As expected, a spate of aggressive cuts has helped the National Health Service back into the black with a surplus of over £500 million for the financial year 2006/7, compared to a shortfall of £547 million in the prior year.

Furthermore, the proportion of all NHS organisations still in the red has dropped from 33% in the previous year to 22%, with the gross deficit still concentrated in a relatively small number of organisations, according to the Department of Health.

"If we hadn't taken decisive action to deal with the overspending, the NHS deficit would have doubled again this year,” said Health Secretary Patricia Hewitt, who previously promised to resign if the Service closed the year in deficit again. “Instead,” she insists, “the NHS has a fairer and more transparent financial system than ever before. The minority of over-spenders know they have to put their own house in order instead of expecting Strategic Health Authority trusts to bail them out.”

And Dr Gill Morgan, chief executive of the NHS Confederation, which represents over 90% of NHS organisations, said that the figures “show that because of the hard work and commitment of NHS staff the vast majority of NHS trusts are getting back on track financially.” But she did concede that the 22% of trusts still grappling with debt are a “concern,” and that “there are still going to be difficult decisions to be made in those organisations and areas.”

Larger reserves

Commenting on the surplus, she said: £500 million is less than half of 1% of the entire NHS budget and so actually allows for a very small amount of flexibility in NHS organisations’ budgets. Other organisations outside of health actually plan for much larger reserves and so it is prudent for the NHS to do the same.”

But not everyone is so pleased with the result. In fact, the rather sudden swing into profit has sparked concern from many sides of the industry, given the factors behind the turnaround. Thousands of jobs were cut over the year, training budgets were given a substantial crop and, according to media reports, trusts even began postponing operations so they wouldn’t eat into the year’s profit.

“While the NHS may be in credit today, the journey to balance the books has wreaked havoc on the NHS and is a return to boom and bust health economics,” said Dr Jonathan Fielden, chairman of the British Medical Association’s Consultants’ Committee. “There have been excessive cuts in service and it will take years to rebuild the trust and collaboration that has been destroyed in the past year,” he stressed.

Gold star for FTs

Meanwhile, The rapidly expanding NHS foundation trust sector well overshot expectations for performance in 2006/7 and “is in excellent financial health,” according to figures published by its independent regulator Monitor.

FTs turned in an aggregate surplus of £130 million, beating the target by £104 million, as “greater efficiency resulted in significantly improved operating margins and a healthy surplus across the sector,” explained Monitor’s executive chairman William Moyes.

“It is very significant that 56 out of 59 trusts ended the year in surplus,” commented Sue Slipman, director of the Foundation Trust Network. “The strong financial position of Foundation Trust hospitals demonstrates that the FT model is not only robust, but is one that is starting to prove its worth and take the NHS in a new direction. Trusts are using their financial freedoms to innovate in services to patients and also to drive efficiency, productivity and value for money,” she concluded.