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Mr. Roger Casale (Wimbledon): Will the right hon. and learned Gentleman give way?

Mr. Clarke: I shall not give way only because of the pressure of time. I usually enjoy giving way.

I shall outline why I think we face the present crisis, what the short-term causes have been and what the immediate response should be. I believe that the principal underlying cause of the present problems is financial. Indeed, it is a financial crisis. As I have said before, the Government got the money wrong. They have set about tackling public expenditure problems in a most peculiar way, which has damaged the health service most especially.

It is not true that the Government followed for the first two years the spending plans that a Conservative Government would have followed. That is a slogan, but it

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is untrue. We had annual spending rounds during which Secretaries of State for Health discussed with the Treasury the current situation in the health service and what it would be reasonable to spend in the light of economic circumstances during the next year.

I do not believe that any Conservative Secretary of State for Health ever accepted that in years two and three there would be handed out what had been pencilled in during previous years. It was the now candidate for mayor of London, the right hon. Member for Holborn and St. Pancras (Mr. Dobson), who had the unfortunate experience while Secretary of State for Health of being told that that was exactly what would happen to him. If a Major Government had been returned to office, I do not believe that we would have contemplated anything of that sort.

The idea that health service expenditure would be fixed for three years in that way and never revised has been addressed only in the final years of this Parliament. As the hon. Member for North Devon (Mr. Harvey) has said, if the Government stick to their present plans they will, at the end of this Parliament, get back to a percentage increase in NHS spending that matches that of the former Conservative Government. That illustrates what was wrong; the Government made no attempt to address what was going on.

It is not true that the Government were constrained by public sector debt problems, for example. They simply went to a slogan-based approach to public spending that bore no relation to the needs of the NHS.

What has been the Government's reaction so far? I watched the Prime Minister on the Frost programme, and it seems that the Government have come up with another slogan. It seems that £21 billion is now discredited. I shall not repeat the excellent description of the way in which that ridiculous figure was arrived at that the hon. Member for North Devon gave the House. No one outside the House believes that the figure is an honest description of the Labour party's spending plans. Lord Winston is not the only one with doubts.

We now have not a three-year but a five-year target. When the next three years have passed, we shall have expenditure on the NHS that equals average percentage GDP across the European Union. That target does not address the needs of the service or priorities within government. It is a slogan that has already been produced for the next election campaign. Whether it is realised depends on many unforeseeable events, most of which are utterly beyond the Government's control. To what extent will our GDP grow over the next few years? Many European Governments are trying to reduce their health expenditure. To what extent will their GDPs grow? What rate of increase in expenditure will in practice be the outturn in other European countries?

At present, no one can seriously guess what the average percentage of GDP spent on health will be throughout the European Union. Nobody knows what our GDP will be. We have only a press release for a Frost interview, not a serious and fresh look at the funding needs of the NHS. The police service, which has also been badly dealt with by the Government, and the education service, which thought that it was the first priority, have already started saying, "What does this mean for us?" If EU average expenditure on health races ahead or if United Kingdom GDP dips, what will happen to our claims for our needs? The Government's approach is absurd.

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The Government should not adhere to their present three-year comprehensive spending review without revisiting it. It was a dreadful mistake to give up annual spending rounds, and the NHS is one of the victims. It is impossible to set in stone arbitrary targets for spending and not allow the Secretary of State to revisit them. I do not believe that the Chancellor of the Exchequer and the Government will stick to their published plans for this year, next year and the year after, whatever the next comprehensive spending plan produces.

The Prime Minister had the nerve to say, correctly, that the problems of the NHS should be tackled by a combination of money and reform. I think that we are all agreed upon that. Quite a few Conservative Members have taken part in various attempts at reform in the past, and reform is further needed. The difficulty is that the Government's approach to reform so far has been essentially slogan-based and extremely political. It is a rather short-term reaction to what they inherited. When genuine new ideas are put forward for the medium or longer term, the Government are deeply resistant to contemplating any fresh look at how the health service might be financed or run.

Lord Winston said that the Government have not told the truth about the abolition of the internal market. Only the Labour party calls it the internal market. I am glad to say that the Government do not tell the truth when they claim that they have abolished the former arrangements. They have kept the purchaser-provider divide and much of the management information. They tell the hon. Member for Wakefield that they have abolished the internal market. Actually, they still have it in place. In fact, they are messing about with it in a somewhat ill thought-out way. I believe that when the Government's reforms are handed over, they will not be in a state of perfection. We made dramatic changes to the way in which the NHS was run and it could reasonably be expected that there would be continued evolution from where we were--but evolution was certainly required.

The purchaser-provider split gives distinct people in the health service, particularly GP practices, health authorities and advisers to patients, the chance to question what health needs are most dominant locally and how best to commission the highest standard of care delivery. That is what purchasing the service means. Someone examines the greatest priority need and decides how to use resources to meet it.

Providers are able to respond to demands. Slogans such as "Let us go for co-operation and not competition" have been used as an excuse for inhibiting the ability to switch from one source to another so that those involved might have a choice in how they best provide the service in their locality. That should not have happened. I have talked in the past about the replacement of GP fundholding with primary care trusts. It was a retrograde step, which has reduced the role of GPs.

NHS Direct was set up far too rapidly. The new Secretary of State was dominated by consumerism when he first took office. I do not mind being dominated by that, but NHS Direct may or may not work. It is a rather ill-tried concept. Money is being put into it when funding is not obviously readily available. The danger is that that will increase expectations of, and demands on, the service without proving to be an effective way forward. It is costing money and staff at a time when that expenditure could be better directed elsewhere by others in the service.

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I shall comment briefly on other reactions to the crisis. The nurses' pay settlement has been mentioned. I am glad that the Government stick with the review body system, which they used so to dislike and which they inherited from the Conservative Government. Of course, it is nice to be able to implement a review body award in full straight away. The Government make the point that we did not do so and that we used to phase awards. We phased them because we used to have regard to the ability of the service to afford the pay increase that was to be introduced.

We always implemented review body awards in full. However, it would have been irresponsible to say to health authorities, "We are now going to implement the pay award in full when we know that you do not have the funds." The Government, who panicked over the weekend about the health service, have done just that. They believe that, as it is in local areas that they will carry the consequences of a diminished ability to deliver the service, they can have their press release now about how they are implementing pay increases in full and straight away.

My right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) said most of what I wished to say about the longer term, and I have taken up my time speaking about the shorter term, but I could not put it better than my right hon. Friend has already done.

Every time an Opposition Member speaks about change, we are accused of wanting to privatise the NHS. That sterile argument is ridiculous. My hon. Friend the Member for Woodspring (Dr. Fox) made it clear that we are committed to the NHS, to its principles and to increased expenditure on it. We wish to explore ways in which the resources available to health care as a whole can be increased. Some suggestions are ill thought-out. I do not approve of the American system, and under the continental system, Governments must be careful about the costs that they impose on employers and hence on employment, with the prospect of causing unemployment.

We favour an imaginative look at alternative ways of funding health care. We have consistently supported partnership with the private sector. The Liberal Democrats, in the shape of the hon. Member for North Devon, were more than usually prepared to concede that expanding the private sector would ease the pressure on the NHS.

Labour Members argue that if the private sector were allowed to grow, it would compete with the NHS for staff, so we should not even try to contemplate new resources coming into the health service from outside general taxation, because that would increase competition for doctors and nurses. That argument is fatuous and could be used against the expansion of resources in practically every other sector of the economy.

The Prime Minister said on Sunday that of course his Government were in favour of partnership with the private sector. He seems to have lost touch with his own party, as well as with the state of affairs in the NHS. One has only to listen to the present Secretary of State and the previous one, and hear of experiences of attempts to develop further partnership with the private sector, to know that the Labour party is still marked by deep and bitter hostility to the idea that we should source health care other than from the national health service, financed by general taxation.

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Every other developed country in the world has found that a sterile approach. At a time when the Labour party has got into its first health service crisis, does not know why and has no policy for getting out of it--apart from a few slogans--it should be more receptive to the original and constructive propositions being put forward by the Opposition.

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