§ Mr. Simon HughesTo ask the Secretary of State for Health if he will list the deficits of each(a) health authority and (b) health trust for the first quarter of the financial year 1997–98. [16716]
§ Mr. Milburn[holding answer 19 November 1997]The forecast surpluses and deficits for all health authorities and National Health Service trusts for the first quarter of 1997–98 are listed in tables, together with information for the second and third quarters. Copies of the tables have been placed in the Library.
As this is fast-track management information which provides a forecast estimate of the position at the end of the year, it is normal for movements to occur during the year.
Forecast income and expenditure figures do not always reflect the underlying financial position, and a large income and expenditure deficit does not necessarily indicate financial problems. There are a number of factors which should be taken into account when looking at the underlying financial position, for example:
an NHS trust may make a charge to the income and expenditure account for provisions such as estimated clinical negligence liabilities and early retirement costs—even though actual payments are not made at this time. In accordance with Generally Accepted Accounting Practice (GAAP), these provisions are made in respect of future liabilities; and any 150W deficit caused by charging them to the income and expenditure account now is therefore not necessarily indicative of underlying financial problems;a health authority which lent (brokered) cash to another health authority in 1996–97 will be repaid this year. Consistent with GAAP, this repaid cash will not score as income on the health authority's income and expenditure account. Any income and expenditure deficit caused by spending repaid brokerage would not necessarily indicate underlying financial problems;a health authority or NHS trust in receipt of transitional funding may have a balanced position or even an income and expenditure surplus.
§ Mr. Simon HughesTo ask the Secretary of State for Health which trusts were placed on a red light status in relation to their finances in each region in(a) 1995–96, (b) 1996–97 and (c) 1997–98. [17338]
§ Mr. Milburn[holding answer 24 November 1997]National Health Service trusts are placed on a red light status when the NHS Executive has concerns over their financial performance. The assessment is based on current and forecast financial positions and is subject to change throughout the year.
Information for 1996–97 Quarter 4 has previously been placed in the Library but is included here for completeness. The analysis of red lights by region is provided for Quarter 4 1995–96, Quarter 4 1996–97 and Quarter 3 1997–98 in a table, copies of which have been placed in the Library.
The criteria used for allocating red lights in 1995–96 and 1996–97 have been the subject of a previous reply I gave the right hon. Member for Flyde (Mr. Jack) on 31 July 1997, Official Report, column 617. The criteria for 1997–98 have been changed to promote consistency and objectivity across the NHS. The financial criteria used for red lights in 1997–98 is an adjusted income and expenditure deficit of more than the lower of £1 million or 1 per cent. of turnover. Adjustments are made to the reported surplus or deficit to remove items which are not within the control of the trust management. These include clinical negligence provisions, early retirement provisions and compensating adjustments for losses on the disposal of assets. Where year to date performance indicates that trusts are likely to breach the criteria by the year end, regional offices light to the trust.
The assignment of red lights in 1997–98 is more mechanistic than in previous years. This has resulted in red lights being assigned because a trust has breached the financial criteria although the NHS Executive regional office may be satisfied that the trust has sound finances, a recovery plan is in place to deliver breakeven and it is delivering the expected benefits. This will generally result in more red lights reported in 1997–98 and as a comparison, an estimate of the number of red lights at Quarter 3 under the old criteria would be around 50 instead of the 74 under the new criteria.