Allowing NHS Trusts and departments within trusts to operate more like a business in retaining some or all of their profits would encourage rigorous financial discipline, an improved work ethic from managers and staff, and a degree of accountability when costs are not covered.
At present, if an NHS department goes over budget, the most likely consequence will be that it's next year's budget will be increased to cover the shortfall of the previous year. No efficiencies or improvements in working practice need therefore be made, and no accountability assumed by managers, because they may be assures that by consistently spending more than their allotted funds, they will consistently increase the amount of money available to them. Any surplus revenue or remaining monies in the budgets of departments who are fiscally prudent – remaining within their allotted funds – are simply transferred to those who have overspent.
Whilst this practice keeps NHS organisations more easily solvent, it also hinders the reforms within the NHS which are necessary if it it to continue to provide care free at the point of use for all. Allowing innovative departments to accumulate even a modest surplus, whilst implementing a system of genuine accountability for managers who overspend or mismanage money would be a big step in this direction. Stepping away from the idea that it is acceptable to "rescue" a department who cannot properly manage their resources without question would also help.
Ultimately, the NHS is more than adequately funded – services need not be cut to preserve jobs or the level of care. It must however reform and learn to use the funds which the taxpayer gives it in a more prudent manner.