THE HEALTH Service Executive (HSE) has put in place a freeze until the end of 2009 on the amount it pays for goods and services.

In a letter to suppliers in recent days, the HSE said that as part of overall cost-containment measures, it was holding the cost of all bought-in goods and services at existing levels until the end of next year at least.

"Specifically, this means that no price increases in respect of goods and services can be granted between the date of this letter and the end of 2009."

The HSE letter said its staff were being advised with immediate effect not to implement any application for price increases received. It also said that internal processes were being put in place to manage this process.

The HSE said that normal contractual obligations would not be affected by the implementation of the new measures.

"We understand that this decision and your support for its implementation may raise issues for you.

"However, we are confident that you will understand that it is absolutely necessary to implement this decision now, in order to minimise impact on frontline patient services," the letter to suppliers said.

It was signed by the HSE's head of procurement and national director of finance.

The letter noted that early indications were, due to changes in the broader economy, that funding availability for next year would be very constrained.

"In that event and in order to minimise the impact of any potential shortfall, on frontline patient-related services, the HSE is implementing a number of cost-reduction/cost-containment measures. The key aim of these measures is to protect frontline services," the letter stated.

The HSE has already warned that it could face a potential €1 billion financial shortfall next year.

A confidential HSE briefing note drawn up for a meeting with trade unions earlier this month said that the organisation had been provisionally informed that it would receive the same level of funding next year as it received in 2008.

In addition, the briefing note said that it had been asked for value-for-money savings of 2.5 per cent.

The HSE note suggested that, on this basis, it would face a shortfall of €1 billion next year if it was to provide the same level of services as in 2008.

On Monday, Minister for Health Mary Harney said the increase in health spending next year would be "negligible" when compared with recent years.

Meanwhile, it has also emerged that the HSE has postponed plans to extend the flu vaccine scheme to those aged over 50. This action was advised by an expert group last month due to its financial difficulties.