Health Committee

Session 2006-07
13 December 2006


Tackling NHS deficits by slashing the amount spent on the training of NHS staff is unacceptable, say MPs.

In a report by the Health Select Committee, MPs conclude that cuts in the budget for the education of hospital workers is having adverse effects on staff morale and could have a significant effect on the quality of the workforce.

MPs believe that savings should not be made disproportionately in areas, such as training, where for structural reasons it is easiest to make them. Other soft targets such as mental health and public health services should also not suffer as a consequence.

Failure of financial Management

In a wide ranging report, the Committee found "compelling evidence of a failure of financial management" within the NHS. "The most basic errors have been made; there are too many examples of poor financial information, inadequate monitoring and an absence of financial control," the report says.

MPs conclude that the inquiry exposed the full extent of the long running deficit in the revenue budget of the NHS.

The Committee found that a few of the largest deficits relate to intractable historic problems, but that:

"many are associated with the extraordinary growth in staff costs arising from pay rises and the large increase in staff numbers. The pay rises have far exceeded the Department's estimates and the numbers of new staff are far higher even than the figures proposed in the NHS Plan. The growth in staff costs points to serious underlying failures in the financial management of the NHS, which have occurred at all levels of the organisation, from the Department of Health to PCTs."

At Government level, the estimated costs of Agenda for Change and the new GP and consultant contracts were 'hopelessly unrealistic'. Government targets such as the aim to see all patients at A&E within 4 hours have been imposed without regard to cost. The Committee calls for effective costing of Government policies. Estimates of the costs should be communicated early to allow better testing in public.

Balancing the books

The Committee believes that the NHS may be in balance by the end of 2006/07 but fears that this may largely be achieved by cuts in the training budget. The report concludes that despite Government promises to get the NHS into surplus by March 2007, it is unlikely trusts with the biggest deficits will get into the black within five years.

The Committee found many trusts' recovery plans unsatisfactory as they encouraged trusts to focus on short-term measures that may further destabilise their situation and not be in the long-term interests of the NHS.

The report calls for the Government's Resource Accounting & Budgeting regime (RAB) to be replaced or refined to give trusts more flexibility and a suitable time period to get out of debt. MPs conclude "it is fundamental that the regime does not reduce trusts' income at the same time as requiring them to pay back any deficit owed."

The creation of a new contingency fund and the top slicing of PCT's budgets should not become a permanent part of NHS funding.

MPs conclude: "Continued top-slicing and the creation of a contingency fund would be an admission by the Department that it accepted that individual trusts would remain in deficit and that it had the ability, and the willingness to 'bail them out'. It could be seen as undermining the attempt to create a culture of strong local financial management."

Political Focus

The Committee are concerned that the need to drive down deficit levels, rather than a desire to improve services, are fuelling some of the changes currently taking place in the NHS.

The report concludes: "In recent years the NHS veered from one priority to the next as the political focus has changed. It has concentrated on meeting targets with too little concern for finance."

Commenting on the report, Committee Chairman, Kevin Barron said:

"The Government should be thanked for wanting NHS expenditure to be more transparent. In doing so, it has highlighted major weaknesses in NHS financial structures. It is important that we should all know what the NHS costs, and not just what it spends.

I hope the rush for balancing all NHS budgets does not mean further top-slicing next year, particularly in areas of high health inequalities. The increased expenditure was designed to tackle ill health in poorer communities and should be used for just that."