Clause 21 - NHS England’s financial responsibilities

Health and Care Bill – in a Public Bill Committee at 4:30 pm on 16th September 2021.

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Question proposed, That the clause stand part of the Bill.

Photo of Julie Elliott Julie Elliott Labour, Sunderland Central

With this it will be convenient to discuss clause 22 stand part.

Photo of Edward Argar Edward Argar Minister of State (Department of Health and Social Care)

The clause provides for a number of financial responsibilities of NHS England and provides powers for the Secretary of State to direct NHS England in relation to those responsibilities. Clause 22 provides the ability to amend the provision in clause 21 that imposes a duty on NHS England to ensure that its expenditure, together with that of integrated care boards, does not exceed the sums received in a year.

On clause 21, proposed new section 223C of the National Health Service Act 2006 places a duty on NHS England to ensure that in each financial year, the expenditure of NHS England and integrated care boards does not exceed the aggregate amount received by them. It should be noted that that is in the context of the historic settlement for the NHS reached in 2018, which will see its budget rise by £33.9 billion by 2023-24. Proposed new section 223CA simply replicates a provision in the 2006 Act, which enables the Secretary of State to specify the banking facilities that NHS England may use.

Proposed new section 233D of the 2006 Act enables the Secretary of State to give directions to NHS England concerning resource use. Any directions given by the Secretary of State under that proposed new section must be published and laid before Parliament. Proposed new section 223E empowers the Secretary of State to direct that the capital and revenue resource used by NHS England and ICBs for specified matters does not exceed a limit set.

Clause 22 could be commenced at a later date than clause 21. It would expand the duty on NHS England to ensure its own expenditure, as well as that of ICBs and English NHS trusts and foundation trusts, did not exceed the sums received by those bodies in a year. The clause is essential to ensure that achieving financial balance is inclusive of the finance of NHS trusts and foundation trusts. It recognises that NHS England must be mindful of the need to ensure that public money is spent as effectively as possible and in the best interests of the public we serve. However, we recognise that the NHS is moving out of an unprecedented period, so we will not commence the clause until it is ready. The provisions will help to ensure that there is clear accountability for public spending and that the NHS lives within its means.

Photo of Justin Madders Justin Madders Shadow Minister (Health and Social Care)

I will talk briefly about clauses 21 and 22, although with your indulgence, Ms Elliott, I will step over into clauses 23 and 24, because we cannot really look at these points without having some regard to those clauses. I promise I will not repeat the same points when we get to them.

We know that ICBs and NHS trusts will have spending limits, and that in theory they cannot go into deficit in any year, but the combined deficits of trusts before the pandemic was several billion pounds. Foundation trusts are in a slightly different position. Monitor is going—clause 26, which I suspect we will not get to today, goes into that, and it reads quite brutally in isolation—so it needs to be clear in the Bill how performance management and financial oversight will work in its absence. We still have questions about that, particularly how accountability will work with those new systems.

We see in these clauses a basic tension that NHS England will apply totals to systems, but individuals within the systems all have their own duties and responsibilities. We might think it is the ICB plus all the providers that deliver the services required, which are paid for by the ICB, but I am not sure that is how it will work in practice.

If I am correct, an integrated system is not defined in the Bill, so how do we control something that does not exist in law? Where accountability lies is very vague. The terminology used in proposed new section 233M, which is where the Bill tries to constrain aggregate financial spending each year, is:

“Each integrated care board and its partner NHS trusts and NHS foundation trusts”.

That suggests some kind of joint responsibility, but where community health services are provided by Virgin Care, that does not appear within that wording. GPs and their spend are considered outside, even though they are commissioned by the ICBs, so how do their costs fit into this system? There have to be some answers on that.

We also need clarity on how NHS England will control the aggregate spending in any patch, because some trusts span more than one area. If we had coterminosity, that might not be such a problem. Can the Minister explain how that will be policed? Core specialist services are also sometimes delivered outside ICBs. How will that all fit in? If a trust or foundation trust wants to argue about its space allocation from the ICB, who is going to decide that? Will it be NHS England or the ICB? Can the Minister help us with that?

What will this all mean in practice? Each system constitutes ICBs plus the trusts, and has a limit. We do not know how ICBs will get their funding allocated. The trusts do not know how the money will be coming down to them and on what basis, because none of that is defined in the Bill. Where does the buck stop for those decisions? Who carries the can if there is an overspend? What if commissioners and providers are on the same side? Where does the buck stop there? Can a system be put into special measures if it overspends? What if it is one rogue provider? Does everyone else have to bear the consequences of that? Do overspends get clawed back?

There are a lot of questions about how this will work in practice, and they go with the sense of uncertainty about exactly what ICBs will be doing when they are up and running. Surely, if an ICB exceeds its total, some kind of regime will have to apply. Will expensive consultants be brought in to tell people what they have done wrong and state the obvious? It is not clear to us what the levers are to apportion accountability and hold people to account. While we have a blurring of the lines between commissioner and provider, that will cause continued problems.

Rather than saying that we are fully against the proposals, we are saying that we do not understand how all this is going to work in practice. I hope the Minister will be able to shine a light on that.

Photo of Karin Smyth Karin Smyth Labour, Bristol South 4:45 pm, 16th September 2021

I echo my hon. Friend’s words. The Minister is going to have to go back to the drawing board on this, although I can see what the clauses are trying to do. Financial directors I have spoken to commend the idea of working together under some sort of shared control. We have had controls before, but clauses 21 to 24 —I may be straying beyond my knowledge of the writing of Bills and financial movements—come under the heading, “Integrated care system: financial controls”, and the entire section is about controlling ICBs and NHS trusts.

We have not had a system defined. We know that control totals are difficult and that autonomous trusts have regulatory rules. We would be here all weekend if we started to talk about foundation trust controls, and what those trusts can and cannot do with their budget. Clauses 21 to 24 test out the definitions of roles and responsibilities, and the tensions throughout the Bill over trying to apply a systems view to disparate organisations with different duties and responsibilities. The Minister has been trying valiantly to say that there is clear accountability through NHS England, but all of us here as Members of Parliament, and as I keep repeating, understand what local accountability is in a system and this is not it.

We do not know what an ICS is, and we have all agreed that that might be okay—we are kind of in favour of permissiveness—but what divides the Committee and, I suspect, people farther afield is that the Government view is that permissiveness is okay, and it is up to the NHS England regions and the Secretary of State. We would like to impose some greater local accountability earlier.

The terminology in proposed new section 223M, on page 34 of the Bill, is clear, and refers to:

“Each integrated care board and its partner NHS trusts and NHS foundation trusts”.

That part of the Bill deals with aggregated spending on revenue and capital. I do not want to overload people’s brains at this time of the evening, but the Bill really is a mess in respect of capital. Our buildings are crumbling and the backlog is huge. We have talked about NHS properties in community health partnerships. The architecture still exists, but it is not clear how that system works. I think poor old Sir Robert Naylor’s edicts and pieces of wisdom are just propping open doors in offices in the Department of Health and Social Care, because they are certainly not being developed and they are not being developed in the Bill.

Will a trust finance director have to seek permission from the ICB to spend their capital, or even to know what it is? If that is the case, it makes a nonsense of the good financial management of some very large institutions. We would all like a bit of financial rigour in the system, but I am not sure the Bill allows us to have any. It is as my hon. Friend the Member for Ellesmere Port and Neston said: for community services, we have the Virgin Cares, but even a community interest company would sit outwith the NHS trust definition. Such companies are regulated by the Office of the Regulator of Community Interest Companies, which is separate from some of this. The regulation for some of these bodies is problematic, and GPs are obviously outside it, even if ICBs start to commission them.

The aim is to allow NHS England to control aggregate spending, but to do that there has to be some direction. Lo and behold, on page 35 of the Bill there are more direction powers for NHS England. We have alluded to the fact that provider expenditure gets divvied up, and some ICBs also commission specialist services; there will have to be some NHS England-defined calculation of how on earth all that fits together. Someone somewhere will need a very large spreadsheet and will have to try to balance the flows of money around the system.

I have asked a lot people, including experts, whether anybody starts to understand financial flows. That is obviously important because we are talking about our taxes and we need to know how they are being spent, who is spending them and who is moving the money between each of these organisations. What about when these bodies cross different boundaries? Will the Minister say whether the trust or the foundation trust gets to argue about which part of its base is allocated to which ICB and vice versa? I am certainly glad—I often am—that I do not live in London and am not trying to work that out for some of the large teaching hospitals that cross many boundaries. There used to be a role for strategic health authorities to try to match what providers said was in their accounts with what commissioners said they thought they had given them. I do not think they matched that often, and the structure in the Bill is much more complicated than that. How it will work in practice matters.

My hon. Friend the Member for Ellesmere Port and Neston has already asked some of the questions. This issue is very complex and involves big sums of money, and ultimately it is about patient care, so who is going to hold it all together? Where is the collective leadership and who will be the top people in these ICSs? The advert for the ICS chairs has gone out, and the pay is £50,000 to £80,000 for three days a week. The requirement on those people is clear; let us see how many of them are not already well known to NHS England. That is deeply problematic, if they are going to work—and we all agree that we would quite like them to work.

In the new system, can commissioners and providers both be blamed for the same things? As my hon. Friend said, can they be put into special measures? Where are the levers? What is going to happen, other than NHS England commissioning expensive consultants to say to people, “You know what? It’s looking a bit complicated and some of you haven’t got the right bits of money in the right places,” and trying to bash some heads together? All that will be done behind closed doors.

When we get down to the money, permissiveness becomes a bit of a work of fiction. This part of the Bill needs to be looked at again, between its leaving this place and arriving in the other place, to get a bit more sense into it. As we all know, the guidance is going out there. This has been worked on by NHS England, so it could come back in fitter form. As I said to the witness from Oxfordshire last week, joint work and integration often fall apart ultimately because of the money. Any local authority financial director, any foundation trust financial director, any good hospital financial director and any community interest financial director will be looking, quite rightly, at their own bottom line at the end of the day, as that is their job.

It is entirely up to NHS England how it navigates this. It looks like clever financial leverage work, and I really do not think that it will work and it all needs to be looked at again. I return to my theme that this is why we need somebody independent and highly skilled working on behalf of the local community to make the ICS work, and not to have it, as a result, an NHS England outpost deciding how it moves money around the system. We need to understand the financial flows, and ensure that they work much better than is laid out in the clauses.

Photo of Edward Argar Edward Argar Minister of State (Department of Health and Social Care)

I will be relatively brief because I am conscious of the fact that we have agreed to get through quite a few more clauses today, although I will try to address the points that hon. Members have made. One of the key issues at the heart of what I think the shadow Minister, the hon. Member for Ellesmere Port and Neston, was saying is around what happens if an ICB or a foundation trust spends beyond its limit. How does that work? What is the process? I am pleased that this brings some welcome clarity, rather than the fragmentation we sometimes see in accounting cashflow, following the cash processes at the moment.

First and foremost, local systems will be informed of their resource envelope at the start of the year and will be required to agree a plan that matches, or is within, that envelope. Therefore, all will start the year with a plan that sets out what is being delivered and how much funding they will receive to deliver those services. However, if overspends emerge within year, that should initially be resolved within the system by the individual organisation either finding offsetting savings or securing savings elsewhere within that system envelope. Through the financial duties imposed by the Bill, the system is encouraged to be collectively responsible for managing its funding envelope, moving away from what we often see at the moment, which is fragmentation in understanding how the money flows, and each organisation considering itself to a degree in isolation.

If the overspend cannot be managed within the system, NHS England and NHS Improvement can use the powers in the Bill to hold the system to account through mechanisms such as the system oversight framework and providing support via the recovery support programme, as well as more informal support from the local region. Additionally, individual trusts or FTs that are not working collaboratively within the system can be held to account using the provider licence and enforcement options available for breaches. Finally, of course, in extremis the Department of Health and Social Care can provide cash support to NHS trusts and FTs to ensure that services continue to be delivered.

The second concomitant part of the shadow Minister’s question was what action NHS England or the ICB can take in response to financial difficulties. Financial performance will be monitored by both of them, and in the first instance any difficulties will be resolved locally. However, as I have set out, tougher mechanisms or sanctions can be imposed on trusts that are not meeting their reporting and financial accounting obligations under the clauses.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.

Clause 22 ordered to stand part of the Bill.