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NHS Finances

Part of the debate – in Westminster Hall at 10:39 am on 14th March 2006.

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Photo of Andrew Lansley Andrew Lansley Shadow Secretary of State for Health 10:39 am, 14th March 2006

I agree with Steve Webb that Andrew George has found a timely opportunity to debate these important issues. It is timely not least in relation to his own health economy, where the pain of these issues is being felt considerably.

I note from the South West Peninsula strategic health authority's report at the end of January that it was looking not only at a sharp deterioration between months nine and 10, but at significant additional risks: £31 million of high risks were identified, illustrating the nature of the range of challenges that the authority has to deal with. All of those challenges are increasing the financial turbulence, whether it is the likelihood of emergency referrals being faster than was planned, which has been mentioned by a number of Members, or the implementation of "Agenda for Change".

One thing that has not been mentioned, except by the hon. Member for Northavon, is the range of costs imposed on the NHS by central Government. It does not mean that the improved remuneration for NHS staff is wrong. What is wrong is to have gone down the path of contracts, whether with GP consultants or "Agenda for Change", and for central Government to have underestimated the cost impacts of those changes, which they are imposing on trusts, and brought them all to bear at the same time, even though increases for the NHS are rising fast.

I shall respond to several points that were raised in the debate. Time does not permit a full discussion of NHS finances, but we will have an opportunity to discuss that again on Monday, on the Floor of the House, courtesy of the Liaison Committee.

The hon. Member for St. Ives raised an important point about resource allocation. No doubt the Minister will want to repeat something that she said on "Newsnight" the other night—that Liverpool has been subsidising the rest of the country for years. That is an interesting approach to finances. She may well say that Central Liverpool primary care trust has a weighted capitation of £1,100, but South Cambridgeshire PCT, which I have the honour of representing, has one of £1,300; ergo, her conclusion is that Central Liverpool is underfunded relative to South Cambridgeshire and is subsidising it. On that argument, Scotland is subsidising the rest of the UK dramatically in relation to NHS resources. West of Cornwall PCT has a weighted capitation of only £1,139, but that is in excess of Central Liverpool, so no doubt Liverpool is subsidising West of Cornwall.

Let us consider how much real money—cash—is going into those PCTs: in terms of the weighted capitation, it is £1,161 to West of Cornwall, £960 to South Cambridgeshire and £1,491 to Central Liverpool. I do not dispute that Central Liverpool should have more money than South Cambridgeshire, but I do dispute that a £530 difference—more than a 60 per cent. increase in resources in Central Liverpool—is necessarily justified by the levels of morbidity. That is happening across the country, and it is partly geographical.

The Secretary of State admitted to the Health Committee that the healthiest and wealthiest parts of the country were suffering those impacts. Where do we end up? We end up standing in a hospital, as I did recently at the Luton and Dunstable hospital, where I talked to the stroke board about patient discharge arrangements. The hospital deals with two PCTs: Luton PCT, which is relatively deprived—for every patient that the hospital sends out to that PCT discharge arrangements are in place—and Bedfordshire Heartlands PCT, which is relatively well off. However, many of the patients discharged to that PCT have no rehabilitation facilities available to them.

We need to do a number of things on PCT allocation. The hon. Member for St. Ives is right to say that we need to consider carefully the market forces factor. Somewhere written on my heart is "area cost adjustment". Those who know about local government finance will know that we had a long and tortuous debate about these things. One clear lesson of that debate was that where there is centrally determined pay in the public sector, it is not right simply to adjust resource allocation in line with local labour market conditions, and there is an interaction between central pay arrangements and local pay which hits somewhere between the two. That relationship must be observed; the real costs of employing staff in that area must be understood, bearing in mind the local labour market and national pay arrangements; and a proper adjustment must be found.

The Advisory Committee on Resource Allocation is reviewing PCT resource allocation this year, and it is right that it should do so. As we have stressed to the Government before, they should be looking increasingly to move from demographic assumptions based on Office for National Statistics data to GP practice lists. If the quality and outcomes framework tells us anything, it is that, increasingly, we know how many people in a community have asthma or diabetes or live with chronic conditions. Those considerations are a major component of overall costs.