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NHS Finances

Part of the debate – in Westminster Hall at 10:29 am on 14th March 2006.

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Photo of Steve Webb Steve Webb Liberal Democrat, Northavon 10:29 am, 14th March 2006

I knew that I could get the hon. Gentleman off the path of loyalty if I tried. Yes, my heart would, indeed, have sunk had I read that article. That is another example of national Government policy, driven from the top, causing local NHS bodies to spend money less effectively than they might. Of course one can always spend more money, but that is not always the answer. The answer is to spend the huge amount of money that has been provided more effectively. In many of the examples of which we have heard, that is not being done.

That is a classic Government response. Take the example of winter pressures. When there is a problem in winter, money is suddenly found. If that money had been in the budget at the start of the year, it could have been carefully planned and carefully spent. What tends to happen is that central Government panic and throw money at a problem. That is a much more expensive way of doing things. One has to hire people at short notice and drag in extra capacity. Yes, waiting lists have come down, but at great cost. The Government have bought in extra capacity at a high price, when the NHS has capacity at a lower price. However, because of dogma, the Government are determined to spend the money and they have not got the bang for their buck. That is the problem.

People keep asking, "How can they have spent all that money but ended up in this situation?" Part of the answer is that a lot of the spending has been unsustainable. Money has been spent on one-off gimmicks and long-term expensive financial contracts. We need long-term financial stability, so that local trusts have freedom, local accountability and the ability to plan. Any rational business would run on that basis. Central Government must take a share of the responsibility.

Mr. Stuart, who makes thoughtful contributions to debates such as this and has campaigned effectively on community hospitals, raised the interesting question of how we can have spent all that money but see health inequalities growing. The problem is that deficits tend to be in places where life expectancy is, on average, better—central London is a different issue. Unfortunately, it would not necessarily help health inequalities if one were to equalise the financing and if money were to go to the deficit areas and away from the surplus areas; we are trying to tackle a double problem.

I have one further point. We have heard about the deficits that roll over to the following year. That is not well understood—meaning that I did not understand it until relatively recently when I went to see a PCT and was told that the problem was like a double ball and chain. The PCT was going to be £20 million in deficit at the end of the financial year, and that money was going to be knocked off its income for the following year. Therefore, if it has a structural deficit of £20 million and if it does exactly the same next year as it did this year, it will be £20 million down next year. However, because its income has been cut by £20 million to pay back last year's debt, it will be as though it is £40 million down. How is it expected to recover from that? There needs to be a more measured transition to sorting out the underlying structural deficits and imbalances. However, the Government engage in constant revolution and helter-skelter reform. They do not give a chance to phased, managed transition, which has to be the best way of using taxpayers' money.

My hon. Friend the Member for St. Ives has done the House a great service in bringing the topic before us. I hope that the Minister will tell us that she is going to put in place structures that will allow local managers to manage and to plan, and not to be subject to constant meddling.