Overview of the financial performance of the NHS in Scotland – podcast transcript

Simon:  Hi, we’re here talking to Geoff Lees the project manager in charge of Audit Scotland’s latest report the Overview of the financial performance of the NHS in Scotland 2005/06.  So Geoff, what’s this report about?

Geoff:  This report provides an overview of the financial performance of the NHS in Scotland 2005/06 and actually builds and complements on our previous reports on the performance of the NHS in 2004/5.  The report actually highlights the key findings emerging from the annual audit process as a means of holding the NHS bodies to account over its use of public funds.

Simon: And what have you found?

Geoff:  Well, what we’ve found is the NHS in Scotland spent almost £9 billion in 2005/06 which is about a third of the total public sector spending in Scotland and spending is planned to reach £10 billion by 2007/08.  NHS boards reported a combined under-spend of £69.6 million which is an increase of £65 million compared to the previous year.  This overall position is largely due to the Scottish Executive paying off the £81.7 million cumulative deficit of Argyll and Clyde.  We also found that boards are continuing to make use of non-recurring means to support their position, such as getting additional support from the health department or using proceeds from the sale of assets.  

Simon:  So there’s more money going into the NHS and yet health boards still seem to be struggling.  Where’s the money going?

Geoff:  Well the increase in funding for 2005/06 was £796 million but it’s difficult for us to tell precisely where the new money is going because the accounts prepared by the NHS boards don’t give us that level of detail.  However, we have found that increases in staff costs which include pay modernisation agreements accounted for £374 million off the additional funding and the fact is cost pressures will always exist in the NHS, rising energy costs, new medical procedures and service redesign will have accounted for much of the additional funding going into the NHS in Scotland in 2005/06.

Simon:  We’re hearing quite a lot at the moment about how bad things are in England financially for the NHS there.  Is it as bad in Scotland or could things go the same way here?

Geoff:  The NHS in Scotland has its own unique issues around demographics and geography and it’s actually difficult to draw comparisons with the rest of the UK.  NHS trusts in England are also under different pressures due to the introduction of payment by results.  However, some of the financial issues in England are common to Scotland for example spending plans exceeding available recurring funding, an over-reliance on non-recurring funding to meet financial targets and, of course, the cost of pay modernisations and rising drug costs.  That’s why it is important there is strong long-term financial and service planning in the NHS in Scotland.

Simon:  You stress there the need for some stronger financial planning in the NHS but health boards finished the year with a £70 million surplus.  So how bad are things?

Geoff:  Well in fact the £65 million increase in surpluses reported by boards between the two years is largely due to NHS Argyll and Clyde’s £81.7 million cumulative deficit being cleared by the Scottish Executive health department.  If you exclude NHS Argyll and Clyde the remaining 23 NHS bodies only reported a marginal increase in surpluses of £4.9 million compared to the previous year.  Our concern is that NHS bodies will not be able to rely on capital revenue transfers in 2006/07 to balance the books and this will make the achievement of financial targets more challenging that year.  

Simon:  You mention there the dissolution of the Argyll and Clyde health board.  Now two health boards, Greater Glasgow and Highland have had to take over the work and some of the financial fall-out of that dissolution.  Is that going to cause them problems?

Geoff:  NHS Greater Glasgow and NHS Highland have taken on additional responsibilities from the former NHS Argyll and Clyde. We understand that they are developing their financial and clinical plans and are in discussion with the Health Department about this but both these boards will have to ensure they have robust governance and planning and monitoring procedures in place to ensure the successful continuation of services and responsibilities.  

Simon: What would you like to see happen now in the NHS?

Geoff:  Well, we would like to see NHS bodies reduce their reliance on non-recurring funding and concentrate on identifying and delivering recurring savings.  We’d also like to see further progress around single system working such as boards moving to one financial system and evidence of more developed governance arrangements and, of course, we’d like to see boards focussing on long term financial service planning.

Simon:  Thank-you very much for your time Geoff.