Chance missed to reform NHS finance controls, say managers
pharmafile | December 11, 2006 | News story | |
A controversial NHS accounting system, in which in-debt trusts are penalised with budget cuts, will continue, despite protests from health service managers.
The Resource Accounting and Budgeting system (RAB) means that, for example, if a trust is £5 million in debt at the end of a year, a further £5 million will be cut from its budget the following year.
In addition to having a lower income, the trust also carries forward the original deficit onto the next year's balance sheet known as 'double deficit' and extremely unpopular with trusts already struggling to control their finances.
"We are very disappointed that the Department of Health has not taken the opportunity of today's announcement to revise the NHS accounting rules, which means that many trusts in financial difficulty are, in effect, penalised twice," said Gill Morgan chief executive of the NHS Confederation, which represents NHS managers.
The Audit Commission called for RAB to be replaced with a system using "sharper, more appropriate" incentives to promote good financial performance.
"NHS organisations are working hard to achieve financial balance in their income and expenditure, but for many the way that deficits are accounted for by the centre makes the challenge of financial balance extremely difficult."
Defending the RAB, health service chief executive David Nicholson said the system freed up money within the system, and if scrapped, would have to be replaced with another mechanism which generated cash.
"There is no such thing as a free lunch on the NHS," he said.
Nicholson made the comments at the launch of a new NHS operating framework for 2007/8 on 11 December – more than three months before the financial year begins. He said this was the earliest launch of the framework in recent years, allowing NHS managers to plan services in a "coherent and organised" way.
Funding for the NHS in 2007/8 will rise by a further £6 billion compared to this year, an increase of more than nine per cent. The increase will be the last in an unbroken run of growing spending, which has seen the NHS budget triple in size in the last 10 years.
Nicholson and his top management team have set out a number of other new measures, most notably a target for nearly all patients to be treated within 18 weeks of first seeing their GP.
This is a much more difficult target for the NHS to achieve, which until now has had targets on sections of each care pathway, which has meant delays or waits could be shifted to parts of the pathway not subject to a target.
Commenting on the new milestone for the 18-week target in the Operating Framework, Gill Morgan, said: "Meeting the new milestone on the 18-week target, alongside the need to achieve financial balance, will be incredibly challenging for NHS organisations. All NHS organisations – both providers and commissioners – will need to work very closely together to meet this target."
The new Operating Framework also put renewed focus on giving greater freedom to local managers and clinicians.
"We welcome the focus in the Operating Framework of more local freedoms for managers and clinicians to decide and deliver on local health and healthcare improvement targets," commented Morgan.
"The NHS Confederation has been calling for a shift in the balance between centrally driven targets and local priority setting and this is a positive step to achieving this. However, we still have further to go to achieve strong autonomous NHS boards that have the freedom to lead and take responsibility."
David Nicholson has said that the government intends to expose all NHS trusts to demands already placed on foundation trusts.
The government says it wants the NHS to achieve an overall surplus of £250 million in its finances in 2007/8.
While this is a tiny fraction of the annual budget, Nicholson said it would provide some "financial headroom" for the huge organisation with a huge budget, which has previously sought to break even at best.
Referring to a well-known simile in health service circles, Nicholson said this could end the days of NHS chiefs trying to "land a jumbo jet on a postage stamp" at the end of every financial year.
