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Seven out of 10 hospitals and other NHS organisations are not only improving patient care, employing more staff and paying them better than ever,
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but doing so within their budget. Two out of 10 have relatively small levels of overspending and only one in 10 NHS hospitals and other organisations account for more than two thirds of the overspending.

My decision to publish those unaudited financial figures, together with the director of finance’s report to me, reflects our commitment to greater transparency in the NHS. In future, we will publish quarterly reports on NHS finances.

In the past, because the focus was largely on the overall financial position of the NHS, overspending organisations had little incentive to improve their performance but relied on other parts of the service to bail them out. The system was unfair because most of the overspending occurred in better-off areas with a generally healthier population and most of the underspending was in places with far greater health needs and health inequalities. We are not prepared to allow that unfairness to continue.

By the end of the financial year, we will return the NHS as a whole to financial balance. The turnaround teams that I announced to the House in January are helping organisations with the biggest financial problems to implement recovery plans that will allow them to maintain and improve patient care within their budgets. As most of the NHS demonstrates, and Sir Ian confirms in his report, there should be no trade-off between improving patient care and sound financial management. They go together.

We are aiming for all organisations with deficits to reach monthly balance of income and expenditure by the beginning of April next year. However, there will be some exceptional cases when an organisation needs longer to make the necessary changes while maintaining patient care. However, because overspending in one organisation has to be balanced by underspending elsewhere, we will continue to challenge and expect that minority of organisations to return to monthly balance as quickly as possible.

We have also asked the new strategic health authorities to establish a regional reserve that will support organisations while they return to balance. That means asking primary care trusts that have stayed within their budget or delivered a surplus to contribute some of their growth money, which averages 9.2 per cent., in the current year and to postpone some of the improvements that they were planning to make for their patients. However, that money will not be lost to those communities. It will be repaid, normally in the three-year allocations period. I have stressed to the health authorities that the areas with the greatest health needs should be repaid first.

There will be difficult decisions to make, especially in the minority of trusts with substantial deficits. In some cases, that will mean work force reductions and we all understand the anxiety and uncertainty that that causes for staff who have dedicated their lives to the NHS.

However, there will not be the wholesale redundancies across the NHS that some commentators have forecast. In most cases, as Sir Ian stresses, work force reductions will be achieved by natural turnover, reduced spending on expensive agency staff, redeploying staff and freezing some posts. Compulsory redundancies will be kept to an absolute minimum and
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those affected will, of course, be given as much support as possible to find a new post.

The NHS is treating more patients and saving more people’s lives than ever before. Of course there is still more to do to meet the public’s rising expectations, as people are living longer and a revolution is taking place in medical care and scientific knowledge. But Sir lan’s report today shows that the NHS is on the right track, and I commend it to the House.

Mr. Andrew Lansley (South Cambridgeshire) (Con): I am grateful to the Secretary of State for giving me the opportunity to see her statement and the financial performance report 40 minutes ago. After her excursion into a parallel universe, it is about time we came back down to earth. She has come to the House today to admit that, for the fourth year in a row under this Government, the financial situation in the national health service is deteriorating, and that the deficit is a great deal larger than in the previous year. She says that there was a net deficit of £512 million in the last financial year. On a like-for-like basis, it was £216 million in the previous financial year, so it is now more than two and a half times greater.

The Secretary of State’s policy has failed, but of course it is the civil servants and the managers in the NHS who will get the blame. Trusts will be singled out and told that they are responsible for the deficit. Sir Nigel Crisp resigned in March. If everything was going so well in March, I wonder why the chief executive of the NHS had to leave in those circumstances. Since then, there has been an exodus from the Department of Health, with people either jumping or being ejected from the sinking ship. Many of them have rightly said that the NHS is suffering from the void of leadership in the rudderless Department of Health. The growing gap between the hard-working staff in the NHS and the leadership that ought to be coming from the Department of Health is causing a crisis of confidence.

The Secretary of State’s statement purported to give us financial information about the past year. She gave us the unaudited figures, and mentioned a sum of £512 million. Did she go on to tell us that the unaudited figures last year were out by 80 per cent. compared with the audited figures? The audited figures were £112 million higher than the unaudited figures. We do not yet know what this year’s audited figures are going to be.

The Secretary of State told us that the gross deficit was £1.27 billion. That is about 1.5 per cent. of the total NHS allocations. She then said that that was being offset by surpluses. Well, yes indeed—there are £760 million of surpluses. But she did not tell the House that more than £500 million of those surpluses have been generated by the strategic health authorities. That means that they have cut their budgets, and they are planning to do so again this year. Most of those cuts will involve training budgets, which will mean fewer posts for doctors and nurses coming into the profession seeking to pursue their vocation. If there is a 10 per cent. cut in training budgets this year—as postgraduate deans across the country expect—that will affect 4,000 training posts for doctors. In Stoke yesterday, a lecturer in nursing at Keele university told me that— [ Interruption.]

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Mr. Speaker: Order. The hon. Member for South Swindon (Anne Snelgrove) must be quiet. It is not her function to sit there and heckle.

Mr. Lansley: That lecturer told me that 120 student nurses who are finishing her course at Keele university will not find jobs.

Did the Secretary of State mention that deficit switching has led to cuts in mental health services that have been deplored by her own national clinical director? Actually, she did not say anything at all about mental health services. She talked about the reductions in waiting times, but did she mention the waiting times for diagnosis? Her own figures, to which she did not admit, now show that waiting times—including waits for diagnosis—can be up to four years for trauma and orthopaedics.

Did the Secretary of State admit that, but for the strategic health authorities cutting their budgets, the deficits would be more than £1 billon—precisely the amount that we predicted last November? In December, the Secretary of State told the Health Committee that the deficit would be managed down to £200 million across the NHS by the end of the financial year. Actually, she said £250 million, but she had to be corrected by her officials because she did not have the figure in her head. However, the deficit has not been managed down to £200 million. It is now two and a half times greater than the figure to which the Secretary of State committed herself in front of the Select Committee.

Did the Secretary of State come here with any apology? No, she did not. Did she come here with any clarification of what will happen this year? No. There may be a chief executive listening to this out there. Are chief executives required to achieve balance over the whole of the current financial year? We do not know. Are they required instead to achieve what the Department is now calling—we shall hear this term again—“run-rate” balance, which means balancing monthly income and expenditure in the last month of the financial year? That is a very different discipline. Perhaps they are expected to achieve such a balance; perhaps they are not. Are they required in all cases to recover earlier deficits? We simply do not know.

The Secretary of State is promising that by the end of this financial year the NHS will have returned to financial balance. Will she tell the House that if by the end of this financial year the NHS is recording a further net system-wide deficit, she will resign?

Yesterday the Prime Minister told the public service to speed up reform, but it is the mismanagement of reform that is holding the NHS back. Public servants want to deliver better services continuously, year by year—of course they do—but they cannot do that under a Government who have let them down. It is policy that is failing. It is not only consultants in the British Medical Association who are saying that. We have a Government who fail to allocate resources in line with the real burden of disease and demand across the country, with the result that some health economies are going into serious deficit.

The Government grossly miscalculated the cost of new contracts, and failed to link those contracts to productivity or reform. They are spending billions on
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the NHS IT programme, but it is over two years late and is not delivering the system that the NHS wants. Last year the Government imposed central targets—the Secretary of State did not mention them—which cost hundreds of millions, distorted clinical priorities, and caused some of the deficits. The Secretary of State talked of 300,000 extra staff for the NHS, but she did not tell us that 106,000 of them were administrators. She has doubled the number of managers, and financial management in the NHS is clearly woefully lacking.

This is a Government who have let the NHS down. Policy failures and mismanagement have left the NHS in serious and growing deficit. Hard-working front-line NHS staff deliver good, indeed excellent, care to patients, but they complain bitterly—and with justification—that that is not because of the Government, but in spite of them. They want to be free of damaging interference by Labour Ministers.

Ms Hewitt: I find it extraordinary that the hon. Gentleman made no mention at all of the dramatic improvements in care that have been delivered in the NHS over the past eight years and, indeed, the past 12 months. I am very surprised that he did not choose to mention that whereas in 1997 the number of patients in South Cambridgeshire who were waiting more than six months, in pain, for operations that they needed was 1,790, the figure in March 2006 was zero. It is extraordinary that the hon. Gentleman failed to mention improvements in his constituency and elsewhere, but I have to say— [Interruption.]

Mr. Speaker: Order. Members on both sides of the House must pay attention to the Secretary of State’s reply. We cannot have Opposition Front Benchers shouting across at the Secretary of State.

Ms Hewitt: Thank you, Mr. Speaker.

Not only did the hon. Gentleman fail to mention the improvements in care for patients; he was clearly very disappointed that the deficit was not higher—that it had not reached the levels that he had predicted. In fact, it is lower than the forecast figure that we published at the half-year point.

The hon. Gentleman asked specifically about surpluses in the strategic health authorities. Many of those surpluses come directly from primary care trusts and other NHS trusts; but instead of being transferred directly to the accounts of overspending organisations, where in the past they have served to conceal the real problem of overspending, they have been held in strategic health authorities.

The hon. Gentleman said that newly qualified nurses and other staff were finding it difficult to obtain jobs. Of course, with more staff in the NHS than ever before—85,000 more nurses alone—it is more difficult for newly qualified nurses to find jobs than it was in the days when it was scarcely possible to find nurses to fill the vacancies that so desperately needed to be filled. What we are doing in response is ensuring that much more effort is made throughout the country to match our newly qualified staff to the vacancies that exist for every kind of staff in some parts of the NHS.

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Let me make it clear once again that I am determined that the NHS as a whole will be back in financial balance by the end of March next year. Of course, as Health Secretary I will be accountable to the House and the public for achieving that goal. We have said that we expect individual organisations to sort out their problems and achieve monthly financial balance as quickly as possible. A small number of them—largely those that have been overspending for several years and have large accumulated deficits—will not even be able to get to monthly financial balance by the end of next year. However, as I said, we will go on helping them to make the difficult but essential changes so that they get back into balance and deliver the best possible care within their budgets without expecting other parts of the NHS and other patients to bail them out.

My final point is that the hon. Gentleman needs to decide whether he wants the NHS to deliver the best value possible for the money—the increased money that he and Opposition Members voted against—that the public have put in. Does he really think that poorer areas, which typically are those that have been underspending, should go on bailing out better-off areas that have been overspending? Does he agree with the right hon. Member for Witney (Mr. Cameron), who wrote to the Prime Minister on 18 May asking for the deficit in Oxfordshire—one of the overspenders—to be wiped out? Does the hon. Gentleman recognise that in that area funding has risen by more than £38 million in the past three years? Does he recognise that it will increase again by more than £36 million in the next two years? Does he believe that south-west Oxfordshire, to take one example, which has 64 GPs per 100,000 population, should be given money from, for instance, Sedgefield, with 52 GPs per 100,000 population? Does he really believe that money should be taken from the poor to bail out the overspenders, or does he, like us, believe in fair funding across the NHS, and the best care and value for money everywhere?

Steve Webb (Northavon) (LD): I thank the Secretary of State for her statement. Will she confirm that she just told the House that the NHS deficit has doubled in the past year? Will she confirm that one in three trusts are in deficit and that one in 10 are in serious deficit, which is more than last year? Will she confirm that the scale of the deficits is so much that the deficit trusts between them have run up a deficit in excess of £1 billion, which they will have to sort out, including paying back any assistance that they get from other trusts? The Secretary of State gave figures excluding foundation trusts. What are the figures including foundation trusts?

Who is responsible for the financial crisis? If the Government set the pay rate for GPs, doctors and consultants, set “Agenda for Change” and NHS staff rates, set the tariff for how much trusts get and set all the targets, is it someone else’s fault or is it the Government’s fault if the sums do not add up? Will the Secretary of State take responsibility for the deficit in the NHS? How much of it is due to Department of Health mistakes, creating bodies that get abolished a few years later and negotiating contracts that result in overspending—the GP contract and the consultant contract? Is that her fault or someone else’s fault? Can
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we believe her when she says that the NHS will be in balance at the end of the year when Sir Nigel Crisp said in December that the deficit this year would only be £200 million and then, just a few months later, she told us that it would be two and a half times as big? Why should we believe her when she says that she will get the deficit under control this time around?

The surpluses in the NHS are in different places to the deficits, so the gross deficit of £1.2 billion is huge. Is not it the case that it takes incredible mismanagement to spend record sums of money on the NHS and to come to the House admitting the worst deficits in years? How has the Secretary of State achieved that? How did she manage to do that?

Is not it the case that what is going on is breakneck NHS reform, because the Prime Minister said that he will not go until the NHS is sorted out? How quickly will it be sorted out? Is not it the case that what we are getting is not measured organisational change, with long-term planning and rational reorganisation, but emergency cuts packages to deal with a short-term financial crisis? Does the Secretary of State accept that that is no way to run the NHS?

Ms Hewitt: I have already given the specific answers to the questions that the hon. Gentleman asked initially. I have made it clear, and I shall make it clear again: seven out of 10 NHS organisations are in balance or delivering a surplus. Two out of 10 have a relatively small deficit, which is quite manageable. One out of 10 organisations, many of which have been overspending for several years, have serious financial problems. The financial figures for the foundation trusts were published earlier this week by Monitor. Their overall deficit is £24 million, making an overall deficit of £536 million, which is still significantly less than 1 per cent. of the overall NHS budget.

If the cause of the deficits was pay rises for staff or targets for better care for patients, there would be deficits everywhere, and there are not. The majority of trusts in the NHS are employing more staff and paying them better, treating more patients faster than ever before, and saving more people’s lives—and they are doing it within their budgets. It is entirely reasonable—I am surprised that the hon. Gentleman does not support this—to say that the NHS should be doing that everywhere.

I am proud of the fact that we are paying our staff better than ever before. I am sure that they will note with interest that the Liberal Democrats are not so keen on that. It is perfectly true that the GP contract cost more than we and the British Medical Association initially anticipated. There is a very good reason for that: it is a performance-related contract and the GPs have delivered more and better care than we and the BMA expected. The additional costs in the GP contracts—somewhat below £300 million—have delivered better care for patients. Indeed, thousands of people are alive today as a direct result of that GP contract.

I stress—I tried to make this point earlier—that in the past the financial reporting systems within the NHS had the effect of concealing persistent
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overspending in a minority of organisations. In some cases, the underlying financial problems were wholly unclear even to the organisations themselves. We have stopped that. As a result of the changes and reforms that we are making, we have much greater transparency right across the NHS as we give patients more choice, as money follows the patients, and as hospitals, particularly foundation trusts, have greater freedom to respond to what patients need while taking responsibility for their performance and for delivering the best possible patient care within those increased budgets. In other words, our reforms are helping to reveal the problems and to deal with them, rather than causing them.

As Health Secretary, I take responsibility for the NHS, for getting the policy framework right, and for ensuring that we have got the right support within the Department of Health to make sure that our front-line staff go on doing a superb job for patients. I regret that the hon. Gentleman, like the hon. Member for South Cambridgeshire (Mr. Lansley), failed once again to acknowledge all the improvements taking place in the NHS for patients.

Mr. Kevin Barron (Rother Valley) (Lab): Does my right hon. Friend agree that the statistic that she just quoted—that seven out of 10 NHS organisations are improving patient care and employing more staff and paying them better—belies the siren voices of both Opposition Front Benchers, and of the BMA consultants this morning? Would not they do better to find out why three in 10 organisations cannot do what the majority can do?

Ms Hewitt: I entirely agree with my right hon. Friend and I know that he, in his capacity as Chair of the Health Committee and in the inquiry that he is undertaking, will help us to do exactly what is needed, which is to ensure that we deliver the best value and the best possible care for patients everywhere—within the enormously increased budgets that we have given to the NHS.

Peter Bottomley (Worthing, West) (Con): Does the Secretary of State accept that it is not a surprise to anyone that every Member present wants a health service that is fair, effective and improving? She says that money will follow the patient, but will she look into what is happening in Worthing—in my constituency and that of my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton)—where the hospital trust is expected to save 8 to 10 per cent. of its budget in-year, with an option of moving accident and emergency services far away from Worthing, which is the largest town in West Sussex? Would that be a case of moving the patients and the money following them—or would it be better to bring the money to the patients and to let them be treated in their own town?

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