This story from the FT is mind-blowing:
Hospitals hide funds to rein in surplus
By Nicholas Timmins, Public Policy Editor
Published: May 25 2008 23:30 | Last updated: May 25 2008 23:30
Hospitals and primary care trusts have prepaid suppliers many hundreds of millions of pounds and have hidden money in other ways in order to keep the National Health Service surplus for last year down to the forecast £1.8bn.
Without such action, senior NHS managers say, the declared surplus for the NHS in England in the financial year just ended is likely to have been nearer £3bn.
That money is in addition to the £2bn of cash in the bank, much of it working capital, that foundation trusts are expected to hold as they generate their own surplus of perhaps £500m.
The move appears to have two motives: first to avoid the political embarrassment of the massive swing to a huge surplus of about £3bn just two years after the NHS in England attracted months of dire headlines when it recorded a £571m deficit; and second, to reduce the risk that a cash-strapped Treasury will claw the money back.
Both ministers and David Nicholson, the NHS chief executive, have said the Treasury will allow the service to carry over its forecast surplus. The NHS also aims to carry over a similarly sized sum this financial year.
Last year, however, the Treasury quietly clawed back £2bn of unspent capital from the Department of Health, and there are fears that if the final surplus exceeds the £1.8bn forecast the Treasury – which is under pressure on its borrowing rules, has just had to fund a £2.7bn tax giveaway to tackle the 10p tax band issue and faces spending pressures from other departments, not least defence – will want the money back.
To reduce the risk, managers say NHS hospitals and primary care trusts have been given “control totals”, which stipulate that while they must deliver the surplus they were forecasting, they must also not exceed it.
Some chief executives have been told their personal performance rating would be under threat if they do.
According to people close to the situation, foundation trusts, which as free-standing businesses can keep the cash, were paid £300m-£400m in advance by primary care trusts for services before the end of the last financial year.
Doris-Ann Williams, director general of the British In-Vitro Diagnostics Association, whose members supply equipment to the NHS, said members had received “a flurry of unexpected cash orders for capital equipment purchases as long as they could be invoiced before the end of March [the end of the financial year]”.
The chairman of one London hospital said it had not only been prepaying suppliers but also shifting money to charitable trustees to get it off the books by the end of the financial year. Some primary care trusts are also said to have prepaid local authorities for services.
One senior NHS manager said: “I don’t think anyone knows what the true picture is, but my guess is that without these measures the real surplus is much closer to £3bn.”