By Marjory Inglis, health reporter

NO AREAS of concern in the finances of NHS Tayside and NHS Fife were highlighted by the nation’s public services watchdog in a report published today.

Earlier this year NHS Tayside reported that the books balanced for the seventh year in succession and today’s national report points out that Fife has extra cash in the kitty.

Audit Scotland’s financial overview of the year to the end of March points out that NHS Fife is building up a surplus to cope with planned expenditures in future.

In 2007-08 the Fife health authority reported an underlying surplus of £2.5 million, with a further surplus of £200,000 forecast for the current financial year. The report notes that the surplus is earmarked for “costs associated with general hospital and maternity redesign.”

The report shows an underlying deficit of £1.6 million in Tayside but the health authority’s assistant chief executive Danny McLaren said that was “not a problem.”

He said that occasionally non-recurring money was used to balance the books. Every year health boards were required to make savings and part of NHS Tayside’s savings last year was only available on a non-recurring basis.

“Our target has always been to move towards a situation where we are both in balance but also we are not relying on non-recurring money to square the books,” said Mr McLaren.

More than £17 million of savings have been identified in this year and Mr McLaren said the position had “improved quite considerably.”

The Audit Scotland report, Financial Overview of the NHS in Scotland 2007-08, found that the health service had an overall underspend of £26 million on its £10.1 billion budget for the financial year ending March 31, 2008.

This was the third consecutive financial year that the service had an overall underspend, and during 2007-08 NHS bodies were less reliant than previously on non-recurring types of income to meet financial targets.

However, coming years will be challenging. NHS bodies will receive smaller funding increases over the next three years than in recent years.

At the same time, they are expected to increase efficiency savings although they will be able to reinvest these savings to support front-line services.

Boards will face continuing costs pressures such as new pay deals for staff, rising drug and fuel costs, and the costs associated with reducing waiting times and service redesign.

They will also face new challenges such as the full implementation of the European Working Time Directive.

The Auditor General for Scotland, Robert Black, said, “The financial performance of the NHS was good during 2007-08. The service continues its steady improvement in this area over the past few years. This is the third year in a row that the NHS has ended the year with a small underspend.

“Boards are relying less on non-recurring funding—such as the sale of assets and using one-off government grants for their day-to-day operating costs.

“However, NHS bodies should now prepare for some considerable challenges ahead. Future funding increases will be getting smaller at the same time as bodies are being asked to generate significant savings.

“In addition to the continuing pressures such as pay deals and drug costs, bodies will also have to deal with new issues such as the need to cover staff whose hours are restricted by European employment laws.”