Pharmaceutical Field - NHS loses £1.4bn cost savings to Treasury

NHS loses £1.4bn cost savings to Treasury

The NHS has underspent its budget for 2011–12 by £1.7bn, but only £300m (18%) of that has been kept for next year’s budget.

The requirement to return £1.4bn to the Treasury breaks Sir David Nicholson’s promise in October 2010 that “every penny” saved by the NHS would be reinvested in patient care.

It also means that while the NHS budget increased slightly relative to 2010–11, there was a small drop in real-terms NHS spending.

The NHS could only use the ‘budget exchange’ mechanism, which allows a department to retain unspent budget, for a fifth of its cost savings.

Its underspend was the largest by any Whitehall department, though the NHS was the only department whose budget was not reduced.

The NHS savings target of £20bn by 2014 is not meant to include budget cuts: it represents the savings needed to keep budget increases very slight despite inflation and demographic changes.

In 2010–11 the NHS underspent £900m, of which only £400m was retained by the department.

The loss of budget savings is a consequence of the Government’s 2010 spending review, which abolished the ‘end of year flexibility’ arrangement that allowed a department to roll over unspent funding.

Health Minister Simon Burns commented that NHS savings in 2011–12 had been made by cutting back on “bureaucracy and IT”, while spending on “frontline services” had increased by £3.4bn.