Welcoming the Government's decision to reverse the Resource Accounting and Budgeting (RAB) principle which means that if a trust reports a deficit in one year, its income is reduced by that amount the following year, Dr Gill Morgan, chief executive of the NHS Confederation, said:
"NHS leaders are delighted that the government has finally come to the right decision to reverse the Resource Accounting and Budgeting (RAB) principle. RAB has meant that many trusts in financial difficulty are, in effect, penalised twice - also known as the 'double deficit'.
"This accounting rule has taken millions of pounds away from frontline services, placing a number of trusts in severe financial difficulty and made getting out of deficit extremely difficult if not impossible.
"The NHS Confederation has been lobbying Government ministers and officials hard over the past months to revise the NHS accounting rules to take action on this matter. The Government's own independent financial watchdog, the Audit Commission, has also been calling for the removal of RAB from the deficits' calculation to give a fairer picture of trusts' financial circumstances and help them achieve financial balance.
"We are also pleased that some of the £450m NHS contingency fund will be used to reverse the top-slice that has been taken from many primary care trusts over the last year. However, given that over £1 billion has been taken from PCTs during this financial year, there is clearly some way to go. Our key concern is that there is transparency in the way finances are reported so that high-performing PCTs are not presented as being in deficit when, without the top-slice, they would be in surplus."