The NHS has built up cash reserves of almost £4bn even as rationing has increased, the number of nurses has fallen and the service has had to make unprecedented savings, an Audit Commission report reveals.
NHS bodies in England underspent by £2bn – 2% of the service’s entire budget – in 2011-12 alone, which contributed to it having just under £4bn of “uncommitted finances”, the watchdog said.
Primary care trusts (PCTs), strategic health authorities and hospital trusts between them generated a surplus of £1.6bn from their budgets in 2011-12, with semi-independent foundation trust hospitals underspending by a further £400m, according the annual report into NHS finances. Another £1.5bn from PCTs having to hold back 2% of their budgets, plus other accounting items, made the overall surplus nearly £4bn.
“Overall, a combination of underspend, surpluses and non-recurrent spending in 2011-12 have given the NHS approaching £4bn in uncommitted finances, providing financial room for manoeuvre in the future,” said Andy McKeon, the commission’s managing director of health.
But the disclosure prompted questions about why the NHS was carrying such large reserves when budgets were so tight and the service has to make £20bn of “efficiency savings” by 2015.
“It is a tragedy that £4bn is sitting in the bank when struggling hospitals are rationing patient care, closing wards, and nurses are losing their jobs,” said Christina McAnea, head of health at the union Unison, which represents 400,000 NHS staff. “This would not happen if hospitals were directly run by the NHS – money could then be moved to where it is needed most, balancing the books and safeguarding patient care.”
“Patients will question why as many as 61,000 posts are at risk in the NHS when there is an overall surplus of £1.6bn,” said Dr Peter Carter, general secretary of the Royal College of Nursing.
But there was no evidence as yet that savings generated by NHS organisations were being ploughed back into improving patient care, as promised by ministers when the “Nicholson Challenge” began, added Carter.
Jennifer Dixon, the director of the Nuffield Trust health thinktank and a member of David Cameron’s now disbanded NHS “kitchen cabinet”, said £4bn was a large amount for a service with a £100bn budget to hold and the money should be spent to help patients and relieve the strain on hospitals.
“In the face of obvious and growing health needs of the population it will be important that this £4bn is made available to be spent on care on top of the pencilled-in budget over the next two to three years. A big candidate for investment is care in the community to reduce the need for hospital admission”, she added.
The report also shows that the number of hospital trusts and PCTs in deficit at the end of the 2011-12 financial year had more than doubled from 15 to 34. Among them, the number of NHS hospital trusts in financial trouble had risen from seven to 10, and their collective deficit from £102m to £177m, and the number of PCTs in deficit rose from two (£18m) to three (£49m). The number of foundation trusts in the red in April rose the most sharply, from six to 21, and their collective deficit went up from £27m to £130m.
Overall, though, the NHS’s finances remain healthy and it succeeded in making £5.8bn of efficiency savings – the first chunk of the £20bn target – as demanded by the Department of Health, McKeon said.
“These savings did not materially affect the total number of frontline staff and do not appear to have resulted in any major transformation to the way care was delivered,” the report states. Some of the savings came from the total number of staff employed by NHS bodies falling by 9,407 (0.9%) in the year to April 2012.
A spokesman for the Department of Health said: “It is better to plan for a surplus because it gives the NHS the flexibility to respond to the unexpected, whilst allowing enough money for investment in new services. The £4bn referred to in this report includes £1.7bn that PCTs must spend from their recurrent resources in 2012-13.”
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