Health finances, fiction and fantasy

Guest post from @TobyMasonBBC

It's become an annual ritual - a bit like the dreaded visit to the dentist. Today's the day we get to see the final accounts for the seven Welsh health boards.

It follows a familiar pattern. The Health Minister praises the boards for breaking even (as they have to do by law), usually after having tens of millions of pounds of extra cash on top of their yearly allocations.

Then comes a passing mention for a few million loaned to some of them at the very end of the financial year. But, taking that into account, well done guys.

And, in a way, it is a deserved well done. Anyone reading the minutes and papers of any of the Boards through the year can't fail to be struck by the titanic effort needed to try and meet the legally-binding break-even target at the end of the year - a task memorably described by one finance director as akin to landing a jumbo jet on a postage stamp.

The financial routine is similar - if not identical - every year. All seven start each year with a hefty gap between their predicted budget and their actual one. They draw up savings plans to meet a proportion of that shortfall. Then there's the rest, which is treated, effectively, as either "make it up as you go along" or "hope for some extra money from the Health Minister like the cavalry coming over the hill" as the financial year draws to its close.

Add a harsh winter to that, with admissions skyrocketing and you get a measure of the challenge they face.

Today is "well done day" for the last financial year. Here's Dr Drakeford:

Through careful financial management of the total health and social services budget, the NHS was able to generate a small surplus of £61k, despite the unprecedented levels of pressure on unscheduled care and other services. In 2012-13, NHS Wales has broken even without needing additional support from Welsh Government central reserves. This is a remarkable achievement, and is testament to the hard work of all NHS organisations and their staff. I offer them my thanks and congratulations.

Well - yes - except they also got an extra £82m from the Welsh Government in the middle of the year. And two of them, Hywel Dda and Powys only actually broke even with last minute loans of £2.3m and £4.2m from other NHS organisations.

The opposition parties are (more in private than in public to be fair) relatively sympathetic to the funding position that the Welsh Government is in, particularly with regards to a health service that eats up more than 40 per cent of the block grant on its own every year and could and would swallow considerably more without making an appreciable difference to the deep seated issues within the service.

There is some frustration from the opposition at the "black box" nature of the £6bn health budget, which makes it exceptionally difficult for them to scrutinise where the money actually goes.

But what they really, really don't like are press releases like today's. Here's Shadow Health Minister Darren Millar:

To suggest that the Welsh NHS broke even without a need for additional financial support is complete and utter fiction. The Welsh NHS received an 82 million pounds bailout last December to prevent massive overspends at the end of the financial year and, even with this cash, some health boards - such as Powys and Betsi Cadwaladr - had to cancel thousands of planned operations to make ends meet, causing spiralling waiting lists and inconvenience for patients.

Here's the Lib Dems health spokesman Aled Roberts, who describes today's statement as "fantasy":

This praise of local health boards meeting their financial requirements is a slap in the face for many patients in North Wales. Just last week, a controversial report made it clear that the only way Betsi Cadwaladr was able to make it to the end of the financial year was by allowing waiting lists to grow and cancelling routine operations.

Incidentally, the Wales Audit Office review referred to by Mr Roberts will be back in the headlines next Tuesday, when senior figures from Betsi Cadwaladr appear in front of the Public Accounts Committee. One suspects thanks and congratulations won't be foremost in the questioning from AMs.

However, this could be the last year that the annual ritual takes place. One of Mr Drakeford's first acts when taking over as health minister was to announce a new Bill to end the legal duty on health boards to break even by the end of every financial year, and instead work across three year budget cycles. This has been widely welcomed by the NHS in Wales, who believe that far too much time and effort is spent trying to crash land the proverbial jet on to the stamp.

But there's a real danger here too - and one that the Minister is very aware of indeed.

That is, that the health boards spend profile during one financial year tends to go - profligate for the first few months to make up for the austerity at the end of the previous year, some belt tightening in the middle few months, pleas for extra cash, followed by desperate, hell for leather cuts, including to frontline services, including elective surgery, towards the end of the year - which of course takes them through the winter and their period of greatest demand.

The three year budget cycle would undoubtedly smooth this process. But what happens if the current profile simply elongates to fill the new spending period - and the cumulative debt overhang towards the end of the third year is beyond what the Welsh Government can provide in additional funding from its reserves?

Bust, not to put too fine a point on it.