'£1.8bn NHS underspend' defended

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Chief executive David Nicholson accepted that there would be well over a billion pounds lying unused in the service's budgets when official figures for 2007-8 are released.

However, he said the situation was "manageable", and stressed that it was down to local trusts whether they chose to use the money they were given.

"It's still in percentage terms relatively manageable," Mr Nicholson told the Commons Health Select Committee.

"Any big organisation like ours, which turns over £100 billion, within 2% it seems to me is a reasonable place to be."

Mr Nicholson added: "We are certainly not saying to people that they cannot spend the money.

"That surplus is not with us at the centre. I haven't got it in a safe in my office. It's actually out there with the Primary Care Trusts (PCTs).

"It really is a matter for local PCTs as to how to use these resources."

The projected surplus of £1.8 billion was calculated by the Health Service Journal (HSJ). That figure is more than treble the £510 million surplus in 2006/07 and comes after a deficit of £547 million in 2005/06.

It is partly made up of money "top-sliced" by Strategic Health Authorities (SHAs) from the budgets of Primary Care Trusts (PCTs), according to the HSJ.