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Editor's blog 3rd October 2008: liquidity or solvency?

Today we will see whether Gordon Brown is better than his predecessor at cabinet reshuffles. It will not be hard: Tony Blair's reshuffles were startlingly clumsy and leaky.

For health, the hope must be for steady-as-she-goes, apart from the probably-doomed Ivan Lewis, whose pre-conference comments on Labour's need for leadership were miraculously followed by the leaking to the press of an old story about Lewis's inappropriately hassling a DH civil servant with romantic intent. Whoever might have been behind that?

More broadly, a quick reflection on liquidity and solvency was prompted by Larry Elliott's excellent think-piece in today's Guardian about the Audit Commission's broadly favourable new Auditors’ Local Evaluation (ALE - great acronym, don't you think?) report on NHS financial management.

An extensive quote from the summary follows below, for quick reference.  The NHS relevance is around preparing for tighter economic times ahead. The Government has committed to let borrowing take the financial strain of the certain drop in tax receipts caused by the downturn. This will see the current CSR running to 2011, or at least until the 2010 general election.

Liquidity is not, therefore, the principal short-term problem for the NHS. What everyone involved in the management of healthcare needs to be doing as a priority is to ensure through data use and commissioning, they are genuinely improving services, moving care upstream and closer to home.

The odds of the downturn being short and sharp don't look so good just now.

Which means there is an ill-wind coming, like a wolf's breath. It will huff and puff. Don't let it blow your house down.

From Audit Commission ALE report 2007-8
"The report assesses how well PCTs and NHS trusts manage and obtain value for money from their financial resources. It stems from auditors’ statutory duty to satisfy themselves that NHS bodies have proper arrangements for securing economy, efficiency and effectiveness (value for money) in their use of resources. Auditors evaluate NHS bodies’ performance in five themes - financial reporting, financial management, financial standing, internal control and value for money. The overall Use of Resources (UoR) score, which is a combined score for the five themes, is used by the Healthcare Commission as part of its Annual Health Check.

"ALE was introduced in 2005/06 and this is the third year of results. The overall picture is one of significant improvement over the three years assessed. Performance has improved strongly in 2007/08 and this success can be attributed primarily to the return to financial balance of all but a small minority of NHS bodies. The improvement is all the more impressive given the fact that the strongest performing NHS trusts have become NHS foundation trusts (FTs) and are not subject to ALE assessments. Furthermore, the PCTs and ambulance trusts reconfigured in 2006/07 have now established much improved arrangements for their use of financial resources.

"There is a link between the effective use of resources and high quality services for patients. In 2006/07, 91 NHS trusts and PCTs were performing well or strongly in their use of resources under ALE. Fifty-eight of the 91 organisations (64 per cent) also scored good or excellent for their quality of services in the 2006/07 Healthcare Commission’s Annual Health Check.

"Key results from the 2007/08 NHS trust and PCT ALE assessments include:
Ninety-three per cent (282) of NHS bodies met or exceeded minimum standards for their overall use of resources.
Fifty per cent (151) of NHS bodies were assessed to be performing well or strongly in their use of resources.
Five per cent (14) of NHS bodies were assessed to be performing strongly – the highest level.
Only 7 per cent (20) of NHS bodies failed to meet the minimum standards. The reasons for failure were a combination of inadequate financial standing and financial management arrangements.
Two per cent (7) of NHS bodies improved their overall score by two levels from 2006/07. Fifty-six per cent (170) of NHS bodies improved their overall score by one level from 2006/07. Thirty-nine per cent (118) of NHS bodies achieved the same score as in 2006/07 and 2 per cent (6) dropped by one level.
Mental health and learning disability NHS trusts performed better than other sectors across all five themes. This has also been the case in the previous two years of ALE. The most common score for NHS trusts overall was level 3, performing well. PCTs’ performance improved strongly in 2007/08, virtually eliminating the gap between PCTs and NHS trusts. However, during 2007/08 the strongest performing NHS trusts became FTs and were not assessed under ALE.

"The number of NHS bodies that met or exceeded minimum standards did not vary greatly across themes. Performance was strongest in the internal control theme and 98 per cent achieved minimum standards. For financial standing, the proportion was 95 per cent and performance for the other three themes was within this range. The range of scores within each theme was also broadly consistent across themes, with the notable exception of financial standing. In this theme, 33 per cent of NHS bodies were assessed as performing strongly, compared to an average of 4 per cent for the other themes.

"Performance varied across England. The NHS bodies in North West Strategic Health Authority (SHA) area achieved the highest average score overall. The average overall score of NHS bodies in Yorkshire and the Humber SHA area was the lowest. NHS London has the highest proportion of NHS bodies performing strongly but also has the highest proportion failing to achieve minimum standards."