The National Health Service (NHS) in England generated a surplus of £1.67 billion in 2007-8, nearly double the target set by the government and three times more than the £515 million surplus achieved the year before, Members of Parliament (MPs) have reported.

Last year’s surplus was equal to about one week’s funding for the whole NHS and represented almost 2% of total available resources, according to the parliamentary Committee of Public Accounts, which today publishes its report on the NHS accounts, based on evidence from the Department of Health and Monitor, the independent regulator of NHS Foundation Trusts.

While 2006–7’s surplus had been concentrated in the Strategic Health Authorities (SHAs), with the Primary Care Trust (PCT) and NHS Trust sectors remaining in deficit, all sectors are now in surplus, the Committee reports. For 2007-8, SHAs delivered a surplus of £903 million, with totals for the PCTs and NHS trusts at £391 million and £380 million, respectively. Only 11 out of 340 NHS organisations (3%) reported a deficit compared with 22% in 2006–07, say the MPs but, with a decade of high funding growth, there is no reason why any NHS organisation should not be able to balance its books, they add.

For last year, the Department had set the NHS the target of delivering a combined surplus and contingency of around £0.9 billion. The contingency was not required and the surplus exceeded the target as a result of NHS organizations exceeding savings plans and due to a reduction in the price of generic medicines. However, the MPs warn that while some contingency surplus is sensible, if it is too large there is an increased risk that patients lose out because less health care is provided than might have been. Managing this risk requires NHS bodies to be more adept at forecasting demand for healthcare, budgeting in a way that best matches resources to activity levels, while having the flexibility to shift resources quickly as new priorities arise, they say.

“Patients lose out if too much NHS funding is sitting unspent in bank accounts,” said the committee's chairman, Conservative MP Edward Leigh.”The Department of Health has said that the surplus and the planned one for 2008-09 will be available to the NHS for spending in 2009-10 and 2010-11. This kind of financial planning over the longer term is good but the needs here and now of patients in parts of the country for drugs and better quality care must not be forgotten.”

The Healthcare Commission says that the quality of services provided by the NHS improved over the year, and there was better financial management and transparency at individual NHS organizations. However, some NHS bodies are still moving cash around the system by making prepayments in an “inappropriate manner;” two PCTs had their accounts qualified because such payments were deemed to be irregular, the report notes.

Meantime, the Department has said that the NHS should generate £15 billion in efficiency savings over the next three years, and it is “of the utmost importance,” the MPs stress, that the NHS achieves value for money from its funding and that productivity is continuously driven up. “What must be demonstrated, rather than just asserted, is that improvements in efficiency are genuine and not at the expense of the care provided to patients,” added Mr Leigh.

NHS Confederation response

The NHS Confederation, which represents more than 95% of organisations making up the NHS, said the 207-8 surpluses “are a testament to sound financial planning and an awareness on the part of everyone in the service of the need to spend public money carefully.”

“It means that as the NHS approaches the next few years, when settlements will be tighter, there is flexibility and financial room to move already built into the balance sheet,” said the Confederation’s director of policy, Nigel Edwards.

“The challenges of the recession for the NHS will be ensuring that patients carry on receiving the best possible care at a time when joblessness and stress-related illnesses can cause greater numbers of hospital admissions, while also finding efficiency savings and providing the best possible value for money for the taxpayer,” he added.