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As the hon. Member for Northavon anticipated, it is right to set out some context for this debate about the treatment of debt in the NHS. The Government have injected unprecedented funding into the NHS and, in doing so, have improved the quality of patient care and access to health services beyond all recognition. NHS funding has doubled in the years between the Government’s first taking office and the current financial year, and it will effectively treble by the end of 2007-08—the financial year that is just about to begin. In fact, under our stewardship, the NHS has enjoyed the benefit of average annual real terms growth of 6.3 per cent., which is more than double the historic annual growth before 1997. Those figures should be put in context. Demands on the health service rise every year, but nevertheless the figures speak for themselves.

Perhaps I may answer just one of the comments of the hon. Member for Eddisbury: he said that the deficit at the end of the 2005-06 financial year represented the biggest in the history of the NHS. I think that those were his words. The audited year-end net deficit of £547 million needs to be set against the final accounts for 1996-97, when the deficit was £459 million. Granted, that was lower than last year’s deficit, but £547 million represented 0.7 per cent. of total NHS revenue spend. The 1996-97 deficit represented 1.5 per cent. of NHS total revenue spend. I am pretty confident in saying that that was a far larger percentage than had ever been seen in the NHS previously. The hon. Gentleman should reflect on that before handing out the lessons.

Every primary care trust received an above-inflation increase in funding in 2006-07 and will do so again next year. That is an average of 9.4 per cent. across the NHS. By far the majority of NHS organisations have also continued to deliver the high quality improvements to patient care that we have asked for, while remaining in financial balance or better. Moreover, we believe that allocating the vast majority of central NHS programme funds to strategic health authorities much earlier in the year, and thereby devolving significantly more control over funding to local decision making, has given the NHS much greater local flexibility to balance local needs and the delivery of national targets.

I want to say something about the announcement last week on the North Bristol PFI scheme. For the hon. Member for Northavon, that is a matter of some controversy, whereas my hon. Friend the Member for Bristol, North-West considers it a very welcome announcement. I picked up from the hon. Gentleman a kind of grudging pleasure that the decision was finally taken and that the trust could move forward. On that matter, and on finances, I accept his point that clarity is the important thing for that hospital trust at this time. It needs to know its future, where it is heading and how it can go from a cycle of difficult decisions into a cycle of improvement and clarity about the future. I accept that general point and I hope that we can begin to provide more of that certainty as the weeks go by.

I believe that the scheme that was put forward—a £347 million PFI for North Bristol NHS Trust—is exciting and financially viable, and I am led to believe that it will transform acute services in the area. I pay tribute to my hon. Friend the Member for Bristol, North-West for the persistence with which he pressed the case for the trust
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and the need for an announcement. In the end, I was happy to meet him and make that announcement for the benefit of the trust.

I hope that the hon. Member for Northavon will accept that, having regard to the management of finance in the long term, it makes more sense—although he may disagree about the location of the scheme—for the trust to benefit from modern facilities in which to provide health care, and that the facilities should not be spread over multiple sites. The arrangements will give the trust financial and running cost benefits in the long term, and there will also be the benefits that come from a larger, integrated clinical team sharing experience and knowledge. That is part of the background to the hon. Gentleman’s debate, but I shall come on to some of the questions that he asked me about the trust’s financial certainty. That is the other side of the equation, now that we have more clarity on the estates question.

We do not underestimate the very real financial and, in some cases, operational challenges faced by some organisations in 2006-07. The hon. Member for North Norfolk (Norman Lamb) referred to some of them. We have always been clear that the priority for this year would be to return the NHS to financial balance overall. For that reason, as the current year got under way, my right hon. Friend the Secretary of State for Health set out three clear financial objectives to be delivered by the NHS without compromising progress against public service agreement targets. Those objectives were to deliver net financial balance across the whole NHS by 31 March 2007; to see an improvement in the financial performance of all organisations that reported a deficit in 2005-06; and to achieve recurrent monthly run-rate balance across as many NHS organisations as possible by the end of the financial year.

The hon. Member for Eddisbury asked what we would take responsibility for: we will take responsibility for the delivery of those objectives, alongside the commitment that they will not lead to the breach of key public service agreement targets. I am confident that we shall be held to those promises, and the NHS is well placed to deliver on them.

As we reported in our third quarterly report on NHS finances, the NHS has made considerable progress in delivering against each of our key financial objectives, and remains on course to end the year in net financial balance. Taking account of the £450 million savings that strategic health authorities have identified by their continued good management of central NHS programme funds, the NHS overall recorded a forecast year-end surplus of some £13 million at the end of the third quarter of the year. That is a remarkable achievement and bears witness to the hard work of NHS staff across the country in seeking to deliver savings, increase the efficiency of working practices and reduce deficits.

I thank the hon. Member for Northavon for saying that he did not demur from the principle that people should be constantly challenged to provide more efficient and productive ways of working. The magnitude of the improvement is perhaps best understood by looking at the movement in net deficit in the past couple of years. It stood at £221 million at the end of 2004-05, and had increased to £547 million in the 2005-06 final accounts. If that trend had continued on a simple linear basis, we might have expected a net deficit of around £750 million by the end of the current year. Instead, the forecast
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surplus of £13 million at quarter three, coupled with our expectation at least to achieve financial balance by the end of the year, illustrates very clearly just what a significant improvement has been achieved and creates a platform of stability from which the NHS can move on.

We should consider organisations that were in deficit at the end of the last financial year in terms of their current in-year financial position, when the impact of deductions for prior overspending is ignored. There has been a significant improvement in those organisations. Our analysis shows that 82 per cent. of trusts and 69 per cent. of PCTs are forecasting an improved in-year position compared with 2005-06. Deficits continue to be concentrated in a small minority of organisations, with 50 per cent. of the gross deficit being attributable to just 5 per cent. of organisations. By far the majority of organisations are in balance or better, and continue to deliver quality services and improvements.

On achieving run-rate balance, I am pleased to say that a healthy majority of NHS organisations reported a positive monthly run-rate balance at quarter three. Indeed, our analysis indicates that only a small number of organisations— 17, to be precise—are not likely to achieve that objective by the end of March. It is right to pay tribute to the trust that serves the constituents of the hon. Member for Northavon and my hon. Friend the Member for Bristol, North-West, because it has made a clear and obvious improvement since its difficulties a few years ago and is now in run-rate balance, hence its wish to push on and achieve foundation trust status. There has been clear improvement, and I am sure that the hon. Gentleman and my hon. Friend will join me in welcoming that.

Norman Lamb: I agree with the Minister on that, but can he explain why the situation in the east of England appears to be moving in the other direction? The total deficit in the strategic health authority increased at the end of quarter three compared with quarter two, so all the disciplines that he is talking about appear not to be working there.

Andy Burnham: I shall answer that point in relation to the causes of deficits. As the hon. Gentleman said in his speech, the origins of deficit are not simple and one cannot pinpoint one factor, because they are complex. He also said that it is not good enough just to say that the quality of management is not good enough in a geographical area. That is true, but there has been a pattern of overspending in certain parts of the country that has been allowed to continue, rather than being tackled. That is part of the reason for what has happened this year—that nettle has been grasped.

The NHS financial system of old did not provide ready transparency on overspending. When people looked at the end-of-year accounts, they did not automatically see that there was a clear problem with overspending in a certain region. It did not become clear, as if by magic, where the problems were. The new financial regime is bringing much greater clarity about where the problems with overspending lie. One difficult point that we need to explain more is that the NHS is not the same in all parts of the country. The infrastructure is different in different parts of the country, and that needs to be considered when working out the causes of deficits.

I shall now answer some of the specific points that the hon. Member for Northavon raised. He asked about the trust’s situation regarding its private finance initiative
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and how the two could be married up, given that the big issue of debt must still be addressed, while progressing with the PFI. I confirm that the trust’s plans were assessed as being financially sound as part of the Government’s overall review, which considered the size of the scheme and whether it would meet future health needs. When we come to the final business case assessment and the final process, we will need to consider the financial position of the trust. Any such consideration will take the trust’s current financial position into account.

The hon. Gentleman asked about the force of the statutory duty to break even and what it means. When an organisation breaches a statutory duty to break even, the appointed auditors will issue a public interest report to the Secretary of State notifying her of the breach. The Department will work with the organisation, via the SHA, to put in place a plan to manage that financial position and to ensure that the organisation remains a viable public body. No penalties are imposed.

That brings me to the hon. Gentleman’s central question about what happens to the debt and what the position is going forward. North Bristol NHS Trust is one of a small number of organisations that present particular challenges to the Department regarding how to map a forward course, because their debts are significant. The hon. Gentleman used the figure £100 million, and we accept that the overall figure is in that region. He pre-empts the decision that will be taken about how to put that trust on a viable footing, but I assure him that his comments will be borne in mind.

I accept the hon. Gentleman’s points about the viability of services, about not requiring the trust to make unacceptable changes to them and about giving it sufficient time to plan, so that the impact of changes can be properly absorbed without threatening the viability of services. If he is asking me for a final conclusion about what is to be done, I am afraid that he pre-empts the discussion and decision.

Steve Webb: Is the Minister considering the suggestion that the £52 million that was added to the public dividend capital might remain? Is that an option?

Andy Burnham: I shall answer that in relation to resource accounting and budgeting, which other hon. Members have mentioned. The hon. Gentleman said that there is no such thing as a free lunch, and that is absolutely true. Given the way in which the financial regime now operates, the NHS cannot allow a deficit to spring up in one part of the system and not seek to deal with its consequences. Under the RAB regime that the Department operates, under the Treasury, overspending in one part of the system has to be accounted for by underspending somewhere else, otherwise the Department overall incurs a problem. That is absolutely the way in which the Department is taking matters forward, as a principle.

Debts should lie where they are incurred, otherwise there will be unfairness to other parts of the country that are not experiencing the problems that the hon. Gentleman mentions. However, the position with a small number of trusts gives rise to special consideration of their financial position. We need to get them back to being viable and able to provide services sustainably. No final decisions have been taken within the Department. I shall not lay out a clear timetable for that, but this issue is being actively considered. As with the PFI situation,
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we intend to give clarity to the trust about its viability going forward, which we will do at the earliest opportunity. The hon. Gentleman must forgive me, but we are 25 days away from the end of the current financial year, and it is too early to pre-empt some of those decisions.

We accept the Audit Commission’s analysis on RAB and the rationale of its review. Overall, its application provides a strong disincentive for overspending, but it is becoming clear that it is increasingly unsustainable for NHS trusts. I cannot commit to a timetable for the implementation of the Audit Commission’s recommendations, partly because a resource buffer would have to be created to cover NHS overspending centrally. I do commit, however, to accepting the principle of what was put to us. We will bring forward further details soon.

There are other issues that I would like to cover, and I hope that the hon. Gentleman will accept my writing to him to tidy up those issues. This has been a good debate at a very important time for the NHS.

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Child Poverty

11 am

Kerry McCarthy (Bristol, East) (Lab): I am glad to have secured this debate on what I am sure all hon. Members will agree is a hugely important subject. The Government made an historic commitment to halve child poverty by 2010 and to abolish it within a generation. I congratulate them on that commitment. I also thank the Minister for the work that he has put in on the issue and, in particular, for attending last week’s launch of Save the Children’s exhibition on child poverty at which he spoke eloquently from his experience about the importance of achieving those targets to reduce child poverty.

It could be argued that we do not need a Westminster Hall debate to bring the matter to the Government’s attention or to urge them to make tackling child poverty a central part of their programme. We have already won the battle of ideas, but with the three-year comprehensive spending review coming up and the Budget due on 21 March, it is important to use this opportunity to urge the Government to reaffirm their commitment to abolish child poverty and to highlight how much more needs to be done to achieve our targets.

I am pleased to see representatives from the other main parties in the Chamber, and I look forward to hearing their commitments to tackling child poverty. The right hon. and learned Member for North-East Fife (Sir Menzies Campbell) “signed the pledge” in a speech on 19 December, so better late than never.

I am somewhat confused about where the Conservatives stand, and I hope that we shall be enlightened today. I gather that the abolition of child poverty is an aspiration rather than a target for them. I am not sure what that means, but I think it means that they think it would nice to abolish child poverty, but they will not spend any money or implement any policies to achieve that. Perhaps we shall find out more about the Conservatives’ intentions.

When the Government came to power, they inherited an appalling legacy. Child poverty had increased under the Conservative Government from 14 per cent. in 1979 to 33 per cent. in 1998—from one in seven children living in poverty to one in three. A generation of children had been abandoned. We know that poverty is often handed down from one generation to the next, so their actions condemned future generations to live in poverty.

The Government should be commended on their work so far in introducing measures such as the national minimum wage and raising it year on year, as well as tax credits, record rises in child benefit, funding child care, Sure Start, children’s centres, the new deal for lone parents and Jobcentre Plus. I could go on.

We have lifted 700,000 children out of poverty, and have achieved a much faster reduction in child poverty than has been achieved in other European Union countries. Child poverty is now at a 15-year low, and we should not overlook that achievement when we consider the scale of the problem that still faces us. A quarter of Britain’s children—3.4 million—still live in poverty. We are all familiar with the UNICEF report that was published last month, which shows the UK at the bottom of the international league tables.

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Jo Swinson (East Dunbartonshire) (LD): On the UNICEF report, the hon. Lady makes good points about the financial aspect of child poverty, but overall well-being comes into the debate. Does she agree that to prevent the spiral of child poverty from passing from one generation to another, we must, in addition to measures to tackle financial poverty, provide opportunities—through education and out-of-school activities—to involve young people in decision making so that they can escape the poverty trap?

Kerry McCarthy: I thank the hon. Lady for her intervention, and I agree entirely that the problem is not just about financial targets. I shall come to that later.

Tony Lloyd (Manchester, Central) (Lab): There is probably a lot of common ground here, but it is right to pay tribute to schemes, such as Sure Start, which, in addition to making a real difference to families in the poorest circumstances, have perhaps done more to alter how people deal with their lives and their capacity to start making decisions about their own lives.

Kerry McCarthy: I thank my hon. Friend for his intervention; he makes an important point. I agree that the issue is not just about putting money in people’s pockets. We must look at their whole lives, and everything that impacts on them and results in the downward spiral of poverty, which then passes to future generations.

The Government have achieved a great deal in reducing the number of children living in poverty, but they missed their target for 2005 by about 300,000. In 2004-05, the last year for which statistics are available, only 100,000 children were lifted out of poverty. I believe that the figures for 2005-06 are due out on 27 March, and I hope that with the figures for tax credits and so on included there will be an improvement, but there is a lot more to do and I want to use this debate to flag up some ways to move forward in achieving those targets.

First, I want to talk about what child poverty means for children. According to Bristol university’s millennium survey on poverty and social exclusion in Britain, which was published last year, a third of British children are forced to go without at least one of the things they need—for example, three meals a day, toys, out-of-school activities or adequate clothing—while 750,000 children go without essential clothing, such as a warm winter coat or new, properly fitted shoes, because of a lack of money. Furthermore, 400,000 children do not have enough food each day and 1 million are too poor to be able to engage in common social activities, such as visiting friends or family, having friends round to play, celebrating birthdays and so on.

In school, children from low-income families risk being isolated, stigmatised and bullied, perhaps because they do not have the right uniform or they cannot afford to go on school trips. Their living conditions in cramped, overcrowded, noisy or damp houses often make it difficult for them to study at home, so they fall behind with their school work.

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