NHS organisations delivered a surplus of £1.5 billion during 2010/11, which represents about 1.5% of total Service resources, the Audit Commission has reported.
Examining the NHS’s finances for 2010/11, the Commission describes the overall performance as continuing to be "good" and consistent with both in-year forecasts and what was achieved in the previous financial year.
The Commission report summarises the audit of annual accounts for Strategic Health Authorities (SHAs), NHS trusts and Primary Care Trusts (PCTs), and looks at auditors’ conclusions on the value for money (VFM) arrangements in place in each organisation. It also reviews the progress made by PCTs and NHS trusts in delivering their cost improvement programmes (CIPs).
Out of 276 NHS organisations, only nine failed to balance their books for 2010/11 - although some others required financial assistance to do so, with 16 NHS trusts receiving additional income totaling £90 million for strategic change or financial support, it says.
A small number of PCTs also distributed money to other local PCTs during the year, to help improve their financial position, and a number of NHS trusts received working capital cash loans to enable them to meet their cash requirements.
NHS trusts and PCTs have a duty to keep capital spending within a set limit, and in 2010/11 three NHS trusts overspent against their capital resource limit for the year. Overall, there was a capital underspend of £272 million (9%) for the year, out of a Department of Health allocation of £2.95 billion.
The Commission report notes that the NHS needs to save an average of £5 billion - about 5% of budget - every year to 2015, in order to meet "the Nicholson challenge" of releasing recurrent efficiency savings of £20 billion by 2015.
In 2010/11, PCTs reported savings of £1.9 billion, up from £1 billion in 2009/10, and NHS trusts reported £1.2 billion savings, the same amount as the previous year; this is equivalent to 1.9% of PCTs' gross operating costs and 4.3% of trusts' gross operating expenses.Also during the year, NHS foundation trusts (FTs) delivered CIPs of 3.9% (3% in 2009/10) of operating costs.
The total efficiency savings as reported by PCTs, NHS trusts and FTs for the year was £4.3 billion, assuming there is no double-counting between organisations, says the Commission, which also notes that most of the savings by PCTs and NHS trusts have been achieved through clinical productivity and efficiency, pay and workforce savings.
The report warns that 2011/12 will be a more financially challenging year. In 2010/11 PCTs received average cash funding growth of 5.5%, while in 2011/12 average growth in recurrent cash allocations for PCTs is 2.2%.
"Organisations that have, up to now, managed their finances well will find financial pressure increasing. They will need to continue to deliver high-quality services, without the funding growth of the recent past," it says.
Commenting on the Commission's findings, the NHS Confederation said the figures showed that NHS leaders were starting out from a strong position to achieve the £20 billion savings required of them, but added that pressure will increase in the years to come.
"Many of our members have told us they are expecting the financial situation facing their organisations to be the worst they have ever experienced," said Jo Webber, the Confederation's deputy director of policy.
"With tighter finances, it will be harder to maintain the progress we have made on the quality of care and getting our books in order. It will require NHS trusts and commissioners to look at doing things differently and more efficiently," said Ms Webber.
"The real test will be over the next 18 months. We need to support NHS leaders to make tough decisions on changes that deliver the right services for patients. We need politicians to get behind plans for new approaches to improving local services that have the best possible care at the top of the agenda," she added, and warned: "without this support, services will struggle to change and improve, and patients will be the losers."