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The Minister of State, Department of Health (Jane Kennedy): I join hon. Members in complimenting my right hon. Friend the Member for Rother Valley (Mr. Barron) on securing this debate, which has had some thoughtful contributions. I appreciate his great experience as a former shadow health spokesman, and well remember working with him in opposition when the health service was very different from the one we know now.

Back-Bench scrutiny of the searching variety that we have heard today is the most testing of Ministers and deserves the most thoughtful response. I will try to give that. I wish to cover three main areas. I cannot guarantee that the whole of my response will be completely thoughtful—one or two contributions merited something less—but I will try.

The hon. Member for South Cambridgeshire (Mr. Lansley) had an interesting column in last week's Health Service Journal, which I commend to the House. The title was, "Stop focusing on the size of the deficit and start looking forward to creating a stronger financial framework". I echo that. I will not quote him selectively, because he is also critical, and we need to consider some of the criticism. He says:

He continues:

as that would send the wrong signals. He then goes on to criticise what he describes as "top-slicing". I will come to that in a moment.

My right hon. Friend the Member for Rother Valley rightly pointed out that the NHS budget has doubled since 1997 and will have almost trebled by 2008 to more than £92 billion. It is right that we examine where the extra resources have gone and the way in which those resources are being used. The extra resources have helped to deliver a transformation of health services. It is important that the House does not lose sight of that. My hon. Friends the Members for West Bromwich, West (Mr. Bailey), for Dartford (Dr. Stoate), for City of York (Hugh Bayley) and for Crawley (Laura Moffatt) recognise that, as do a number of others.

It would take too much time to record all the improvements that we have seen. In 1997, however, it is fair to say that almost 300,000 people were waiting more than 15 months for their operations. Now, no one waits more than six months, and the average is about eight weeks.

Mr Peter Bone (Wellingborough) (Con) rose—

Jane Kennedy: The hon. Gentleman has not been in for the debate, and I would ask hon. Members to allow me to reply to the many points that have been made.

I take on board the comments of my hon. Friend the Member for Dartford about accident and emergency targets and I agree with what he said about follow-up
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appointments. On the point raised by my hon. Friend the Member for Staffordshire, Moorlands (Charlotte Atkins), ambulances are reaching more patients more quickly than ever before, and not just in Staffordshire. She has repeatedly said how important the structure of the ambulance service is in Staffordshire. Ambulance services are extending the range of care that they provide to transform patients' experience and improve efficiency.

Notwithstanding the comments of the hon. Member for Wyre Forest (Dr. Taylor), we have begun to improve the lives of 17 million patients suffering from long-term conditions such as diabetes, mental health problems and coronary heart disease. Those improvements have been enabled by innovation and new treatment methods, but have largely been delivered in the community through improvements to general practice and general practitioners' services. It is true that we have thousands of extra clinicians throughout the country, old buildings are being replaced with new hospitals or surgeries, and new ambulance stations, ambulances and equipment are being provided. We are upgrading the NHS's IT systems with the largest civilian IT project in the world.

The increased spending will be backed up by key reforms—payment by results, new work force contracts, PCT commissioning, foundation trusts, independent inspection and regulation and an efficiency plan to deliver better value for money. In addition, we have made significant investments in pay reform for NHS staff. The hon. Member for Mid-Sussex (Mr. Soames) raised the issue of costs. I do not apologise for addressing the scandal of low pay in the health service.

Mr. Peter Lilley (Hitchin and Harpenden) (Con): Will the Minister give way?

Jane Kennedy: Perhaps the right hon. Gentleman will allow me to continue. I beg his pardon, but I did not see him during the debate—[Hon. Members: "He was here."] I am sorry. I will give way.

Mr. Lilley: I am extremely grateful.

The Minister has not mentioned deficits so far. I asked the Library about the cause of the deficits and was told that 21 per cent. of the increased expenditure last year went on pensions. I was also told that, according to the British Medical Association, consultants' pensions would rise by 24 per cent. and GPs' pensions by 56 per cent. because of the new contracts. Is that a wise and fair use of money when the Government are refusing to do anything about the pensions of those who have been misled and awarded them by the ombudsman?

Jane Kennedy: I believe that it is an appropriate way of proceeding with pay reform. We negotiated the arrangements on the clear understanding that the investment was in return for reform. The new contracts for NHS staff are designed to support service improvement, to deliver real benefits for patients and the service and to improve the working lives of NHS staff. The issue was raised by the hon. Members for Mid-Sussex, for Beverley and Holderness (Mr. Stuart) and for Southend, West (Mr. Amess). I will look into the matters raised by the hon. Member for Southend, West about his local hospital and its application for foundation trust status and write to him if he will allow me to do so.

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Mr. Lansley: What about the tariff?

Jane Kennedy: I shall come to that in a moment.

Most NHS organisations are delivering high-quality patient services and balancing the books. The hon. Member for Southport (Dr. Pugh) mentioned Castro and Mao Tse Tung in one breath, which impressed no Labour Members, or at least very few, but he also said that it was very difficult to manage a demand-led service. That is a typical comment from a Liberal Democrat: the Liberal Democrats find it very hard to make decisions that might prove difficult to handle and unpopular locally. I can tell him that the NHS does manage a demand-led service in large part, and does it very well.

Martin Horwood: Will the Minister give way?

Jane Kennedy: If the hon. Gentleman will allow me, I want to deal with the deficit. While it is small in relation to total expenditure, it is unacceptable and must be eliminated. The majority of the NHS is living within its means and delivering on target, but there is much more that some parts of it can do to eliminate inefficiencies and improve productivity.

Let us take the example of University Hospital of North Staffordshire NHS Trust. In 1997, the trust had just under 3,900 staff. In September 2004, there were slightly more than 5,100. The number increased by 1,232, more than a third. I have observed statements from North Staffordshire with some concern, but let me tell my hon. Friends the Member for Newcastle-under-Lyme (Paul Farrelly) and for Staffordshire, Moorlands (Charlotte Atkins) what the trust is saying. It has benchmarked its work force costs against those of similar trusts and they were the highest for all staff groups except nursing staff, for whom they were the second highest. It will aim to reduce its work force costs towards the average for similar trusts.

I realise that the issue of 1,000 redundancy notices is cause for concern and I appreciate the impact on morale. Nevertheless, I think that the steps that the trust is taking to restore its financial balance are worthy of support, especially where they will not worsen patient services and may even improve them in the long run. Certainly that is the intention.

I am conscious of how quickly time passes. Our aim is to restore financial balance in the NHS by the end of 2006–07, and we have introduced a series of measures to achieve that. Achieving financial balance is not a book-keeping exercise; it is essential to the delivery of sustainable improvement in the future. As well as providing additional investment, we have increased the transparency of financial reporting so that financial problems are exposed and we can deal with them. It is true that we have brought this about by shining a light on deficits. Let me be clear about why we have introduced payment by results. It is a fair and transparent system for paying hospitals for the work that they do. We are putting record funding into the NHS and we want to see results. The experience of other countries that operate systems such as payment by results is that they can help to increase activity.

My right hon. Friend the Member for Rother Valley questioned us about the tariff. He said that it is only as good as the data and that reference costs are not detailed
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enough. A lot of what he said I agree with and I welcome his comments; sight of the letter that he mentioned would be useful to us. We are keen to continue to learn lessons and to improve current systems. As they stand, the reference costs provide reasonable data for the purpose for which they were designed—getting average costs—but they are not sensitive enough to derive patient-level data and could be improved in that respect. That is why we have to make adjustments for specialist top-ups, for example.

We have made some changes to the structure of the tariff to ensure that, for example, we manage the risk of growth in non-elective activity. As the House knows, the tariff was published on 31 January but withdrawn on 22 February because there were some material errors that meant that many prices were wrong. We have now made the necessary corrections, which have been road-tested by the NHS and other stakeholders. The corrected tariff was published on Friday 17 March and is now being used by NHS organisations to refine their plans for 2006–07. A review of the tariff-setting process has been commissioned by Sir Ian Carruthers, so that we can learn lessons for the future. I regret the fact that mistakes were made, but we believe that this was an operational problem and that we have fixed it. The review will tell us more.

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