Hospitals and NHS managers were pressured into spending hundreds of millions of pounds before the start of the financial year to “hide” a £1 billion surplus.

Opposition parties have accused the Government of encouraging NHS financial mismanagement after it emerged that some trusts had been ordering millions of pounds of equipment “as long as they could be invoiced before the end of March” – the end of the financial year.

Primary care trusts also advanced up to £400 million for future services to foundation trusts, which, as free-standing businesses, can keep the money. Some local councils have also been paid in advance for services.

The NHS had forecast a surplus of £1.8 billion in March, but managers now suggest that the true figure was closer to £3 billion, with up to £1 billion being “hidden” by preordering.

Some chief executives have been told that their bonuses could be jeopardised if they exceeded their “control totals” target, so have been using various accounting methods to reduce it.

Two years ago the NHS returned a deficit of £547 million, which was turned into a £515 million surplus in 2006-07. The steps taken to turn the service round have proved to be so effective that the surplus has risen to unprecedented levels in 2007-08. However, such a large surplus presents its own problems as patient representatives have criticised NHS managers for underspending while patients were still being denied vital treatments.

Unions have also used the surpluses to argue for better pay for NHS workers, claiming that they have been generated by greater efficiency from staff.

Doris-Ann Williams, director-general of the British In Vitro Diagnostics Association, whose members supply equipment to the NHS, told the Financial Times that members had received “a flurry of unexpected cash orders for capital equipment purchases as long as they could be invoiced before the end of March”.

The Department of Health has said that all the surpluses would remain within the NHS. This has been possible since 1999, when Gordon Brown, then Chancellor of the Exchequer, relaxed the rules on carrying forward surpluses from one year to the next. But last year the Treasury quietly clawed back unspent money from the Department of Health and there are fears that it may do so again if the surplus significantly exceeds its £1.8 billion target.

Stephen O’Brien, the Conservative Shadow Health Minister, said: “Labour’s financial incompetence under Gordon Brown is making it boom or bust in the NHS – and this uncertainty does nothing to help patients and the hard working medical staff. If money allocated to the NHS is not going on patients then it should not be hoarded.”

Norman Lamb, the Liberal Democrat health spokesman, said: “We do have a crazy situation of substantial surpluses in many acute trusts.

“One of the casualties is mental health services, which benefit from neither targets nor the PreBudget Report and have to negotiate block contracts with primary care trusts. They have suffered as acute trusts cash in. This creates a distortion in priorities.”

A spokesman for the Department of Health said: “Thanks to the efforts of NHS staff over the past year and half we are now in a strong and sustainable financial position, but also – importantly – we remain on course to deliver against our key pledges. The NHS and its staff have managed to achieve all of this at the same time as cutting waiting lists to their lowest ever.

“NHS organisations are bound by strict accounting practices and are subject to a full audit at the end of each financial year.”

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