NHS deficits 'damaging patient care'

MPs have today warned that cuts in staff and training budgets made by NHS trusts struggling to balance their books are "unacceptable" and are damaging patient care.

In a highly critical new report, the health select committee also warns that "soft" services such as mental health and public health services are suffering under new savings drives.

NHS trusts recorded deficits of £520 million last year, and health secretary Patricia Hewitt has warned they must be in total surplus by 2008. She has staked her job on the fact that the health service will be back in balance by next April.

Today's report acknowledges the need for better budgeting in the health services, investment in which has doubled under the Labour government, and notes there is a "good deal of evidence of poor financial management" in trusts.

However, it warns central government is also to blame for the crisis, saying the cost of the new GP and consultant contracts, and Agenda for Change, were "hopelessly unrealistic". Targets, such as on A&E waiting times, are also "expensive to meet", it says.

It also warns the financial regime is too tough, saying most trusts' recovery plans are "unsatisfactory" and demand short-term cuts that are "destabilising" the health service.

The overall accounting system - resource accounting and budgeting (RAB) - is also criticised as inappropriate for NHS trusts, echoing the conclusions of the Audit Commission this summer.

It demands the system, which cuts funding to trusts by as much as their deficit in the previous year, effectively penalising them twice, be scrapped. However, Ms Hewitt announced on Monday she would not review RAB for another two years.

The report also warns against the way the government is taking surplus funds from trusts that manage their finances well and giving them to those with deficits, so-called top slicing. It says it defeats the whole aim of encouraging individual financial management.

Health secretary Patricia Hewitt responded by saying that 90 per cent of debts were in 20 per cent of NHS trusts, and said her department was working closely with them to put this right.

She repeated her expectation that the NHS would be in £250 million surplus by the end of 2008, adding that if all trusts were performing at the level of the top 25 per cent, they would save £2 billion.

Ms Hewitt said: "As a result of [the government's] investment, backed by reform, the NHS has cut waiting times, built new hospitals and surgeries, paid for more doctors and nurses to work and train, and improved access to healthcare for millions of people."

However, shadow health secretary Andrew Lansley warned the financial failures in the NHS had undermined the benefit of this extra funding, and were "damaging services, staff morale and threatening the future of our NHS".

"There is a risk that current failures will create long-term damage as the government top-slices budgets across the country," he said.

Liberal Democrat health spokeswoman Sandra Gidley added: "The government cannot continue to bury its head in the sand over the NHS.

"This report confirms that so called 'soft targets' such as staff training and mental health services are being cut in a desperate attempt to clear deficits. This is a false economy as the damaging effects on patient care and staff morale will be felt for years to come."

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