Health chiefs blame 'admin error' for failure to declare £417m NI windfall

Officials at the Department of Health failed to declare to the Treasury that they had received a pot of money which enabled them to balance their books, the National Audit Office (NAO) has said.

The department said an "administrative error" meant it failed to declare £417 million it received unexpectedly from the National Insurance Fund run by Revenue and Customs, which enabled it to stay within its overall budget by a "wafer-thin" margin.

The department kept within budgets set by Parliament for revenue (RDEL) by £210 million (against a £114.7 billion RDEL budget) and capital (CDEL) by £58 million (against a £3.6 billion (CDEL) budget), the NAO said.

But it said the Department of Health did not notify the Treasury of the extra £417 million it received, which meant "neither HM Treasury nor Parliament had the opportunity to consider whether to reduce any voted funding for the department by an equal and opposite amount".

Without this extra money, the department would have exceeded its RDEL budget set by Parliament.

The NAO said: "The failure to follow well-established practice in relation to these National Insurance receipts has been ascribed by the department to an administrative error. HM Treasury has chosen not to impose fines on the department due to this overspend."

In the face of NHS trusts running a £2.45 billion deficit, the Department of Health also raided £950 million from budgets meant for capital investment, such as building repairs and new equipment.

This means long-term investment plans have been set aside for the "short-term goal of meeting day-to-day spending", the NAO said.

Amyas Morse, head of the NAO, said: "The NHS in England remains under significant financial pressure, which is demonstrated in its accounts. It has again used a range of short-term measures to manage its budgetary position but this is not a sustainable answer to the financial problems which it faces.

"The department and its partners need to create and implement a robust, credible and comprehensive plan to move the NHS to a more sustainable financial footing."

Anita Charlesworth, director of research and economics at the Health Foundation, said: "Today's figures confirm the Department of Health overspent its budget - not surprising given the scale of financial difficulty across NHS providers, stemming from national failings in workforce planning and slow progress on productivity.

"To avoid a bigger overspend, the department relied on a large raid on the capital budget and one-off accounting measures that are not repeatable. As the NAO says, while this approach may be understandable, it is unsustainable. The cupboard is now bare."

She said NHS trusts are now heading for a half a billion pound overspend in 2016/17.

She added: "Time is running out - from next year, the financial position of the NHS only gets worse. The NHS urgently needs a strategy to improve its efficiency and crucially, to ensure it has the workforce needed to deliver high-quality patient care."

Nigel Edwards, chief executive of the Nuffield Trust, said: "The Department of Health has managed to avoid breaching the parliamentary limit on its spending only through a highly irregular 'administrative error' which meant it had an extra £400 million to play with.

"Even with that, the department had to rely on a series of unusual and one-off accountancy measures to create a veneer of financial balance which is not reflected in anyone's reality. As the National Audit Office has pointed out, these efforts have focused on the short-term Whitehall aim of balancing the budget while neglecting the more important issue of the long-term sustainability of the NHS."

Richard Murray, director of policy at the King's Fund, said: "The news that the Department of Health overspent its budget last year is further evidence of the serious financial crisis engulfing the NHS. Although the department avoided breaching controls set by Parliament on a technicality, the strong rebuke issued by the National Audit Office underlines the significance of this."

He added: 'It is no longer credible to argue that the NHS can continue to meet demand for services, deliver current standards of care and stay within its budget. If the Government is serious about restoring financial balance, it must review its priorities for the NHS and be honest with the public about what in can deliver with the money it has been allocated."