Motion made, and Question proposed, That the sitting be now adjourned.—[Claire Ward.]

9:30 am
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Andrew George (Shadow Secretary of State for International Development, International Development; St Ives, Liberal Democrat)

I am pleased to have secured this Adjournment debate. It is pertinent, particularly as it comes after what I describe as the sacking of the chief executive of the NHS, and after the announcement only last week that the Royal Cornwall Hospitals NHS trust faces an £8.1 million deficit this year and is engaged in a financial recovery programme that will involve the sacking of 300 staff and the loss of vital services to the trust at three hospitals that cover Cornwall, two of which are in my constituency. I also raised the issue of acute hospital funding on 6 April last year—the debate can be found in columns 1545 to 1554 of Hansard.

I should declare an interest, as my wife is a nurse in the local trust. I should also say by way of background that I welcome the increase in NHS resources. I am not mealy-mouthed about the substantial resources that the Government have put into the NHS since 1999. However, many of us are asking what those resources have achieved. There have been cuts in some of the headline figures in respect of waiting lists, but serious questions must be asked about the effectiveness of the use of resources in the NHS.

The sacking of Sir Nigel Crisp last week demonstrated the seriousness of the situation that many hundreds of trusts will face towards the end of this financial year. Arguably, Ministers are more exposed now that he is gone than they were before, and his departure raises questions about why so many primary care trusts, and acute trusts in particular, are facing such high deficits.

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Andrew Turner (Shadow Minister (Charities), Home Affairs; Isle of Wight, Conservative)

I apologise for arriving after the hon. Gentleman began his speech. Will he speculate on whether the Government hold any responsibility for what happens at the local level in the health service? They have a propensity to say that it is all a matter for the trusts and PCTs, but they appoint every member of the executive boards of those trusts and PCTs.

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Andrew George (Shadow Secretary of State for International Development, International Development; St Ives, Liberal Democrat)

Given the hon. Gentleman's last remark, one could say that his question is rhetorical. The fact is that the Secretary of State appoints all the boards and sets the targets, guidelines and parameters in which each trust operates. I entirely agree with the hon. Gentleman that trusts are, in effect, agents of the Government—they are not separate from the Government in any way. The Government cannot pretend that trusts are remote bodies over which they have little control, or simply pass the buck and not accept responsibility. I shall further embellish that point later. I do not take the view of those who would like to secure a ministerial scalp before lunch that somehow Ministers must be accountable for the loss of a paper clip in some distant outpost, but they must be accountable for important matters such as the fundamental management of NHS finance. The chief executive lost his job over that issue, and, as Ministers are now exposed, it is the Minister's duty to be accountable.

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John Hemming (Birmingham, Yardley, Liberal Democrat)

Does my hon. Friend agree that the Government's swerve at the last minute, which involved top-slicing the budgets of primary care trusts by between 1.5 per cent. and, at one stage, 6 per cent., and the withdrawal over three years of the purchaser protection adjustment caused financial chaos across the country for which Ministers are directly responsible?

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Andrew George (Shadow Secretary of State for International Development, International Development; St Ives, Liberal Democrat)

The Minister will have heard that question, so there is no need for me to embellish it. I am sure that she will take it on board and address it when she replies to the debate.

The fundamental question is, where has all the money gone? We know that about half of it has gone on general practitioner, consultant and "Agenda for Change" salary increases, but one must ask where all the rest of it has gone. We also must ask whether the culture of target setting improves performance and patient care or simply adds to administrative complexity.

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David Taylor (North West Leicestershire, Labour)

As the husband of a nurse, does not the hon. Gentleman welcome what the Government have done, particularly since 1999, in addressing the low pay that bedevilled nursing in particular and, to a certain extent, other clinical disciplines in the NHS? Surely that was long overdue and welcome.

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Andrew George (Shadow Secretary of State for International Development, International Development; St Ives, Liberal Democrat)

Of course it was welcome, but one could set a benchmark against which pay increases would be assessed. GPs work nine-to-five, five days a week yet get five times as much as hospital nurses, who deal with stressful situations and work antisocial hours—weekends, nights and so on. Whether they should receive one fifth of what GPs do is a matter of parity within the NHS, which obviously needs to be sorted out. There is also the question of regrading, which happens whenever pay increases come along. Nurses are often downgraded rather than given a salary increase. The picture is not quite as rosy as the hon. Gentleman describes, although I agree that the general increase—the general trend—is welcome. I thought that I had welcomed it earlier.

The situation is dire indeed in Cornwall, which I mentioned earlier. Right hon. and hon. Members would be surprised if I did not mention it a few times. There are significant overspends this year, but that is not new: the PCTs inherited deficits from their predecessor organisations. The question is whether the services provided in Cornwall as a result of all this extra money being spent—more than the Government had in fact budgeted for—are better than in other parts of the country, or whether there is some other explanation. Also, what future opportunities will there be to review the appropriateness of the Government's funding formula for NHS trusts?

The situation in Cornwall is serious. There are concerns about how things are being managed, and there is a lack of confidence in the local NHS. Last year, I was at Helston protesting with the local community about the cutting of 10 of 34 beds in that vital community hospital, which serves the remote Lizard peninsula. On Tuesday last week, I was complaining to the chief executive of the Royal Cornwall Hospitals Trust that there were 14 ambulances, nearly the whole provision for Cornwall, queued up outside the front door of accident and emergency at Treliske in Truro, and there were no beds available within the trust to admit patients, yet a day later the trust was talking about a deficit and the need to sack staff.

It is clear that the situation is untenable. It demonstrates that the service is in crisis. Managers go through an admirable coping process and say that everything is under control, but it is not. There are some very serious questions about the future financing of hospital services in places such as Cornwall which need to be addressed. I do not bear any criticism of front-line clinical staff, who are clearly hard-working, dedicated professionals, but local people worry that their service is not being run in the best interest of patients. What is the problem? Is it a failure of staff, of management, of funding or of the Government? We need to understand how funds are allocated to PCTs, and I know that for many this is a rather turgid subject.

Since the national health service was established in 1948, a variety of formulae have been employed to attempt to achieve fair and equitable funding. The present system can be traced back to the resource allocation working party created by the then Department of Health and Social Security in 1976. The working party introduced the concept of weighted capitation, and current allocations in England are weighted in respect of four separate components in NHS funding: hospital and community health services, drugs and prescriptions, general practice infrastructure and HIV/AIDS.

Hospital and community health services account for 82 per cent. of the overall spend, and a population head count is weighted for each PCT, according to age, emergency ambulance cost adjustment, need and market forces. Some, like the emergency ambulance cost adjustment, account for just 0.5 per cent. of the overall allocation. Need indices are not favourable to rural areas. For example, Cornwall, which is the poorest objective 1 area in the country, has significantly less funds according to its need index than the two other, wealthier objective 1 areas—Merseyside and South Yorkshire—and those regions are far more urban than Cornwall.

I will not go into detail about all the factors that go into weighing the matter up, but rural matters tend to lose out on the need index. The biggest impact is the higher weighting given to the market forces factor. The three Cornwall PCTs collectively tend to be at the bottom of the market forces factor league table, which contains 303 PCTs across the country. At present, Torbay is at the bottom, with the West of Cornwall PCT in my constituency second to bottom. However, the table is supposed to reflect local wage rates and other market factors.

I fully accept that all Members engage in a certain amount of special pleading with the Minister for the formula to be skewed in a direction that would benefit their own constituency, and I suppose that I am guilty of that. However, there is a fundamental issue of parity in this case. The market forces factor has a heavy influence on the overall funding allocation and it seems bizarre that the consideration that seems to have the greatest impact on the overall allocation of the market forces factor applies in circumstances where, as David Taylor said, the majority of the funds are spent according to national pay structures.

In any case, there is a lower staff turnover in areas such as Cornwall. The National Audit Office report in 2004, which examined the cause of deficits in Cornwall's PCTs, said:

"There is low staff turnover, with many staff at the top of their payscale."

In fact, in circumstances where Cornwall is at the bottom of the earnings league table for both the public and the private sector, those employed in the NHS tend to be found at the upper end of their pay scale. If anything, we should be getting more money to reflect that, rather than less.

Of course, that still does not justify the abnormality of the heavy weight placed on the market forces factor at the expense of all other factors. For example, the geography of Cornwall means that it cannot call on emergency services from the north, west or south at times of crisis, and that should be factored into its emergency service planning, its ambulance service, its accident and emergency services and the vital casualty service at West Cornwall hospital in Penzance. Regarding access to services, Cornwall's geography means that it is bordered by only one authority to the east, so the capacity to share resources and achieve economies of scale in that way is very limited. The acute trust's provision of services has to operate at 13 different sites, as well as running the three other services.

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Andrew Lansley (Shadow Secretary of State for Health, Health; South Cambridgeshire, Conservative)

Does the hon. Gentleman share a concern about the new arrangements for out-of-hours services in Cornwall? He will know about the matter better than me, but when I was in Truro just over a year ago, one of the integrated factors there was that the call services for NHS Direct, the ambulance service and the out-of-hours service could operate together. The letting of a contract for out-of-hours services away from KernowDoc will run the risk of further disintegration of emergency services, when we should be moving in the opposite direction by trying to achieve greater integration, at least in terms of commissioning. That seems not to be happening in Cornwall.

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Andrew George (Shadow Secretary of State for International Development, International Development; St Ives, Liberal Democrat)

It is certainly true that there has been enormous surprise and concern about the loss of the contract from KernowDoc. Serco, a company that does not have a tremendous track record so far—I understand it has just started running an out-of-hours service in the Cardiff area—has successfully bid for the out-of-hours contract. I understand the concerns regarding how streamlining or joint working with other out-of-hours services, such as NHS Direct, will be co-ordinated under the new regime, but many GPs who will be called on to support that service have yet to be convinced that the new arrangements are adequate. In fact, they may add further to the administrative complexity of the service.

To return to the issue of the market forces factor, the King's Fund report in 2004 cites its chief economist John Appleby, who, in issue 114 of the Health Service Journal, said:

"While the principle of adjusting purchasers' allocations and providers' prices to take account of unavoidable differences in cost is clearly sound, there is a question of how to do it."

He went on to say that the market forces factor

"is not the perfect solution to the issue of unavoidable cost variations".

That is why I am rather surprised that the Government have not taken into account other geographical factors of the type that I described. There are issues of economies of scale because it is clear that in areas such as Cornwall which have problems of remote rurality one cannot sacrifice accessibility by putting all services into one major centre. The unit costs are inevitably going to be higher if there are more smaller community hospitals and other services of the type that I described. There are bound to be higher travel costs. Research has shown that rural staff tend to travel two and a half times further than urban-based staff—that seems rather a low figure—and higher levels of unproductive time as well as cost prevail as a result. Therefore, staff-to-patient ratios need to be higher.

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Graham Stuart (Beverley and Holderness, Conservative)

Does the hon. Gentleman agree that, without recognition of his point about rurality and the additional costs of having centres in rural areas, where inevitably the unit cost per treatment will be higher, payment by results could have a devastating effect on rural services, such as community hospitals?

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Andrew George (Shadow Secretary of State for International Development, International Development; St Ives, Liberal Democrat)

I accept what the hon. Gentleman says, and I shall come on to my concerns about that particular approach taken by the Government.

When we take into account all those concerns and the need for a skills mix in smaller centres, it is no wonder that the service is struggling financially. Is Cornwall receiving better treatment than the rest of the country because of the benefits of overspend, and are managers being over-generous with their resources? At the same time, ambulance response times in Cornwall, particularly for category A calls, are not very good. In fact, they are among the lowest in the country. Sub-specialties tend to be further away. Often they are in Bristol or elsewhere, 200 or 300 miles away. The accident and emergency service often involves queues outside the hospital. It is not working properly, and there are fewer diagnostic facilities in Cornwall. Often patients have to travel for them, and there is still only one CT scanner.

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Andrew Turner (Shadow Minister (Charities), Home Affairs; Isle of Wight, Conservative)

The hon. Gentleman is being very generous in allowing so many interventions.

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Andrew George (Shadow Secretary of State for International Development, International Development; St Ives, Liberal Democrat)

Possibly too generous.

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Andrew Turner (Shadow Minister (Charities), Home Affairs; Isle of Wight, Conservative)

I certainly should not agree with that.

Is the hon. Gentleman aware that in response to my question a few days ago, the Minister conceded that the funding to provide patients with a choice of five hospitals should recognise the cost of travel, otherwise it would benefit the rich and not the poor? Does the hon. Gentleman think that it ought to be taken into account in Cornwall as the Minister said it ought in the Isle of Wight?

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Andrew George (Shadow Secretary of State for International Development, International Development; St Ives, Liberal Democrat)

I am grateful to the hon. Gentleman for that intervention. I was not going to cover the frankly diversionary issue of choose and book, and the expensive computer and administrative system that will need to be put in place for what is a fatuous choice for people in remote areas. It is quite absurd. Most people in my area want to be treated, and treated well, in their local hospital, for which they have enormous loyalty and respect. Instead of the resources going into administrative procedures, they want them to be spent in their local hospital, which is often struggling because of the lack of those resources.

What numerical impact does the market forces factor have on a place such as Cornwall? According to the table I mentioned earlier, on which Cornwall is 11 per cent. below the national average as far as the market forces factor is concerned, the calculation made by the Royal Cornwall Hospitals NHS Trust showed that if Cornwall were just 4 per cent. below the national average, the trust would earn an extra £10 million and the primary care trust would earn £4 million. At a stroke, it would remove the deficit and put the NHS trust into credit. It demonstrates just how important the market forces factor is.

In a debate last year, the then Under-Secretary of State for Health with responsibility for community, Dr. Ladyman, said in response to me that

"if it is clear that the formula allocation is not working for some reason, it will be reviewed."—[Hansard, 6 April 2005; Vol. 432, c. 1554.]

I hope that the Minister accepts that there are serious concerns today about how the allocation operates.

In the national context, we must consider more widely why funding crises affect a quarter or more of NHS trusts. There is bureaucracy, and there is a large number of chief executives. Even allowing for Sir Nigel Crisp's intervention last summer, when he sought to amalgamate many PCTs, 13 chief executives still need to come together to obtain a strategic view of health services in Cornwall. That includes social services, all PCTs and the various trusts that serve the Isles of Scilly and Cornwall. At the end of the PCT amalgamation process, all we have ended up with is too few chief executives—not a big change at all.

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David Taylor (North West Leicestershire, Labour)

I am grateful to the hon. Gentleman for giving way yet again. Is not he struggling to make a case for a national funding crisis? We are dealing with perhaps £800 million, which is approximately what the Chancellor of the Exchequer raises from taxation every 12 hours. If a large public service such as the NHS is within 1 per cent. of the framework set for it, it is evidence of a service in neither meltdown nor acute crisis. Some tuning is needed, however, particularly at local level in the quartile of PCTs that have the greater problems.

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Andrew George (Shadow Secretary of State for International Development, International Development; St Ives, Liberal Democrat)

That is very brave. I have already said that I welcome the money; the question is, how is it being spent? According to the Department's own figures, the number of managers since 1997 has increased by 68 per cent., while the number of nurses—welcome, indeed—has increased by 23 per cent. We have to identify where the money is going, and it appears to be going to management to feed the complex bureaucratic system that the Government have set up.

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Andrew George (Shadow Secretary of State for International Development, International Development; St Ives, Liberal Democrat)

No, I will not.

On top of the complex funding mechanisms and the ball and chain of the market forces factor, Cornwall faces another factor: owing to the way that resource accounting and budgeting works, when Cornwall goes into deficit, it receives less money in the following year by the same amount as its current deficit, meaning that it must then run forward weighed down by two balls and two chains. The whole system is bizarre.

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Andrew Lansley (Shadow Secretary of State for Health, Health; South Cambridgeshire, Conservative)

The hon. Gentleman has been generous in giving way. Does he share with me the view that, contrary to the contention of David Taylor, the nature of the financial problem is the sheer volatility and uncertainty experienced by trusts? Last year, the Royal Cornwall Hospitals NHS Trust had £26 million of planned and unplanned support; this year, the strategic health authority has put in further support. The authority's own report shows that the forecast deficit deteriorated from £11.9 million for the whole SHA from month nine, the end of December, to £23.5 million at the end of month 10. The situation is deteriorating seriously. The hon. Member for North-West Leicestershire may call it tinkering or trimming, but the reduction of 300 jobs at that trust is serious.

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Andrew George (Shadow Secretary of State for International Development, International Development; St Ives, Liberal Democrat)

I hope that right hon. and hon. Members will not mind that, having taken so many interventions, I have taken so long. It is important to tease out the issues.

It is true that as the Government, through the Secretary of State, appoint the Royal Cornwall Hospitals NHS Trust board and chief executive, they are responsible for the climate in which the board operates and the decisions that it takes. The Secretary of State should face those 300 people to explain to them that they are losing their jobs because of the direct relationship between that extremely bad news and the decisions that she takes.

If I had time, I could explain why payment by results has a distorting effect, adds to trusts' administrative costs and does not help with greater efficiencies. The target culture also has a distorting impact. I understand that we must seek incentives to meet the need for desirable outcomes, but hitting targets often means missing the point. Although performance against targets seems okay, actions taken have been at variance with the intention of those goals. Ambulance waiting times outside accident and emergency units show that patients are not brought inside because of the fear that they will reach the four-hour waiting time limit. An admissions netherworld has been created in which people are taken out of accident and emergency units and put into clinical decisions units before they are eventually admitted. I am not sure that those situations are entirely clinically acceptable.

The target culture also distorts clinical priorities and patient safety. Ambulance response time targets are met by co-responders and volunteers. That is fine, and we appreciate the efforts of those volunteers, but often that is simply a ploy by which to address the need to meet ambulance response time targets. Targets also encourage a culture of cynicism and manipulation of data, as shown in the article by Gwyn Bevan and Christopher Hood in the British Medical Journal on 18 February this year. The target culture creates additional bureaucracy, as shown by a consultant in my constituency, Alastair Paterson. He treated all his serious cancer patients immediately, without a waiting list, but he was told last year that he had to create a waiting list—more unnecessary bureaucracy.

All that raises questions, and I have given the Minister notice of some of the issues that I shall raise. In my view, local authorities, because of the budgetary constraints and strictures on them, are, in effect, agents of Government. If that is true, certainly primary care trusts and acute trusts are agents of Government.

How can we explain the overspend in Cornwall? What assessment have the Government and the Minister made of the appropriateness of the funding formula for places such as Cornwall? What opportunity will there be to vary the formula? If the problem is management incompetence, the Secretary of State should step in, but if the problem is not incompetence or bad management, there must be another explanation, which must include questions of formula funding. Does the Minister accept that some of the largest proportionate deficits are experienced in the poorest regions? Does she accept that targets in respect of the new so-called private sector disciplines have an impact in terms of increased management costs?

The situation in Cornwall is extremely serious. I am sure that the Minister understands that 300 people will lose their jobs. Patients in Cornwall, who need better services and better access to services, need proper answers. The mayor's parlour campaign team in Cornwall is asking for a review of health spending in Cornwall. I hope that the Minister will consider these questions seriously. The problem is not only national; in some areas, there is a particular focus and a particular acute need. The acute need in Cornwall needs to be addressed by the Government undertaking a review of funding and spending and of the provision of hospital and acute services.

Several hon. Members:

rose—

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David Amess (Southend West, Conservative)

Order. I shall begin to call Opposition spokesmen at 10.30 am. Many hon. Members are seeking to catch my eye, so unless speeches are extremely short, there will be widespread disappointment. I call Tony Baldry.

10:03 am
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Tony Baldry (Banbury, Conservative)

Andrew George has done us all a great service today. The Minister will go through her Division Lobby and talk to her colleagues, but she needs to note the fact that, on the Labour Benches generally, there is not enormous concern about the NHS, as is evidenced by the fact that there are very few Labour Members in this Chamber today. That is not because they are uninterested in the subject, but because of the way in which the Government have skewed the formulas and the fact that we now live in two Englands. That so many colleagues are present from the south, the centre, the west and the east of England shows that the NHS, in parts of the country, is in serious difficulties. In Oxfordshire, for example, we received only 85 per cent. of the average of national spending on the NHS.

I shall ask the Minister specific questions. The Oxford Radcliffe Hospitals NHS trust faces a £15 million deficit for this financial year. The strategic health authority, at the behest of the Secretary of State, sent in the accountants, the turnaround team. That team concluded that there was no financial mismanagement at the trust—indeed, no incompetence whatever—but that the deficit arose because of "over-trading". The deficit did not become apparent until halfway through the financial year. If it was caused by over-trading, that over-trading did not become apparent until halfway through the financial year. Who is responsible for that? Is it the PCTs, which are the commissioners? Is it the Oxford Radcliffe Hospitals NHS Trust? Should it have known that it was over-trading, should the Thames Valley strategic health authority have had mechanisms in place to see what was going on in a key trust, or should the Department itself have known that something untoward was going on?

What do Ministers and their financial advisers mean by "over-trading"? Surely it means simply that GPs have been referring patients on the waiting list to the Oxford Radcliffe Hospitals NHS Trust list for perfectly legitimate treatment and operations. How will Ministers deal with such "over-trading"? We have seen that, in part, they are dealing with it through the rather bizarre system called the clinical liaison advisory service, which is, in effect, second-guessing GPs' referrals. That means that the system is trying to limit the number of people who can have access to hospital treatment in Oxfordshire.

Today is Tuesday 14 March. The end of the financial year is only days away, but we still do not know how the Oxford Radcliffe Hospitals NHS Trust will save £15 million—we have absolutely no idea. I wrote to the chief executive, Trevor Campbell Davis, some two weeks ago, asking whether he could give some indication as to how, between now and the end of the financial year, he intended to save that money. As of yet, I do not have a response. I think that that indicates that the sum is so significant that the savings can be made only through large-scale closure of wards, large-scale reductions in services and very considerable postponement of operations. Whose responsibility is it to ensure that the books of the Oxford Radcliffe Hospitals NHS trust are brought back into balance? Is it the responsibility of the chief executive of the trust or is it the responsibility of the chief executive of the Thames Valley strategic health authority?

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Tony Baldry (Banbury, Conservative)

I will not give way because quite a lot of colleagues want to speak.

We experience hit after hit in Oxfordshire. Only this week we were told that, under the purchasing parity formula in the NHS, we will lose £4.5 million. That presumably means that the single PCT that will emerge in Oxfordshire in the summer will have £4.5 million less to spend next year. Some Labour Members consider such sums to be trivial. Actually, for a trust that is having to save £15 million of unplanned spending, these slash-and-burn cuts always happen not in the most rational way but in such a way that the largest amount of money can be saved in the shortest time, and that often damages health care considerably.

We have yet to see the worst in Oxfordshire, because we have yet to know where the cuts will fall. My real concern is that, in a sense, this issue has nothing to do with the total sum of money going into the NHS. The Minister should reflect on this. The failures that occurred in Oxfordshire were failures of mechanisms. How was it that it took until halfway through the financial year for anyone to realise that anything untoward was happening? What was happening was not really untoward. The Oxford Radcliffe Hospitals NHS trust was simply doing what it was meant to be doing: treating lots of patients. It is a major teaching hospital and research centre of excellence and it will always treat a large number of people. We all need to know from the Minister what mechanisms will be put in place to stop the type of crisis that I have described recurring year after year.

My final point is that the Thames Valley strategic health authority this year had to find, quite justifiably, an extra £15 million for Milton Keynes because the census did not take account of the fact that Milton Keynes had grown so fast. If the authority had had that extra £15 million, it would not have had to raid its reserves and borrowings to bail out Milton Keynes. It would have had some money that it could legitimately have used to help the Oxfordshire health economy to get back into balance this year. Of course, it must get back into balance, but perhaps it could have done so from a position of stability, rather than going into next year with £15 million of cuts from this year to sort out, as well as having to make substantial reductions in activity next year to avoid the "over-trading" position that we are in this year. I should be grateful if the Minister could answer those points today or write to me.

10:11 am
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Graham Stuart (Beverley and Holderness, Conservative)

Like other hon. Members, I welcome the debate and congratulate Andrew George on securing it.

The background to the deficits in the NHS is Britain's transformation as an economic power. The previous Conservative Administration took this country from its status as the sick man of Europe and an economic basket case to, in 1997, the status of the most powerful economy in Europe—more powerful than any other in the area. That provided an unprecedented opportunity to transform not only health outcomes but outcomes in a welter of policy areas that would affect the most vulnerable and the weakest in society.

The health opportunity—the opportunity to transform our health care—was, I think, particularly great. To give the Government credit, as other hon. Members have, it could be said that perhaps it has taken a Labour Government to make the record investments in the NHS that have been made, notwithstanding the large increases in spending above inflation that took place under the Conservative Government; but how has the opportunity been used? How has the transformation of the British economy that was brought about by the previous Conservative Government and inherited by the present Government been used to improve health outcomes? Unfortunately, despite their being one of the Government's key targets, health inequalities have in many cases widened and worsened despite the record sums that have been available thanks to the transformation of the economy.

The Government's report, "Tackling Health Inequalities", said that the gap in life expectancy between the bottom fifth and the population as a whole widened by 2 per cent. for males and by 5 per cent. for females between 1997–99 and 2001–03. It goes on to deal with the gap in the infant mortality rate between the poorest and the general population, which was 19 per cent. higher for the poorest in 2001–03 compared to 13 per cent. in 1997–99.

The NHS, which is now going into crisis, has had record spending put into it, but the very group for which one would have thought the Labour Government would most make a difference—and indeed they promised that they would make a difference to that group—has been let down. In fact, Danny Dorling, professor of human geography at the university of Sheffield, has said:

"This is the first Labour government that has failed to narrow the gap. It is astonishing after eight years and making reducing health inequality a key target that we are in this position."

Not only is the health service now in financial crisis, with the chief executive forced out ahead of his own timetable, and not only is it recognised that there are hundreds of job losses around the country, but we actually have wider health inequalities at a time of record spending.

This is a true financial crisis. Arguments that it is less than 1 per cent. of the spend are not matched by the reality on the ground, or by the top-slicing that hon. Members have already referred to, which has effectively punished those who have managed to balance their books. That is a direct result of the way in which the Government have interfered, using target culture and central interference in the NHS.

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Graham Stuart (Beverley and Holderness, Conservative)

I am always delighted to give way to the hon. Gentleman, but just before I do perhaps I may quote the chairman of the British Medical Association's consultants committee. The Minister may find it harder to dismiss his comments than she does to suggest that Opposition Members are trying to score points for no purpose. The chairman, Dr. Paul Miller, said:

"It is hard to understand why at a time when the government has invested unprecedented funding in the health service, trusts may have to lay off staff and close wards . . . Something is going terribly wrong"—

I can understand why the Minister does not want to listen when she hears this from the chairman of the consultants committee—

"when patients pay the price for these financial problems and the government's lack of joined-up thinking".

That is what the professionals think, and I am interested now to hear from the ever-loyal hon. Gentleman.

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David Taylor (North West Leicestershire, Labour)

I did not recognise that description, but I am grateful to the hon. Gentleman for giving way. I want to challenge the suggestion by his Front-Bench colleague that I described the current position as trivial for the trusts involved. The key point that the hon. Gentleman and other hon. Members are bringing out is not the burgeoning of an NHS bureaucracy, which is often the butt of attacks by Opposition Members, but the chronic under-management, over many years, of parts of the NHS and, indeed, the dire need for talented public sector accountants and others involved in information and communications technology. I declare an interest as a member of both professions. Is that not the issue, rather than the construct that the hon. Gentleman is trying to sell to the House at the moment?

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Graham Stuart (Beverley and Holderness, Conservative)

I apologise to the hon. Gentleman for suggesting that he is ever loyal, which, as some of my colleagues have pointed out, is not true. None the less, he is doing a very loyal job today and putting a brave face on a situation that is almost impossible to defend. We have had a 68 per cent. increase in the number of managers in the NHS, dwarfing the number of clinical front-line staff. It is only in a target-driven, centrally directed and bureaucratic NHS that we need such huge numbers of managers. People want decent local hospitals in which the local management, who are appreciated, do not fill in endless forms and reports-back to meet artificial Government targets, but focus on their local population.

That is the answer. Because of the central controls driven by the centralist state, we have cricked-neck policing and cricked-neck health care. Managers are unable to look down and provide answers to the needs of the local population. Instead, they are for ever turning their necks to look up as they feel their chains being pulled by Ministers; and as the panic increases in the Department in question, the yanks on the chain increase too. It may be hard for some hon. Members to imagine—at least not without pleasure—the Minister playing with a chain in that way. [Interruption.] I am getting into dangerous territory and will rapidly move away from it. If the Minister wants to intervene, I should be grateful. In fact, I should be grateful if anyone would.

There is a growth in inequalities. There is a financial crisis, and we have seen the departure of the chief executive, a senior civil servant in the Department of Health. The Government's response is to blame others. We will not look to the Minister today to play the game of dubious statistics and pretending that all is well despite what is happening in our constituencies. In my constituency, the Hornsea minor injuries unit has been saved. We are grateful for that. Its hours have been slashed, although it can take seven hours to get by public transport from the Hornsea area into Hull and back again. That is the reality for rural areas. The same hospital has lost 10 beds and there is a waiting list. One old lady—the hospital can be seen from her home—was on a waiting list while she was in Hull and unable to return and be supported by friends and family. That was because of cuts made purely on the basis of the trust's financial position.

In the same trust, in Withernsea, which is also in my constituency, the minor injuries unit that used to operate 24 hours a day has had its opening times halved. That, again, is the result of financial chaos and crisis in this Government's NHS. Perhaps it is inevitable that the statistics will be rolled out in an attempt to show that all is well, but I hope that the Minister will recognise the real issues right across Members' constituencies. As a Member representing a constituency in the north of England, I can tell my hon. Friend Tony Baldry that the north is not unaffected.

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Graham Stuart (Beverley and Holderness, Conservative)

I am going to finish, so I apologise to the hon. Gentleman.

I hope that the Minister will be honest with us, admit the problems and suggest how they might be tackled, so that areas such as mine, and the poorest, most vulnerable people in them, cease to be let down by a Government who have spent fortunes but delivered too little.

10:20 am
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Mark Lancaster (North East Milton Keynes, Conservative)

I realise that time is marching on, so I shall keep my contribution as brief as possible. I simply want to put on record some of the specific challenges facing my primary care trust in Milton Keynes, and I am grateful to my hon. Friend Tony Baldry for setting out some of the special problems that we face.

I start by paying tribute to the primary care trusts' hard-working staff. All too often, the focus is on doctors and nurses, and little credit seems to be given to the support staff, so I would like to sort that out today.

Like virtually every trust in the country, Milton Keynes primary care trust faces a difficult financial year in 2006–07. I can, however, praise the Government—this is one thing I can praise them for—because, for first time in many years, due recognition will be given to the fact that the population of my city has increased rapidly. That has helped to relieve some of the pressure, because the old funding formula was based on out-of-date population figures, which made life difficult for trusts such as Milton Keynes.

Although I am always happy to give the Government credit where credit is due, I would probably struggle to go any further, and I apologise for that. One of the principal problems facing the trust is that although it has extra cash to take the population increase into account it feels that it has much less control over that cash. Given the current NHS crisis, it does not understand why the Government are retreating into centralised control, rather than allowing it to have total control over its cash.

With that issue to one side, it is clear that this will be yet another difficult year for the health service in Milton Keynes. However, one of the things that impresses me most about Milton Keynes PCT is that it has a clear strategy, despite the financial constraints, of developing services. It is not simply retreating. At the heart of that strategy is the start of a major change, with the trust moving from being an illness service to a health service, and I am sure that all of us would support that. Two key priorities will be to start moving more services closer to where people live and to change the pattern of emergency care. The hope is that that will be achieved by experimenting with emergency care practitioners visiting people at home, opening a walk-in centre and reducing the need for emergency care.

That, however, is where I begin to have a problem. Although those are innovative ideas, which should be applauded, the primary care trust admits that part of its motivation comes from the fact that emergency care costs are spiralling and that reducing emergency admissions is a key target in the trust's effort to contain costs.

Other factors also mean that the trust's scope for manoeuvre in the next financial year will be extremely restricted. First, the strategic health authority has charged the trust a one-off levy of £5.5 million to pay off debts from the current financial year across the region and meet the cost of reorganising the health service—an issue to which my hon. Friend the Member for Banbury referred. The idea is that some of that money will be returned to the trust at an unknown date in the future, but that is the key point—the date is unknown. My question is whether the financial crisis in the NHS has reached such a point that we now have to rob Peter to pay Paul. When will that money be returned? How can people plan?

Secondly, virtually all the £2.5 million that the trust has been told that it can use to provide extra services is already committed to the running of the new walk-in centre and paying for the new electronic care records system—there is simply no room for manoeuvre. An added problem is that the tariff and rules associated with payment by results are still being revised, and the final figures have not been released. Combined with the fact that the trust simply does not know when the money that it has to pay to meet the one-off levy will be returned to it, such problems make budgeting for the future very difficult.

I have a message for the Minister. As she may be aware, Milton Keynes is an unusual city in that it has a Labour MP, a Conservative MP and a Liberal Democrat council. However, all three political parties are united in their belief that the only future for Milton Keynes primary care trust is for its boundaries to be coterminous with those of a unitary authority. We have a great history of working closely with our great council, and not a single person believes that we should move to a wider primary care trust, which would share the north of Buckinghamshire.

My final point is about the Two Shires Ambulance NHS trust, which is an excellent three-star trust based in Northamptonshire and Buckinghamshire. It has a budget of just £30 million, and although there might be financial incentives for creating a larger trust, there is great unease locally that a super-trust that stretched all the way down to the Isle of Wight would be too large and that much local knowledge would be lost. There is great cynicism locally when the Government say that they are consulting on the reorganisation of the Two Shires trust. Will the Minister explain why, if the consultation period is still open, the jobs of chief executive and chairman in the proposed new super-trust were advertised in The Times on 19 January? Is that really what consultation is all about, with decisions being made long before consultation periods are closed?

10:26 am
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John Hemming (Birmingham, Yardley, Liberal Democrat)

I thank my hon. Friend Andrew George for arranging this debate. I also thank you, Mr. Amess, for calling me to speak, and I know that I have to end at half-past 10. I had not intended to speak, but when I saw how few Members were intending to participate, I thought that I could perhaps get in.

I particularly congratulate Mr. Lancaster on identifying all the key points that are causing a major crisis in the finances of the health service. Tony Baldry mentioned purchaser protection adjustment, and there is also the top-slicing of primary care trusts and the fact that we do not yet know what the tariffs will be. It is important to understand what impact that can have on hospitals.

There are certain ways in which trusts can press a button and get money from their PCTs. Some PCTs are finding that unusual things are being diagnosed and that that benefits the trusts. We cannot complain when trusts do that—they are simply using the processes that exist—but it puts other PCTs under financial pressure.

The top-slicing varies. The initial figures were between 2 and 6 per cent. and will perhaps end up at 1.5 or 2 per cent. The purchaser protection adjustment may be 2 per cent. For my trust, it is 2 per cent. this year, 3 per cent. the year after and 4 per cent.—compared with the current financial year, of course—in the subsequent year.

The big problem is that things are done at the last minute. Anyone who does financial planning in the public sector needs time to plan. In that respect, Ministers have responsibility for the shambles that they are creating in the health service because they are signing off last-minute changes to the finances. A large part of those finances are difficult to change, so those parts that can be changed suffer greater changes, and emergency care is one of them. Obviously, certain people put a greater demand on emergency resources, so a lot of effort will go into them.

It has recently been argued that managers should be sacked without compensation if they fail to manage finances—that is, they will not get a peerage. However, we really have to ask whether Ministers should be sacked without compensation for putting us in the current situation, because this is the calm before the storm. It is no good the Government saying, "It's all about local decisions," because it is not. The Government claim credit for putting lots of money into health services and say, "Isn't it brilliant?" They then cut the amount available and say, "It's nothing to do with us, guv—it's all to do with local decisions. You've closed the hospital. You've got to balance the books." However, the fact is that last-minute changes are causing the crisis.

Payment by results is turning into a massive shambles across the country. There are last-minute changes, there is no co-ordination and people have no time to plan. Frankly, we have to look very carefully at top-slicing and payment by activity, which is about £320 million across the country. If we reverse that, there is a better chance of doing something over the next year. Otherwise, everything will be a total mess.

10:29 am
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Steve Webb (Shadow Secretary of State for Health, Health; Northavon, Liberal Democrat)

May I begin by joining others in congratulating my hon. Friend Andrew George on securing the debate? He is known across the House as a doughty fighter for Cornwall, and he has demonstrated that again this morning.

Let me pick up from where my hon. Friend John Hemming left off. In a typically terse and effective contribution, he highlighted the kernel of the problem, namely that nobody objects to financial discipline and rigour when huge amounts of taxpayers' money are being spent, but that those on the front line and the people who manage our hospital finances are faced with permanent revolution. As many colleagues know, there is an attempt in local government to give longer-term stability through two or three-year budgets. The way things are going, the NHS would like three-week budgets.

To expand on the example given by my hon. Friend the Member for Birmingham, Yardley, a letter went out to PCT finance directors on 1 February to say that the purchaser parity adjustment—the adjustment made in cases in which the amount paid is different from the tariff—will be halved next year. So at six or seven weeks' notice, trusts suddenly have millions of pounds more or less than they expected. To pick two cases at random, at about six weeks' notice, South Gloucestershire PCT will lose £3.8 million and Oxford City PCT will lose nearly £10 million. How is the front line, which is accused of being causing the deficits by mismanagement, expected to manage against a backdrop of permanent change? We are told that the system is designed to reward well managed trusts—those that get their deficits under control—yet those that have done so now find that their budgets are to be top-sliced to try to bail out other parts of the system.

In the midst of all that, the kernel of a good idea is trying to get out. That is to say that, given that the NHS has been shockingly unaware of its costs under Governments of both of the two larger parties for a protracted period, the move to sort out the situation, identify what the costs are and reflect them more accurately is a move in the right direction. However, we should not try to sort out in 10 weeks structural imbalances that have been built up over 10 years or more. What have the Government done? Instead of recognising that there are imbalances and developing a long-term strategy to sort them out, they are hastening the process of reform by bringing in and standardising the tariff prices more quickly. That is a strange reaction to the imbalances.

David Taylor, in an unusual display of loyalty, said, essentially, "What is £800 million among friends? It is not a big percentage." However, it is a mistake to net off the surpluses against the deficits, because the fact that there is a surplus somewhere in the country does not make life any better for the place that has the deficit. The gross deficit is therefore bigger than the figure that he cited. We have heard from my hon. Friend the Member for St. Ives about the front-line impact of the imbalances.

It is possible to get hysterical about all this, and I accept that it is important to keep the issue in context. However, we have to accept that there is a serious problem if front-line services have to be cut, and local people cannot plan because they do not know from one week to the next what their budget is going to be next year.

Tony Baldry, who is no longer in his place, mentioned over-trading. The situation is surreal: the NHS is being driven to be more efficient, do more operations and get waiting lists down, but when it does so, it is told that it is working too hard, doing too much and causing problems and needs to slow down. We have all heard of examples. Through the Liberal Democrat website, libdemnhswatch.com, we have heard of instances that occurred earlier in the year of sessions being cancelled and people being told that they could not run their clinics. Waiting time maximums are turning into waiting time minimums. In other words, people who could be seen quicker because there is capacity in the system are being turned away and NHS facilities are lying idle because the money has gone and more cannot be spent until 1 April. That is mismanagement on a grand scale. However, it is not happening at a local level predominantly; it is happening at central level.

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Steve Webb (Shadow Secretary of State for Health, Health; Northavon, Liberal Democrat)

Yes, predominantly. Nobody is suggesting that everything is perfect at local level, but I think that, on reflection, the hon. Gentleman will agree that the serious mismanagement comes from the top. The trusts are acting within a framework that is determined at the top. We welcome decent pay for nurses—we have all campaigned for that—but the environment within which trusts operate is centrally determined contracts for staff, centrally determined contracts for consultants, and central arrangements for practically everything that trusts do. However, when there is a shortfall in paying for overpriced PFI contracts—perhaps the hon. Gentleman will be more sympathetic to this point—and the sums do not add up because central Government have set the tariff, it is said that the fault is local.

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Andrew Lansley (Shadow Secretary of State for Health, Health; South Cambridgeshire, Conservative)

Does the hon. Gentleman take the view that the flexibilities that should be offered to trusts should include an ability to price at the margin for their additional capacity? If they have available capacity, they should be able to offer it to PCTs at a marginal price in order to use it more effectively.

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Steve Webb (Shadow Secretary of State for Health, Health; Northavon, Liberal Democrat)

I certainly think that that is worth considering. Anything that enables existing capacity to be used, instead of sitting idle, must be worth considering, so I am sympathetic to the idea.

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David Taylor (North West Leicestershire, Labour)

Is the hon. Gentleman announcing a Liberal Democrat regional pay policy for NHS workers? In relation to PFI, did he pick up in today's paper the fact that the midwife of many an expensive PFI project, Laings, saw its profits jump by 43 per cent. this year? Did not his heart sink, as mine did, when that figure emerged into the public arena?

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Steve Webb (Shadow Secretary of State for Health, Health; Northavon, Liberal Democrat)

I knew that I could get the hon. Gentleman off the path of loyalty if I tried. Yes, my heart would, indeed, have sunk had I read that article. That is another example of national Government policy, driven from the top, causing local NHS bodies to spend money less effectively than they might. Of course one can always spend more money, but that is not always the answer. The answer is to spend the huge amount of money that has been provided more effectively. In many of the examples of which we have heard, that is not being done.

That is a classic Government response. Take the example of winter pressures. When there is a problem in winter, money is suddenly found. If that money had been in the budget at the start of the year, it could have been carefully planned and carefully spent. What tends to happen is that central Government panic and throw money at a problem. That is a much more expensive way of doing things. One has to hire people at short notice and drag in extra capacity. Yes, waiting lists have come down, but at great cost. The Government have bought in extra capacity at a high price, when the NHS has capacity at a lower price. However, because of dogma, the Government are determined to spend the money and they have not got the bang for their buck. That is the problem.

People keep asking, "How can they have spent all that money but ended up in this situation?" Part of the answer is that a lot of the spending has been unsustainable. Money has been spent on one-off gimmicks and long-term expensive financial contracts. We need long-term financial stability, so that local trusts have freedom, local accountability and the ability to plan. Any rational business would run on that basis. Central Government must take a share of the responsibility.

Mr. Stuart, who makes thoughtful contributions to debates such as this and has campaigned effectively on community hospitals, raised the interesting question of how we can have spent all that money but see health inequalities growing. The problem is that deficits tend to be in places where life expectancy is, on average, better—central London is a different issue. Unfortunately, it would not necessarily help health inequalities if one were to equalise the financing and if money were to go to the deficit areas and away from the surplus areas; we are trying to tackle a double problem.

I have one further point. We have heard about the deficits that roll over to the following year. That is not well understood—meaning that I did not understand it until relatively recently when I went to see a PCT and was told that the problem was like a double ball and chain. The PCT was going to be £20 million in deficit at the end of the financial year, and that money was going to be knocked off its income for the following year. Therefore, if it has a structural deficit of £20 million and if it does exactly the same next year as it did this year, it will be £20 million down next year. However, because its income has been cut by £20 million to pay back last year's debt, it will be as though it is £40 million down. How is it expected to recover from that? There needs to be a more measured transition to sorting out the underlying structural deficits and imbalances. However, the Government engage in constant revolution and helter-skelter reform. They do not give a chance to phased, managed transition, which has to be the best way of using taxpayers' money.

My hon. Friend the Member for St. Ives has done the House a great service in bringing the topic before us. I hope that the Minister will tell us that she is going to put in place structures that will allow local managers to manage and to plan, and not to be subject to constant meddling.

10:39 am
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Andrew Lansley (Shadow Secretary of State for Health, Health; South Cambridgeshire, Conservative)

I agree with Steve Webb that Andrew George has found a timely opportunity to debate these important issues. It is timely not least in relation to his own health economy, where the pain of these issues is being felt considerably.

I note from the South West Peninsula strategic health authority's report at the end of January that it was looking not only at a sharp deterioration between months nine and 10, but at significant additional risks: £31 million of high risks were identified, illustrating the nature of the range of challenges that the authority has to deal with. All of those challenges are increasing the financial turbulence, whether it is the likelihood of emergency referrals being faster than was planned, which has been mentioned by a number of Members, or the implementation of "Agenda for Change".

One thing that has not been mentioned, except by the hon. Member for Northavon, is the range of costs imposed on the NHS by central Government. It does not mean that the improved remuneration for NHS staff is wrong. What is wrong is to have gone down the path of contracts, whether with GP consultants or "Agenda for Change", and for central Government to have underestimated the cost impacts of those changes, which they are imposing on trusts, and brought them all to bear at the same time, even though increases for the NHS are rising fast.

I shall respond to several points that were raised in the debate. Time does not permit a full discussion of NHS finances, but we will have an opportunity to discuss that again on Monday, on the Floor of the House, courtesy of the Liaison Committee.

The hon. Member for St. Ives raised an important point about resource allocation. No doubt the Minister will want to repeat something that she said on "Newsnight" the other night—that Liverpool has been subsidising the rest of the country for years. That is an interesting approach to finances. She may well say that Central Liverpool primary care trust has a weighted capitation of £1,100, but South Cambridgeshire PCT, which I have the honour of representing, has one of £1,300; ergo, her conclusion is that Central Liverpool is underfunded relative to South Cambridgeshire and is subsidising it. On that argument, Scotland is subsidising the rest of the UK dramatically in relation to NHS resources. West of Cornwall PCT has a weighted capitation of only £1,139, but that is in excess of Central Liverpool, so no doubt Liverpool is subsidising West of Cornwall.

Let us consider how much real money—cash—is going into those PCTs: in terms of the weighted capitation, it is £1,161 to West of Cornwall, £960 to South Cambridgeshire and £1,491 to Central Liverpool. I do not dispute that Central Liverpool should have more money than South Cambridgeshire, but I do dispute that a £530 difference—more than a 60 per cent. increase in resources in Central Liverpool—is necessarily justified by the levels of morbidity. That is happening across the country, and it is partly geographical.

The Secretary of State admitted to the Health Committee that the healthiest and wealthiest parts of the country were suffering those impacts. Where do we end up? We end up standing in a hospital, as I did recently at the Luton and Dunstable hospital, where I talked to the stroke board about patient discharge arrangements. The hospital deals with two PCTs: Luton PCT, which is relatively deprived—for every patient that the hospital sends out to that PCT discharge arrangements are in place—and Bedfordshire Heartlands PCT, which is relatively well off. However, many of the patients discharged to that PCT have no rehabilitation facilities available to them.

We need to do a number of things on PCT allocation. The hon. Member for St. Ives is right to say that we need to consider carefully the market forces factor. Somewhere written on my heart is "area cost adjustment". Those who know about local government finance will know that we had a long and tortuous debate about these things. One clear lesson of that debate was that where there is centrally determined pay in the public sector, it is not right simply to adjust resource allocation in line with local labour market conditions, and there is an interaction between central pay arrangements and local pay which hits somewhere between the two. That relationship must be observed; the real costs of employing staff in that area must be understood, bearing in mind the local labour market and national pay arrangements; and a proper adjustment must be found.

The Advisory Committee on Resource Allocation is reviewing PCT resource allocation this year, and it is right that it should do so. As we have stressed to the Government before, they should be looking increasingly to move from demographic assumptions based on Office for National Statistics data to GP practice lists. If the quality and outcomes framework tells us anything, it is that, increasingly, we know how many people in a community have asthma or diabetes or live with chronic conditions. Those considerations are a major component of overall costs.

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Steve Webb (Shadow Secretary of State for Health, Health; Northavon, Liberal Democrat)

This is the first time that I have heard the hon. Gentleman say that, but is there not an issue about GP lists being incomplete in urban areas? Is it not the case that the middle classes always register, but the urban poor do not? Might not funding be skewed away from those who are most in need?

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Andrew Lansley (Shadow Secretary of State for Health, Health; South Cambridgeshire, Conservative)

Of course. I do not pretend that that is the only measure, but it is clear that some aspects of morbidity in communities are not being captured by the demographic figures presented by the ONS. In so far as there are mismatches between GP practice lists and what ONS data tell us about the number of people and the nature of the population, that must, of course, be adjusted for. As we have discovered with local government and health financing, getting allocations right is never a simple matter, but it is perfectly clear that it is wrong at the moment and needs to be changed.

The hon. Member for Northavon seems to be saying that the only way to deal with the current situation is to stop reform and hold everything up. In truth, there are two considerations. The first is that the Government have put a great deal of additional money into the NHS in the absence of reform, and are now in a hurry because they did not sort many of those things out earlier. The NHS plan in 2000 should have been just that, an NHS plan that began in 2000, but many of the changes, such as PBR, or payment by results, and the tariff, are being introduced in 2006 and 2007—that is how far behind the plan is.

The second consideration is, frankly, incompetence. At the end of the last financial year, the Government did not know what the deficit was. Three months after the end of the financial year, the Secretary of State was telling the House that it was a net £140 million; it turned out to be £250 million. As the hon. Member for Northavon said, that £250 million disguised the fact that there were gross deficits of over £600 million. In the debate that we had on the Floor of the House in November, we told the Government that it looked as though net deficits would be in the order of £700 million and that gross deficits would be £1 billion. The Secretary of State said, "Oh, it will be fine. We are actually planning. All the recovery plans are in place and the net deficit this year will be lower than it was last year." However, we know from what the late, lamented Sir Nigel Crisp told the Health Committee a week or so later that a £200 million net deficit was being targeted for this year.

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John Hemming (Birmingham, Yardley, Liberal Democrat)

Does the hon. Gentleman share my concern that frequently in NHS organisations, but not always, recovery plans involve getting additional funds from other NHS organisations, which, obviously, on a net basis, does not really help much?

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Andrew Lansley (Shadow Secretary of State for Health, Health; South Cambridgeshire, Conservative)

Sometimes, that is how the recovery plans are put together. In some instances, that is an acceptable way of dealing with things in a local health economy. What is unacceptable—I was going to come to this—is to go to the point at which the whole direction of reform in the NHS is being perverted. Taking one third of the addition to PCT allocations next year, which is what a 3 per cent. top-slicing on PCT allocations is, effectively says to PCTs across the country, "You can't plan on the basis of the cash increases you were anticipating for next year. All the growth money that might have been available for you next year is going to be taken away from you." In effect, all the decisions about system improvement and growth in the NHS next year will be determined by strategic health authorities, and probably taken away in order to use deficits, so there will be no growth next year as a consequence.

The incompetence has, I am afraid, extended to the tariff. On 22 February, the Department of Health told PCTs and trusts across the country that there is a severe and deteriorating position, while also telling them that the underlying errors in the tariff mean that they have no basis on which to calculate their business plans for the forthcoming year. It is a sorry tale of incompetence on the part of the Government, for which Ministers are accountable. Lord Warner at least had the grace to say, in another place, last Thursday, that he was responsible, and to apologise unreservedly. I hope that the Minister will do the same today.

10:49 am
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Jane Kennedy (Minister of State (Quality and Patient Safety), Department of Health; Liverpool, Wavertree, Labour)

This has been an interesting debate. I hope that you will allow, Mr. Amess, that it has been combative, and I intend to respond in true style and take no prisoners.

I congratulate Andrew George on this timely debate. It is a matter of great public debate. I particularly commend the contribution of Mr. Stuart, whose style I will emulate in my response.

In my firmly held view, having known the party for such a long time, hypocrisy on the subject abounds among the Liberal Democrats. With no credible policy on the future of the health service, they hide behind "The Orange Book" in which Mr. Laws discusses the central proposals of the break-up of the NHS and a move to a system of social insurance. There was not one word about any of that in today's important debate. It is interesting that all those who espoused and were involved in drawing up "The Orange Book" have been promoted.

The hon. Member for Yeovil went on to argue for a switch from a monopoly NHS system to a national health insurance system, with the heath service remaining in place but as only one of the options available to all citizens. He went on to say:

"Additional charges could be paid by those people willing to pay for higher quality non-clinical services, such as private rooms. Such 'enhancement' charges would be set by each health insurance provider."

If it is argued that "The Orange Book" was pre-general election, at the party's September conference Mr. Oaten

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Andrew George (Shadow Secretary of State for International Development, International Development; St Ives, Liberal Democrat)

Will the Minister give way?

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Jane Kennedy (Minister of State (Quality and Patient Safety), Department of Health; Liverpool, Wavertree, Labour)

The hon. Gentleman will have to listen to me for a moment, as I sat and listened quietly. I shall come to Cornwall all too quickly, and he will hear my response.

In September, the hon. Member for Winchester said:

"Some already question the idea that the NHS can provide everything free at the point of delivery. Is it time to start making a charge for some non-essential NHS procedures?"

Liberal Democrat Members should invite their constituents to consider what exactly their party is proposing.

The Labour Government inherited a national health service that was on its knees. In 1997 patients were corralled and managed through a waiting list system that was organised to fit the chronically poor level of resources that the Conservative Government provided. In Cornwall in 1997, in the Royal Cornwall Hospitals NHS Trust, 1,172 patients waited longer than six months for in-patient treatment, including day care surgery. Now, no patients wait for more than six months. That is thanks to the hard work and dedication of the staff at the hospitals, including their managers. As has been acknowledged, it is also partly due to the receipt of record resources as a result of our policy on funding the NHS. Funding has increased, as everybody knows, from £34.7 billion in 1997 to £69.7 billion in 2004–05. By 2007–08, spending on the health service will have increased to more than £92 billion. The Conservative party utterly rejected that policy when we put it forward.

The South West Peninsula strategic health authority has seen year-on-year increases in real terms of more than 6 per cent. In 2005–06, the increase was 6.1 per cent. Next year will see a 6.2 per cent. increase in overall resources, and 2007–08 will see a 7 per cent. increase.

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Jane Kennedy (Minister of State (Quality and Patient Safety), Department of Health; Liverpool, Wavertree, Labour)

I will give way in one moment. Neither of the Opposition parties—I am sure that my hon. Friend will agree—deserve any credence for their crocodile tears about so-called painful decisions. I shall come to the point about Liverpool in a moment.

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Paul Truswell (Pudsey, Labour)

I thank my right hon. Friend. If the hon. Members for Banbury (Tony Baldry) and for Beverley and Holderness (Mr. Stuart) had permitted me to intervene, I would have perhaps told them a story that was different from what they were trying to say. For example, in Leeds we have a deficit, which is a problem, but in cash and percentage terms it is certainly lower than the one that was inherited. [Interruption.] The hon. Member for Beverley and Holderness, who is making a comment from a sedentary position, is the great champion of community hospitals, but when his party was in office we saw the closure of St. George's hospital in Leeds, Marguerite Hepton hospital, Roundhay maternity hospital, Woodlands orthopaedic hospital and The Grove convalescent hospital. That was the product of the economic miracle that his party tried to deceive the House into believing existed.

Photo of Jane Kennedy

Jane Kennedy (Minister of State (Quality and Patient Safety), Department of Health; Liverpool, Wavertree, Labour)

I am grateful to my hon. Friend. He makes a valid and proper point. The health service has made huge steps in providing faster, more convenient access to care. There is so much that we can say about how the health service has improved: improved services, reduced waiting times at their lowest in nearly a generation, big reductions in mortality rates, and accident and emergency departments that have been transformed from the dreadful memories that Labour Members have of the state of the health service in the run-up to 1997. In the Royal Cornwall Hospitals NHS Trust, more than 96 per cent. of patients consistently wait no longer than four hours in accident and emergency.

Photo of Andrew George

Andrew George (Shadow Secretary of State for International Development, International Development; St Ives, Liberal Democrat)

I forgive the Minister for the rather bizarre way in which she opened her speech, as attack is the best form of defence. She must accept that I have acknowledged the improvements and the fact that the money is going in. We voted for those improvements. However, will the Minister please address the kernel of the questions that have been asked about the mismanagement of that money?

Photo of Jane Kennedy

Jane Kennedy (Minister of State (Quality and Patient Safety), Department of Health; Liverpool, Wavertree, Labour)

If the hon. Gentleman will allow me, I will come to that.

The truth is that we have made enormous strides in the quality and quantity of services that are provided to the general public and to patients of the health service. We have thousands of extra clinicians throughout the country. We are replacing old buildings with new hospitals or surgeries, and providing new ambulance stations and ambulances, some through the PFI route. My hon. Friend David Taylor, who is not here, might quarrel with me about that but he would acknowledge the role that private finance initiatives are playing.

In 1997, the Royal Cornwall trust had 102 consultants. Now there are 184. The hon. Member for St. Ives spoke about the concerns about budgeting at the trust, but the plans that it has in place involve improving efficiency in management and administration. It will also, as it says in its press release,

"be fundamentally reviewing how we deliver patient care services, through"

service redesign. In particular, it will be

"concentrating on improving day surgery rates, theatre utilisation,"

improving

"length of stay and reducing the numbers of patients who fail to turn up for appointments."

All those steps will result in improved patient services to those patients who use the trust.

Instead of being criticised for making sensible proposals about how to manage their resources more effectively to deliver improvements in services for local people, which is what the hon. Gentleman is engaging in with his local campaign, management in the area should be commended for their actions and supported in their proposals. We are working with those organisations that face the biggest problems, and sending in the expertise to help them address their problems of poor financial management.

Tony Baldry asked whether health service organisations were over-trading. To some degree, I agree with his proposition. Waiting lists have virtually gone. Patients are managed in a different way and the pressures on services are changing. Top-slicing has been raised by a number of hon. Members. Strategic health authorities are agreeing locally what arrangements should be put in place to help all the organisations in an area to organise their finances so that they continue to deliver improving services. The hon. Gentleman might say that we are dictating the way forward, but that is actually arranged locally through systems that have been used in the past. Deficits might traditionally have been managed by one part of a SHA area helping another out—that continues to be done in Liverpool, although Liverpool did not always have the extra resources that it now has. I remember the days when there were serious inequalities in areas such as the one that I have the privilege to represent and the struggle that the health service had to deliver even decent services to the local community.

The overspending in the NHS and the over-performing remain a relatively small proportion of the overall budget. All areas of the country—

Photo of David Amess

David Amess (Southend West, Conservative)

Order. The next subject of debate has been withdrawn, so the sitting stands suspended until 12.30.

Sitting suspended until half-past Twelve.