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Mr. Deputy Speaker (Sir Alan Haselhurst): Order. We must move on to the next debate.

18 Jun 1997 : Column 285

Oxfordshire Health Authority

1.30 pm

Mr. Tony Baldry (Banbury): I am pleased to have the opportunity to raise the matter of the funding of Oxfordshire health authority. I am grateful to the Minister for being present to respond, given his particularly heavy work load. It may be some consolation to him to know that, when I was a junior Minister, I responded to no fewer than 65 Adjournment debates in one year, so he has some way to go yet.

The national health service budget is huge. Spending on the NHS this year will be about £725 for every man, woman and child in the United Kingdom. This year, spending on health will rise by about £1.6 billion, and spending on hospital and community health services will increase by 3 per cent. over and above inflation. I appreciate that we are dealing with substantial sums of money, which for many years have increased in real terms.

In Oxfordshire, total NHS spending this year will be about £325 million. That works out at about £540 for each man, woman and child in the county. Therein lies the problem. The national average is £725 for each person, as opposed to £540 in Oxfordshire--a difference of £185 for every man, woman and child in the county.

There is an agreed national capitation funding formula: everyone understands what it means and how it is worked out. There is no dispute that, according to the formula and its criteria, Oxfordshire is the third most underfunded health authority in England. Having regard to its population, size and other relevant factors, it is £9.6 million below target.

That underfunding is of considerable concern, given that health authorities understandably have limited scope for carrying forward recurring deficits or shortfalls on their budgets. That, straightforwardly, is the thrust of my request to the Government: that, as soon as possible, a way should be found to get Oxfordshire's funding nearer to the sums that it should receive under the national capitation funding formula.

I appreciate that this problem is not new, and that some funding formula or distribution mechanism is necessary to allocate NHS resources to different parts of the county. I also realise that, wherever and whenever a funding formula is used, there are bound to be variations in spend per head to reflect different needs and different demands. However, the position in Oxfordshire is slightly different.

The nationally agreed and recognised capitation funding formula is used to calculate how much each health authority should receive. Some authorities receive more than they should under the funding formula, whereas some, such as Oxfordshire, receive substantially less. Put simply, the Department of Health should ensure as speedily as possible that all health authorities are treated fairly and that, so far as is humanly possible, they are funded according to the national capitation funding formula.

The consequence of Oxfordshire health authority's underfunding is that, last year, it overspent by £4 million. It is required to have a sustained financial balance by March 1998. That £4 million overspend for last year must be put in the context of the £9.6 million that it is adrift from what I consider to be a fair target.

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In any event, if the health authority is to have a sustained financial balance by March 1998, savings will have to be targeted on managerial and support services just to preserve existing service levels. As a consequence, significant service reductions will have to be made in Oxfordshire during the year in several trusts.

In particular, the community health trust is likely to experience emergency closures of part of one or more community hospitals. Ward closures are likely at the Oxford Radcliffe trust, and the health authority is currently discussing the implications for patient services of financial provisions within the Radcliffe infirmary trust. I am sure that the Minister will not mind if the hon. Member for Oxford, West and Abingdon (Dr. Harris) briefly intervenes in the debate and takes a little of my time to explain the problems affecting hospitals in central Oxford.

Not surprisingly, Oxfordshire health authority is concerned about the relative underfunding of the NHS in Oxfordshire. It is also concerned that future formula changes could further work against Oxfordshire. To that extent, I want to put down a marker, because in my experience all Governments review the funding formula. There is a real danger that, if markers are not put down, more money will move away from shire areas, such as Oxfordshire, and into urban areas.

The impact of high wage and housing costs must be given emphasis in any new calculation, as must the impact of hosting a major teaching hospital. There is a compelling case for the NHS nationally to devote more resources to a movement towards national capitation targets; otherwise, authorities that manage their resources best will continue to be penalised.

Moreover, the financial problems experienced by Oxfordshire health authority have consequences for the whole of the country. Oxfordshire medicine is a national and international product: it attracts a high rate of national and international research income. The Oxford medical school is one of a small handful of schools that gained the highest, five-star ranking from the Higher Education Funding Council for England. If those standards are allowed to slip, the losses will not be solely Oxfordshire's, but will affect the overall advancement of medical practice and research throughout the United Kingdom.

Those worries are shared not just in the county but by the British Medical Association, which has written to me expressing concern that one of the consequences of the financial allocation for Oxfordshire will be a reduction in services provided by the Oxfordshire Mental Healthcare trust. It says that the drug and alcohol addictive behaviours unit may have to close, and argues that, given the Government's understandable commitment to addressing the wider problems of drug and alcohol addiction, it would be inappropriate to reduce such a service. All those points reflect the pressures on the health authority's budget.

I have a further specific concern. My constituency contains Horton general hospital NHS trust. Oxfordshire, with Oxford at its centre, has a huge concentration of medical expertise and experience in the John Radcliffe hospital, the Radcliffe infirmary and the teaching hospitals. For many years, there has been a general hospital in Banbury, the second largest town in the county, which is some distance from Oxford--in the north, on the Warwickshire-Northamptonshire border.

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That hospital serves not just north Oxfordshire but south Northamptonshire, Warwickshire and parts of Gloucestershire. My hon. Friend the Member for Daventry (Mr. Boswell) and I feel that we share Horton general hospital, because so many of its patients come from south Northamptonshire.

I do not expect the Minister to respond in detail to the points that I am going to make--it would be unfair of me to do so--but I want to put down some markers. Compared with the huge central Oxfordshire complex, Horton general hospital has a very small budget--approximately £22 million a year--but it has a recurring overspend of between £700,000 and £800,000 a year, which, given its small budget, is fairly serious.

Concern has been expressed about the hospital's ability to deliver services and to meet the needs of some of the royal colleges. Consequently, an inquiry was set up last year, chaired by Mr. Arthur Davidson QC, a former Labour Member of Parliament. The inquiry took evidence, and made various recommendations. One of those recommendations was that, in the light of Horton's financial difficulties, consideration should be given to trust reconfiguration throughout Oxfordshire, which might reduce overhead costs and safeguard services.

The Davidson report was, however, very clear about the fact that any reconfiguration involving Oxford providers needed to focus on locally managed services to secure the continuation of an appropriate level of service in the north of the county--that is, Banbury--in the future. A general hospital was needed in Banbury, with services by and large managed in that hospital. Other services might be delivered elsewhere--for instance, by one of the Oxford trusts--but a locally managed NHS trust hospital was needed.

Horton general hospital NHS trust fears, given the way in which discussions about trust reconfiguration are going, that it will be asked to merge with the Oxfordshire community health trust, and that that trust will sub-contract the management of acute services at Horton to the Oxford Radcliffe hospital trust. Alternatively, it might be merged with acute hospitals in Oxford, in which case those hospitals would delegate services more appropriately dealt with by the community health trust. That, too, would effectively mean management being sub-contracted by the community health trust. In any event, the Horton trust board--along with many people associated with the hospital--fears that the hospital will effectively disappear as an entity and that all its services will be managed elsewhere.

There is a third option, which the hospital and others have been pursuing: the "Banburyshire" solution. Horton would take under its wing some services from the community health trust and some from south Northamptonshire. Although aspects of that option are administratively unattractive, particularly in Northamptonshire, a viable general hospital in Banbury would be able to continue to provide the services that it has been providing for many generations.

Horton, and people associated with it, are worried about the fact that other trusts in Oxfordshire are projecting major operating deficits. The Oxfordshire community health trust is projecting a deficit of £400,000, and the Oxford Radcliffe hospital trust one of £700,000, rising to £2 million in the next three years. The regional health authority steering group's proposals seem to have

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concentrated only on trying to eliminate Horton's deficits. If Horton merged, either partly or fully, with the community health trust or an acute trust that continued to experience financial difficulties, the trust involved would naturally be tempted to balance its books by cutting services at Horton.

I hope that if any proposals are conveyed to the Secretary of State about trust mergers in Oxfordshire, he will carefully consider whether they have the support of the Horton general hospital NHS trust board. The legal position relating to the dissolution of trusts, and the establishment of new trusts, is fairly complicated and it would be quite difficult to act against the express wishes of the local hospital.

As recently as 12 June, the Health Service Journal published a report that stated:

In April, the university of York produced some interesting research that stated that, although concentrating services through trust mergers or service rationalisation may have been seen as a way of enabling NHS purchasers and providers under pressure to reduce management and operational costs,

I have two straightforward requests. First, I ask the Government to consider Oxfordshire health authority's funding overall. I am not asking for extra resources generally in the NHS; I am saying that existing NHS resources ought to be allocated more fairly, so that all health authorities are as near as possible to the national capitation funding formula. It seems ludicrous that authorities such as Oxfordshire should be consistently so far from the mean.

Secondly, Oxfordshire's underfunding is putting pressure on smaller units such as Horton general hospital NHS trust. I hope that if proposals are presented to the Secretary of State, he will have regard to the concerns of the trust board, those who work there and the patients whom the hospital has served, and wishes to continue to serve for many more years.

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