Press release: Failure to revise accounting rules is a missed opportunity, say NHS leaders

11 Dec 2006

Commenting on the Department of Health's Operating Framework, Dr Gill Morgan, chief executive of the NHS Confederation which represents over 90 per cent of NHS organisations, said:

"We are very disappointed that the Department of Health has not taken the opportunity of today's announcement to revise the NHS accounting rules which means that many trusts in financial difficulty are, in effect, penalised twice.

"The Resource Accounting and Budgeting (RAB) principle means that if a trust reports a deficit in one year, its income is reduced by that amount the following year. In addition to receiving less income the following year, the trust also carries forward the original deficit onto next year's balance sheet. This is known as a double deficit.

"The NHS Confederation and the government's own independent financial watchdog, the Audit Commission, has called for the removal of RAB from the deficits' calculation to give a fairer picture of trusts' financial circumstances.

"NHS organisations are working hard to achieve financial balance in their income and expenditure, but for many the way that deficits are accounted for by the centre makes the challenge of financial balance extremely difficult."

Commenting on the new milestone for the 18 week target in the Operating Framework, Dr Morgan, said:

"Meeting the new milestone on the 18 week target, alongside the need to achieve financial balance, will be incredibly challenging for NHS organisations. All NHS organisations - both providers and commissioners - will need to work very closely together to meet this target."

Commenting on the Operating Framework's focus on greater freedoms for local managers and clinicians, Dr Morgan said:

"We welcome the focus in the Operating Framework on more local freedoms for managers and clinicians to decide and deliver on local health and healthcare improvement targets.

"The NHS Confederation has been calling for a shift in the balance between centrally driven targets and local priority setting and this is a positive step to achieving this. However, we still have further to go to achieve strong autonomous NHS boards that have the freedom to lead and take responsibility."

Notes for editors

The NHS Confederation represents more than 90% of the organisations that make up the NHS. Its members include the majority of NHS acute trusts, ambulance trusts, foundation trusts, mental health trusts, primary care trusts, special health authorities and strategic health authorities in England; trusts and local health boards in Wales; and health and social service trusts and boards in Northern Ireland.

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