07/03/2014 06:21 GMT | Updated 06/05/2014 06:59 BST

The Return of NHS Deficits

Last month the Health Secretary claimed the NHS had turned a corner. A year on from the Francis Inquiry, into the failings at Mid Staffordshire NHS Foundation Trust, Jeremy Hunt hailed a new era of transparency and compassionate care. Alongside this so-called "Francis Effect" more good news would hit the Health Secretary's desk. The much dreaded "A&E" crisis that was meant to bring the NHS to its knees failed to materialise. Yet the Government is not out of the woods yet. 2013 was a difficult year for the NHS. 2014 could well be even worse.

In a bid to improve quality the Government has taken its eyes off the money. Back in 2010 the health service was set the mission of improving productivity by £20 billion. As many leading independent voices and the Government itself recognised, achieving such savings would only be possible by fundamentally transforming how care is delivered and organised. However in recent weeks there have been the first signs that the health service is off course. In February the influential Health Select Committee warned that while "straightforward savings" have been made, sustainable reform to services has barely begun. Monitor, the health service regulator, has also reported that NHS hospitals have fallen behind on their saving plans for the second year running.

Most worrying for the Government is the growing evidence that the many of the NHS's hospitals may not be able to balance the books this year. Monitor's latest quarterly report found that the number of Foundation Trusts in deficit has doubled to 39. A similar number of Trusts - NHS providers that are still managed by the Department of Health - are also expected to be in deficit by the end of the year. In total, between 40 and 50 per cent of acute hospitals could be in deficit by the end of the year.

While the NHS frantically tries to shore up their finances, in the next few months veteran civil servants in the Department of Health will be thinking back to the last major deficit crisis in 2006. In that year 30 per cent of NHS organisations reported a deficit and Patricia Hewitt, the Health Secretary at the time, took personal responsibility for turning the finances around. On that occasion the Government was able to make short term savings in the workforce budget and increase spending to return the NHS to surplus. This time the options draw in the Health Secretary's office is nearly empty.

Keeping the health service within its already huge budget requires hard choices. Firstly, a growing number of hospitals are no longer clinically or financially viable in their current form. Widespread reconfiguration of hospital services and moving more care into different settings will be a priority for whoever is in government in the years ahead. Secondly, in the wake of the Francis Inquiry, quality of care has become synonymous with staff numbers. Indeed recruiting additional nurses and agency staff has been one of the big costs that has pushed NHS hospitals over the edge in recent months. While the Government has talked up more doctors and more nurses as a sign of improvement, an NHS based on inputs and not outcomes is not sustainable.

Even if the Government can find some extra money down the back of the Treasury sofa this will only buy a few months for David Cameron and Jeremy Hunt. As growing numbers of providers veer towards insolvency the legacy of 2006 is clear: the public will expect politicians to act and fast. A few weeks ago the Health Secretary managed to sidestep any blame for the delay to "", the ambitious project to share patient data. If the NHS runs into the red in 2014 Ministers are unlikely to escape the spotlights once again.