The health service recorded a financial deficit of about €400 million in the five months to the end of May, Health Service Executive chief executive Anne O’Connor has said. She told the Oireachtas health committee there had been a significant overspend in the HSE’s pay budget due to “significant use of agency [staff] who are high cost”. O’Connor said the largest deficits arose in the State’s acute hospitals which were seeing “unrelenting demand”. However, she said there were early indications that measures the HSE put in place in April to deal with overspending were having an effect. She said the growth of the deficit, which stood at €250 million at the end of March, had slowed and that she expected to see a significant reduction in the coming months. She said some parts of the HSE which had had escalation measures applied due to overspending up to March were showing the largest reductions.Meanwhile, Department of Health secretary general Derek Tierney told the committee that BAM, builder of the long-delayed national children’s hospital, had given a commitment to complete the project by the end of August. Tierney said “we will wait to see” given 19 previous deadlines had been missed. In response to questions from Sinn Féin health spokesman David Cullinane about financial controls, O’Connor said: “I definitely think we could spend money better” overall.She said the figures for May did not represent a dramatic reduction in overspending but “we have seen a turn”. Replying to Labour TD Marie Sherlock, the HSE chief executive said the health budget for this year had, in part, been based on assumptions that certain levels of savings would be made.She said these savings “did not quite materialise”.“We certainly have been very challenged In terms of the level of activity [in the health service]. The level of activity has been very high in the winter period which resulted in higher costs in hospitals for opening additional capacity and all of that.”O’Connor said there had been significant increases to other costs such as the provision of drugs. “We know that increased activity leads to increased costs in terms of things like aids and appliances and diagnostics.”O’Connor said she could not give a forecast at this stage but the HSE had to “absolutely pull back [spending] to the national service funded levels”.She added: “At the minute we are outside of that, so very significant work is under way to bring that back.”Asked about the €175 million in savings his department has been asked to find under a cross-Government levy applied to offset an overrun on education spending, Tierney said: “We are going to have to understand how we achieve that.“I am sure we will negotiate that with both the Department of Public Expenditure and the HSE in the coming months. We do have to see how that settles in the context of the pressure we are seeing now.”He said this year’s health budget was about €27 billion but implicit in that was a requirement for total balanced pay and non-pay control.“There are some external factors driving pressures into our non-pay control,” he said, adding that measures had been introduced to strengthen financial controls including central approval for recruitment and a post-by-post review. He said the payroll was not an infinite resource there had to be pay and control discipline. He said there also had to be strong monitoring and “we have to pay particular attention how agency [work] is used as a structural recruitment piece”.