NHS finance rules ‘penalising those in debt’
Accounting rules for NHS trusts are making it harder for the most in debt to balance their books and should be scrapped, the health watchdog says today.
The Audit Commission warns that the current system means debts – which totalled more than £500 million across the NHS last year – are counted twice, both in the year they were accrued and the year after.
In a government-commissioned report, it recommends the Department of Health set up a reserve fund to cover the debts of NHS trusts in the short-term.
The watchdog says this is not the same as writing them off, but means trusts would not have to balance their books within a year as they had to at the moment.
Instead, as long as they could pay their monthly bills, trusts would only have to break even over three or five years – a business model already applied to foundation trusts.
The NHS Confederation, which represents health managers, welcomed the plans to scrap the “dysfunctional” resource accounting and budgeting (RAB) regime, which leads to this so-called double-deficit.
“Our members will also be pleased that the Audit Commission has recommended that the Department of Health introduce a proper banking function that will lend trusts money against their business plan,” said policy director Nigel Edwards.
“The confederation has been calling for a strategic banking function for some time to enable trusts to borrow to support long-term change.”
Although the government has stressed that NHS deficits represent only a fraction of the overall health service budget, hospitals across the country have been axing jobs and cutting back staff over the past few months to balance their books.
Critics have blamed the pace of health service reform introduced in the past few years, including payment by results and practice-based commissioning, which have put extra demands on trusts.
Today’s report says scrapping the RAB regime would give trusts more flexibility in responding to reforms in the NHS.
“The NHS is a unique and complex organisation and its economy is equally complex. Our proposals are challenging and wide-ranging, and they may take time to implement,” said Michael Lyons, the commission’s acting chairman.
“But, the financial management and accounting regime of the NHS needs to change to keep pace with the many significant new health reforms that are designed to further improve the NHS.
“Crucially, our recommendations support the NHS reforms, would enable trusts and PCTs to achieve better value for taxpayers’ money and contribute to consistent, reliably funded services for patients.”
The Department of Health said it would consider the proposals and respond in due course.
