The National Health Service is on track for an ‘underspend’ of £500 million for the financial year 2006-7 after a spate of aggressive cost cuts, according to figures compiled by The Guardian.

Health Secretary Patricia Hewitt will likely be breathing a sigh of relief after a cost-cutting campaign which, the newspaper says, included ward closures and the loss of 22,300 jobs (mainly through local recruitment freezes but also some compulsory redundancies), has done its job by generating a surplus. Earlier this year, Hewitt said she would resign if the National Health Service ended the year in deficit again, after the NHS overshot its budget by £547 million in 2005/6.

But news of the expected surplus has sparked some concern in the industry. Dr Sam Everington, acting chairman of the British Medical Association, said: "If these figures are right, we know that some trusts must have unnecessarily cut back on services to patients such as reducing operating lists and clinics, closing wards, cutting education and training budgets, and making staff redundant."

And it didn’t sit too well with the health unions either, which claimed that the size of the surplus indicates that the NHS can afford the 2.5% pay rise recommended by an independent review body for healthcare staff but postponed by the chancellor Gordon Brown until November, The Guardian reports.

A 'clearer' picture

Commenting on the situation, Andy Cowper, editor of the British

Journal of Healthcare Management and Commissioning Health, said: "Reforms to NHS finances in recent years have been about creating a clearer picture of the real financial situation. In the past, a lot of the true picture was skilfully and deliberately hidden. It's understandable that many people feel amazed the the NHS was making deficits after having received over 8% budget increase in real, cash terms per annum every year since 2000. The need to avoid deficits was therefore paramount in the 2006-7 financial year."

He went on to say: "What is perhaps less surprising is the news that the NHS has made a tiny 'surplus' by cutting all unnecessary spending. That is what it was being told to do. The underspend is less than half of 1% of the NHS budget. Maybe we should consider more fully the question of on which side of exact financial balance we want the NHS to err?"

The Guardian calculated its figures using information from Strategic Health Authorities; the Department of Health is due to unveil provisional results for the year in June.