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MPs’ flexibility push should end underspends

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The call from MPs for more flexibility in NHS spending is timely and sensible when budgets are being squeezed by public sector austerity.

Health reporting HSJ and LGC logo

It is one thing to see health spending squeezed because of public sector austerity. It is another to see it restricted because complex financial rules make it difficult to spend money that has already been committed to the NHS.

‘The problem is a mismatch: FTs are allowed to carry over surpluses, while the DH has little flexibility to do so’

That is why the Commons health committee’s call for the abolition of “unnecessarily inflexible” restrictions on NHS spending is timely.

The committee began investigating underspending by the Department of Health after HSJ reported the DH had returned nearly £3bn of its budget to the Treasury over the previous two years.

The department has always emphasised that part of its “underspend” is actually foundation trust surpluses, which remain available for FTs to spend in future years. But as the committee reports: “The use of such funds remains subject to strict overall ceilings on expenditure.”

Dorrell’s discussion

The problem is a mismatch: FTs are allowed to carry over surpluses for future years, while the DH has little flexibility to do so, but FTs’ spending counts against the department’s budget. That means the department has to ensure use of FT reserves is offset by underspending elsewhere.

‘Dorrell said dealing with the issue would require “a discussion with the Treasury around the way spending control limits work”’

The straightforward way to resolve this would be to give the DH more flexibility to carry over budget underspends. That would mean expenditure of providers’ reserves would not always need to be offset with underspending elsewhere − and the total available for healthcare in the coming years would be greater.

That seems to be the solution health committee chair Stephen Dorrell had in mind when he said dealing with the issue would require “a discussion with the Treasury around the way spending control limits work”.

Mr Dorrell is a trusted unofficial adviser to the health secretary and a former financial secretary to the Treasury. Let us hope his views encourage that discussion.

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