Clause 3 — Increased product of additional rates to be paid into National Insurance Fund

National Insurance Contributions Bill – in the House of Commons at 1:15 pm on 13th January 2011.

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Photo of John Healey John Healey Shadow Secretary of State for Health 1:15 pm, 13th January 2011

I beg to move amendment 8, page 2, line 2, at end insert

'The National Audit Office shall report to Parliament by the time of Royal Assent on the Finance Act 2011 on the sum that would be required from the product of additional rates in order for the health service allocation to grow in real terms in every year.'.

It is good once again to face the Exchequer Secretary across the Dispatch Box, although not so good to do so from the Opposition side and with him on the Government side. However, he is a serious Minister doing a serious job. He showed that in the way he responded to my right hon. Friend Mr Hanson and the debate on the first group of amendments. I hope that the Exchequer Secretary will feel that amendment 8 and the amendments that were not selected were intended to be helpful to the Government. With them, we are offering to him, his boss the Chancellor and his colleagues in government the opportunity to act to prove to the public that they will honour the promises the Government made about protecting NHS funding and ensuring it sees a real funding increase each year, not a real cut.

The Bill and national insurance contributions legislation more generally are about raising and allocating national insurance funds and contributions paid into that fund. The NHS has had a special place in that legislation certainly since 2002, when we decided to move, from April 2003, to raise an extra 1% on earnings above £43,800 and to allocate all that extra income to the health service and the NHS. The amendments we tabled, including amendment 8, give the Government the chance to do the right thing by the NHS and the British people. Amendment 8 in particular lays the groundwork for the Exchequer Secretary and his colleague the Chancellor to make the right decisions in order to honour their promises in the Budget.

There were big improvements as a result of Labour's investment in the NHS over the past decade-51,000 extra doctors, 98,000 extra nurses, patient satisfaction at an all-time high-and it is hard to remember that in 1997 there were more than 280,000 people waiting more than six months to get into hospital for the operations they needed. I make that point to explain the broader context to amendment 8, as I am conscious that the House is debating a relatively narrow provision.

The House will see that we refer in the amendment to health service allocations growing

"in real terms in every year."

As a result of the strength of support for the NHS after 13 years of Labour in government-a recognition of the special place that the NHS has in the hearts of the British people and of the enormous improvements that people had seen-the Conservatives took the view, as they went into the election and came into government, that they needed to protect, or try to protect, some of the improvements for which Labour had been responsible. That was why we heard the now Prime Minister-then Leader of the Opposition-say to the Royal College of Physicians back in January:

"We are the only party committed to protecting NHS spending."

"I'll cut the deficit, not the NHS," he said. "Unlike us," he argued, Labour

"have not committed to protecting areas of the health budget such as public health and capital investment," although of course capital investment over the spending review will be cut by more than 17%. Indeed, we saw those very phrases-"I'll cut the deficit, not the NHS"-on the Conservative party's posters during the election campaign, with the Prime Minister's smiling, air-brushed face on them.

Importantly, that personal commitment found its way into the coalition's programme as a formal pledge. Indeed, the coalition agreement said:

"We will guarantee that health spending increases in real terms in each year of the Parliament".

When the Minister's boss, the Chancellor, delivered his spending review statement on 20 October, one of the few flourishes in his speech came when he said:

"This coalition Government made a commitment to protect the NHS and increase health spending every year. Today we honour that commitment in full. Total health spending will rise each year over and above inflation."-[ Hansard, 20 October 2010; Vol. 516, c. 959.]

However, I spent a little time in the hon. Gentleman's position as a Treasury Minister, and I know that the devil is often in the detail of spending reviews. Despite what the Chancellor said, the problem is that when we looked at table 2.3 of the Green Book, on page 44, we saw that a significant slice of the money for the NHS in England had to be spent not on NHS services but on social care, in an attempt to plug a big hole in social care funding and stave off some of the prospective cuts for some of the most vulnerable people.

That means that, instead of the full allocation of funding being spent on the NHS, £0.8 billion will have to be spent on social care next year, with £0.9 billion spent the following year, £1.1 billion the year after and £1.2 billion in 2014-15. The problem-this is what the terms of the amendment refer to-is that when we take out the double-counting of money for the NHS and social care, instead of the 0.1% increase in NHS funding for next year promised by the Chancellor, there will be a 0.6% cut, or a shortfall of £700 million. In other words, the Government are breaking the promise that was solemnly made by the Prime Minister, set out in the coalition agreement and repeated on the Floor of the House by the Chancellor when he delivered the spending review.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence) 1:30 pm, 13th January 2011

Does my right hon. Friend agree that the NHS will incur another huge cost-a cost that will not go towards improving patient care-owing to the announced reorganisation of the NHS? For example, with the abolition of the primary care trust in my constituency, most of the money will go on redundancy and organisational costs, which will be another burden and, basically, a cut in the NHS budget.

Photo of John Healey John Healey Shadow Secretary of State for Health

It is an extraordinary state of affairs that a series of serious and significant pledges, set out formally in the coalition agreement in May, should have been broken in the White Paper produced by the Health Secretary in July. My hon. Friend is right: the one thing that the Government promised not to do in the coalition agreement was to go ahead with a top-down internal reorganisation, but that is exactly what is now planned. It could cost up to £3 billion. It is high-risk and high-cost; it is exactly the wrong thing to do at this stage, when the NHS is facing such tight financial pressures. I also have to say to the Minister that his colleagues are already showing signs of strain.

I am anxious to return to the amendment that the House is discussing. The House will notice that it refers to the National Audit Office, which is an independent, authoritative body. The Minister will appreciate the assessments, analyses and authoritative views of independent bodies. He and his colleagues set up the Office for Budget Responsibility. Its independence has-shall we say?-been put on perhaps a slightly more questionable footing than that of the NAO, but it is nevertheless an important organisation. Indeed, the problems of the hon. Gentleman and his colleagues were compounded when their Office for Budget Responsibility updated the economic forecast and the fiscal numbers in November. One of the significant changes in its independent, authoritative assessment of this country's economic prospects was to its forecast for inflation, thereby changing the deflator-in other words, the amount by which the Government and everyone else anticipate that costs in general, and Government spending in particular, will rise. Instead of a GDP deflator for 2011-12 of 1.9%, as set out in the OBR's June report, its updated economic forecasts in November gave a deflator of 2.5%.

In other words, even before we take into account the double-counting of funding for both the NHS and social care, we have, instead of the wafer-thin rise of 0.1% for England that the Chancellor promised, a much heavier cut, of 0.5%. That has been confirmed by the Library, and by independent, authoritative bodies in the health field and the Select Committee on Health, which said in its report into public expenditure on 14 December that

"the Government's commitment to a real terms increase in health funding throughout the Spending Review period will not be met."

So the Government are breaking their promises to protect NHS funding in England, Scotland and Wales. Next year, Scotland is now being short-changed in NHS funding by £70 million, while Wales is being short-changed by £40 million. In total next year, there will be shortfall from the promise made by the Government to the British people in their coalition agreement of more than £1.3 billion-not a rise in NHS funding next year, but a cut. On 20 October, the Chancellor promised to increase health spending over and above inflation. That promise is being broken by £1.3 billion.

Our amendments today, including amendment 8, are intended to be helpful, as I said to the Minister. They are intended to demonstrate how the Government can deal with the problem, if they have the will to keep their promises on funding for the NHS. We endeavour to act as a responsible Opposition, as our leader promised we would. The amendment is therefore designed to show helpful ways in which the Government can use this legislation to keep good both the Chancellor's word and the Government's promise to protect NHS funding, and thereby to see a real increase each year in this Parliament, and not, as at present, to deliver a real-terms cut.

The amendment suggests having an independent assessment and a report carried out by the National Audit Office. The independence is important: it is designed to try to give the public more confidence in what the Government are doing; to give this House more confidence in what they are doing; and to give everyone more confidence that what was a central promise from the Government and a personal promise from the Prime Minister is in fact being met.

This subject came up at the last Prime Minister's Questions before Christmas, and it was interesting to note that the Prime Minister told the House:

"I am confident that we will fulfil our goal of real-terms increases every year in the NHS."-[ Hansard, 15 December 2010; Vol. 502, c. 902.]

That will not happen next year. The Exchequer Secretary is a talented Minister and he has an opportunity to give his big boss, the Prime Minister, the confidence that he clearly wishes to see by accepting the amendment and allowing the NAO to do an independent report, demonstrating the extent of the shortfall and the extent to which the Government are breaking their promise fully to fund the NHS. By doing so, he would do the House and perhaps even himself a favour.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Communities and Local Government), Shadow PC Spokesperson (Culture, Media and Sport), Shadow PC Spokesperson (Wales)

In the light of the situation that he has explained applies in England, does the right hon. Gentleman agree that it is reckless for the Conservatives in Wales to promise in the forthcoming National Assembly elections to increase spending on health above the retail prices index?

Photo of John Healey John Healey Shadow Secretary of State for Health

One of the two consequences of devolution is that in this area of health such decisions are taken in Wales for Wales. The second, however, is, I have to concede to the House, that I, as an English shadow Health Secretary do not follow those decisions in detail, so I think the hon. Gentleman is going to have to prosecute that argument in his home area.

Finally, the House will note that the date in the amendment is anticipated to be after the expected Royal Assent to the Bill, so it is tied to the Finance Act. The Exchequer Secretary might want to discuss with the Chancellor the idea of doing this assessment, publishing the report and highlighting the shortfall, showing the extent to which the promises they made to protect NHS funding and give it a real-terms increase in each year of this Parliament are being broken. The Budget, of course, provides the Chancellor's opportunity to make good his word and make good the promises that his Government have given to the British people on the NHS.

Photo of Stella Creasy Stella Creasy Labour, Walthamstow

I rise to speak to amendment 8, because it goes to the heart of the Bill and what we do in this House. We do not pass laws to raise money for no purpose. Clearly, we raise national insurance for social insurance purposes. Since 2003 there has been a hypothecated fund in our national insurance contributions specifically for funding the NHS, and the amendment addresses that. It is critical that we get the Bill right and that it reflects the important purpose that we attribute to national insurance. I note that, back in 2003, the then Opposition opposed such use of national insurance, but they have come a long way in the past seven years. That is why it is important to get the Bill right and make sure that the public can have confidence that when national insurance is levied, funding will go to national health care services. My first point concerns why that is important and why the NHS therefore needs the guarantee that amendment 8 would provide. Secondly, I will explain why the public have a reasonable expectation that such provision be made.

First and foremost, we know that the NHS needs more money; it has always needed further investment. Indeed, in 2002, the Wanless report set out some of the challenges that our generation of parliamentarians will face in supporting the national health service. More recently, the King's Fund has highlighted the massive financial pressures on the NHS as it seeks both to make efficiency savings and to deal with the impact of inflation on the cost of treatments. I note that the King's Fund estimates that the Government's VAT rise will cost the NHS an estimated £200 million to £300 million every year. In Committee, the Minister argued that the Bill will reduce the amount of national insurance overall that the NHS has to pay by £200 million a year, so it is interesting to note that that reduction will be swallowed up by an increase in expenditure as a result of the rise in VAT that the Government have introduced. That is before we get to the cost of the planned reorganisation. We must ensure that the NHS has as much funding as it needs to meet its obligations, notwithstanding the promises and pledges that the Government have made.

Photo of Mel Stride Mel Stride Conservative, Central Devon 1:45 pm, 13th January 2011

Does the hon. Lady accept that, irrespective of whether the amendment is accepted, the Government have the ability to provide whatever level of resourcing for the national health service that they deem fit?

Photo of Stella Creasy Stella Creasy Labour, Walthamstow

The hon. Gentleman raises the interesting question of how we guarantee that. That is precisely the point that I am coming to, because his Government made a pledge to my Walthamstow constituents that they would "cut the deficit, not the NHS". As my right hon. Friend John Healey has set out in his remarks, there is some uncertainty over whether that is the case. Indeed, we could be seeing cuts in the NHS unless we can be sure that the money it needs will be generated. The amendment provides the Government with an opportunity to show how and why they will do so and to consider hypothecation through the national insurance contributions fund, which has been accepted as a principle across the House, to ensure that the money is provided.

There has been sleight of hand in the investment promised by this Government for the NHS through the attribution to social care. As a former local councillor I know that social care is one of the largest costs that any local authority will face, so the cuts that we have seen in local authority budgets over the last couple of months raise severe questions about the ability to deal with adult social care-even before we consider its relationship to health care at local level. It is very clear to me that there are real concerns about the funding that will go to the NHS in the years ahead.

The amendment would mean that we could all have confidence in the fact that money would go to the NHS budget, about which I know Members across the House care, so that the real-terms increase that my constituents and the Minister's constituents were promised can be made good-not to mention concerns about job losses in the NHS as a direct result of some of this Government's policies. If Government policy is about job creation and the Bill is about ensuring that people are employed and the economy is in recovery, cuts in the NHS that will lead to job losses will provide a real challenge. The amendment is designed to make sure that, given the pressures on its budget, the NHS has the money that it needs, and that the public's expectation, which is reasonable and proportionate given the statements made by Ministers both before and after the general election, will be met.

I note in particular that before the election the Chancellor was very concerned about what the national insurance contribution rise might do to the NHS budget. I am sad to see that the Chancellor is not in his place today; I wish he was here to talk to us. I know that my right hon. Friend the Member for Wentworth and Dearne wrote to him, encouraging him to participate in today's debate. He should apply the same degree of concern to ensuring that the money is there for the NHS.

As a member of the Public Accounts Committee, which deals with the National Audit Office, I particularly support the amendment. The amendment would involve the NAO, which has a strong track record of ensuring not just probity but value for money. It is a key concern for us all in these times of economic austerity to ensure that the money goes to the front line in the NHS, that there is a real-terms increase, as we have been promised, and that the Government are held to account if we do not get that, because my constituents living in a poor area such as Walthamstow are already losing out by not getting the national insurance holiday and should at least have confidence that when national insurance contributions go up, the money will go to the NHS, as many of us hope.

I hope that the Government will accept the amendment. It is a reasonable amendment to help the Government to keep their promise to the people of Britain that the money goes to the NHS so that we can all have confidence that the NHS will thrive in the years to come.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I shall speak briefly in support of the amendment. I strongly endorse what my right hon. Friend the shadow Health Secretary and, indeed, my hon. Friend Dr Creasy have said. Strains in the health service are already being felt, as are pressures on jobs. In my constituency, we are already seeing job losses in the primary care trust and the hospital trust.

There are obvious points to be made about the increasing costs of modern treatments and the reorganisation mentioned by my hon. Friend Mr Jones, who is no longer in the Chamber. Even Conservative Members have suggested that that reorganisation will lead to further privatisation of the health service, and private health services are inherently more inefficient than public health services. The Americans spend twice as much on health as we do, yet millions of Americans have no proper health cover, because private sector health care is much more expensive than public sector health care. We want to keep public health care in the public sector. Indeed, I believe that even the services that have already been privatised should be returned to a full public national health service. I am sure that Nye Bevan would agree. No doubt he is turning in his grave at this moment at the thought of what the Tories are going to do to the health service, but that is a debate for another day.

However, there are other, less obvious points to be made about the health service. It is, for example, inherently labour-intensive. Unlike manufacturing, it cannot take advantage of productivity gains. Its costs rise not in line with inflation, but in line with average earnings. If we are to ensure that health service employees are properly paid, there must be real-terms increases equivalent to the rise in earnings, not just the rise in prices. In general, earnings rise more quickly than prices as the economy grows, although that is not necessarily the case at present. If we are to have a health service that is as good as we wish it to be, we must bear the employment costs in mind.

I agree with what my right hon. Friend John Healey said about what Labour achieved during its 13 years in office by increasing spending and improving the quality of the health service. The previous Tory Government had left it in a terrible state. However, although the improvements have been massive, there is still more to do. We must not allow health service funding to be threatened in the ways that have been mentioned today. Amendment 8 is important because it will ensure that that funding is protected. There are many other problems in the health service, and we must not put more pressure on it. We do not want what happened at Stafford hospital to happen elsewhere because of underfunding and understaffing in wards. We must ensure that the service is properly funded.

Photo of Steven Baker Steven Baker Conservative, Wycombe

I cannot help wondering whether the hon. Gentleman realises that Buckinghamshire, for example, has inherited an underfunding of 17% per head in comparison with the national average. I am afraid that Labour did leave us a legacy of underfunding, although only in certain parts of the country.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I believe that there is a massive difference between the proportion of gross national product spent on health under the Tories before 1997 and the proportion spent on it now. Although I think that we should spend more on health-I have always argued that we should spend as much on it as Germany and France, but we have still not quite reached those funding levels-we have made massive improvements.

For a long time I complained that health service spending in Luton was below the fair funding target. We lobbied our own Ministers heavily on the issue, and I think that we made some progress in persuading them to move in the right direction, but we must ensure that health funding in all areas increases as a proportion of GDP. I hope that Buckinghamshire as well as Luton, North will benefit in that regard.

We must accept that improving health care sometimes means increasing rather than decreasing labour intensity. Health care will improve if a ward containing 20 beds and two nurses is given a third nurse. That is certainly true in the elderly care sector, about whose future I am seriously concerned. The fact that our population is ageing is an additional major burden for the health service. We all want to ensure that we are cared for properly when we are elderly-even more elderly than I may be at present. When we are elderly and need care, we want that care to be properly funded, so that we do not suffer in the later stages of our lives.

I strongly support what was said by my right hon. Friend the Member for Wentworth and Dearne, and I hope very much that the Government will accept the amendment.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

It has puzzled me slightly over the years that successive Governments, and the Treasury in particular, have been so reluctant to engage in hypothecated funding. I know that there are arguments for and against it, but one of the main arguments for it-as has been borne out by the changes in 2003 involving the hypothecation of increased national insurance contributions-is the building of public support for the deed itself. It is true that if we want good services we must pay for them, but people want to know for sure that their money is going where they think it is going.

People in Britain tend to say that we should have Scandinavian-style public services with American-style taxes, but the two simply do not fit together. Scandinavian-style public services come with high taxation. If people can feel confident that their money is going where it is most needed, they will be much more committed to spending it. As I said earlier, I have not always understood why even my own party's Governments have not necessarily been particularly keen on that point of view. It seems that Members have been captured by the Treasury as soon as they have become Treasury Ministers. However, an innovative step has been taken.

Amendment 8 does not ask for the national insurance increase to be hypothecated at this stage. It merely suggests that the door should be left open, and that if it proves impossible to reach the health service spending target to which the Government have committed themselves, it should be possible to use the national insurance increase to ensure that that commitment can be fulfilled.

Photo of Gavin Shuker Gavin Shuker Labour, Luton South

Have not the Government already accepted the case for the hypothecation of national insurance contributions for the health service? Does not the amendment merely seek to help them along the way by ensuring that the hypothecated funds end up in the right place so that they can fulfil their own commitment?

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

It is true that they have not chosen to retreat from the path taken by the previous Government, but the amendment gives them an opportunity to use the fresh, additional contributions if that is required.

The Government have taken a huge step forward in accepting that more money needs to be spent on the health service. For some years, when we were in government, one of the themes that emerged from the then Opposition was that spending lots of extra money was not making a difference. According to them, lots of money was going in at one end, with no indication that anything good was happening at the other end. I perceived that as a sort of softening up: they were telling people that they would still have a good service if they did not spend as much on it. Now, however, there seems to be a recognition that the money is important, and that spending is necessary after all.

That approach is vindicated by the increase in public support for the health service over the past 13 years. According to the findings of a 1997 survey, the level of public satisfaction with the service then stood at 34%. When the same question was asked in 2009, it had risen to 64%-the highest level since the study was first conducted, well before 1997-which showed that people really appreciated what was happening to health spending. I urge the Government not to put all that at risk, but to leave this opportunity open by accepting an amendment that would allow them to meet their own health spending targets and ensure that we do not lose people's current satisfaction with the NHS.

Photo of Mike Gapes Mike Gapes Labour, Ilford South 2:00 pm, 13th January 2011

I will be brief. This amendment is important. As my hon. Friend Dr Creasy said, it has been tabled in the context of the fact that provision for spending on social care is being taken into consideration in the overall budgeting, and there are clearly big problems. There are already concerns about the impact of bed blocking this winter.

I saw a letter yesterday from the chief executive of the Barking, Havering and Redbridge University Hospitals NHS Trust, John Goulston, that was sent to my constituency neighbour, my right hon. Friend Margaret Hodge. It was about the closure for periods over this recent winter of the accident and emergency services at the Queen's hospital and the King George hospital, because of the impact of massive increases in admissions and bed blocking. That is serious, and it shows that we need the commitment to the ongoing level of spending in the NHS that is conveyed in the amendment. Because of the decisions of the Joint Committee of Primary Care Trusts in December, the Barking, Havering and Redbridge trust is about to close the accident and emergency and maternity services of King George hospital in my constituency.

Also, yesterday I was informed that the chief executive of the Barking, Havering and Redbridge trust is about to leave for pastures new-for a job with London regional NHS-after three years in post, during which he has not managed to remove the deficit, which is ongoing in that two-hospital trust. He is to be replaced by the chief executive of Chase Farm. She has presided over getting rid of the accident and emergency services at Chase Farm, and she will presumably get rid of the accident and emergency service at King George hospital, Ilford next.

Photo of Nick de Bois Nick de Bois Conservative, Enfield North

She has not done away with it yet, and nor, indeed, has North Central London, but they have been putting up a determined fight to do so, and I entirely understand the point that the hon. Gentleman is making.

Photo of Mike Gapes Mike Gapes Labour, Ilford South

I am grateful for that intervention. The hon. Gentleman will know that the previous Member of Parliament for his constituency, Joan Ryan, fought very hard over many years, as I was fighting for my hospital with my neighbour, Mr Scott and others, and we continue to do so. As a result of a motion carried unanimously, across the parties, by Redbridge council last week, we are calling on the Secretary of State to intervene to save the accident and emergency and maternity services at King George hospital, Ilford.

If the spending is not in place, more and more hospitals and NHS trusts will face such a problem. It is not just about money; it is about management incompetence, NHS bureaucrats and some consultants who have a model of health care that is not in the interests of the community. However, it is about resources. Those responsible hide behind all kinds of arguments, but ultimately this is an extremely important issue that cannot be left to consultants or NHS managers. It requires political accountability and political decision making, because the public provide the money and vote the money, and it is important that we are accountable for how that money is spent-and so should those people in the NHS bureaucracy on massive inflated salaries, earning two, three, four times what Members of Parliament earn, who do not take account of the wishes of the local community, the local councillors or local Members.

Photo of Nick de Bois Nick de Bois Conservative, Enfield North

The hon. Gentleman should take some comfort, as we have done since the election, from the fact that the Secretary of State has imposed four very determined tests that will allow for GP support and public support. He can take some encouragement from that.

Photo of Mike Gapes Mike Gapes Labour, Ilford South

I am sorry to disappoint the hon. Gentleman, but I have read the tests. They talk about clinical support, but what we have had is a rigged consultation and a group of placemen and women-hand-picked GPs-who are in charge, and there has been no ballot of GPs so there is no means of assessment. Those responsible say that the decision is clinically led, but we are now beyond that because the Joint Committee of Primary Care Trusts has said there has been clinical support, even though we know there is significant opposition. We now require the Secretary of State to intervene, and to save King George hospital's accident and emergency and maternity services, which we have had in my constituency since 1926.

Photo of David Gauke David Gauke The Exchequer Secretary

First, may I welcome John Healey? It is a great pleasure to debate with him again. My first experience as a Front Bencher was debating with him and, although we now sit on different sides of the House, it is good to do so once again. I am pleased to be sitting on the Government Benches now, rather than on the Opposition side, but I am sure he has ambitions to return to these Benches. There are not many subjects on which I agree with the vast majority of Labour MPs, but one on which I do is the high regard in which they obviously hold the right hon. Gentleman. I am pleased by his popularity and the progress he has made.

Amendment 8 would require the National Audit Office to report on how much would be required from the additional rates in order for the health service allocation to grow in real terms every year. It may be useful to clear up one or two potential misconceptions. The amount that is to be spent on the NHS was confirmed at the spending review, and is unaffected by whether funds come from national insurance contributions or elsewhere. The amount of national insurance contributions allocated to the NHS depends on economic circumstances as well as the proportions specified in legislation. I would like to reassure the House that it is no part of Government policy to cut NHS funding automatically if, for example, global economic conditions lead to a reduction in national insurance contributions allocated. To be fair, that has not been the position of any Government, notwithstanding the fact that there has been an allocation element of national insurance contributions not just from 2003, but from 1948 when the NHS was created.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

We have to be very precise about what we mean when talking about cutting funding. Previous Governments and Ministers have talked about funding not being cut when it has stayed the same in money terms, which is a real-terms cut. Even raising funding in line with one or other measure of inflation may mean a cut. We have to talk about this in real terms in the sense of what is actually done within the health service. That is the measure we should use, in order to make sure nothing is cut inside the health service.

Photo of David Gauke David Gauke The Exchequer Secretary

I note the hon. Gentleman's remarks. The position is set out in the coalition agreement, and the October 2010 spending review met the Government's commitment on HNS funding in full, and did so without changing the allocation of national insurance contributions to the NHS. The effect of our policy is to maintain the level of national insurance contributions allocated to the NHS and to allocate additional revenues from rate rises to the national insurance fund. This helps ensure that plans for payment of pensions and other contributory benefits are sustainable in the long term. We can protect pensioners by the new triple-lock, which guarantees each and every year a rise in the basic state pension in line with earnings, prices or a 2.5% increase, whichever is greater.

In ordinary circumstances, we should expect contributions to rise broadly in line with earnings, and therefore to rise in real terms. Therefore, under the Government's proposals we should expect allocations to the NHS to rise in real terms in a typical year. Amendment 8 would require the NAO to report on how much would be required from the additional rates in order for the health service allocation to grow in real terms every year. The Government's view is that this would be a pointless exercise, since whether or not the NHS allocation grows, the Government have decided on the amount the NHS will spend. In any case, the amount allocated to the health service from national insurance contributions would, other factors being equal, be expected to grow in line with earnings and therefore grow in real terms every year under the terms of the Bill. This amendment is therefore unnecessary, and I recommend that the right hon. Member for Wentworth and Dearne withdraw it.

I have focused my remarks narrowly on what the amendment is about and why it does not do what is intended. However, I must remind the House of Labour Members' comments on the subject of health spending more widely. The right hon. Gentleman's predecessor as shadow Health Secretary, who is now shadow Education Secretary, has said:

"It is irresponsible to increase NHS spending in real terms within the overall financial envelope that he, as chancellor, is setting."

It was also not that long ago that the shadow Chancellor, whose remarks we study closely, said that there was

"no logic, sense or rationality" to the policy of ring-fencing NHS spending. I am pleased that Labour Members are now taking a different approach. It has been clear from the remarks made by the right hon. Member for Wentworth and Dearne that they are in favour of real-terms increases in health spending, and we are pleased that the Government have won that argument.

Photo of John Healey John Healey Shadow Secretary of State for Health

The Minister was talking about the shadow Chancellor and the approach we take to the decisions that the Government have made on NHS funding. May I therefore remind the Minister of what my right hon. Friend said when he so ably responded to the spending review statement? He said:

"We support moves to ring-fence the health budget".-[ Hansard, 20 October 2010; Vol. 516, c. 968.]

Photo of David Gauke David Gauke The Exchequer Secretary

That was the shadow Chancellor's position then, but I believe that a few days earlier he had said that there was

"no logic, sense or rationality" to the policy. If he has changed his position, Government Members would welcome that. The Prime Minister-my "big boss", as the shadow Health Secretary has described him-has said that we are

"confident that we will fulfil our goal of real-terms increases every year in the NHS."-[ Hansard, 15 December 2010; Vol. 520, c. 902.]

That will occur, regardless of whether any amendment such as that proposed by the right hon. Member for Wentworth and Dearne is included in the Bill; this is a matter of spending and this mechanism is not terribly helpful. Given those comments, I hope that he will withdraw the amendment, although I am not optimistic.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I should like to say how pleased I am that my right hon. Friend the shadow Health Secretary has been able to extend the offer of support to the Government with this amendment. He seeks to be as helpful as an Opposition can be and to encourage the Government to live up to their coalition agreement promise to ensure real-terms growth for our national health service.

As many of my hon. Friends have said, the NHS is absolutely at the top of our constituents' concerns and it is important that we ensure that we deliver a real-terms increase, particularly given the relatively high level of NHS inflation compared with mainstream inflation. I am sorry that, despite the hand of friendship being offered, the Minister felt that amendment 8 was "a pointless exercise" and "unnecessary". I thought that rather cruel. We think that the National Audit Office probably would be more than happy to undertake a study to find out how much money the Chancellor would need to add to the sum already committed in order to fulfil the Prime Minister's promise. Interestingly, the Minister said that he was confident that the Government "will" meet their commitment; he did not say that they "have" met it. Perhaps I am reading between the lines in a way that I should not, but it was almost as though the Minister was conceding, to a degree, that the sums allocated in the spending review do not fulfil that real-terms growth.

I am sorry that the Minister did not address the two key points, and I would be more than happy to give way to him if he would care to address them. The first relates to the social care switch, whereby accounting and statistical opportunities have suddenly been taken to move a sum that had been and still is to be delivered by local authorities under the budget heading of the NHS-of course, social care will continue to be delivered by local authorities. Perhaps the Minister would like to confirm that that is the case. Therefore, to classify this money as part of the NHS growth is disingenuous in almost anybody's book.

The second issue that, regrettably, the Minister did not address is inflation, which is quite high and rising. No wonder then that, as the shadow Health Secretary said, the Office for Budget Responsibility changed its definition of the deflator from 1.9% in June to 2.5% now. Again, the needle is being moved from real-terms growth, as was being claimed, to a real-terms cut for the national health service budget. When we combine those two elements, we see that we are talking about a £1.3 billion shortfall in real-terms growth. That is a serious sum and it affects all our constituents, which is why the amendment is so important. We believe that it could represent at least 12,000 nurses and 3,000 consultants, if we are generous about what that £1.3 billion represents. These health services affect each of our constituents, so I would be grateful if the Minister addressed those two issues.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North 2:15 pm, 13th January 2011

My hon. Friend mentioned inflation costs, over which the health service currently has no control, because they relate to things such as energy, fuel and food. All those costs are externally generated, because we import a lot of those things, and so we have no real control over the costs. Therefore, the health service has to be compensated properly for the extra costs.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Absolutely. My hon. Friends the Members for Luton North (Kelvin Hopkins), for Walthamstow (Dr Creasy) and for Edinburgh East (Sheila Gilmore) have all mentioned that these costs are increasing. As we know, the drugs budgets and so forth are increasing, so this issue will be right at the centre of the national political debate. We know that this Government have a habit of casually casting aside the commitments that they made in the coalition agreement. We really do not want them to rack up yet another broken promise, but it is starting to look as though the Treasury is in that particular space. This situation is not good for our constituents, we want the national health service to grow successfully and we thought that this amendment would offer the olive branch of friendship across the Chamber so that the NAO could, once and for all, clarify whether the Government are living up to their promise. The Minister's description of our attempt as "a pointless exercise" is hurtful and, for that reason, we probably have to divide the House to ensure that we can at least test this issue and try to keep the Government to their commitments.

Question put, That the amendment be made.

The House divided: Ayes 90, Noes 262.

Division number 167 National Insurance Contributions Bill — Clause 3 — Increased product of additional rates to be paid into National Insurance Fund

Aye: 90 MPs

No: 262 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.