NHS deficits and the struggle to balance the books

The deteriorating state of NHS finances in England has been well documented.

Some who follow the subject closely argued that the £2.45bn deficit across health trusts in England in the last financial year was not as bad as it might have been.

But it was still a dramatic increase on the previous 12 months and it illustrates two major challenges for the government - one immediate and the other longer term.

Right now, the deficit at English hospital and other trusts, in other words the difference between the money they received and what they had to pay for patient care, is causing real headaches at the Department of Health.

Official accounts are being prepared for the financial year which ended in March and are set to be published in the summer.

If senior civil servants can't demonstrate that the DoH kept within the limit of around £116bn voted on by Parliament, there will be serious and unprecedented trouble in Whitehall.

A National Audit Office inquiry could follow, along with heavy political flak directed at the government.

Usually deficits among health trusts can be balanced by surpluses elsewhere in the system, for example in clinical commissioning groups. This time, officials have struggled to find the money in the system to balance the books.

'Cooking up'

A finance director at a hospital trust has told the BBC anonymously that unorthodox methods are being used to make the sums add up.

He alleged that the department was "cooking up accounting alchemy" to turn large hospital deficits into a much lower figure to ensure the NHS meets its spending limit.

He claimed that transferring money from investment to day-to-day spending was being encouraged on a much wider scale than was normal.

The same finance director went on to say that consultancy firms had been sent into 20 trusts to assess whether their accounting assumptions were too cautious.

He claimed that their findings were being passed back to the Department of Health which would use them to adjust the overall deficit position downwards.

He said: "I am deeply worried that the findings of the 20 site visits are likely to be used to alter the NHS accounts."

The Department denied there was anything untoward going on, while acknowledging that parts of the NHS were under pressure.

A spokesman said: "The transfer from capital to revenue makes no difference to the overall departmental picture given Parliament has voted to approve it - to say otherwise is misleading. Our financial statements will be audited by the independent National Audit Office."

Funding mismatch

Ministers also argue they have helped hospitals curb the increase in spending on agency staff.

Looking beyond the current scramble to balance the books, there is a longer term financial challenge for the NHS.

It is hard to see how the aggregate trust deficit can be reduced significantly this year. So a chunk of the extra money allocated by the chancellor for 2016-17 will be eaten up before a single extra patient is cared for.

The deficit reflects a fundamental mismatch between the funding flow to hospitals and what they need to find the right staff and provide appropriate care.

Ministers argue they have given NHS leaders all the extra money they asked for and that greater efficiency savings can be made. But health spending is not keeping pace with demand and, as a share of national income, is behind many other leading economies.

More than one health expert has pointed out that it is time for the nation to decide how much it wants to spend to deliver the healthcare citizens expect.