The provision of health services in Gwynedd has always been a problem, and I speak as a Gwynedd Member of 20 years' standing. Llandudno hospital, for example, in my constituency has been under some kind of threat throughout most of those years, and even before I became a Member it was threatened.
The problems of Gwynedd health authority are particularly acute at this time because the authority has, properly, tried to put through a rationalisation scheme which would enable it to stay within budget in future years. The rationalisation scheme has meant taking painful decisions about closures of local hospitals which are very dear to the hearts of local people because of the great service that they have rendered in the past.
All of that might be bearable if the prospect of better services in future was bright and clear but, sad to relate, it is not so; and the authority's present problems are exacerbated by its current deficit which it is trying to eliminate by a variety of measures involving a curtailment of services. That—very much in outline—is the background against which this debate is taking place.
The crucial questions are, as hon. Members have noted, whether the authority is adequately financed currently and to achieve better levels of service which are its aim for the future. I say in parenthesis that I have yet to meet an authority that, however generous its allocation, could not do with more money. The demand for finance is endless in the NHS. No authority relishes the prospect of a closure. It knows only too well of the popular outcry that ensues.
The authority claims to be underfunded, so I will make clear Gwynedd health authority's position. The authority's revenue funding this year, taking account of the funding for the review bodies' pay awards, is £69·6 million, an increase of £4·7 million, or 7·2 per cent., in cash terms over last year's allocation.
The authority is forecasting a likely overspend of about £4 million this year. Its problems result from the burden of overspending which built up in previous financial years and which it has not yet successfully tackled. It is, with the help of management consultants, currently working to retrieve the situation and to identify further remedial measures which will allow it to achieve financial balance.
The authority has a statutory obligation to plan its expenditure within its notified allocations, and this is what it is in the process of doing. So long as it can demonstrate that it has a sound strategy for achieving financial balance, it will continue to receive sympathetic consideration from the Welsh Office as regards any reasonable request for temporary financial assistance.
We dispute the authority's claim to be under-resourced. The authority is in fact shown by both the capital and revenue formulae used to assess the relative funding position of Welsh health authorities to be one of the best resourced authorities in Wales.
Gwynedd health authority has questioned the validity of the formulae assessments, and last year commissioned a firm of management consultants to review the formulae. This was subsequently considered by the joint NHS-Welsh Office resource allocation working group which was conducting its own review of the formulae. RAWG recommended, and following consultation with other health authorities my right hon. Friend accepted, that there should be no major changes to the revenue formula and that various changes proposed in respect of the capital formula should be deferred, pending further consideration of the impact of the White Paper "Working for Patients" on allocation arrangements generally. I shall return to funding issues later, but I want to be absolutely sure that I deal as adequately as I can with Caernarfon cottage hospital, which featured prominently in the speech of the hon. Member for Caernarfon (Mr. Wigley) for understandable reasons.
Gwynedd health authority's proposals for Caernarfon cottage hospital entailed the closure of 14 GP beds and the minor casualty service. It suggested that the physiotherapy service planned for the hospital would not be started, the dental service currently provided at the hospital would be reprovided elsewhere, and the speech therapy offices would be relocated in alternative accommodation.
The hon. Member referred in particular to the loss of the minor casualty unit at the Cottage hospital. The writ provided treatment only for minor casualty cases and major accident victims were, and will continue to be, treated at ysbyty Gwynedd. When he considered the authority's proposals, my right hon. Friend was of the view that during GP surgery hours minor casualty cases would be likely to be treated at local GP surgeries, but he accepted that such cases seeking treatment outside those hours would be likely to have to travel to ysbyty Gwynedd, some seven miles away. Gwynedd health authority has given its assurance that ysbyty Gwynedd will be able to deal with the additional demand on its accident and emergency unit as a result of the closure of the minor casualty service at Caernarfon.
I understand that a notice has been placed at the cottage hospital redirecting casualty patients to ysbyty Gwynedd and that public notices of the closure of the unit are appearing in various local papers during the course of this week. The health authority accepts that ideally it should have advertised its alternative arrangements earlier.
The consideration of future minor casualty provision in Caernarfon is for the health authority to decide, but I am certain that it will take into account the hon. Gentleman's useful suggestions in any plans that it may bring forward.
Turning to the hon. Member's discussion of possibilities of reproviding the GP medical beds formerly at the cottage hospital, let me say that their reprovision was not a proposal put to my right hon. Friend by the health authority, which made it clear that it needed to make the revenue savings associated with their use. Approval was therefore given to their closure on that basis.
Whether any GP medical beds might be provided elsewhere, such as at Eryri hospital, as the hon. Gentleman suggested, is a matter for the health authority and the decision letter made it clear that my right hon. Friend expected the health authority to keep health service provision in the Caernarfon area in the long term under review and to publish its updated plans.
Following my right hon. Friend's approval of the closure proposal, disposal of the cottage hospital building is a matter for the health authority once it has complied with the conditions set down in the decision letter for full closure. The authority will be entitled to retain the capital receipts in order to augment the resources available for its capital programme. Should a voluntary organisation or the social services department make an acceptable offer to purchase the building, I am sure that the health authority would give it serious consideration.
Much has been said about revenue and capital funding, and I shall deal with those issues as far as I can. In terms of revenue funding, the White Paper changes require health authorities to be funded in line with their weighted population share rather than, as now, in terms of the catchment areas that they serve. Therefore, that formula disregards cross-boundary flows of patients but will otherwise be like the present formula in so far as it will reflect the size and age structure of each authority's population and will take account of other factors, such as morbidity, that reflect differences in relative needs. Proposals for the new formula are being developed in consultation with RAWG and will be subject to further consultation with the service as a whole later this year. It is, of course, important that the formula is generally acceptable to the service.
At present, capital allocations are based on the well-known capital formula. White Paper changes, particularly in relation to the new roles of health authorities and hospitals, mean that the formula approach needs to be recommended. RAWG has been consulted on the options for allocating future capital in the light of the new arrangements and a consultation paper will be issued to the service early in the summer.
I am aware of the constraints that Gwynedd health authority feels that the existing capital formula shares approach places it under. I am aware of its desire to see changes in the revenue and capital formula. I remind the House that the existing formulae are accepted by the other authorities in Wales as reasonably fair. The capital formula was unanimously supported by health authority chairmen when it was introduced in 1984.
The new capital formula will be introduced after 1991–92 because, in order to allow stability for planning purposes, health authorities have been advised that capital allocations in that year will be based on the present formula. The exact timing of the introduction of the new capital funding arrangements has yet to be determined. It will depend on the outcome of the consultation process and, as with revenue, there will need to be a transitional period for phasing in the changes.
I hope that what I have said makes it clear that we are developing an approach to the future of revenue and capital funding of authorities in Wales in consultation with the service. However, until the details have been settled it will not be possible to be specific about the effect of changes and the time scale in which they can be achieved.
In terms of the future, hon. Members will know that Gwynedd health authority has engaged management consultants, Coopers and Lybrand, Deloitte, to assist with a review of its finances and services. I stress that the management consultants have not been appointed by the Welsh Office or to dictate to the authority the way forward. The authority is being assisted by the management consultants in looking at the current position and possible options for the future. In June, which is when we expect the consultants' report, authority members are due to consider a report from its officers, drawn up with the assistance of the management consultants. It is likely that the report will set out options for the future which will have to be considered and decided upon by the authority members. Any substantial changes in the service considered necessary in the future will be subject to consultation before they can be implemented.
I would not wish to disguise my or my colleagues' disappointment at the continuing problems of financial control in Gwynedd health authority. None the less, there is evidence that the authority is addressing both these problems and the opportunity represented by the NHS reforms.