Richard Douglas gets a health check

As financial director of the Department of Health, Richard Douglas is at the
centre of the political action.

Tory leader David Cameron raised the temperature last week in his first
policy speech by promising to deliver Tony Blair’s health reforms if the prime
minister is forced to compromise by his rebellious backbenchers.

This must be galling for a prime minister who has poured huge amounts of cash
into the NHS coffers, in an attempt to raise standards in ailing hospitals, and
ensure he has a legacy of domestic policy success.

To add to his embarrassment, and surely that of Douglas, some of the extra
investment appears to have been mishandled.

Just before Christmas, KPMG was awarded contracts to provide ‘financial hit
squads’ to work with the 50 highest overspending health authorities and trusts
in England.

Douglas is under pressure to sort out the financial malaise after a
collective overspend of £600m in 2005 and a warning from NHS chief executive Sir
Nigel Crisp that the books must be balanced by 2006/07.

To say it won’t be an easy task is an understatement, as amply illustrated in
information revealed by PricewaterhouseCoopers at the end of last year – news
that an NHS trust in London, which was seen as a flagship PFI scheme, could be
facing financial disaster.

PwC warned that the Queen Elizabeth Hospital NHS Trust in Woolwich had a
deficit that could balloon from £19.7m currently to £100m by 2008/09.

This May well see Douglas reach the fifth anniversary of his appointment as
director of finance and investment for the Department of Health. It is his third
spell with the department, having worked there on secondment from the National
Audit Office for two years in the early 1990s, and three years as deputy FD
covering the final year of the Tory government and the first two of the Labour
administration.

He returned again in 2001 after a two-year stint as FD with National Savings,
and told Accountancy Age’s sister title Financial Director that he saw his
current job as the ‘pinnacle’ of his profession and an ‘honour’. This proved to
be an unwitting glimpse into the future, as he was made a companion of the Order
of the Bath in the latest New Year’s honours list.

In his current role he sits on the department board responsible for ensuring
that the nation’s health services perform. Douglas was keen to remind health
managers at a conference in December that they need to strive to hit their
targets and avoid financial deficits.

‘We have created a system that targets break even, almost to the penny, so
it’s inevitable that it risks deficit. A small miscalculation, an unexpected
pressure, will move you to the other side of the break-even line,’ he said.

Douglas advised them to budget for a surplus so that any unexpected pressure
will not force them into a deficit.

Whether the message will get through, only time will tell, but similar
warnings in recent years appear to have fallen on deaf ears. Even some of the
new pioneering foundation trusts, which have a degree of independence from the
NHS, have run into financial trouble.

The political fallout of a failure to get to grips with money troubles in the
NHS could be serious for both Blair and health secretary Patricia Hewitt. For
Douglas it could also be a serious matter.