This has been a tough year for the NHS. Ongoing financial problems means the news agenda continues to be driven by stories of financial mismanagement and cuts in patient services.
Who is to blame we hear them cry? A cursory glance at the headlines from the latest financial performance report from the Department of Health would suggest that PCTs are the major culprits, responsible for 60 per cent of the gross national deficit (£793 million). Nearly half of PCTs are shown as being in deficit, compared to just over a third in 2005/6, so the position seems to be deteriorating. Yet if you look closely the figures tell you a rather different story.
Over £1 billion has been taken from PCTs during this financial year through the top-slicing regime. This money is then held by the SHAs in their reserves to offset the region's deficit. The impact of this top-slicing has been to throw a large number of PCTs into apparent deficit, when without the top-slice they are delivering a surplus. When the effects of top-slicing are taken into account, the number of PCTs in deficit falls from 71 (47 per cent of PCTs) to 29 (19 per cent of PCTs). Or to put it another way, 42 PCTs have been sent into deficit because they have been top-sliced.
Although there are a number of PCTs in genuine financial difficulty, the overall position is relatively healthy. Without the top-slices the net position for PCTs is a surplus of £405 million rather than the net deficit of £739 million after the top-slice. The gross deficit in PCTs is £405 million (or 30 per cent of the national problem) rather than £793 million.
Does this matter? I would argue that it does. It is not the principle of top-slicing that PCTs are questioning - there are many sensible reasons why such a regime should be in place. It is the presentation of PCTs' bottom line as well as who makes the decision to top-slice and how the money is used that causes concern.
Let me address each of these points in turn.
The majority of PCTs are effectively managing their finances and delivering high standard local services to patients within budget. Yet the Department's financial reporting says otherwise. Why? Because the effect of the top-slice is not factored into the final forecast figures. For example, a PCT might be forecasting a £10 million surplus against its financial allocation but because it had been subjected to a top-slice of £15 million the Department's reports would show this organisation as forecasting a £5 million deficit.
Not only does this portray the PCT as a poorly performing trust affecting its Healthcare Commission Annual Health Check rating and as a knock in its reputation on a local and national level. But because PCTs are subjected to RAB (and there is no suggestion that this should change) the fact that an organisation is presented as being in deficit means that its available funding for the following year will be reduced unless top-slices are returned to PCTs.
It is ludicrous that high performing, well managed PCTs are punished, therefore affecting frontline patient services, because top-slices sit in SHA reserves rather than are reflected as PCT surpluses.
The Quarter 3 report is the first time the effects of top-slicing have been addressed, frustratingly however this is not in the forecast figures - only in the analysis copy. Although the paper suggests that top-slices should be returned, there is no guarantee on the timescales other than saying it should not exceed the three year allocation cycle.
While parts of the NHS remain in deficit, some form of top-slicing will still need to happen. However, PCTs should be given more power and autonomy to decide collectively how much should be taken and how this money should be utilised - after all this is their money that we're talking about here, not the SHA's.
PCTs are funded on the basis of weighted capitation calculated on the needs of the local population. The imposition of top-slices has started to undermine the principle of capitation funding. This principle needs to be restated and PCTs need to be given the freedom to take a responsible overview of the region's health community - together - and determine what is best for local patients.
In a recent survey of NHS chief executives 70 per cent said they think the NHS is hidebound by bureaucracy supporting the claims of many critics. The accounting rules and financial processes that are used to mange NHS finances certainly add fuel to this argument.
David Stout
Director
NHS Confederation Primary Care Trust Network
