Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 4:41 pm on 7th July 1997.

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Photo of Frank Dobson Frank Dobson The Secretary of State for Health 4:41 pm, 7th July 1997

I am not going to take any lessons in the financing of the national health service from the Liberal party, whose Members are apparently gibing at our commitment to provide £1.2 billion extra for next year when, in their election manifesto, they promised only £540 million extra for next year.

The Minister of State, Department of Health, my hon. Friend the Member for Darlington (Mr. Milburn), is heading a task force that is identifying further savings, which will switch more money out of paperwork and into patient care. Those include reducing the cost of routine staff recruitment and reducing transaction costs that, under the existing system, leave some individual patient transactions costing as much as the cost of 80 other such transactions. Those sort of changes can be made by modifying the existing system, and they are being made.

Much greater savings should follow the replacement of the internal market by a system of local commissioning. To make sure that the savings that should follow do follow and that we have the best and most cost-effective new arrangements, we will put in place a number of pilot schemes for local commissioning and draw on existing best practice. I have already arranged for the Audit Commission to be involved in that process, so that a proper audit trail and cost effectiveness are built in from the start.

It was not only in the generalities of the workings of the internal market that the previous Government let so much money go to waste. Huge sums of health service money have been paid out unnecessarily, and spectacular sums of money due to the health service have not been collected. The previous Government paid little or no attention to those matters and, as a result, the NHS has been denied the use of the money, services to patients have suffered and the job of the staff has been made more difficult. The failure of the previous Government to address those issues has also meant that there are no really reliable estimates of the sums involved or of the savings that can be made.

Let me start with prescription fraud. The overwhelming majority of patients, doctors and pharmacists are honest, but a small minority are not and they have been ripping off the NHS and the taxpayer. The previous Government did little to stop that. We are determined to tackle that huge drain on the NHS by introducing anti-fraud measures into the system and rewarding pharmacists who detect fraud. We also intend to ensure that the criminal justice system takes prescription fraud more seriously. As I have explained, I cannot give a firm estimate of the scale of prescription fraud or of likely savings, but estimates vary from £85 million a year, through £100 million a year, to more than £130 million a year.

The next item is the cost of insurance. The balkanisation of the NHS into 429 separate trusts has led to their spending more than £50 million a year in insurance premiums to cover themselves mainly against employer's and third party liability claims and damage to property. That was previously covered by Crown indemnity. We are examining what savings could be made, either by the trusts pooling risk, or even by the return of Crown indemnity. Estimates of the potential savings from those alternative approaches range from about £20 million a year to £30 million a year.

Next, there is the matter of NHS supplies, which we have identified as an area in which substantial savings can be made. An Audit Commission study estimated that £150 million in savings could be achieved over three years. We will also be looking at the NHS Supplies Authority, which accounts for roughly half of all supplies purchasing, with contracts of more than £1.75 billion a year.

Next, I come to the failure of the previous Government to make sure that the NHS actually collects the money due from insurance companies towards the cost of treating people injured in road accidents. That has been the law since the 1930s and was last renewed by Parliament by way of the Road Traffic Act 1988, which provides for a flat-rate emergency treatment fee for immediate medical attention and charges for subsequent in-patient or out-patient treatment. The process of collecting those sums and, in particular, collecting the charges for in-patient and out-patient treatment from insurance companies is extremely complex and erratic. As a result, the NHS receives only a fraction of the money due to it.

The current receipts under the 1988 Act for in-patient and out-patient treatment are believed to total around £20 million. Details of the income from the emergency treatment fee have never been collected centrally.