Headlines: July 26th, 2006

Leading figures from local government have joined colleagues from the National Health Service to call for reform of the health and social care system so further cuts can be avoided. This follows a study which shows that councils are being affected by budget deficits in NHS trusts.Meanwhile the Audit Commission is recommending major changes in the financial management and accounting regime of the NHS to help improve financial performance and lessen financial risks for individual bodies. The details are set out in a report being sent today to the Secretary of State for Health, Patricia Hewitt. Key recommendations include a move away from Resource Accounting and Budgeting towards a regime offering sharper and more appropriate incentives for good financial performance.

The report also calls for improvements in oversight and management by the Department of Health and strategic health authorities, and the Commission wants to see key elements of a more effective and swifter system for identifying and dealing with financial distress at NHS bodies. In addition, it says, financial support in the form of working capital should be available for NHS organisations.

Local Government Analysis and Research conducted comprehensive research into the impact on authorities where NHS trusts were in deficit and this showed that almost seven out of ten councils had been affected. Fifty-five of the 78 local authorities in areas where the local Trust is in deficit say the NHS body has made cost-cutting measures that have impacted on councils. These include withdrawing finance from jointly funded projects, an increase in the referral of patients that would normally be cared for by the NHS and paying no more than one per cent inflation on existing contracts.

In turn local authorities have adopted a range of measures to cope with the cutbacks such as withdrawing services from people with low-level care needs, lengthening waiting times for social care assessments and services, transferring resources from other services like leisure facilities and transport and using budget reserves.

Council leaders have stressed that the deficits are only one of the pressures faced by social care budgets. The financial settlement from the Government and the needs of an ageing population, have also put councils in difficult situations. David Rogers, the Local Government Association’s social care spokesperson, said health and social care were two sides of the same coin and it was impossible to cut services on one side without hurting the other.

“This is not a name, blame and shame game. Councils do not want to start a war of words with the NHS, indeed the only way we will overcome these worrying problems is to work more closely together,” he said. Dr Gill Morgan, chief executive of the NHS Confederation, added, “NHS organisations with financial problems are taking action to re-balance the books and plan for the future. However, it is clear from the LGA survey that NHS deficits have had some effect on other local services, just as local authority financial difficulties in other areas of the country have had an adverse effect on NHS services. It is tempting when you have financial problems of your own to blame someone else or another organisation. However, the reality is that when organisations are under financial pressure, this is precisely the time when a collective approach is vital.”