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The Department of Health (the 'Department') and the NHS achieved a surplus of £515 million in 2006-07, representing 0.6 per cent of total available resources. This followed two years of rising deficits, and the Department, working with the NHS, has done well in restoring overall financial balance. While the national picture is one of financial surplus there remain variations in financial performance. The surplus is concentrated in Strategic Health Authorities, whilst overall Primary Care Trusts and NHS Trusts remain in deficit Of the 372 NHS organisations, 82 recorded a deficit of £917 million, with 80 per cent of this being reported by just 10 per cent of NHS organisations. There are also regional variations, with the East of England Strategic Health Authority area having a deficit of £153 million and the North West achieving a £189 million surplus. Financial recovery is therefore inconsistent and more needs to be done so that all parts of the NHS achieve financial balance. The Committee concludes that the return to financial balance is the result of the Department's tighter performance management of NHS finances in the way funding flowed through the NHS together with a programme of support for local organisations with particular financial difficulties. In the short term, this largely centralist approach was appropriate. For the future if the NHS is to remain in financial balance more health organisations locally need to improve their financial management. Failure to keep a tight grip on financial performance will undermine health care for patients.
In the last financial year the Department of Health made financial recovery priority and managed to turn the deficits of 2005-06 to a surplus of £505 million in 2006-07. The Comptroller and Auditor General is the statutory auditor of the financial accounts of the NHS and has the duty to certify and report to Parliament on them. This report is published alongside in the NHS Summarised Accounts to provide more detail on the financial performance of the NHS, how it moved into balance and the challenges that face it in the future.
In continuation of HC no. 742 of session 2006-07
This National Audit Office report (HCP 63-I, session 2008-09, ISBN 9780102954418), looks at the financial performance of, and financial management in, the NHS during 2007-08. It also explains some of the issues which are likely to provide financial challenges for the NHS in 2008-09 and beyond. Where the report refers to performance of the NHS it covers the performance of Strategic Health Authorities, Primary Care Trusts and NHS Trusts, as reported in the NHS Summarised Accounts (ISBN 9780103288079). The report also contains an analysis of the financial performance of NHS foundation trusts.
Spending on the NHS is the fastest growing area of public expenditure, with a budget for 2004-05 of £69.7 billion, rising to £76.4 billion in 2005-06 and £92.6 billion in 2007-08. Despite the increased resources, the NHS reported an overall deficit of £251 million (including Foundation Trusts) in 2004-05, the first time since 1999-2000 that the NHS as a whole had overspent. In 2005-06, the overall deficit increased to £570 million, with a rise in both the number of NHS organisations (Strategic Health Authorities, Primary Care Trusts, NHS Trusts and NHS Foundation Trusts) reporting a deficit and the proportion of those bodies reporting a deficit. Following on from a report (HC 1059-I, session 2005-06; ISBN 9780102938159) published in June 2006, jointly prepared by the National Audit Office and the Audit Commission, the Committee's report examines three main issues: the factors that led to the deficits, the impact on the organisations involved, and the steps taken to recover the deficits. Amongst its findings, the Committee concludes that there are a number of reasons why NHS bodies are in deficit, with most organisations in deficit tending to have had a deficit the previous year. Bodies already in deficit looking to turn their financial position around can be disadvantaged as they are expected to recover that deficit in the next financial period. The NHS has been under significant financial pressure to meet the costs of national pay initiatives which the Department of Health had not fully costed, and as some NHS bodies have coped better than others in managing these cost pressures, this indicates that the standard of financial management expertise varies across the NHS, as does the level of clinical engagement in financial matters.
Since their introduction under the Criminal Justice Act 2003, community orders have offered courts the ability to impose a range of 12 possible 'requirements', including accredited programmes (such as anger management courses or alcohol and drug rehabilitation), unpaid work in the community and supervision by the National Probation Service. There is little information available nationally on the effectiveness of community orders. On the key measure of reconviction, figures from the Ministry of Justice showed that for those sentenced to community orders, their actual reconviction rate was significantly lower than those sentenced to custodial sentences for similar offences. There is, though, no basic information such as national data on whether offenders have completed their community orders, nor on why offenders have failed to complete them. The National Probation Service has set national standards but these are applied inconsistently. The Ministry's current method of funding Probation Areas is unsatisfactory and slow to respond to changes in demand from the courts and it is felt that there is a need for a more flexible system. On the basis of a report by the Comptroller and Auditor General, the Committee examined the Ministry of Justice on increasing effectiveness of community orders; building the confidence of both the court and the community in community orders; improving the funding formula; and tightening adherence to the requirements of orders.
The 14-19 education reform programme aims to increase young people's participation in education and training beyond age 16 and raise their educational attainment. Central to the programme are new Diploma qualifications, being introduced between September 2008 and 2013, in 14 different occupational areas that offer a blend of academic and vocational learning. This report examines: giving all young people access to Diplomas; reducing complexity and communicating simply; and having the capability to deliver the reforms. The Department for Children, Schools and Families (the Department) has involved universities and employers in designing the Diplomas and developing their content. As new qualifications, there is still much work to be done to convince parents, employers and universities that Diplomas are a credible alternative to existing qualifications. To help make the qualifications more understandable, the Department and its partners need to demonstrate clearly how Diplomas will help young people progress into further learning and employment. By 2013, the Department is aiming for all young people in England to have access to all 14 Diplomas at three different skill levels. The Department has spent £590 million on the programme. It has not yet established cost estimates built up from the local level for delivering Diplomas, and has only just begun surveying local authorities to assess their capital requirements.
The Single Payment Scheme replaced previous European Union production-based agricultural subsidy schemes from 2005. The Department for Environment, Food and Rural Affairs, through the Rural Payments Agency, had chosen to implement the most complex option for reform in the shortest possible timescale, and the Agency had badly underestimated the scale of the task. This led to delays in making payments to farmers, erroneous payments and additional project and administrative costs, as reported in the Committee's earlier report (55th report session 2006-07, HC 893, ISBN 9780215036179). The Agency has estimated that there were £20 million of overpayments for the 2005 Scheme, and £17.4 million for the 2006 Scheme. The Agency has taken little action to recover the identified overpayments, with the risk that farmers may have unknowingly spent the money in the interim. Of 19 overpayments in excess of £50,000 paid in August 2006, the Agency had started the recovery process with only two of the farmers affected. Major changes made to the Agency's IT systems have enabled most farmers to receive payments earlier under the 2006 Scheme than for the 2005 Scheme. There has been a substantial impact on the costs of the business change programme to improve the Agency's efficiency, and the total project cost is now likely to exceed £300 million. In mid 2007, staff numbers in the Agency peaked at 4,600 and are not expected to reduce to 3,500 until 2010. The Agency is still not able to offer adequate advice to farmers on the progress of their claim. It was reluctant to specify targets by when such information would be available and when payments would be made under the 2008 Scheme.