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Mr. Paul Burstow (Sutton and Cheam) (LD): We have established that the proposition of the chief executive of the NHS that this is a year of financial correction is a rather useful euphemism for describing the build-up of pressure in the national health service that is causing so much difficulty on the ground, not just for those who are struggling with balancing their budgets but, more importantly, for those who are suffering the consequences of services being dislocated and cut.

By month five of the current financial year, Sutton and Merton PCT, in my area, was already forecasting its current £1.3 million deficit, and it is now forecasting a £5.2 million deficit by the end of the year. As we have heard, however, those figures mask the true magnitude of the problem and the pressures faced by PCTs and other NHS organisations. Notwithstanding its deficit, my PCT has been told by South West London strategic health authority to achieve a surplus of £6.7 million to help bail out other parts of the NHS locally. That means that a gap of £11.9 million must be closed before the end of the year. Moreover, it must all be seen against the PCT's opening deficit of £7.4 million, which in the past year has been funded through non-recurring items such as cuts and delays in projects.

The Secretary of State suggested that the NHS was all right because many NHS organisations broke even. What she forgets is that while they may break even on 31 March, on 1 April their debt is back around their necks, causing difficulties for their organisation and the recovery plans on which many fail to deliver. Most of the deficit on my patch arises not because of management failures and non-provision of services, but because of the challenge to NHS managers and staff to meet the access targets with which the Government confront them. It is a case of over-performance—a lovely phrase that is used when a hospital carries out more operations than was intended during a particular fiscal year. A hospital that provides more treatments becomes a target for pressures to cut budgets and spending. That is another example of historic underfunding of the NHS.
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It is against that backdrop of funding pressures in my local health economy that my local health service proposes to close two district general hospitals and replace them with a smaller critical care hospital with fewer beds, underpinned by a network of local care hospitals that will have no beds at all. I fear that that network will never exist. A critical care hospital will open in due course, but it will not provide a satisfactory service without the support of the network because the PCT will not be able to invest in the services that would enable it to operate properly. I hope that the Minister will assure me that the "Better Healthcare Closer to Home" programme on my patch will deliver in full for my constituents and will not leave the legacy of a critical care hospital bursting at the seams because it did not receive the primary care and diagnostic services that it needed.

Let me say something about the wider position in London. The Secretary of State told us that most NHS organisations were not in deficit, but that clearly does not apply to London. Of the 42 NHS organisations providing acute and mental health services, 23 are in deficit, according to their final accounts as recorded recently. It seems that the NHS in London faces a £94 million deficit, with which it must grapple during the current financial year. That is a huge drag on it.

The problem with debates such as this is that they are clouded by inadequate reports from SHAs about the true position. The lack of numbers in some of the reports submitted by their boards, and the obscurity surrounding the level of risk, beggar belief and do not provide a framework in which accountability can exist and Members in all parts of the House can scrutinise the performance of their NHS organisations.

North West London SHA is a case in point. Having been warned consistently by Kensington and Chelsea PCT that the PCT had been in deficit last year, in September, December and February this year the SHA was still reporting that it would break even by the end of the financial year. Then, there was the big surprise at the end of the year when the PCT found itself in a huge financial mess.

All that demonstrates an inherent problem with which the Government have failed to deal. The growing instability in NHS finances will be amplified by the roll-out of payment by results. As a consequence, more NHS organisations will be in difficulty and will struggle to balance their books. The Secretary of State assures us that the present deficit is containable and manageable. She fails to point out, however, that organisation of the NHS is in transition—that it is on the way to becoming a market model and that the deficits will matter far more when the transition is completed. The demand side of the service now holds the whip hand, the commissioners have not been given the strength to do the job, and the Government's proposals for PCT reorganisation have come too late. They have woken up to the problem, but they are shutting the stable door when the horse has bolted way ahead.

The Government's general election manifesto proposed a £250 million or 15 per cent. saving through NHS reorganisation. The final twist came in Sir Nigel Crisp's statement, reported last week, that the NHS planned to increase the role of SHAs and not to allow the new PCTs full control over their budgets until they could demonstrate their ability to deliver their financial
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plans. Effectively, that constitutes centralised control over NHS finances. The Liberal Democrats do not want it, but the Government seem content to allow it.

I hope that the Minister will give reasons for the proposed change and centralisation. As we approach a year in which funding gaps are widening, the Government propose to reduce funding after the growth of the past few years. I fear that we will have not a soft landing but a rough landing, and that unless the Government get a grip we will have a real problem.

6.37 pm

Mark Simmonds (Boston and Skegness) (Con): I agree with my hon. Friend the Member for Banbury (Tony Baldry) about the deplorable complacency of the Secretary of State's speech. She wanted to talk about anything other than the motion, and her responses to the serious points made by my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) were unacceptable. I can be more positive about the hon. Member for Colne Valley (Kali Mountford), who made a typically articulate speech. She made a good case for the abolition of central Government targets. Along with the Government's manipulation of the funding formula, mentioned by my hon. Friend the Member for South-West Surrey (Mr. Hunt), those targets are the main reason for the terrible deficits that most PCTs are now experiencing.

I warned the Government that they would find themselves in this position as long ago as November 2001, when I initiated an Adjournment debate in Westminster Hall on the future of Skegness and District hospital. I asked the Minister to reassure my constituents and me that when the PCT ran short of money, it would not close wards. What safeguards would the Government introduce to ensure that wards would not be closed and beds would not be lost? The then Minister of State, the right hon. Member for Redditch (Jacqui Smith)—who, rather worryingly, is now Minister for Schools—replied

On 1 November this year, one ward—50 per cent. of that hospital's wards—closed.

In January 2003, I initiated an Adjournment debate about the future of Pilgrim hospital, the main hospital in my constituency. I asked the then Minister, the hon. Member for Tottenham (David Lammy) to reassure me that there would be no downgrading of facilities at that important hospital in my constituency. He said

—"them" being my constituents—

This summer, two wards in Pilgrim hospital, Boston closed, losing 59 beds—another disgrace.

I held a debate in July this year, to which the Under-Secretary the hon. Member for Birmingham, Hodge Hill (Mr. Byrne) replied—I see him in his place. I have to say that his response that day was at least more articulate and sensible than either of the two responses that I had received in the previous debates—
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[Interruption.] Not only did he go to Harvard, he also had an interest in Lincolnshire church architecture, which means that he cannot be all bad. I pointed out that the Government had failed to act in time to stop the ward closures and asked him to put on record his assurance that there would be no further diminution of health care provision in my constituency or elsewhere in Lincolnshire. Even that Minister, however, failed to do so.

My hon. Friend the Member for South-West Surrey may not have known it, but he hit the nail right on the head. In my view, there has been a deliberate policy by the Government to manipulate the public sector funding formula not just in the health service, but across the public sector, to move resources—particularly out of rural areas that have Conservative and sometimes Liberal Democrat MPs—in order to benefit their own MPs, especially in marginal seats. The hon. Member for Wirral, West (Stephen Hesford) has effectively confirmed that today.

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