News / NHS delivers strong figures but difficult year lies ahead

The overall financial position of the NHS in England remains strong, but more organisations are struggling to break even as the service enters a critical year.

The NHS (including foundation trusts) is in line for a £1.7bn surplus at the end of the financial year, according to the latest figures from the Department of Health and Monitor. However, papers from strategic health authority board meetings show primary care trusts and NHS trusts that are not forecasting a year-end deficit are taking steps to cut overspending.

There were warnings 2011/12 would be tougher than 2010/11. An NHS Confederation survey found managers were most worried about financial balance and savings in the new financial year.

Following last month’s Budget, the government has revised its inflation forecast upwards. Institute for Fiscal Studies director Paul Johnson said the NHS faced a four-year budget freeze – the tightest since the 1950s. The government would ‘barely’ meet its pledge to increase health spending year on year between 2010/11 and 2011/12.

‘The government is meeting its pledge, but is sailing perilously close to the wind,’ Mr Johnson said.

Department of Health deputy chief executive David Flory said SHAs and PCTs forecast an aggregate surplus of £1.269m or 1.3% of revenue at the end of quarter three in 2010/11.

‘This forecast surplus is in line with the revised operating framework and will help to provide a strong foundation as we move towards the end of this financial year and towards the crucial transitional year ahead,’ he added.

NHS trusts forecast a £132m operating surplus (down from £177m in the previous quarter), while foundation trusts delivered a net surplus of £330m at quarter three – £55m ahead of plan.

Four PCTs forecast a gross deficit of £34m at Q3 – Cumbria Teaching (£8m), Peterborough (£3m), Surrey (£20m) and Barking and Dagenham (£3m). Four PCTs, including Cumbria Teaching and Peterborough, had forecast a gross deficit of £56m at Q2.

Five NHS trusts said they would end the year with a gross operating deficit of £94m. This compares with three forecasting a gross operating deficit of £69m in the previous quarter.

Trusts in London continue to struggle. In 2008/09, the capital’s trusts had an aggregate deficit of £21m (0.1% of turnover), but this fell to just £3m in 2009/10. But at the end of Q3 2010/11, the forecast deficit stood at £16m (now 0.2% of current  turnover). United Lincolnshire Hospitals NHS Trust (£14m) was the only trust outside the capital forecasting a deficit.

There was better news in the capital’s primary care trust sector, with Haringey Primary Care Trust and Sutton and Merton Primary Care Trust forecasting they will break even after predicting deficits in the previous quarter.

Despite foundation trusts’ continued financial strength, there are concerns. Monitor chair David Bennett said foundations had no room for complacency. The regulator was anticipating an escalation of contract disputes between foundations and their commissioners in the fourth quarter and possibly next year.

‘Foundation trusts will be affected by commissioners’ need to make savings. It is essential trusts and their commissioners, including the new pathfinder GP consortia, work closely together to find a mutually acceptable response.’

Last month, Monitor’s board decided Tameside Hospital NHS Foundation Trust was in significant breach of its terms of authorisation. This followed a deterioration in the trust’s financial position and what the regulator said was a failure to take ‘appropriate and timely action to control operating costs’.

At Q2, the trust had a £1.2m deficit against a planned surplus of £0.9m and at Q3 the trust’s year-to-date deficit was £1.5m against a re-forecast deficit of £1.2m. The regulator will not use its powers of intervention, but a recovery plan must be agreed by 30 April.