NHS Reform and Health Care

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Mr. Heald: I beg to move amendment No. 134, in page 8, line 17, leave out `not exceeding' and insert `equal to'.

The purpose of this probing amendment is to ask why the Secretary of State should pay a sum ``not exceeding'' the amount allotted rather than a sum ``equal to'' it. It may be that the sum allotted is provisional and that, if the costs of an authority are lower, the Minister would want to pay less—as one would. However, he does not appear to have a duty to pay more if the costs are higher.

Let me give an example. Can the Minister explain what happened in connection with last year's underspend of £700 million? Some may find it hard to believe that there was a £700 million underspend, given pressures on the NHS such as waiting lists. What is the duty of the Secretary of State to health authorities? Why is it that he pays a ``not exceeding'' figure on part I expenditure of the sort dealt with here, but pays a sum equal to the expenditure under on part II? Is it because the amount that is recovered under part II has already been spent and is therefore quantified, whereas the allotted amount is a provisional sum? Can the Minister explain?

Mr. Hutton: I am grateful to the hon. Gentleman for spelling out the purpose of the amendment and so dispelling the confusion. The amendment would require the Secretary of State to pay the strategic health authority the full amount of its allocations, whether or not it requested the full payment of those allocations. That would not be sensible. The clause carries over the precise wording of previous legislation as it applies to the funding of the NHS organisations. It is not a device to allow financial subterfuge or the withholding of moneys that have been identified for NHS use and are needed for NHS patients.

The Government intend to fund the new strategic health authorities in precisely the same way as Labour and Conservative Governments have always funded health authorities. Strategic health authorities will be able to draw down funds up to the level of their allocation as they need them during the year, but it has never been the practice of any previous Administration to make their allocations before the money is needed. That is essentially what the provision would allow the Secretary of State to do.

It is true, as the hon. Gentleman says, that strategic health authorities might want to spend less money—perhaps to finance a project in a subsequent year. The Government intend to allow strategic health authorities the flexibility to carry forward such planned underspends into future, but if the strategic health authorities, rather than the Exchequer, had to hold the money themselves from the beginning of the year, it would not necessarily represent good value for money for the taxpayer. There is no subterfuge.

10.15 am

Mr. Heald: In relation to the underspend last year of £700 million, is that money allotted? I believe that it is. If so, is it available this year for the various health authorities and bodies in the NHS to spend? Is all of it available or only part of it? What would happen if there were an overspend and the allotment was not enough? Is there a power that is not in the Bill to make additional payments?

Mr. Hutton: The hon. Member for Oxford, West and Abingdon tabled several amendments that relate to deficits and underspends. I am not an accountant but, as I understand the position, the majority of the deficits that he referred to—I shall come to the point about underspends—are not deficits that involve repayment. That is the sort of deficit that I would like to have myself and I would need to speak to my bank manager about it. A large amount relates to the way in which accounting rules require building values to be recorded on the balance sheet. They do not necessarily all give rise to an immediate call for repayment; they are not debts in that sense of the word.

The hon. Member for North-East Hertfordshire referred to underspends, and it might be helpful to try to explain one or two related matters. The total budget for the Department of Health last year—2000–01—was more than £45 billion, which was managed, as the hon. Gentleman knows, by more than 450 NHS bodies. The underspend to which he referred represents approximately 1.5 per cent. of total NHS expenditure. More than a third of that underspend was actually a planned contingency fund to meet costs that might arise or become due in the following year. There is always an element of that in any large organisation and provision needs to be made for it. On one level it looks like an underspend, but it has actually been put aside specifically to deal with expenditure that will arise in the following year. I make it clear to the hon. Gentleman that none of the money has been or will be wasted; it will all be spent on the provision of health care for the benefit of patients.

Substantial amounts were included in the underspend. For example, £250 million was deliberately held back and carried over to meet identified expenditure commitments arising in the current year, 2001–02. That would not have been counted in previous years, but a change in Treasury rules means that it is now counted as part of that underspend. There was some capital slippage of about £140 million, spread across approximately 450 trusts. NHS bodies manage a large capital programme, a significant proportion of which is devoted to building projects. Some delays are caused by planning problems; even for such basic reasons as bad weather. That money must be carried forward to the next year, and will not be lost. The hon. Gentleman rightly referred to the problems of underspend. I have tried to explain as best as I can—as a lawyer, and not as an accountant—how I understand those sums to be calculated.

The legislation is a continuation of the existing legal powers that apply to the funding of the new bodies, which will be called strategic health authorities, not health authorities. They will have a different role, but the funding arrangements will be the same as those applied by previous Governments. The hon. Member for North-East Hertfordshire was Member when his party was in government, and the hon. Member for West Chelmsford was a Health Minister. We do not plan to change the rules that satisfied both hon. Gentlemen and the Government then; the rules are a sensible way of funding the NHS and ensuring that the Exchequer does not lose out.

Mr. Burns: My hon. Friend the Member for North-East Hertfordshire raised the important issue of underspend, and I thank the Minister for a comprehensive response, even though he is not an accountant. However, the issue still concerns me. My hon. Friend talked about an underspend of £700 million. The Minister said that, for sound and common-sense reasons, a third of that figure—just over £200 million—would be a contingency fund. That reduces the underspend to approximately £0.5 billion. The Minister then identified £200 million that must be carried over to the current financial year. I can understand that, without knowing the budget items for which that figure must be carried over.

The Minister also mentioned £140 million for capital projects. If my mathematics are right, there is a remaining underspend in the NHS of approximately £110 million. That is a small amount of money in terms of Government public spending, but a considerable amount of money to me and you, Mr. Hurst, as we both represent constituencies in mid-Essex. We all know that the hospital waiting lists in mid-Essex have never been shorter than when the Government came to power in May 1997. You probably had the same experience as I did, Mr. Hurst, when you were canvassing in the streets of Braintree and villages in your constituency.

The Chairman: Order. I am not certain that the Chairman's position or activities are relevant to the progress of the Bill.

Mr. Burns: Please accept my apologies, Mr. Hurst. I will change the line of my argument by saying that I remember canvassing in Chelmsford and in villages that were part of the Braintree constituency before boundary changes. Because of the Labour party's rhetoric and the expectations that were raised, people on the doorstep believed that if a Labour Government were elected, when they turned up at Broomfield hospital—which is in my constituency but which serves mid-Essex—consultants would be waiting at the doors and fighting with each other to carry out operations of choice.

That was the level of expectation and the reason why people thought that there would be no underspend on health care by a Labour Government. In the past four and a half years, however, waiting lists have grown longer every day. Constituents in mid-Essex will be puzzled that the Government could have spent a lot of money in the current financial year to help to alleviate the problems that cause constituents so much suffering, misery and upset because more and more of them have to wait longer for their operations. That does not take into account the new phenomenon in health care provision; the waiting list to get on to a waiting list.

Mr. Hutton: The hon. Gentleman makes his remarks in the context of underspends. Will he remind us of the underspend in the final year of the last Conservative Government?

Mr. Burns: The context of my comments is the current underspend, which my hon. Friend the hon. Member for North-East Hertfordshire has identified. That is what concerns my constituents. Funnily enough, they do not live in a time warp where life was frozen in 1996–97. They are concerned about what is happening to them at the moment. Indeed, most people act on that basis. Many constituents, including those of the Minister, would be amazed to hear that despite all the pressures on financing health care, the Government actually underspent. My constituents will not be happy to know that more operations could have been carried out—not only in mid-Essex, but throughout the country—and that what to most people are substantial amounts of money are not being used when there are so many demands on them.

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Prepared 29 November 2001