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Mr. Nicholas Soames (Mid-Sussex) (Con): I agree with the right hon. Gentleman on that point, but is he aware that 87 per cent. of the increase this year has been spent on meeting increased cost pressures? If costs in the
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NHS continue to increase at their present rate, the deficit by 2010 will exceed £7 billion. How does he envisage the Government tackling that problem?

Mr. Barron: I have several questions on NHS costs to put to the Minister of State, Department of Health, my right hon. Friend the Member for Liverpool, Wavertree (Jane Kennedy). Some hon. Members may have read my recent comments in the press on the fact that we know what the NHS spends, but not what it costs. I think that, after 58 years, we ought to know exactly what it costs. I shall go into detail on that issue later.

David Taylor (North-West Leicestershire) (Lab/Co-op): May I challenge the figure given by the hon. Member for Mid-Sussex (Mr. Soames)? I agree that the sum is substantial, but that figure cannot be correct. At least 20 per cent. of the increased spending on the NHS is going on new staff and staff in new posts, which is delivering a wider range of services. It cannot possibly be the case that 87 per cent. of the increase is somehow being spent on inflation.

Mr. Barron: My hon. Friend is probably right. I have never looked at costs in detail, but we know that NHS inflation is higher than ordinary inflation in our economy. Perhaps the hon. Member for Mid-Sussex will speak during the debate and tell us how he arrived at that figure.

Bob Spink (Castle Point) (Con): Does the right hon. Gentleman share my concern that strategic health authorities and PCTs trying to remove the deficits will seek soft targets for cuts and that that will put even more pressure on hospice budgets? The average children's hospice gets only 5 per cent. of the funding it needs from those sources, and Little Havens in my constituency gets only 1.8 per cent. Will he do all he can through his Committee to bring pressure to bear on the Government to tackle the hospice funding formula?

Mr. Barron: I heard the hon. Gentleman's question during Prime Minister's Question Time last week and I am with him on that issue. The Bluebell Wood children's hospice is being built in my constituency, so I shall have an even greater constituency interest in years to come. However, I would be misleading the House if I were to say that my Committee is likely to look into children's hospice funding in the next few months.

It is striking that there was no warning of the deficits. Last year, on a budget of £67 billion, there was a deficit of just £250 million. When they gave evidence to the Health Committee on 1 December last year, the former permanent secretary at the Department and the then NHS chief executive, Sir Nigel Crisp, told us:

Perhaps so, but the House will have seen that when he left his post earlier this month, he was quoted in the press as saying:

I think that most of us who know Sir Nigel will congratulate him on his retirement and hope that it is a long and happy one. I do not know whether he will make
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it into the other place, but during the few short months that he and I were involved on the Health Committee, I regarded him as a good professional. I wish him well in whatever he does in the future.

In 2004–05, the NHS overspent by just £250 million—the first time that it had overspent since 1999–2000. That was reported by the NHS director of finance in his January 2006 report to the Secretary of State for Health. The director of finance emphasised that the overspend was small in relation to the overall sum managed, but said that it was still a cause for concern. He highlighted three reasons for that concern. First,

financial outturn. Secondly,

Thirdly, the overspend

In some ways, everyone was surprised by such a large increase in deficits. The financial director also reported that

and that the NHS estimated

Those comments were made in the "Financial Turnaround in the NHS" report published in January. That represents an overall increase in the deficit of 150 per cent. on the £250 million deficit reported in 2004–05. That increased deficit threatens to destabilise the NHS, so we must control it. I am a great believer in the national health service—I always have been, and I always will be—but we will lose out if we do not gain control and find out what it costs to provide services for our constituents. The only way to do that is to ensure that bottom-line balances at the end of each year for all NHS trusts give a true and accurate picture of the level of activity and are not fictitious figures. Sadly, on occasion, people who have overspent have wanted to hide that fact by submitting fictitious figures.

Mr. David Burrowes (Enfield, Southgate) (Con): In his deliberations in Committee, has the right hon. Gentleman encountered a reluctance by the Government to engage with the Audit Commission, which wishes to establish exactly what the costs and out-turn are? Does he surmise that that reluctance is because the Government do not want to expose the fact that the directives, edicts and targets that they have issued have created problems for Chase Farm hospital in my constituency, for example, which has been pressurised to dismantle its accident and emergency facilities?

Mr. Barron: The Government cannot avoid the Audit Commission, which has a statutory role. I shall deal briefly with the work of the Audit Commission in the past few months, but I advise the hon. Gentleman not to turn around and say that he knows the reasons for the overspend. Most people do not know the reasons—I shall deal with that later—and the situation is not as simple as he suggests.

Mr. Andrew Lansley (South Cambridgeshire) (Con): The right hon. Gentleman said that we should not seek
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to disguise or obscure the nature of the deficits, and I entirely agree. Does he therefore agree that it is important to focus on gross deficits? It is not good enough simply to talk about net deficits. Last year, as he said, there were gross deficits of £623 million. This year, as of month 6, they were nearly £1 billion. It will not do for Ministers to tell the House, as they have in the past, that the net deficits will be the same as they were the previous year when, only three weeks later, they admit that the gross deficits cited in our debate in mid-November of nearly £1 billion were accurate.

Mr. Barron: I agree that we need an open and honest debate. The greatest problem for the NHS, certainly since I have been a Member of Parliament, is the fact that it is treated as a political football. It appears in everyone's manifesto, and it is kicked around almost every day in the House. I am not suggesting that Ministers in the present Government have done this, but Conservative Ministers did not want to advertise certain issues, as they knew that they would be magnified and turned over by the press. As a result, we do not have sensible debates on health care, but it is about time that we did.

The report that I cited earlier says that 28 PCTs with a combined turnover of £5.6 billion were forecasting a deficit of £264 million, or just 4 per cent. Thirty-four NHS trusts with a combined turnover of £6.5 billion were forecasting a deficit of £467 million, or 7 per cent. That excludes foundation trust hospitals. Analysis by accountants KPMG showed that 18 organisations required urgent intervention and that 23 needed additional expertise and/or resources. It is not clear from the report whether such interventions and additional resources are helping to turn around trusts' finances.

Mr. James Arbuthnot (North-East Hampshire) (Con): Is not one thing that the report highlights the effect of change, which can create huge cost differences? Frimley Park hospital, a foundation hospital that serves my constituency of North-East Hampshire, has hugely increased the costs that it charges to my primary care trust. As a result, the hospital will end up with a £17 million surplus, whereas my primary care trust has a huge deficit. Is it not that change that we need to address in our debate?

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