I did not follow that entirely, but yes, of course, we want a better NHS, if that is what the hon. Gentleman said. If we have more services in the community, that will free up the acute sector to enable it to treat more people more quickly. If people have to go to hospital, they want the prospect of safe treatment without having to wait too long and as locally as possible, although that depends on the nature of the operation that they face.
Not enough has been said about the plans to modernise the NHS. It has not been sufficiently reported. It involves change and change can be difficult, but it is a good news story which, when I discuss it with NHS staff and constituents, is one that they can broadly sign up to, even if it goes under the peculiar term of reconfiguration.
But the context has dramatically changed in recent months, and that context arises from the consequences in Bedford of the Bedford Hospital NHS Trust's £11.8 million deficit. I do not have time to go into why there is that deficit, but it is combined with the Government's decision this year to address the NHS's overall deficit of the last financial year by top-slicing the budgets to PCTs, and the two together have created real pressures. They are short-term financial pressures, but they could lead to up to 200 redundancies at Bedford hospital, although the figure is likely to be significantly less. Nevertheless, it is worrying, and damaging to staff morale, and it will slow up the development of the consequential primary care services that will be needed if there is to be a shift to some extent from acute to primary. Such uncertainty is bad for staff morale and the public do not understand what is happening. They know that there have been improvements and that there is a lot more money year in, year out, but they face difficulties such as they have not experienced for years. That situation provides fertile ground for others to increase people's fears by telling scare stories. In the case of Bedford hospital, the scare stories were started by the Liberal Democrats in The Daily Telegraph on
The important issues are more difficult. The serious issues facing Bedford district general hospital are managing the four-year financial recovery plan to eliminate the hospital's debt, changing the shape of local NHS services to improve them for the long term and ensuring that those two tasks are carried out while maintaining a full range of services, particularly the 24-hour accident and emergency service. Those are the challenges in Bedford, and they clearly worry my constituents. We are not helped by fears being whipped up unnecessarily, which goes on day in, day out in my constituency.
There are real problems that we must face up to, so what should we do? First, when changes are prepared and published, there should be a three-month statutory consultation process with which people are urged by all parties to engage on the basis of facts and a measured and informed debate rather than on the basis of scare tactics.
Secondly, the Government must examine RAB, the resource accounting and budgeting financial management system that now applies across central Government. The principles of RAB have supposedly been applied to NHS trusts across the country, which means that, if a trust reports a deficit in one year, its income is reduced by that amount in the following year. That is a double whammy, which is unfair and guaranteed to make a difficult situation worse. Furthermore, the in-year deficit is reported to the balance sheet reserve and carried forward cumulatively. Bedford hospital trust reported an income and expenditure deficit of £8.48 million in 2004-05, and Bedford PCT passed on a reduction in its service level agreement income of that amount in the following year as a result of RAB. However, because that reduction would have devastated the hospital, which would not have been able to pay many of its staff, the trust was permitted to borrow that sum from the strategic health authority. That cash borrowing, which did not appear in the accounts in the normal way, was interest-free, and the sum was to be paid back in the following year. In 2005-06, the in-year deficit was reduced by the trust to £3.41 million, which under RAB should have led to a cut in its income of that same amount in this financial year, but that did not happen, because a deal was done with the SHA.
I hope that Ministers look carefully at the Audit Commission's review of the NHS financial management and accounting regime, which contains a clear and powerful critique of RAB and the labyrinthine system of complex financial devices which dominates, and has always dominated, the NHS. It calls for an end to RAB being applied to the NHS and for a system of much greater clarity and transparency. What is happening to Bedford hospital reinforces the message from the Audit Commission. In one year, RAB was applied, but cash borrowing was allowed to cover the cut, and then it was not applied in the next year.
Some might say that we muddled through and that the situation is okay, but I disagree, because the system is bizarre and confusing, and it perpetuates a culture within the NHS that is not businesslike. If RAB were not applied to the NHS, as proposed by the Audit Commission, which has also made suggestions for improvements, Bedford hospital and other trusts with deficits would still have to address their deficits. We are not talking about just wiping deficits clean and pretending that they do not exist, but at least we could then build on a system that enables clear planning, openness and transparency which more people than just the finance director could understand. The NHS needs that important development, so that it is not just left to the finance director to understand the finances, and so that all elements of a hospital, for example, contribute to financial efficiency.
It is also important to get rid of RAB so that we abolish its cumulative balance sheet feature. That element might not appear to matter, but it will from April next year when the capital funding regime is due to change and an NHS trust's ability to borrow will partly be judged by the state of the balance sheet. Under RAB, while Bedford Hospital NHS Trust should eliminate its deficit within four years, the balance sheet will show the deficit for eight years. That is a wholly ridiculous situation.
Thirdly, we should continue to close the gap between what the health economy in Bedfordshire gets and what it should get in terms of its capitation—the system known as fair funding. Year on year, in Bedfordshire, despite Conservative claims that somehow money is being robbed from Bedfordshire in order to over-fund the north of England, this Labour Government are closing the gap with regard to fair funding. We need, however, to continue that process.
Fourthly, we need a period of stability within the NHS—