be stabilising but some finance directors have told Public Finance that they fear a review being carried out by the National Institute for Health and Clinical Excellence could add further pressure. Nice is considering lower- ing its thresholds for defining high cholesterol in pa- tients with type 2 diabetes (clinicians are likely to also apply these to patients at risk of developing the disease).

'This would mean using more aggressive and expensive cholesterol-lowering drugs on a wider section of the population. …

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