Hospital Finances

– in Westminster Hall at 11:30 am on 19th July 2011.

Alert me about debates like this

[Mr Clive Betts in the Chair]

Photo of John Pugh John Pugh Liberal Democrat, Southport 2:30 pm, 19th July 2011

I could not help thinking on my way here, as I passed the scrum of photographers and reporters, “There are an awful lot of people. They can’t all be coming for the debate on hospital finances, however important it might be.” I apologise in advance to the Members present, who I know debated such themes extensively in the Committee that considered the Health and Social Care Bill. I can only say that I did not anticipate that today would turn out as it has. I wanted to flag up an important issue that I think will dominate next year’s headlines and to put some of my thoughts and concerns on record. I will not suggest that we could all go off quietly, have a cup of tea and discuss it in a genteel way, but if the Minister and the Opposition spokesman give adequate responses, we might curtail this debate before an hour and a half.

When I arrived in this place in 2001, one of the first people whom I met was another new MP, Dr Richard Taylor, a distinguished Member who had just won the Wyre Forest constituency somewhat unexpectedly. David Lock, an unfortunate colleague of yours, Mr Betts, had lost half his votes in the election simply by virtue of his stance on hospital reconfiguration. Since then, an axiom in this place has gone something like this: “If you back hospital changes and any sort of configuration, you lose; if you oppose hospital changes and any sort of configuration, you ordinarily win.” I certainly sat through many debates, somewhat better attended than this, on hospital configuration in many parts of England when I was part of the Liberal Democrat health team, and generally speaking, that has been the invariable subtext to the debate.

Offstage, away from the Commons arena, many groups were set up during the previous Parliament to defend their local hospitals in a variety of ways. An all-party group was set up on community hospitals, and another, of which I was a founding member, was set up on small hospitals. It is recognised that reconfiguration and change in the acute sector is ordinarily political dynamite. Understandably, this and previous Governments have wanted to keep the issue at arm’s length.

One way to do so is to suggest that it is all a matter of local decision making, although somehow it always comes back to the Secretary of State’s desk. Another way is to refer such matters to a reconfiguration panel, a device set up expressly to keep things off the Secretary of State’s desk. A third way is to claim that whatever change is in the offing is the result of extensive work by consultants—McKinsey is often involved. I have never found them particularly helpful myself, as ordinarily they suggest that hospitals solve their financial problems by simply doing less, meaning closing wards and so on. However the technique favoured by most Governments hitherto has been deferral: putting off the agony in the expectation that some other Secretary of State will have to pick up the ball and run with it. The current Secretary of State is a veteran of many hospital configuration debates, having been a health spokesman for his party for a long time.

That is the background to the issue. However, I suggest that the landscape is changing dramatically. First, there is a widely accepted view that more services should be delivered in the community, and, presumably, that fewer services should be delivered in the acute hospital sector. Many of the effects of the “any willing provider” policy and patient choice are already working their way through the system, leading to an increase in the deficit on the acute hospital side. Since the 2010 Budget, there is clearly a need across the health sector to find substantial savings, amounting in national terms to £20 billion.

Added to that is the chronic effect of private finance initiatives, which appear to be crippling many in the hospital sector. An investigation conducted by The Daily Telegraph found, for example, that one fifth of hospital trusts with active PFIs have closed casualty departments, while during the same period only 4% of hospitals without PFIs closed or proposed to close casualty departments. We can clearly see from the cases of some individual hospitals—I shall not name them here—that severe problems have been brought about chiefly, if not exclusively, by long-standing PFI debts. The Daily Telegraph investigation—we do not need to believe The Daily Telegraph, but this is what it says—found that

“Some PFI hospitals—built and run by private firms and effectively rented back to the state—will end up costing taxpayers more than 10 times their capital value.”

Much of that cost, of course, is picked up by the acute sector.

In addition, constant deferral has sometimes made problems more acute, which is particularly true in London. Further grief is generated, to some extent, by adjustments, not uninfluenced by the Department of Health, to the tariff for many acute services. Not long ago, primary care trusts were strapped for cash and acute hospitals were okay; to some extent, intervention in the tariff has changed that, and the acute sector could do absolutely nothing except remonstrate.

Some trusts are in serious trouble, and their problems cannot be eternally deferred. The problems of the South London Healthcare NHS Trust, for example, are critical. The other day—I am sure that the Minister will be familiar with this issue—I picked up a brochure distributed around Merseyside saying, “Save Whiston and St Helens hospital”. He might be surprised to know that it says that

“local politicians have been informed by Ministers in the Department of Health that plans are in place to privatise”

Whiston and St Helens hospitals.

Photo of Simon Burns Simon Burns The Minister of State, Department of Health

As the hon. Gentleman is not an MP for that area, I will explain a bit of the background. One or two hon. Members are scaremongering among the local population. Despite repeated assurances from me and others, they will not accept that there is no intention, in any shape or form, to privatise Whiston or any other hospital.

Photo of John Pugh John Pugh Liberal Democrat, Southport

To be fair to the Minister, I was using that case as an illustration not of what is afoot but of how such things become inflamed and distorted and how emotion tends to dominate, rather than facts.

Photo of Simon Burns Simon Burns The Minister of State, Department of Health

I certainly accept that, but will he join me in saying that hon. Members have a responsibility to be accurate about the true situation? Some hon. Members are prepared to put grubby party politics ahead of accuracy in their public accusations.

Photo of John Pugh John Pugh Liberal Democrat, Southport

I was handed this leaflet during a meeting on Sunday in Southport. A number of inaccuracies were expressed within the room, but I do not know how they were generated or who is chiefly responsible.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

Does the hon. Gentleman also agree that the Minister could clear up today any uncertainty on the question whether failing trusts might be dealt with by privatising or franchising through privatisation? The Minister could tell us what Matthew Kershaw at the Department of Health meant the other day when he told the Health Service Journal that private franchises might be one way to consider dealing with failing trusts.

Photo of John Pugh John Pugh Liberal Democrat, Southport

I am sure that the hon. Gentleman can ask his own questions when the time comes. The point that I am making, which could be made about several hospitals, is that financial trouble is not necessarily coupled with clinical trouble, as it is in the case of the hospital that I am discussing. Sometimes they go hand in hand, but in this particular case there is a clear pattern of good clinical delivery, which we all want to see sustained. However, most of us know, even if we do not want to name individual hospitals, that about 20 hospitals—17, 18 or 19 of them—will not be in good shape for foundation trust status, largely because of the financial problems that they currently face.

The issue is how we address these problems without the kind of collateral political damage that we saw in Kidderminster. The solution is not obvious. Mergers between different trusts do not always work well. Nigel Edwards, the previous chief executive of the NHS Confederation, said that no merger has ever done the trick of resolving the problem—not by itself anyway. Neither is it possible to do things and get away with it by shepherding other NHS custom in the direction of those hospitals that are financially challenged. I believe that that is the concern of hon. Members in Warrington apropos what may happen at Whiston. If the facility is PFI and expensive, there is an argument that that will be the one that is maintained. Indeed, the previous Government were accused of doing precisely that in connection with Burnley hospital, where Blackburn was the more expensive proposition in capital terms. I do not think that that is the way to do it.

I do not think we can go back to what used to be called brokerage, whereby basically some hospitals do well, some do badly and the strategic health authority comes along at the end of the year and masks the whole procedure by handing out money. That is a discredited tool that has long been dropped. Plenty of loans are available, however, which hospitals are sitting on and which they have to repay. A few years ago, under the previous Government, if a deficit was incurred, an equivalent amount was taken off the following year’s allowance, but, happily, that scenario no longer exists. This is not a situation in which immediate and obvious solutions exist.

To some extent, the modern view of the NHS—namely, that we need to encourage private autonomy to allow the strong to merge with or to acquire the weak, or to allow the weak to simply fail via a variety of different market adjustments—has some appreciable weaknesses, which I would like to discuss. If we let a hospital’s culture or ecology sort itself out as best it can in any particular area, we may find that at some point in time there will be a conflict with the Secretary of State’s duty to secure a comprehensive health service, because how it turns out might not actually do that. In crude terms, there are many situations in which we would take the view that we cannot let an acute hospital or a district general hospital fail.

The problem, however, persists and our failure as politicians to address it in a mature, sensible way has been subject to a fair amount of criticism. I refer hon. Members to an article in The Times initiated by comments made by Dr Peter Carter of the Royal College of Nursing, who said:

“In our metropolitan areas we have far too many acute hospitals. That’s a drain on the system and it has got to change”.

Dr Carter, of course, represents the nurses. He went on:

“People are going to have to be brave to make these decisions. Some of those hospitals that we have known and loved, and which were performing appropriately in their day, are no longer appropriate.”

In the same article in The Times on 17 June, Chris Ham from the King’s Fund—we know him well—said:

“For too long politicians have not been willing to show the leadership that the health service needs.”

That is a kind of allegation of almost wilful political inertia, which in the view of those experts seems to be compounding the problem.

Politicians are subject to a twofold accusation. The first is of being inert, cowardly and fearful, and the other is that they agree to certain things in private, but take a completely different stance in public. Under the previous Government, we saw the spectacle of one Minister proposing and supporting radical upheaval in the NHS, while another, Hazel Blears, opposed it. Similar points are made by many think-tanks, which do not need to get their hands dirty with the business of reconfiguration.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

In a similar vein, does the hon. Gentleman agree that, before the last election, it was less than helpful to see the current Secretary of State standing outside various hospitals with a placard protesting that they would not close on his watch?

Photo of John Pugh John Pugh Liberal Democrat, Southport

I have direct experience of the Secretary of State coming to my constituency to support his own party’s candidate and taking the same stance as me on the local configuration issue. He has ample experience of that. To be fair, the Secretary of State has told me that doctors are not necessarily completely blameless. Apparently, some doctors say privately that certain things need to be done, but they are not prepared to attend public meetings to say so, which is understandable. Certainly, some people in the clinical community will propose a reconfiguration, while others will oppose it—often citing differing clinical evidence.

To pull things together, the reality is that this is a tricky problem and solving it by central diktat or dirigisme is attractive only to think-tanks, never to politicians or people who have to work in real time in the NHS. It is probably also insufficient to simply set tests or parameters and let the thing unfold, if we want to end up with a comprehensive service in all areas. The Government are never quite out of the equation, however much they might wish to exit and leave it to the health economy to sort itself out. They are not a bit player in any sense. Hitherto, but maybe not henceforward, they have influenced the tariff, which has an immediate effect on the viability of hospitals. They have subsidised acute sector competition and opened access to alternative providers, all of which impact directly on the acute sector.

More importantly, the Government’s drive—this is accepted as the drive of not only this Government, but the previous Government—to make NHS providers autonomous has reduced opportunities to cut costs across the whole acute sector. I will give three straightforward examples. A lot of NHS property is essentially dormant and not needed at present, and companies would manage it to better revenue and capital effect on the budget. These companies, however, deal in property portfolios, not in isolated plots of land held by an individual hospital. Properly managing the dormant and surplus estates of the NHS is an extraordinarily good way of benefiting the acute sector, but it is difficult to progress when the acute sector is divided into specific, autonomous and relatively small units.

Similarly, we would all regard savings in procurement in the acute sector as relatively painless. If we can, it would be far easier to make savings in procurement rather than in staffing or in actual services, which are more painful to progress.

The recent National Audit Office report established that the autonomy that hospitals individually possess militates to some extent against them making some of the savings that we clearly would wish them to find. I shall read briefly a couple of sections from the NAO report:

“The local control of procurement decisions and budgets in the NHS contrasts with the direction that is being taken for central government procurement.”

It points out that Sir Philip Green has saved appreciable amounts of money across central Government by achieving large-scale efficiencies in procurement. The report goes on to state that

“this approach does not apply to the NHS which operates as a discrete sector, increasingly driven by a regulated market approach, in which the government does not control providers such as hospital trusts. Central government, by contrast, operates as a single body of departments where consistent and collaborative procurement arrangements can be pursued.”

If we read the report and analyse the net effect of that, we realise that NHS hospital trusts pay widely varying prices for the same thing. The NAO report gives examples of hugely different procurement exercises that have resulted in very strange outcomes. It states that

“the 61 trusts in our dataset issued more than 1,000 orders each per year for A4 paper alone.”

It points out that procuring on a scale greater than individual trusts will have benefits. I know that there are procurement hubs and so on, but essentially, as the NAO analyses the problem, it thinks that the current NHS structure means that we are missing out on across-the-board savings within the acute sector. It concludes by saying:

“We estimate that if hospital trusts were to amalgamate small, ad-hoc orders into larger, less frequent ones, rationalise and standardise product choices and strike committed volume deals across multiple trusts, they could make overall savings of at least £500 million, around 10 per cent of the total NHS consumables expenditure”.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

Does the hon. Gentleman agree that having listened to or sat through, as I did, 40-odd sittings on the Health and Social Care Bill, it is precisely such fragmentation that we are worried will get worse and will be compounded by the Bill’s measures? Is he concerned that the sort of centrally planned savings that he describes as being achieved through procurement will be forgone?

Photo of John Pugh John Pugh Liberal Democrat, Southport

The scenario that the NAO and I have described was actually created by the advent of foundation trusts and the architecture put in the place by the previous Government as much as by anything that the Bill might do. The Bill will not substantially worsen the opportunities for savings. However, we might wish to consider the following issue in the context of the Bill. The NAO states:

“Given the scale of the potential savings which the NHS is currently failing to capture, we believe it is important to find effective ways to hold trusts directly to account to Parliament for their procurement practices.”

That is a perfectly valid point. It is not a political point; if anything, it is a housekeeping point.

The NAO has produced another recent report entitled, “Managing High Value Equipment in the NHS in England.” We are talking here about things such as MRI scanners that cost millions of pounds. The NAO points out that, in reducing the costs of high-value equipment and maintenance, it is far preferable if the whole exercise is strategically planned, rather than planned within each individual trust. It concludes that

“the planning, procurement, and use of high value equipment is not achieving value for money across all NHS trusts.”

In other words, NHS trusts are looking after themselves, rather than considering whether there is spare capacity in the equipment of a neighbouring trust, simply because they are, by and large, poised in a competitive relationship. Already the drive to secure quality, innovation, productivity and prevention savings and the rationalisation that follows from that is being hampered—if not blocked—by a degree of obduracy from the foundation trusts, who are looking after themselves rather than the whole health economy. The drive to secure such savings is also being hampered to some extent by the need to satisfy competition requirements, which I should say, in case the hon. Member for Pontypridd is going to intervene, were already in place.

I have given the example of Merseyside where centralising pathology, which is a wholly sensible thing to do, has had to get over the hurdle of impressing the co-operation and collaboration panel. It was apparently satisfied when it discovered that pathology could be obtained in Wigan. That was enough competition and was okay. However, the fact that those involved had to get over that hurdle delayed the savings and some of their impact. I pause for a second to ask hon. Members to speculate about something. If Marks & Spencer behaved in exactly the same way with regard to all its separate stores, we would consider that to be an imbecilic business practice. There is no reason why we should not query it when we see it within the NHS.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

I have a great deal of respect for the hon. Gentleman, but does he not agree that it is slightly ironic that he should be making this argument now, given that Opposition Members consistently argued throughout the passage of the Health and Social Care Bill that the sort of fragmentation he is talking about will get worse once we get rid of all strategic planning at a regional and national level? If we get rid of strategic health authorities and primary care trusts, that will be a major problem and will compound the issues he is talking about.

Photo of John Pugh John Pugh Liberal Democrat, Southport

I am not wholly convinced that we will get rid of that level of planning. Instead, it will go through another avatar or incarnation and reappear as a subset of the national commissioning board’s activities. That organisation is rapidly developing regional tentacles, some of which look very similar to parts of the strategic health authorities. Yes, there is the need for some strategic look at how savings are to be achieved if we are going to make savings across the acute sectors; otherwise, we are missing some very soft savings in times of severe financial restraint. It is not me saying that; it is those people who have looked at the matter in the greatest depth—in this case, the NAO.

However, one cannot roll back the clock; we are where we are. I suspect that there will be a fair amount of merging among trusts so, perhaps with the evolution of super-trusts, we will get real economies of scale. The key question I ask and the reason behind this debate is: what can the Government actually do to manage this process of change, given that all the financial information coming our way now and next year will illustrate that there will be change and that significant problems need to be addressed in London and other parts of the country? The way I see it is this. There is a yawning gap between what the public would like to see and what hospital administrators consider to be financially expedient or workable, and what doctors see as clinically desirable. There is sometimes a tendency to confound the two. I have seen many cases for change based on financial expediency that are represented as cases about promoting a clinically desirable framework. That has always created a degree of cynicism on the part of the public, who see the money rather than the clinical needs of the services driving change.

Financial expediency and clinical desirability are different. None the less, they are both forces that we can do nothing specific about as they stand. Those forces are driving change even though the public, particularly in London, are probably reluctant to accommodate that. One very bad way of resolving such a dilemma—and it will be a difficult dilemma for whoever has to deal with it—is simply to do the politically expedient thing and work out which option loses fewest votes. That does not necessarily produce anything like a desirable situation and it creates a lot of bitterness, particularly if political leverage is used to benefit candidates of one or another party, however tempting that may be.

To make a positive suggestion for a way forward, I accept that this is a very difficult environment, and one that is only going to get more difficult, but I would like to draw attention to what I have picked up in most of the debates I have had, in this Chamber and elsewhere, on reconfiguration, often in parts of the world that I was not directly informed about. In those debates—I remember a well-attended debate, with many Conservative hon. Members, about reconfiguration in the Watford area—the fundamental issue that crops up time and again is access. People spend far more time talking about the way to the service than about the shape of the service—far more time talking about traffic than about clinical processes. We have to draw a lesson from that.

It seems fairly straightforward that people who have serious life-threatening diseases have one primary consideration, which is to get the best conceivable service they can to save their life. Recognising that, they will go to where that best service is. For example, in my constituency of Southport people who contract cancer often have to travel to Clatterbridge hospital in the Wirral for some of the specialist cancer services that are not available in Southport. Although they would rather have those services on the doorstep, they would sooner have the best conceivable service. On the other hand, asking people who are travelling for very complex, life-critical services to also travel in order to get triage should they have some mishap, or to travel if they want to do something very ordinary like give birth to a baby, or if they want to attend a clinic, or if they want to get their chronic condition attended to or assessed, or if they want some sort of initial diagnosis of their symptoms, or if they want a routine stay in hospital, then to suggest that they should not go local, that they should travel further, creates uproar. Frankly, if they are asked to travel further than other people and prolong an anxious journey, or encounter some tortuous route, that will enrage them significantly.

A lot of debates about hospital reconfiguration in this place have been about the fears of one community about the basic, simple services for which they will unfairly be made to travel further than other people—fears that, in a sense, they have been rejected and that some other community has been selected to have services on its doorstep. The tendency of many people in the health service is to think that that is an issue, but not a health issue—the Department of Health does not do highways.

I can give a classic example of that in my constituency. There are two hospitals in my local trust—one in Southport and one in Ormskirk. The services were configured, I think largely for political reasons, in a rather strange pattern. A and E for adults is in one hospital, and A and E for children is in another. Theoretically, if there is a car crash with both parents and children involved, they would go off in different directions. That strikes many people as almost perverse. When people in Southport, complain very vocally and emphatically, as they still do, about having to traipse over to Ormskirk even for the most minor ailment affecting a child, they have a legitimate grievance. I have to say that that appeared to be a grievance that was shared by the Secretary of State. When he was campaigning for the Conservative candidate in my constituency, he agreed with me on precisely that point. If one reads the fine print of the Shields report, which did that configuration, one finds a very short sentence saying, in effect, “this is a fine configuration which I, Professor Shields, medical man, wish to stand by.” He treats the weakness—that there is a long and tortuous road between the two communities—as though that really was outwith the particular suggestions that were being made.

I recall similar issues with regard to the debate that we had about hospitals in the Watford area. People said that the configuration had not recognised the fact, unbeknownst to the health authorities, that it may have been possible to get from one part of the community to another at 10 o’clock or mid-afternoon, but not at peak time. That would not work or be satisfactory for the people who would have to negotiate dense traffic and no direct road. I looked at the Secretary of State’s four tests for acceptable configuration. They show progress in the right direction, but the one thing that they did not mention was physical access and time taken in access to health services.

In conclusion, I would like to make a positive suggestion. When we think about configuration, we need to lay down access standards that offer some kind of basis of what people can rationally, reasonably expect: to test proposals coming forward against access standards; to ensure that access is, as far as we can get it, fair for all; to have goals for access that allow for variations in people’s condition, whether life-critical or standard; to allow to some extent for differences in rural and urban environments; and to allow even for factors such as population density. People in London would be flattered, to some extent, by the picture they see of access arrangements in London. They probably feel that they are not as good as they might be, but in comparison with rural environments they are markedly different.

If the Department of Health could take access seriously, then the huge political problems that are on the horizon, and not very far on the horizon, can be resolved in a less politically contentious way. We could then convince people that some of the reconfiguration that may have to be done is fair, if not welcome. Until we do that, we are going to get into precisely the same territory as Dr Taylor and David Lock in Kidderminster. It is the failure on the part of the NHS, I guess, to talk to the department of highways and the Department for Transport effectively. It is a failure to take into account what it means for the ordinary patient, and how it looks from the ordinary patient’s point of view, that really makes these difficult issues absolutely explosive.

Photo of Owen Smith Owen Smith Shadow Minister (Wales) 3:07 pm, 19th July 2011

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate John Pugh on securing the debate, albeit at an hour and on a day when there is a little competition for the attention of the House and perhaps of the media, too. Maybe the media are watching, but I have my doubts.

I will start on a note of agreement with the hon. Gentleman, and, I am sure, the Minister, on the need to make savings in the NHS. There was widespread agreement before and after the general election that the NHS needs to make significant savings of £15 billion or maybe £20 billion in the spending period, which is vital. Equally, the NHS needs to find ways to achieve those efficiencies to achieve productivities that will allow those savings to be sustained over a longer period. There is also widespread agreement that there is a massive challenge in achieving those savings, and addressing perennial problems that have persisted in the NHS under successive Administrations.

Some trusts, as the hon. Gentleman has said, are consistently in the red and have been for a while. They seem to have persistent and perhaps insurmountable problems with their finances. There has been an evolving but still too opaque process of dealing with that, with bail-outs or loans from the SHA or the PCT to trusts that have struggled. Despite the efforts of successive Governments, and particularly the previous Labour Government, there remains too much variability in the quality of service offered and prices paid across the NHS. I also agree with the hon. Gentleman that there have been persistent political obstacles in the way of achieving the reconfiguration of services, which we all recognise may be required to deliver some of the proposed savings.

Since the Government came to office more than a year ago, they have been right to try—rhetorically, at least—to address those issues and to spell out some of the challenges and potential solutions. First, we all agree that there needs to be greater transparency on accounting, on design decisions about services and, in particular, on reconfigurations of acute services. Secondly, there has been widespread agreement over a long period that clinicians need to take greater responsibility for redesigns and, as the Government would put it, to be at the heart of decision making in ways that force them to take account of issues and be responsible about engaging in the ongoing debate. Finally, there is agreement that we need a more effective means of dealing with failing trusts, so that we have a failure regime that allows whichever party is in government to reconfigure vital services in a way that protects them.

The Government want to do all those things, and they are right to want to do them, while increasing quality at the same time, but the problem is that their prescription for achieving them is entirely inappropriate. It is the wrong prescription for the NHS, and it will not achieve what the Government want; in fact, it will compound the problem. The past year has been a wasted year, in which many of the decisions that the Government say they want to take and that they want the NHS to take have been put off. The health service has had to deal with the chaos of having to wait and wonder what the future will hold for individuals and institutions across the NHS, as the Government’s shambolic Health and Social Care Bill passes slowly and tardily through the Commons.

The principal reason why the Government have introduced the Bill is that they still have an entirely misguided belief that competition in the NHS between providers will result in a more efficient allocation of resources, drive productivity and lead to innovation in the NHS, which is not the case. The planning that the hon. Gentleman has mentioned is vital in the NHS, and that is particularly true of planning that militates against injudicious decisions being taken by parts of the NHS that are more autonomous than they were previously.

Ultimately, the chaos we have seen over the past year has been worse than not allowing the NHS to take the necessary financial decisions and steps towards reconfiguration to achieve better financial outcomes. Worse still, it is compromising patient care. The quality agenda that the Government profess to support and pursue above all else, even in respect of competition, is not letting the NHS improve as quickly as it has done in the past. The Minister is looking quizzical, but I would point to the fact that the figures for 18-week waiting times, for four-hour waits at A and E and for the time people wait to receive vital diagnostic tests are all increasing.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

Yes, they are. The Minister says they are not, and if he wants to intervene, I would love to hear what he has to say.

Photo of Simon Burns Simon Burns The Minister of State, Department of Health

I know that the hon. Gentleman does not want to misinterpret the facts, and even he will have to accept, if he looks at the facts, that the median waiting time remains stable. Even someone he loves to quote—Chris Ham of the King’s Fund—has acknowledged that in recent weeks.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

The King’s Fund explicitly said that, for the months from February through to March, numbers for the 18-week wait were at a three-year high. The Minister talks about median waiting times, but we need to talk about overall waiting times. He cannot disagree with the fact that the figures for the other waiting times that I have mentioned—the waiting times for diagnostic testing and for four-hour waits in A and E—are at their highest levels since their inception. That is where we are, and I fear that is where we will be for a long period unless the NHS is allowed to concentrate on clinical targets, which are crucial to the quality of service that patients receive, rather than having to worry about future configuration and structure.

How has the vital question of savings been dealt with over the past year? The hon. Member for Southport has discussed the need to save between £15 billion and £20 billion, and service reconfiguration is one way to do that. We do not know exactly how we are doing on savings right now, because the Government have not told us where we are or whether we are on track to realise those savings. We know that trusts are being asked to make savings of about 4% a year, but we do not know how many actually are. We fear that we are behind the curve in achieving that figure, which Monitor’s report of September last year suggests that 63% of trusts are failing to do. The King’s Fund tracker, which came out only last week, said that half the managers it surveyed feared that they would not hit the 4% target, and an even greater proportion feared they would not hit the 6% target that they are setting for themselves.

Photo of Simon Burns Simon Burns The Minister of State, Department of Health

Will the hon. Gentleman accept—I am sure that he knows this—that the King’s Fund work was only a snapshot? It surveyed only 29 finance directors out of 165, and 27 of them made the comments that he has described. However, the latest quarterly NHS performance statistics, which are an actual look at what is going on across the NHS rather than a snapshot, show that 20 of the 21 indicators are being reached. Of those, 14 show improvements, whether that is on bowel and breast cancer screening or on times for admission for minor strokes. That gives a more accurate assessment of what is going on.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

Of course, the baseline for those outcomes is relatively new, because this is a new set of indicators. More importantly, however, the Minister will accept that I was talking specifically about financial data and whether services will hit their financial targets. I acknowledge that the King’s Fund tracker is but a snapshot and that, as the Minister has said, it uses only 29 NHS trusts. However, the Monitor survey of September last year, which I have mentioned, related to all 100-odd foundation trusts, and it found that 63% of them are behind the curve in achieving the 4% target. It is not, therefore, inexplicable or out of the realms of possibility that the King’s Fund survey might be entirely accurate, even though it is a snapshot. Of course, the Minister can clear this up for us right now by saying precisely how many foundation and non-foundation trusts are on target to meet the 4% target for productivity savings this year. He can clear that up for us, and we will have no further questions about it. He could publish a tracker to keep things clear for us.

After quality and savings, the third issue that I want to discuss is transparency, because the Government have persistently said that more transparency in the system will allow decisions to be taken in a better way and to be scrutinised, as well as allowing an improvement in productivity and quality. Other Opposition Members and I have pursued this issue during the seemingly endless sittings on the Health and Social Care Bill. I have said repeatedly that the fog around this issue has not got any thinner; in fact, it was approaching pea-soup status towards the end of our sittings.

We have no real idea how the Government will address the apparent shortcomings in the 17—or is it 20 or 25?—trusts that are currently in trouble and do not have the requisite stability to achieve foundation trust status. We do not know exactly what the Government are doing to bring them up to foundation trust status. Nor do we know precisely what will happen if one of them goes bust. We do not know what the failure regime is—

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

Well, as we said in Committee, we wait with bated breath to hear what the failure regime will look like. It is a crucial piece of the jigsaw if the Government are to be trusted with the NHS and if we are to know precisely what regime they will put in place to protect services that, as we have heard across the country, are considered vital for communities.

We do not have any idea, really, how many of the existing foundation trusts are overspent, and therefore in breach of their authorisation. The Minister could inform us about that. He could be a little more transparent about precisely what the situation is. I mentioned this earlier, but the Minister could clear up persistent concerns, in particular on the Labour side of the House, that the Government think that private sector management might be a means to improve the productivity, efficiency and, indeed, perhaps even the clinical quality, of some of the failing trusts. I do not think that that fear is wholly misplaced. We simply need to listen to the words of Matthew Kershaw, who is employed in the Department of Health to oversee that very process, and who told a Health Service Journal conference just the other day—it was reported only a week ago—that it was perfectly possible that we might look at means by which private sector companies might come in to run, through franchise, some failing trusts.

Photo of Simon Burns Simon Burns The Minister of State, Department of Health

The hon. Gentleman really takes the biscuit. He raises the possibility of private sector companies providing a manager or managers where the management in an NHS hospital are failing to help pull it round and return it to stability. He conveniently forgets that there is only one instance, to the best of my knowledge, where that is happening in the NHS, and it is—possibly, provided it is all finalised—at Hinchingbrooke hospital in Huntingdon. That was set in progress not by a Conservative Government, but by his party’s Government, under Andy Burnham, prior to the general election. To complain about something that his own party’s Health Secretary did is somewhat rich.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

The difference, of course, is that that is one instance in a system where there is still strategic management, planning and control, both at the centre and in the regions. The difference under the new dispensation, as envisaged in the Health and Social Care Bill, will be that we shall have a fundamentally disaggregated, fragmented NHS with more autonomy and with the ability for more trusts to choose what to do. That runs the risk that the Secretary of State will have far less control over those private providers, if they are running franchises.

Photo of Simon Burns Simon Burns The Minister of State, Department of Health

The hon. Gentleman can wriggle as much as he likes. The fact is that he has been holed below the waterline. A Labour Government set up the only example in the health service in England of what he said, specifically, it was unacceptable to do. He could at least have the decency to come clean and accept it, and, if he feels so strongly now, he could apologise.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

I am not sure that I am the most celebrated politician being asked to apologise today. I do not need to apologise and do not feel that I am holed below the Plimsoll line, because clearly a very different future scenario is being painted as a result of the changes that the Minister and the Government are pushing through in the Bill. Our grave concern is that the local populace, politicians, and, indeed, Parliament, will have far less control over and insight into what different parts of the NHS will be doing after they are afforded that much greater autonomy. Of course, there will also, ultimately, be a far greater ingress of private companies into the NHS at many levels.

Photo of John Pugh John Pugh Liberal Democrat, Southport

Does the hon. Gentleman accept that his argument is an argument for all seasons? He can use it whenever he criticises the Government for something and then finds out that his party’s Government have done it; so he has rendered himself undefeatable in argument, but somewhat meaningless.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

I would love to be undefeatable in argument, but I am not sure whether that is true. However, I will add one thing before I move on. I did not say—this is the principal reason why I do not need to apologise to the Minister—that the idea of a private company coming in and running an NHS service should never be countenanced. I suggested that in the world envisaged in the Health and Social Care Bill, where there will be a significant increase at many levels in the number of private sector providers in the NHS, there is an immediate local concern, in addition to the far more substantive problems of competition law becoming the norm for organising the NHS and, crucially, dismantling it. The local concern is that there will be less control over a greater proportion of the NHS, once we have more private providers. That clear concern is widely felt across the House and outside it.

The hon. Member for Southport touched on how NHS bureaucracy allows tough decisions to be taken. He talked about politicians not being prepared to take tough decisions, and about the NHS’s own clinicians, bureaucrats and managers being unable to do so. That needs to be recognised, because there are difficulties with an organisation as big, and arguably as unwieldy, as the NHS, with so many different moving parts and so many different agendas in play. However, as to the labyrinthine bureaucracy that the Health and Social Care Bill will create, with the welter of new organisations—the national commissioning board at national and local levels, consortia, senates, clinical networks in addition to the ones that we currently have, health and wellbeing boards, HealthWatch, the Office of Fair Trading and the Competition Commission—it is beyond this simple politician to see how that much more complex architecture will facilitate easier decision making in the NHS about tough reconfigurations. I just cannot see how it will get easier with far more complex architecture.

I thought that the hon. Member for Southport talked interestingly about how, at a more aggregate level, one might imagine better ways to manage what he called the “dormant surplus estate” of the NHS, which is an interesting point. There are ways in which dormant bits of hospitals and dormant land could be better managed. I have grave concerns about the world that I envisage will pertain in several years, if the Bill unfortunately passes, in which different parts of the NHS will have much greater autonomy in making those decisions, and there will be a much greater risk that the motivation behind them will be financial as opposed to clinical. I find it impossible to believe that the likelihood of aggregated strategic decision making in respect of that estate will be improved by allowing the NHS to break up, as I fear it will. The National Audit Office report that the hon. Gentleman prayed in aid was not on precisely that territory, but it pointed to a risk that always attends autonomy—that it results in less strategic decision making, because decisions are made at a more micro level. That risk clearly attended foundation trusts, and it will get worse, not better, under the Bill.

Lastly, the Minister has talked about clinicians sitting at the heart of the decision-making process. Again, I use the analogy of a labyrinth in the NHS; I cannot see how in that new labyrinth clinicians will be at the heart of decision making. It is a labyrinth that would challenge Theseus, let alone the NHS. Those clinicians will be in the maze with many bureaucrats, some of them perhaps rebadged and shifted from primary care trusts and strategic health authorities into consortia, the NCB or the NCB’s regional arms, and some perhaps from BUPA, Assura Medical or one of the other bodies that will no doubt help to manage commissioning for consortia, and, potentially, for acute care.

In reality, the previous Government funded the NHS from a point where it was on its knees. They tripled the funding of the NHS, radically increased capital spending and raised some of the issues that the hon. Member for Southport has mentioned about the private finance initiative—we could have a long debate about that and how we should reconsider some of those capital projects.

Photo of Simon Burns Simon Burns The Minister of State, Department of Health

The hon. Gentleman just said that the previous Government tripled funding on the NHS. Will he share with the Chamber how much the NHS was funded in financial year 1996-97?

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

My recollection is that in 1996-97 the NHS was funded by around £39 billion, and it has now gone up to around £111 billion.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

Well, it is not far off. With the greatest respect, funding pretty much tripled—the figure might be £10 billion short, but it is pretty close.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

Okay, let us call it 2.8 times, as opposed to three times, but the increase was rather large. It was certainly reflective of the enormous need when the Labour Government came to power in 1997, following the chronic underfunding of the NHS presided over by the Government in which the right hon. Gentleman was a Minister. Some of the capital spending and its mechanisms, as I have said, need to be opened up and debated, so transparency ought to be a good thing in that case. That capital investment was undoubtedly required, because we needed new hospitals and investment, which were not provided by the previous Tory Government and which the Labour Government delivered.

In the latter years of the Labour Government, after the 2006 White Paper and, crucially, Lord Ara Darzi and his review, we started to look carefully and in a structured fashion, given the difficult nature of the task in hand, at how clinician-led reconfiguration of the NHS could come about and, notably, at greater integration between primary and secondary care and at delivering more of the services traditionally delivered in secondary and tertiary care in the primary care setting. That was the legacy that we left this Government, who have, with respect, blown it. They have wasted the past year, instead of moving on with that positive heritage. They have shifted into their misguided belief that competition in the health service, as for utilities, white goods or whatever other analogy they want to use, will drive more efficient decision making, innovation and better productivity. The Minister is wrong about that, and that will not happen. I am absolutely certain that that is the case.

In pursuing the illusion of competition, the Minister is running two risks in the reconfiguration and financial agenda that we are debating today. First, the increased short-term risk is of ill-considered cuts and reconfigurations in the NHS as a result of managers with their eye only half on the ball, and, as Sir David Nicholson has conceded, half their time spent wondering and worrying about their personal and professional future. There is a real risk that short-term decisions are being taken in that worrying, troubling atmosphere.

In the longer term, the far more profound risk is that the sort of competition that the Minister believes will drive greater efficiency and the disaggregation of the NHS, will result in an NHS that delivers worse, more fragmented care, with more variability in the price paid for care, which is a licence for a postcode lottery. My grave concern is that the Government are prepared to countenance such a future and prepared to take such risks with the NHS.

Photo of John Pugh John Pugh Liberal Democrat, Southport

The hon. Gentleman is right to say that competition is not a panacea for developing efficiency in all places, but nor was the Darzi prescription, which he has just mentioned and which was written in the same way for everyone throughout the land. My own constituency ended up with a Darzi clinic, which was in the community but actually further away for more people in Southport than the district general hospital—we are now struggling to fill it and to find a use for it. Although I accept that competition is not a universal panacea, there is a problem with top-down prescription.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

Darzi was not only about polyclinics—that they were the principal prescription that he came up with is one of the myths. There was a much broader agenda in play which, as I have said, was about integration and pushing more services into primary care, although not necessarily into polyclinics. All I was suggesting was that the Government could legitimately have pointed to that area as a legacy of the previous Government that they could have picked up and run with—one they could have made significant inroads on in the past year. Instead, they have misrepresented the direction of travel as one wholly driven by a belief in market forces, as the ultimate way to get efficiency in the NHS. That is what led to this wasted year.

Finally, I entirely agree that politicians need to be a lot braver about the NHS. Politicians of all stripes need to take difficult decisions about how services must be restructured and reorganised for the 21st century. The way to go about it is not the Government’s method, whereby they abdicate a greater degree of responsibility for the NHS—pushing it, at arm’s length, to the NCB and others, including the private sector. Nor is it wise for the current Government to have come into office with so many hospitals able to parade a photo of the current Secretary of State or local Tory MPs holding placards saying, “We will not allow this service or that hospital to close.” That was not wise, and it might have sown false hope for some hospitals, which I suspect that the Government will come to rue in future.

Photo of Simon Burns Simon Burns The Minister of State, Department of Health 3:36 pm, 19th July 2011

May I also say what a pleasure it is to serve under your chairmanship this afternoon, Mr Betts?

I congratulate John Pugh on securing the debate and on his particularly interesting and thoughtful speech. I have some sympathy with him, but he is right: sadly, events elsewhere on the parliamentary estate are securing more attention. However, I hope to reassure him by saying that this debate had quality rather than quantity.

It is a particular pleasure to have Owen Smith with us. We have got used to him, while in Committee on the Health and Social Care Bill, and he is beginning to invent—or rather, reinvent—himself as some sort of cheeky chappie, who talks the talk that is fed to him by his party elders. One has to admire him because, more or less, most of the time, he manages to stop that smile from completely breaking out on his lips—he clearly does not believe a lot of what he is telling us, because it flies in the face of reality. If one needed an example taken to its typical extreme, it would have been his accusations about private managers helping to secure and turn around any NHS hospital, because the only example will probably be Hinchingbrooke, which was of course set on its way by Andy Burnham. We have to admire the hon. Member for Pontypridd for bringing up an example as fraught with danger for him as that.

The subject of the debate is interesting and, as the hon. Member for Southport said on a number of occasions, difficult in many ways. Before engaging in it, however, I pay tribute to those doctors, nurses, ancillary staff and others who work day in, day out in hospitals up and down the country doing a fantastic job for patients. All too often, because the quality of their care for patients is seamless, it goes unnoticed, which is a reflection of the high standards that they set for themselves in providing that care.

We believe that we must have a sustainable national health service in this country—one that can evolve with the times and changing situations, whether medical or financial. The report this week from the independent Office for Budget Responsibility has underlined the importance of the Government’s commitment to long-term fiscal sustainability for the NHS. It also demonstrates the critical importance of responding to our ageing population. Consequently, health funding will need to rise in the coming years, and the Government are totally committed to its doing just that.

As hon. Members know, we gave a commitment in our election manifesto to provide a real-terms increase in funding in every year of the Parliament while we are in government—the lifetime of this Parliament. We have honoured that, and we will continue to do so in subsequent years. The only trouble is that because of the horrendous economic situation that we inherited from the last Government, the available money is far more restricted, because we must take some extremely tough decisions to sort out the mess that was left to us. That has meant that the real-terms increase in NHS funding has been modest, albeit a real-terms increase, and has presented a challenge to the NHS, as the hon. Members for Pontypridd and for Southport said.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

Will the Minister say how much less that amount of money will be as a result of the pause and listen exercise, and the increased cost resulting from the Health and Social Care Bill?

Photo of Simon Burns Simon Burns The Minister of State, Department of Health

The answer is no. It is not, “No, I will not give an answer”; it is no to the fundamental question. The hon. Gentleman is aware from previous discussions that the cost of the listening process and the Future Forum was modest, and the impact assessment for the Bill, which he studied, will be updated, as he well knows, when the Bill leaves this House and goes to another place. The current impact assessment shows that the one-off cost of the modernisation and improvement of the NHS is about £1.4 billion. By the end of this Parliament, the savings generated by that modernisation process and the changes will be about £5 billion, and £1.7 billion a year thereafter until the end of the decade, of which every penny will be reinvested in front-line services. There will be a subsequent impact assessment, probably in about six or seven weeks, subject to progress in this House, and if there are any changes or updating we will see them in that impact assessment, and there will be an updated figure.

Photo of Simon Burns Simon Burns The Minister of State, Department of Health

The hon. Gentleman says he looks forward to it. Let us hope that he does when he sees the figures, because in my experience he rarely looks forward to anything that flies in the face of his arguments or is not helpful to his arguments, because he finds that disappointing. I hope that he will be disappointed when the new impact assessment comes out.

To return to my original point, the increase in real terms that we will make in every year of this Parliament will mean a £12.5 billion increase in funding for the health service over the lifetime of this Parliament.

The report from the Office for Budgetary Responsibility emphasises the importance of constantly increasing productivity within the NHS and other public services. As the hon. Gentleman knows, in every year of the last Government there was a fall of between 0.2% and 0.4% in productivity in the NHS, which is unacceptable, and ultimately would become unsustainable because we need to generate growth and productivity to drive improvements in patient care, outcomes and the overall performance of the NHS in providing patient care.

As the hon. Gentleman and the hon. Member for Southport said, we embraced and accepted the quality, innovation, productivity and prevention agenda challenge set out by Alan Johnson, which involved savings of £20 billion over three years originally, but we have extended it to four years. By cutting out inefficiencies, and enhancing and improving best practice that can be shared within the NHS, we can make savings that can be ploughed back into patient care.

The extra £12.5 billion to finance the increase in the health service over the next few years will not alone be enough to meet the rising demand for health care and its increasing costs. We need to find savings of up to £20 billion during the lifetime of this Parliament that we can reinvest, and that is the crucial challenge facing the national health service. I am confident that it will meet that challenge over the next three to four years.

The overall strategic health authority and primary care trust surplus of £1.375 billion during the last financial year will act as a sound financial platform for the NHS. Every penny of that surplus should be used to help to improve health outcomes for patients, and to meet the challenges and demands as we move to the new, modernised NHS, subject to approval in this House and another place. The challenge for every NHS organisation is to improve the quality of care that it offers while ensuring that money spent on care is spent effectively and efficiently, because that is what matters to patients and to the public.

My hon. Friend referred to the crucial move to community-based services, which is already happening, and will continue to happen where it is clinically appropriate. The hon. Gentleman spoke about the impact on hospitals of reducing hospital-based activities and delivering more services in the community. That is a crucial area, and a valid issue to raise. As I said, where it is clinically appropriately and when it can lead to demonstrable improvements in patient outcomes, more services should be provided in the community—for example, in GP practices or even in the home. All of us as constituency MPs and those of us with a particular interest in the

NHS and health care know of examples and more and more practices where home and community settings are being used to meet the demands and needs of local populations, because the vast majority of people in this country would prefer, when it is clinically appropriate and feasible, to be treated in the community in their own homes instead of having to go to a perhaps inappropriate hospital setting for treatment. The QIPP long-term conditions workstream seeks to ensure that patients can be cared for effectively in their home or community, avoiding unplanned, unnecessary and expensive admissions. That is better for the patient, better for the NHS and better for taxpayers. It is also an opportunity for hospitals.

Increasingly, the best hospitals think of themselves no longer as just a physical place of bricks and mortar, but as providers of excellent health care. For example, Croydon Health Services NHS Trust provides both hospital and community services through a number of community and specialist clinics throughout the area. It is effectively becoming a health care trust instead of simply a hospital trust. That is the way for the future.

A considerable amount of the debate was spent on reconfiguration, and I would like briefly to address that. As society and medicine change, so must the NHS. The hon. Gentleman and my hon. Friend said that tough decisions will have to be taken, and that people will have to be brave, honest and realistic in addressing the issues. I totally agree.

The NHS has always been responsive, whether to patients’ expectations or improving technologies. As lifestyles, society and medicine continue to change and evolve, the NHS must also change to meet those challenges. As technology and clinical practice get better and better, some services that were previously provided only in acute hospitals can now be safely provided in other places. A local health centre, a GP surgery or even the patient’s own home may, when appropriate, be the setting for health care and treatment that were previously not possible or feasible in such places. That shows how our health care is constantly evolving and improving.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

I hope the Minister will forgive me as I have asked this sort of question many times. Does he feel that in the world envisaged by the Health and Social Care Bill, where there is more competition between different providers in local health economies, it will be more difficult rather than easier for the sort of integration he speaks of to come about?

Photo of Simon Burns Simon Burns The Minister of State, Department of Health

In light of the hon. Gentleman’s question, I will preface my reply by the words, “if he will forgive me.” We have had these conversations frequently—to be polite—during the course of the 42 sittings of the Health and Social Care Bill, and I fundamentally disagree with him. As we modernise the NHS, we are seeking through the Bill to put the patient at the centre of their experience, so that they are totally involved in their treatment and needs, are talked with rather than talked to, and can be part of the decision-making processes by which we are driving up the quality of patient care and improving outcomes. We will ensure those things through a comprehensive national health service, greater integration and far greater collaboration.

Photo of Simon Burns Simon Burns The Minister of State, Department of Health

There is no point in my giving way to the hon. Gentleman; I have only 10 minutes left and whatever I say he will not accept publicly because it runs contrary to the mantra that he and his hon. Friends constantly spout as they seek to undermine the procedures that will ensure a first-class national health service to meet the demands of our citizens.

Returning to my original point, at the same time as one will see different settings for appropriate care, other services that need highly specialist care will be centralised at larger, regional centres of excellence where there is clear evidence of improved health outcomes. Reconfiguration is about modernising treatment and improving facilities to ensure that patients get the best treatment as close to home as possible, thereby both saving and improving lives. That is an essential part of a modernised NHS, but it should not be enforced from above.

There will be no more impositions of the kind that saw a GP-led health centre in every PCT, whether it was wanted or not. Instead, the reconfiguration of services will be locally driven, clinically led and will have public support. It will be change from the bottom up, not the top down. The reconfiguration of services should—and will—be a matter for the local NHS. There is no national blueprint for how health care should be organised locally, and services need to be tailored to meet the specific needs of the local population. Effective local engagement will ensure that services continually improve, based on feedback from local communities. In an NHS that is built around the patient, changes to services must begin and end with what patients and local communities need. Last May, my right hon. Friend the Secretary of State introduced four tests, and current and future reconfigurations must be along the lines of the four basic premises in those tests. Local plans must demonstrate: support from local GPs; strengthened public and patient engagement; a clear clinical evidence base; and support for patient choice. The tests make sure that any changes to health services will be true to the spirit of, “No decision about me, without me.”

The hon. Member for Southport also raised the important issue of the private finance initiative. We have seen evidence from around the country of significant problems in a number of hospitals as a result of decisions taken by the previous Government to approve what were sometimes extremely expensive PFI schemes that became a drain on a trust’s annual income. As the Government confirmed at the end of last year, where PFI schemes can clearly be shown to represent good value for money, we remain committed to public-private partnerships, including those delivered by PFI, and they will play an important role in delivering future NHS infrastructure. We also believe, however, that there have been too many PFI schemes, and that some were too ambitious in scope. In addition, we have also had serious concerns about the value for money of some PFI contracts signed in the past.

The Treasury has reviewed value for money guidance for new schemes, and looked at how operational schemes can be run more efficiently. In January, the Treasury published new draft guidance, “Making savings in operational PFI contracts” which will help Departments and local authorities to identify opportunities to reduce the cost of operational PFI contracts. As part of that savings initiative, my noble Friend Lord Sassoon, Commercial Secretary to the Treasury, launched four pilot projects to test the ideas in the Treasury’s draft guidance. One of those pilots was a hospital PFI scheme at Queen’s Hospital in Romford. The focus of the Romford pilot was to find efficiency gains and savings within the PFI contract, allowing the quality of care for patients to remain the top priority. Earlier today, Lord Sassoon announced the results of three of the four pilots, including that at Romford hospital. The Romford pilot showed that savings of 5% could be made to the revenue cost of the PFI scheme.

I welcome the Treasury’s findings, but we have yet to consider them in detail. I understand that the Treasury has now placed updated value for money guidance on its website. I hope that that will help trusts with operational PFI schemes, and trusts that are planning PFI schemes, to make significant savings. Every penny of those savings will be retained by the trust to be reinvested in improving patient care.

Photo of Owen Smith Owen Smith Shadow Minister (Wales)

I have a basic factual question for the Minister. Will the results of that survey lead to an attempt to reopen or renegotiate any of those contracts?

Photo of Simon Burns Simon Burns The Minister of State, Department of Health

As I said to the hon. Gentleman a few moments ago, the pilot schemes and investigation published by my noble Friend Lord Sassoon show that there is potential within existing PFI schemes to make some savings—I cited the figure of up to 5%. We are going to study that report. It was published earlier today and we need time to look at it and see how those savings can be realised within the context of the existing PFI scheme, rather than by reopening it and starting again.

In conclusion, there are many challenges to the NHS, but those concerning finances will be assisted and helped by our commitment to a real-terms increase in funding. During his comments, the hon. Member for Southport said that the reconfiguration programme must be driven by local demand and needs, and I agree with him. He raised the issue of access to facilities being part of those considerations, and it may console him that I am able to assure him that access will form part of any consideration. Local people will determine where their local services should be placed and, together with a number of other factors, the issue of access should be considered. Such decisions must be determined by what the local community needs and what meets its requirements in the provision of health care. In many ways, such decisions will be determined with the same checks and balances, and with the involvement under a modernised NHS of health and well-being boards, and in certain circumstances, the national commissioning board. Overview and scrutiny committees will have the opportunity to refer plans to the Secretary of State.

As the NHS is modernised, the changes outlined by the Secretary of State will begin to take effect and give clinicians and the local NHS greater control over decision-making processes, rather than having politicians micro-managing on a day-to-day basis from Richmond House. That will provide a future for the NHS that can meet the requirements of enhancing and improving patient care and, most importantly, improving outcomes for patients.