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The money drought is set to continue

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The Department of Health’s £2.2bn underspend, rows over payoffs and the NHS management revolving door all highlight the money worries affecting the health service. The system needs a review.

Health reporting HSJ and LGC logo

In Budget week I found three reports on my desk about NHS finances and plenty of wider agonising about the significance − or not − of the Department of Health’s latest £2.2bn underspend, as lowlighted by George Osborne’s cheerless assessment of the nation’s housekeeping. It was spotted by Health Service Journal’s eagle eyed Crispin Dowler.

‘“We must do better.” If I had a pound for every time I have heard that one…’

The steady-as-she-sinks Budget with its crowd-pleasing 1p off beer (so much for minimum pricing, quipped Tory GP Sarah Wollaston) is easily forgettable, though NHS staff will suffer further pay pressure. It was all overshadowed by unseasonal snow that threatens to push UK plc into triple-dip recession and by the inevitable controversy surrounding Jeremy Hunt’s formal response to the Francis report. That will reverberate through the system for much longer. A duty of candour but not whistleblowing? Hands-on nursing?

But the money drought will reverberate too. “We don’t know how big the storm will be or how long it will last,” a Tory town hall chief warns. He could have been talking about the NHS or for that matter the Cypriot banking system. We are all in no-growth trouble and are yet to get the measure of it, let alone the implications.

On Tuesday the tiresome Sun attacked NHS ringfencing as shoring up waste. Ominous. Hence the alarm that the Treasury might be trousering that unspent £2.2bn. It triggered a letter to Jeremy Hunt from Andy Burnham about Whitehall accounting, the theology of departmental expenditure limits (DELs) and money which continues to sit in NHS trust accounts, whether it is spent or not. Or does Mr Osborne get it?

Hence too renewed warnings (this one from Public Health England) that we must improve our lifestyle choices because the NHS cannot afford to patch us up, more rows over secretive payoffs and NHS management’s revolving door (we can’t afford them either), not to mention Mr Hunt’s contribution to the immigration debate: unpaid bills for treating foreigners is probably closer to £200m than £20m, he said. “We must do better.” If I had a pound for every time I have heard that one…

Tightening the noose

What they all have in common is money worries. So does the Nuffield Trust’s The Anatomy of Health Spending and the NHS Confederation’s Tough Times, Tough Choices: being open and honest about NHS finances. The former detects a welcome 6 per cent growth in community care in 2011-12, 0.5 per cent more on mental health, 1.2 per cent more on hospitals, offset by 1.2 per cent less on GP care.

‘It all strikes the committee as unduly complex and in need of review. Amen to that’

Private finance initiatives incidentally still cost less than 1 per cent but is rising. Staff costs fell 3 per cent, but your wallet already knew. The Confed speaks of “an unprecedented financial dilemma” as demand rises and real-terms cash stays roughly flat.

So who is right about that allegedly trousered £2.2bn? The third report (HC651) on my desk came from the Commons health committee and its public spending analysis coincidentally addresses the underspend theology. Whitehall departments must not overshoot their annual DEL and therefore allow themselves a “modest” cushion of £1bn or so (ie: 1 per cent of the NHS budget) against unexpected (the blizzards?) costs. That was normal under Labour, too, officials told MPs.

Under 2011 rules the departments can carry over 0.75 per cent of an unforeseen surplus revenue DEL and 1.5 per cent of a capital DEL. Prudent NHS purchasers and providers with unspent money in their accounts will be able to carry it over. Spending it is their choice and does not hurt Mr Hunt’s DEL. But the Treasury and NHS Commissioning Board seem to be tightening the noose. It all strikes the select committee as unduly complex and inflexible, and in need of review. Amen to that.

Michael White writes about politics for The Guardian

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