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Mr. Andrew Lansley (South Cambridgeshire) (Con): I am glad to follow the hon. Member for Crawley (Laura Moffatt), who illustrates one of the reasons why things
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have gone so badly wrong—because prior to the 2001 election, she and the right hon. Member for Darlington (Mr. Milburn) got together to offset the possibility of hospital reconfiguration in the Royal Surrey hospital. I have been to that hospital; I talked to its chief executive last year. If she and the right hon. Gentleman had not intervened, it would have saved £10 million a year and it would have been possible for it to have survived financially, whereas at the moment it is in crisis mode.

Mr. Blunt: My hon. Friend will be interested to know that I have calculated that the cost of general elections in the constituency of Crawley is about £20 million.

Mr. Lansley: I am grateful to my hon. Friend.

Laura Moffatt rose—

Mr. Lansley: Perhaps the hon. Lady would like to explain, because she did not get much time to speak. If hospital services in Crawley disappear, it will be because at an earlier point she was more interested in saving her political skin than in the services provided by that hospital.

Laura Moffatt: I am deeply grateful to the hon. Gentleman for giving way, but not because I believe that I have anything to answer for—my constituents know very well what I was fighting for. I am intervening on his behalf because he is talking about the wrong hospital, which many of my constituents will find most amusing.

Mr. Lansley: I went to Crawley and to Reigate prior to the last election, and I have been to the East Surrey hospital. I remember the conversation exactly. The hon. Lady has to deal with the point that my hon. Friend the Member for Reigate (Mr. Blunt) made. Instead of making cheap shots, she might contemplate the expense that she has caused her constituents.

With one or two unhappy exceptions, it has been a good and important debate, and I congratulate the right hon. Member for Rother Valley (Mr. Barron) on securing it. It comes at precisely the right moment. That was reflected not least in the contributions by Government Back Benchers, who displayed an attitude that was not present, by and large, in mid-November, when we initiated a debate in our own time on deficits. We said then that we believed that £1 billion of gross deficits and several hundred million pounds of net deficits were in prospect this year. The Secretary of State came to that debate and said, in effect, that recovery plans were in place and that it was going to better this year than last year.

Frankly, the Government have been, and remain, in denial. On 6 December, in front of the Health Committee, the Secretary of State said:

One has to wonder what world she was living in at that point, as at about the same time she admitted that the net deficit was rising to £620 million. We now know, although the Government still will not admit it, that
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subsequent forecasts by strategic health authorities add up to some £755 million. There are some very serious deficits in several trusts, but there are also deficits across a much larger number of trusts. Our latest estimate from board papers suggests that more than 139 trusts are experiencing deficits. It is a system-wide problem.

The right hon. Member for Rother Valley was right to say that we know what the NHS spends, but we do not know what it costs. The system has to be open and transparent. He has not heard from me, and he will not hear from me, the idea that we should go back to the bad old days of everybody covering everything up. However, he should talk to his Front-Bench colleagues who, far from pursuing a direction of openness and reform, are, through the proposal that primary care trusts should top-slice allocations, moving in precisely the opposite direction. Contrary to shifting the balance of power, they are taking control of the budgets. The Government will renationalise much of the growth money, which will then be spread around the system to try to obscure the financial consequences of necessary reform.

The hon. Member for Birmingham, Yardley (John Hemming) understands such matters, but reached the wrong conclusion about what is required. It is necessary not to delay the structure of reform, but to complete it consistently. One of the central problems is not too many changes at once—if they were all mutually reinforcing because a clear strategy existed, managers and others in the NHS would understand and accept them. However, they find constant, mutually inconsistent changes impossible to tackle. For example, how is it possible for the chief executive of the NHS to say one thing about the future structure of PCTs and their functions—that they are commissioning, not provider bodies—at the end of July, yet, two months later, they become provider bodies again? The same is happening to allocations. Contrary actions will not deliver successful reform.

I have every sympathy for the position of the hon. Member for City of York (Hugh Bayley), which requires reform. I suspect that he believes in the structure of reform and that we need devolved decision making and the provider trusts to be held to account for their productivity. The consultants' contract did not achieve that. Simon Stevens, who was special adviser at No. 10 at the time, subsequently admitted that the contracts were negotiated without building in productivity. Provider trusts, like foundation hospitals, should have the freedom to manage their costs more effectively. The Government's imposing of costs lies at the heart of much of the problem.

There is a 7 per cent. increase in costs on the tariff this year compared with last year. Is it any wonder that the hospitals that receive increases in cash resources find that most of it goes straight out of the door? The tariff takes no account of the impact of the working time directive. The 7 per cent. includes nothing for the costs of implementing the NHS programme for IT, as if hospitals paid nothing for that. It also contains nothing directly for implementing waiting time targets.

I have asked Ministers which part of the tariff for next year reflects the Government's proposal to move towards 18-week waiting times. I am sure that the Minister has included something in her speech about that. However, I have also received replies to questions
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that show that, next year, the Government estimate that the move will cost £1 billion, yet that is not included in the tariff. Where, therefore, will those costs be met?

We heard conflicting and contrasting speeches about the circumstances at the University hospital of North Staffordshire. I shall not comment on that except to say that a central question for the hon. Members for Newcastle-under-Lyme (Paul Farrelly) and for Staffordshire, Moorlands (Charlotte Atkins) is how the University hospital of North Staffordshire can possibly afford rebuilding. That can happen through only two means. Either the tariff—the payment by results—adjusts in future to reflect the costs of building new hospitals and providing new services, or hospitals cut back their activities so dramatically that they are deemed affordable by the Government and Monitor. Clearly, the University hospital of North Staffordshire is moving in the latter direction. It must do that because the Government are telling us nothing about the former possibility.

The operating rule book for 2006–07 was published at the end of January and it stated that the Government would shortly publish new affordability criteria for PFI projects. That has not happened, just as we do not know what will happen to the tariff after the end of this year. We discussed the possibility of marginal pricing Upstairs in Committee. Time and again, I said that, if the NHS has capacity and primary care trusts have patients who need treating but constrained budgets, one might at least allow for the possibility that they could reach agreement between themselves about marginal pricing of additional capacity towards the end of the year for treating those patients.

The hon. Member for Dartford (Dr. Stoate) appears to consider it reasonable that Darent Valley hospital should spend 10 months treating patients over trade and then stop. That is not a sensible approach.

Dr. Stoate: Will the hon. Gentleman give way?

Mr. Lansley: No, I do not have much time. Also, in the course of his 10 minutes, the hon. Gentleman used as many words as most people would use in 20.

I want the Minister to accept reality. Up to now, the Government have refused to respond to freedom of information requests for the month nine and month 10 forecasts of the strategic health authorities. Will the Minister tell us what their forecast estimate is? Will she also be clear about how the SHAs can possibly move from their present position to system balance within the next year, in the light of the way in which resource accounting works? The present structure dictates that if an organisation consumes its resources in the first year of a three-year public expenditure round, it has consumed in advance the resources that would otherwise have been available to it for the following year. That is understandable in theory, but it is going to be disastrous in practice.

The Government are going to cover many of the deficits. Let us face it, they have increased their departmental expenditure limit by £112 million for this purpose. They will also add about £116 million by underspending on their central programmes. Procurement on the connecting for health programme is slow, which gives them another £200 million, and the
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end-year flexibility will give them another £200 million. They were lucky last year, in that a gross error in the calculations of the NHS litigation authority meant that they had hundreds of millions to spare. That is not going to happen this year; the contingent liabilities on that are going up. The Government can cover deficits in regard to the departmental expenditure limit this year—the question is, will they, and what will they do next year to help trusts to achieve these ends?

There is a better way forward. It would mean that demand management could not be achieved by manipulating the tariff and that it would have to be achieved by giving genuine budget control to general practitioners through the reintroduction of GP fundholding in a form that allowed the care of patients in the community to be managed by those who have a responsibility both for the clinical care of their patients and for the budgetary consequences of that. This would require genuine freedoms. I suspect that, at the end of the year, we will find that—contrary to the prediction of the Royal College of Nursing—foundation trusts will deliver a far better outcome than other NHS trusts in terms of finances. This is a condemnation of the performance management system in the Department of Health.

We do not want to see primary care trusts top-slicing, a return to cash brokerage—which is in fact happening—or short-term measures that are to the long-term detriment of the NHS, including the closure of intermediate care beds in community hospitals and the sacking of staff. A year ago, the staff were the heroes—the Government were cheering as they headed towards their waiting time targets, but now, in too many places, they are going to suffer the consequences of the Government saying, "Balance your books, and don't worry about the waiting time targets."

That is completely contrary to what the then Health Minister, the right hon. Member for Barrow and Furness (Mr. Hutton), was telling the House almost exactly a year ago. He said that people were always forecasting deficits at this time of year, but that things always turned out all right in the end. Either that showed a lamentable failure to understand what was going on—which has continued for months—or he was simply focusing on the general election and the waiting time targets, and to hell with the financial consequences after the year end. I do not know which it was, to be honest, but this must not happen again.

Given the present resource constraints—astonishing, despite the 9.6 per cent. cash increase—the Government cannot carry on trying to achieve waiting time targets while loading costs, pressures and change on to the NHS in the way that they are now doing. At the moment, the tariff for next year promises a 6.5 per cent. increase in costs. Hospitals are being told that they will receive a 1.5 per cent. increase in tariff. The squeeze on hospitals will be dramatic.

The Government say that everything is to be looked after in the community. Well, Labour Members might like to have a look at the Department of Health's annual report. The number of health visitors went down between 1998 and 2003, and the number of district nurses also went down during that period. The resources in the community are simply not there, and until they are
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there cutting back the hospitals will be dangerous for patients. It would be far better for the Government to be realistic about this, to give GPs the opportunity to manage their budgets on behalf of the patients, and to give the professionals throughout the whole of the NHS the freedom to deliver services for patients, and the budgets to do the job.

9.44 pm

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