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NHS Finances

Part of the debate – in Westminster Hall at 9:30 am on 14th March 2006.

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Photo of Andrew George Andrew George Liberal Democrat, St Ives 9:30 am, 14th March 2006

Of course it was welcome, but one could set a benchmark against which pay increases would be assessed. GPs work nine-to-five, five days a week yet get five times as much as hospital nurses, who deal with stressful situations and work antisocial hours—weekends, nights and so on. Whether they should receive one fifth of what GPs do is a matter of parity within the NHS, which obviously needs to be sorted out. There is also the question of regrading, which happens whenever pay increases come along. Nurses are often downgraded rather than given a salary increase. The picture is not quite as rosy as the hon. Gentleman describes, although I agree that the general increase—the general trend—is welcome. I thought that I had welcomed it earlier.

The situation is dire indeed in Cornwall, which I mentioned earlier. Right hon. and hon. Members would be surprised if I did not mention it a few times. There are significant overspends this year, but that is not new: the PCTs inherited deficits from their predecessor organisations. The question is whether the services provided in Cornwall as a result of all this extra money being spent—more than the Government had in fact budgeted for—are better than in other parts of the country, or whether there is some other explanation. Also, what future opportunities will there be to review the appropriateness of the Government's funding formula for NHS trusts?

The situation in Cornwall is serious. There are concerns about how things are being managed, and there is a lack of confidence in the local NHS. Last year, I was at Helston protesting with the local community about the cutting of 10 of 34 beds in that vital community hospital, which serves the remote Lizard peninsula. On Tuesday last week, I was complaining to the chief executive of the Royal Cornwall Hospitals Trust that there were 14 ambulances, nearly the whole provision for Cornwall, queued up outside the front door of accident and emergency at Treliske in Truro, and there were no beds available within the trust to admit patients, yet a day later the trust was talking about a deficit and the need to sack staff.

It is clear that the situation is untenable. It demonstrates that the service is in crisis. Managers go through an admirable coping process and say that everything is under control, but it is not. There are some very serious questions about the future financing of hospital services in places such as Cornwall which need to be addressed. I do not bear any criticism of front-line clinical staff, who are clearly hard-working, dedicated professionals, but local people worry that their service is not being run in the best interest of patients. What is the problem? Is it a failure of staff, of management, of funding or of the Government? We need to understand how funds are allocated to PCTs, and I know that for many this is a rather turgid subject.

Since the national health service was established in 1948, a variety of formulae have been employed to attempt to achieve fair and equitable funding. The present system can be traced back to the resource allocation working party created by the then Department of Health and Social Security in 1976. The working party introduced the concept of weighted capitation, and current allocations in England are weighted in respect of four separate components in NHS funding: hospital and community health services, drugs and prescriptions, general practice infrastructure and HIV/AIDS.

Hospital and community health services account for 82 per cent. of the overall spend, and a population head count is weighted for each PCT, according to age, emergency ambulance cost adjustment, need and market forces. Some, like the emergency ambulance cost adjustment, account for just 0.5 per cent. of the overall allocation. Need indices are not favourable to rural areas. For example, Cornwall, which is the poorest objective 1 area in the country, has significantly less funds according to its need index than the two other, wealthier objective 1 areas—Merseyside and South Yorkshire—and those regions are far more urban than Cornwall.

I will not go into detail about all the factors that go into weighing the matter up, but rural matters tend to lose out on the need index. The biggest impact is the higher weighting given to the market forces factor. The three Cornwall PCTs collectively tend to be at the bottom of the market forces factor league table, which contains 303 PCTs across the country. At present, Torbay is at the bottom, with the West of Cornwall PCT in my constituency second to bottom. However, the table is supposed to reflect local wage rates and other market factors.

I fully accept that all Members engage in a certain amount of special pleading with the Minister for the formula to be skewed in a direction that would benefit their own constituency, and I suppose that I am guilty of that. However, there is a fundamental issue of parity in this case. The market forces factor has a heavy influence on the overall funding allocation and it seems bizarre that the consideration that seems to have the greatest impact on the overall allocation of the market forces factor applies in circumstances where, as David Taylor said, the majority of the funds are spent according to national pay structures.

In any case, there is a lower staff turnover in areas such as Cornwall. The National Audit Office report in 2004, which examined the cause of deficits in Cornwall's PCTs, said:

"There is low staff turnover, with many staff at the top of their payscale."

In fact, in circumstances where Cornwall is at the bottom of the earnings league table for both the public and the private sector, those employed in the NHS tend to be found at the upper end of their pay scale. If anything, we should be getting more money to reflect that, rather than less.

Of course, that still does not justify the abnormality of the heavy weight placed on the market forces factor at the expense of all other factors. For example, the geography of Cornwall means that it cannot call on emergency services from the north, west or south at times of crisis, and that should be factored into its emergency service planning, its ambulance service, its accident and emergency services and the vital casualty service at West Cornwall hospital in Penzance. Regarding access to services, Cornwall's geography means that it is bordered by only one authority to the east, so the capacity to share resources and achieve economies of scale in that way is very limited. The acute trust's provision of services has to operate at 13 different sites, as well as running the three other services.