News / Nicholson hails headoom created by £1.7bn surplus

04 June 2008

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A compilation of strategic health authority figures by Healthcare Finance, based largely on unaudited month 12 figures, shows the service will return an aggregate surplus of £1.7bn, around £70m less than forecast at month nine.

This was confirmed by NHS chief executive David Nicholson in his annual report. He said the projected £1.7bn surplus gave the service ‘the flexibility and headroom to be more responsive’.

But he warned the reserve must not be squandered. ‘It gives us a fantastic opportunity to work with patients and communities to tackle those issues that are of local importance.’

The figures do not include foundation trusts, figures for which will be published in June. The biggest movement between quarter three and year-end was in NHS North West (see box), where the outturn fell from a forecast £350m to £317m.

The SHA said the movement was due to primary care trusts accelerating investment plans.

A number of factors have created the surplus, according to the Department. The NHS was required to make a minimum surplus of £250m in the 2007/08 financial year and all organisations were asked to create a further 0.5% contingency fund (equivalent to £526m) in their financial plans.

The end of resource accounting and budgeting meant the NHS was required to plan for a further £140m surplus – on this basis the service should have made a surplus of £916m.

But many organisations were able to release contingencies over and above 0.5% during the year because they were on target or ahead on cost improvement plans. Others moved from forecast deficit to break-even or surplus, while a new deal on generic medicines saved £200m.

HFMA chairman Chris Calkin said the surplus represented good financial management and was only around 2% of the total budget. But he added PCTs had understandably exercised a degree of caution because of uncertainties over allocations from 2009/10, the prospect of a new allocation formula and the need to achieve targets, such as the 18 weeks referral to treatment target.

‘They are being prudent in terms of making recurrent commitments but the money will be released over the next year,’ he said.

‘However, we also need to recognise the need to improve forecasting, planning and budgeting to ensure resources are being used effectively’.

Year-end figures

SHA                                            Latest figures £m                       Q3 £m

North West                                            317                                       350

North East                                             129                                       140

Yorkshire and the Humber                 280*                                     280

West Midlands                                      157*                                     170

East Midlands                                       140**                                   140

London                                                    300**                                  300

South East Coast                                  85                                         90

South Central                                         75                                         80

East of England                                     86                                         90

South West                                             149                                      149

Total                                                         1718                                   1789

Source: SHA month 12 figures (*month 11, ** month 10)