A POTENTIAL multi-million pound overspend for Gwent's Local Health Boards (LHBs) will be wiped out in a deal with the area's surplus-making NHS trust.

Last December, LHBs - there are five in Gwent - were saddled with an unforeseen total bill of around £8m after the Assembly altered its guidance on budgeting for extra costs of continuing care in residential and nursing homes, expected following a High Court ruling in England, called the Grogan judgement.

Previous guidance had advised LHBs not to include potentially expensive Grogan costs in 2007/08 budgets.

But late last year they were advised instead that these costs must be met from existing budgets, as extra money would not be available to cover them.

For some LHBs, the new guidance turned estimated break-even positions - and in the case of Monmouthshire a projected surplus - into six- and seven-figure deficits overnight, with barely a quarter of an already difficult financial year remaining. Newport LHB alone initially forecast an unplanned overspend of £3m.

Boards across Wales, many already facing repayment of loans on previous debt, found themselves in similar positions, forced to trawl budgets to find ways of bridging the cash gap through efficiency and other savings.

Meanwhile, Gwent Healthcare Trust predicted a £3.5m surplus, achieved through the likes of reduced drug costs and other departmental savings, and by the end of February LHBs had reduced their combined estimated overspend to £3.5m-4m.

The aim then was to use the trust surplus to offset the LHBs' deficit. The latter was subsequently further reduced to £2.2m, meaning in turn that the trust could still report a surplus.

That trust surplus was then boosted by a further £900,000, due in large part to reductions in potential arrears payments owed to staff through the Agenda For Change NHS pay modernisation programme, and lower than expected costs in meeting waiting times targets.

The trust will use its surplus for early part-repayment of an Assembly loan to cover previous debt.