Management faults ‘to blame’ for NHS deficits

Ineffective management or leadership is to blame for many of the financial problems facing NHS trusts, a new report from the spending watchdog warns.

Research by the Audit Commission finds that inadequate calibre of trust leadership, a high turnover of board members and the distractions of large building projects are largely to blame for deficits of £512 million last year.

However, the body representing NHS managers, the NHS Confederation, warned against making staff scapegoats for the problems facing the health service, saying government targets and long-term accountancy issues also contributed to the deficits.

The Audit Commission report is based on audits of 25 NHS trusts which incurred a total deficit of £174 million in 2004-05, and highlights a number of common themes which led to financial failure.

It warns that effective management is often lacking, the quality of financial information available to plan is often weak and even then, members of the board are often distracted by large scale projects, such as PFI building works and mergers.

When faced with financial difficulties, the watchdog says many trusts are too prone to distance themselves from the problems or come up with short-term fixes, such as selling off assets or borrowing money.

It also notes the failure of senior doctors to engage in the budget-making process in NHS trusts, saying this is anomalous given that clinicians spend most of the money.

“To varying degrees, combinations of weak governance, poor management and lack of engagement of clinicians have contributed to financial failures in a small number of NHS bodies,” said acting commission chairman Michael Lyons.

“There are lessons to be learned and our report identifies a series of indicators that will help all NHS organisations promptly to identify when they are at risk and to take action to avoid financial failure. It is crucial that boards and management get the basics right.”

However, Gill Morgan, the head of the NHS Confederation, warned that it was “all too easy” to blame managers for the financial trouble in the health service.

“Deficits are in part the result of short-term pressures on the service including national targets and workforce reforms,” she explained.

“Longer-term issues, such as major structural problems, exposed by changes to accountancy rules, are also to blame. The minority of trusts with deficits are taking action to re-balance the books and plan for the future.”

A spokeswoman for the Department of Health welcomed the recognition that financial balance could only be achieved through finance staff, management, clinicians and board members working together.

But she also noted that many of the organisations highlighted in today’s report were now “on the road to recovery”, adding that 69 per cent of NHS organisations broke even or recorded a surplus last year.