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The NHS reported a surplus of £1.67 billion in 2007-08. According to a report jointly prepared by the Audit Commission and the National Audit Office and published today, the surplus achieved reflected good use of resources rather than a failure to deliver healthcare. The Department of Health (DH) has given a commitment that the NHS will be able to spend the surplus in future years.

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However, the surplus was significantly higher than the original forecast of £916 million and more than three times that recorded in 2006-07 (£515 million).

According to today’s report in 2007-08 only 11 out of 340 NHS organisations, or 3 per cent, reported a deficit, compared with 22 per cent in 2006-07. In 2007-08, strategic health authorities (SHAs) delivered a surplus of £903 million, primary care trusts (PCTs) a surplus of £391 million and NHS trusts a surplus of £380 million. This is a key change from 2006-07, which saw the PCT and NHS trust sectors still in deficit overall. NHS foundation trusts delivered a further surplus of £395 million.

There were cash balances in the NHS totalling £0.9 billion at the financial year-end. NHS foundation trusts held an additional £2.3 billion. Auditors found that the capital underspend (see notes for editors) in 2007-08 was 22 per cent (£521 million) compared to a 43 per cent underspend in 2005-06, and a 40 per cent underspend in 2006-07.

Auditors’ findings show that the quality of financial management in the NHS improved overall during the year and performance has improved across all NHS sectors. NHS organisations made good progress in meeting national healthcare targets and the quality of healthcare, as rated by the Healthcare Commission, improved.

In 2006-07 the DH designated 17 NHS trusts as financially challenged. Seven trusts continued to be so classified at 31 March 2008. More work will need to be done by these organisations, in conjunction with their SHAs and the DH, to achieve sustainable financial operating performance.

The DH and NHS are facing a number of challenges for 2008-09: including changes to the financial strategy for the NHS, changes to the financial reporting framework and timetable, and further system reforms under which a quality element will be introduced into how NHS organisations are funded. The surplus generated and better financial management should, if maintained, help with the financial implications of meeting these challenges.

"The surplus of £1.67 billion is equivalent to about one week’s funding for the whole NHS. The organisations in the NHS are performing better financially and this surplus has created an element of certainty for financial planning that has not existed in recent years. This is especially reassuring given current financial pressures throughout the economy.

"Auditors have found matters to be addressed, such as localised accounting issues, and there are long-standing financial problems affecting a minority of trusts. The significant challenges for the NHS next year are in meeting new International Financial Reporting Standards and tougher deadlines on closure of accounts, but it looks as though most NHS bodies are well placed to cope."

Tim Burr, the head of the National Audit Office, said:

"Good financial management is not just about achieving a surplus. It is also about meeting delivery targets within the resources available. The surplus was generated through good financial management: NHS bodies delivered more cost savings than expected while still delivering against targets and improving the quality of healthcare. But better forecasting of the outcome could enable resources to be deployed more flexibly in-year."

Steve Bundred, Chief Executive of the Audit Commission


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