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The problem was highlighted last year when, following discussions with SHAs on two-year rolling-programme contracts, which saw some negotiated reductions in NHS training, some of the universities were suddenly told to make in-year reductions. That was outside of the usual negotiations and resulted in reductions in education funding, particularly for continuing professional development. There was also reduced commissioning for 2006-07 by an average of 10 per cent. and reduced post-registration and CPD commissioning for 2006-07. In addition, some SHAs refused to implement the benchmark pricing.

All of that undermined the previous, very good partnership working that was going on between universities and the health service. It has also undermined students’ morale. In previous years, 99 per cent. of students went straight into jobs, even if they were not in their first-choice hospitals, but that has changed. I understand that physiotherapists are the worst hit: only about 25 per cent. of those who graduated in 2006 found employment. Adult nursing also presents a particular problem, as many mature students in their 30s and 40s are not mobile because of their family commitments. If they cannot find jobs locally, there are no jobs for them to go to. The impact of the changes on students is as important as that on institutions, and I am concerned that the changes are storing up problems for the future.

I am sure that my hon. Friend the Minister knows about the leaked internal work force document that was published by the Health Service Journal in early January, which projected a shortage of 14,000 nurses by 2011 and expressed concerns about the recent cuts in the number of nursing students. I fully understand that having a properly planned work force for the NHS is extremely difficult to get right, but the universities want to work with the Government, the SHAs, the wider health economy and the Department of Health. Above all, they want a sustainable long-term partnership so that they can develop a health care work force that is aligned with the future needs of the health and social care strategy that the Government want to put in place.

I endorse everything that my hon. Friend the Member for Warrington, North said on this important issue. We all hold the NHS very dear. The changes are affecting NHS delivery and the universities that provide training, and we must all work together to solve the problem as soon as possible.

1.18 pm

The Minister of State, Department of Health (Andy Burnham): The matters described today go to the heart of the future strength of the national health service. I congratulate my hon. Friend the Member for Warrington, North (Helen Jones), who is also my neighbour, on securing this debate. It puts a welcome focus on work force issues. As she rightly said, we perhaps do not focus enough on these matters. I also thank my hon. Friend the Member for Blackpool, North and Fleetwood (Mrs. Humble) for her eloquent contribution. All of the points raised were legitimate, so I shall take them on board and take them back to my Department.

I agree with my hon. Friend the Member for Warrington, North that the impact on newer universities must be
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carefully considered. I, too, have an interest in the success of not only the health service in the north-west but the institutions that she listed.

Helen Jones: I am sorry to interrupt the Minister. Would it help if he were to visit my constituency and to meet Professor Wheeler, the vice-chancellor of the university of Chester, to discuss the impact that this situation is currently having?

Andy Burnham: Since that would entail a three or four-mile journey, I am happy to agree to that suggestion; it would be a pleasure to listen to the vice-chancellor.

My hon. Friend was right to recall the decimation of the training of health professionals in the mid-1990s and to say that the effects of changes in such training are often felt years down the line. It was this Government who felt the effects of those changes and of the chronic staff shortages. She was right to say that the situation led to the spending of health resources on temporary, agency and bank staff and to the recruitment of large numbers of staff from overseas.

The NHS has a vested interest in getting this right and in working with the Department for Education and Skills to get the partnership properly balanced, so that it benefits all partners—the NHS, the universities and the students who wish to study in them. We owe a responsibility to all partners in this equation.

Nurses and allied health professionals are at the heart of the NHS, providing care 24 hours a day, 365 days a year. They care for the sick, support the vulnerable and work to prevent ill health in hospitals and in the community, and make a real difference to people’s lives, day in, day out. They are supported by a vast array of scientists and technicians, who provide valuable laboratory and screening services, which are crucial to the diagnosis and treatment of patients.

Before I address the specific problems that have occurred recently, it is important that I put today’s discussion into context. From 2003-04 to 2006-07, the multi-professional education and training—MPET—allocation has increased by 20 per cent. That is a real commitment to investing in the education of the future NHS work force. Strategic health authorities receive the allocation as part of an overall funding envelope. Within that envelope, SHAs are expected to balance their budgets and to meet their commitments. That has helped the Government to fulfil the commitments set out in the NHS plan that was published at the beginning of this decade.

I do not want to bandy too many statistics around, but I should say that more than 80,000 more nurses work in the NHS today than did so a decade ago. During that decade, the number of students entering nurse training has increased by 9,900, or 75 per cent. and there has been an increase of 3,700, or 94 per cent., in the number of allied health professionals. The medical school intake in England in 2006-07 was 6,451, which represents an increase of 2,702, or 72 per cent.

I cite those figures because it is important to set out the context—the huge investment in the training of health professionals that has been made since this Government came to power. That investment has now fed through to a much expanded, better trained and better motivated work force in our NHS.

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Helen Jones: I entirely agree with the Minister about the increase in the NHS work force. He quoted figures on the training budget allocations. Does he accept that those allocations are not necessarily all being spent on training?

Andy Burnham: I should get to the heart of that question, because it is the reason why my hon. Friend called for this debate. It touches on issues concerning the future planning of requirements in this area that have emerged during the past year in the NHS.

Mrs. Humble: The Minister rightly mentioned the increased number of people in the NHS work force. He will be aware that the demographic profile is such that large numbers of people are expected to retire shortly. If cuts are to be made now in the number of students being trained—let us remember that it takes three years to train a nurse—we must ensure that come 2011 or 2012 people have been trained to replace those who retire.

Andy Burnham: I hope that my hon. Friend will accept that I do not avoid the question when I say that these issues are sometimes more of an art than a science; it is difficult to get the two sides of the equation right.

In answer to the question put by my hon. Friend the Member for Warrington, North, I should say that it is true that in this financial year not all of the funds allocated for education and training have been spent on those things. In 2006-07, we allocated £3.694 billion to education and training centrally and another £460 million to bursaries; there was a real-terms increase, but I accept that not all of that money has fed through directly to training. I shall explain a little more about that.

We invest in the development of the health care work force through the MPET levy, which goes out to SHAs. In 2006-07, that was part of a bundle of central budgets. We took that route to allow SHAs greater flexibility to use resources to tackle local priorities, including financial deficits. I understand what my hon. Friend says about hoping for the best, but I hope that she agrees that some decisions are best taken in the region that they affect. The emphasis is on giving more decision-making responsibility to the region and to the local level. Having said that, we can take things from this year so that we improve how we plan for our work force requirements.

In many ways, this was an exceptional year, because there was a reorganisation of both primary care trusts
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and SHAs. That will have impacted on the relationships within the different regions of the country and on discussions between higher education institutions and the health bodies. There have also been financial pressures on the NHS. I believe that my hon. Friend accepted that balancing the books was one of its crucial priorities and that everything flowed from having financial stability in the NHS.

My hon. Friend is correct that the situation has led to reductions in the number of commissioned training places and in the support for NHS organisations providing training places for students and trainees. In meeting their responsibilities to balance their budgets, SHAs have made savings from their overall MPET allocation. The savings are emerging at about 10 per cent. of overall MPET allocation and it is inevitable that they will have had some impact on higher education institutions.

I should make a point of context. In the coming years, as we take on board the points made about planning and adjusting for the future work force and examining the age profile of the existing work force, it is important to accept that the levels of investment in training and education may have to stabilise or to be adjusted, because in the early part of this decade we were correcting a previous decade of decimation in the funding of training of health professionals. There may be a period of adjustment as we return towards the right level.

Although we will not ring-fence MPET funding, we want to put in place a more robust service-level agreement between the Department and the SHAs. That answers one of the questions that this debate has raised. We want that service-level agreement to pick out long-term work force planning requirements so that we ensure that the SHAs are responsible for spending their money with a view to their long-term planning needs.

The committee that my hon. Friend mentioned has met, and it was agreed that the Department of Health would work with the Council of Deans to monitor the figures going into training. In addition, Universities UK and the Office of the Strategic Health Authorities have agreed to work together better to improve partnership arrangements between higher education institutions and SHAs.

I would like to go into more detail on some of the things that we are doing. My hon. Friend is right to request this debate and to call for more action in this area to tighten up and improve on what has happened. I shall write to her to cover any points that I have not addressed.

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Government Debt

1.30 pm

Mr. Mark Field (Cities of London and Westminster) (Con): It is a pleasure to serve under your chairmanship, Mr. Pope. I wanted to say a few words during the previous debate, but the Minister was saved by the bell.

I welcome the Economic Secretary and am glad that he will reply to my debate. That is probably apposite, because I want to raise a number of concerns that go back some time—indeed to before the Government came into office.

Politicians in this country are being neither open nor transparent about the state of public finances. Too much Government borrowing is funding current consumption, and we are mortgaging our future and expecting subsequent working generations, some of whom have not yet been born, to foot the bill for the cost of today's health care, education and pensions. That approach is neither prudent nor sustainable. That cavalier outlook to public expenditure has a fairly long political tradition in this country. After the second world war, Britain frittered away its Marshall aid on welfare consumption, in contrast, of course, to the Germans under Konrad Adenauer and Ludwig Erhard who invested the US-backed aid in rebuilding a world-beating German industry. My own party also failed to address that fundamental problem. During several periods in recent decades, particularly in the early 1970s and early 1990s, the national debt rose as a result of an unwillingness to take difficult and unpopular political decisions to curb public sector consumption.

The Chancellor of the Exchequer's diversionary tactic over the past decade has been to use the mechanism of the private finance initiative—now the public-private partnership—to remove from the public balance sheet a proportion of the capital costs associated with the Government’s much-vaunted investment in the public sector. The Treasury’s response to criticism of the PFI has always been robust. The Chancellor argues that it was set up by the previous Conservative Administration, which is true, but he also says that his Government are simply adopting the same rules, but under tighter accounting standards. We were wrong then, and he is wrong now.

The concept of unitary payments—the amalgamation of the capital and service costs of PFI projects—has been adopted as a supposedly simple method of allowing easy comparison between contractors during the PFI bidding process. However, that means that a huge amount of current capital expenditure, which the Government would have had to borrow against, is turned into future payments to contractors. In short, I contend that the PFI acts as a form of disguised borrowing, with repayment postponed for up to 30 years.

There is no fundamental economic difference between PFI projects and the raising of cash from issues of Government debt. The principal and the interest must be repaid in both cases. The shrewd device of the unitary payment, however, gives rise to a misleading picture of future Government financial commitments. The obligation to repay principal sums
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under PFI projects should be accounted for as a Government debt obligation, and unitary payments which contain a capital-equivalent component should be treated in accounting terms in the same way as ordinary Government debt.

I fear that it is a little difficult to describe the working of PFI projects without being beset with arcane or complex terminology, but I contend that the lack of transparency and use of off-balance-sheet funding is not acceptable in the private sector. Any company, never mind its auditors, adopting such tactics would be subject to critical scrutiny.

The supporters of PFI claim that one of its greatest benefits is the ability to transfer the risk of a project or service failure to the private sector. That assertion is often used to justify the superficially generous deals that operators of PFI contracts appear to have won in the course of negotiation. However, the significant profit potential that those contracts endow on operators, which is evidenced by the inflated share price of many companies that have won lucrative PFI contracts for school, transport system and hospital building here in London, comes at a real cost to future generations of taxpayers, who will foot the bill for today's consumption. All too often, far too little risk is transferred. I suspect that some of that is down to poor negotiation, with most operators—for example, the bus companies in London—running rings round their public sector counterparts when drawing up repayment terms.

The Treasury admitted to the absence of risk transfer as long ago as July 2003 when it said in the document “PFI: meeting the investment challenge”:

On the one hand, the Government commit themselves as the ultimate guarantor, and in truth many PFI projects cannot be allowed to fail if only for purely political reasons, as evidenced by the vast and unsustainable deficits accrued by many national health service trusts. On the other hand, there is often no sum representing the cost of being the ultimate guarantor on the Government’s balance sheet.

While, admittedly, some £20 billion of the capital value of PFI projects has been included on the current Government balance sheet, estimated payments on the PFI contracts for the 25 years to 2030 total some £138 billion, leaving £118 billion of public sector debt currently unaccounted for. That, of course, takes no account of those PFI contracts that are set to last beyond 2030, which is, admittedly, a relatively small minority. Most independent calculations suggest that at the very least an additional £25 billion should be added to the balance sheet by including a risk-rated percentage of total liabilities arising from PFI. Even that aggregate of £45 billion—the existing £20 billion and the additional £25 billion—wildly understates the truth of the situation.

The fact is that the great majority of PFI projects are undertaken by local authorities as, I suspect, my constituents and those of all other London MPs will
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soon discover to their horror when the financial implications of many of the contracts agreed to by the Mayor of London become apparent. Worse still, there has never been any pretence about the balance of risk assessment being made for any of those projects and, again, given the vital social and political importance of the schemes, the Government as the ultimate guarantor will have to cough up.

We have already seen the early skirmishes in what I suspect will be a particularly high-profile battle between the Treasury and the Mayor of London in relation to the budget for the 2012 Olympics which has, as some of us always predicted, spiralled totally out of control. Clearly, a guarantee from the Treasury would have immediately placed that entire project on the Government balance sheet and would amount to public borrowing. I understand, for that reason alone, why the Chancellor and the Financial Secretary would not have had much truck with that option.

There is also a further category of debt, which is classified as contingent liabilities by the Office for National Statistics and the general rule is quite plain; financial reporting should follow the substance of the commercial effect of a transaction, not the form in which it is dressed up. As a result, some £1.25 billion of bonds issued by London and Continental Railways—the body responsible for the channel tunnel rail link—were reclassified as Government debt in August 2005 because the debt was ultimately guaranteed by the Government and the bondholders were not deemed to be at risk from default. It had been hoped that the Statistics and Registration Service Bill, which received its Second Reading in the House in January, would provide the opportunity to end the uncertainty surrounding the Government’s accounting. I suspect that that may prove to be wishful thinking, but the Bill has been in Committee and we shall no doubt examine it on the Floor of the House before too long.

As some of our brightest investment banking brains create ever more complex financial instruments, the line between substance and form becomes ever more blurred. I accept that transparency in these matters may not always be easy to achieve, but the case of Network Rail gives rise to the strong suspicion that the Government have sometimes deliberately manipulated the calculation of Government debt. Following the collapse of Railtrack five years ago, Network Rail was set up in such a way as to be legally independent of the Government. The management restructuring and the fiction that Network Rail, as a company limited by guarantee, was under the control of its members has helped to mask the fact that the company ran up £18.2 billion of debt by July 2006.

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