Report says NHS is mired in huge debts

A joint report by the National Audit Office and the Audit Commission says that the National Health Service is reeling under huge debts due to financial mismanagement.

The report says that almost one in five NHS bodies were mired in debts in 2003-4. On the whole, the NHS has run up a deficit of almost 140 million pounds last year. This state of affairs prevails despite record government investment in the health sector.

Commenting on the state that the NHS is in, James Strachan, Chairman of the Audit Commission said, “Financial management is now a matter of major concern for the NHS. The Department’s welcome policy of greater transparency on financial matters means that many of the old practices, which obscured the year-end financial position, are no longer possible. We can now see where the real financial problems lie which is the first important step on the way to addressing them. Important reforms like Payment by Results and the new financial regime for NHS Foundation Trusts are also increasing the risks and demand first class financial management.”

The report also found that more than 100 NHS bodies were in the red with 16 of them reporting a deficit of more than £5 million. NAO head Sir John Bourn said, “2003-04 was a relatively stable year in terms of challenges facing NHS financial management but, even so, a number of bodies clearly found it difficult to manage their resources effectively. The major developments taking place in 2004-05 and beyond will pose unprecedented challenges with which all bodies in the NHS will have to deal.”

The pressure on the NHS was immense in the light of the new reforms regime, the report said. Mr. Strachan added, “All NHS bodies need to reassess their own financial management arrangements in the light of this report. We will help in that process. For the first time our auditors will now score PCT and NHS Trust financial management arrangements and show clearly what needs to be done to secure improvement.”

Responding to these findings, the Health Secretary Patricia Hewitt said, “The problem that I think we have got in parts of the NHS is that they are not particularly efficient. I think that what will happen is that individual hospital departments, if they are not able to deliver the quality of care that patients want and to balance their books, they will find themselves replaced by other hospitals who are doing better for that particular procedure.”

Shadow Health Secretary, Andrew Lansley lashed out at the government by saying, “The Government claims to be spending record amounts on the NHS but the money is not getting through to services. Extra costs, bureaucracy and waste are eating up the additional resources while deficits affecting the frontline are causing cuts to patient services.”

The report has also outlined four themes for improving the financial management at the NHS;
* The role of the board in improving financial management;
* Improving forecasting of the year-end position;
* Earlier production and audit of the annual accounts;
* Increasing the transparency of financial reporting.

For the detailed report, please visit www.nao.org.uk and www.audit-commission.gov.uk