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I accept the achievements gained, and I will let the Minister talk about them. However, because of the nature of the world, matters that cross the desks of Members of Parliament and therefore exercise our minds—and the minds of members of the public and the press—are those that are not going quite so well. At present, the sad reality is that it is thought that any reconfiguration—however well meant and however much it delivers for patients—is being done just because of the deficits. I find it hard to believe that the Government welcome that idea, because it makes their job that much harder. It is for that range of reasons that the Select Committee undertook to investigate those deficits. It was interesting, but, on occasions, quite hard to cope with the fact that we seemed to be undertaking an inquiry into work force planning at the same time. On numerous occasions, those matters seemed to be inextricably linked, because the lack of planning on staff numbers and wage decisions seemed to have contributed to the deficits.
As the report’s findings were explained comprehensively by the Chairman of the Committee, I will focus most of my comments on the Government’s response to the report. It was clear when we undertook the inquiry that there was no single reason for the deficits. We felt that several factors were significant, including the funding formula, which has been mentioned, and we spent some considerable time getting our heads around resource accounting and budgeting. It was clear that aspects of central and local management were poor. Government initiatives, private finance initiatives and wage bills were determined centrally and, to an extent, imposed locally, but local implementation and the way in which different trusts tried to achieve targets probably contributed to the current situation.
We had particular concerns about top-slicing, the cuts in education and training and the proposed contingency funds, but the Government’s response to some of those concerns was a little disappointing. The Committee recommended a review of the—I am sorry, I muddled up my notes.
Mike Penning: Speak from the heart.
Sandra Gidley: I intend to. The Committee recommended a review of the funding formula. We took a host of evidence on that, but there was little agreement. The review is being undertaken by the Advisory Committee on Resource Allocation. It is useful to note that the change to practice-based commissioning might mean that we have to look at these matters a little differently. That was a positive response from the Government.
The Liberal Democrats welcome the news that the market forces factor will also be considered. It is clear that the cost of providing services in rural areas is particularly high, as is the cost of providing services in the south of England. While no one would argue that the areas of highest deprivation do not require some extra funding, there is a case for ring-fencing some of that funding for public health needs, so that we reduce the cycle of deprivation that is sometimes perpetuated from one generation to the next. It is disappointing to analyse the spending of spearhead primary care trusts, because there is such huge variation in the amounts of
their budgets that they allocate to public health. If we are to help some of those areas to achieve better health outcomes in the longer term, surely greater attention needs to be devoted to the amount of money spent on public health.
Mr. Stewart Jackson (Peterborough) (Con): Does the hon. Lady, like me, deprecate the fact that a significant number of PCTs across the country—this was found out under the Freedom of Information Act 2000—have significantly reduced, or even cut by 100 per cent., their sexual health education budgets to make up for deficits? Does she agree that that is a retrograde step?
Sandra Gidley: I agree with the hon. Gentleman. I will return to that issue later.
When establishing a funding formula, nobody ever looks at how much it costs to deliver a similar service in different parts of the country. The costs in the south of England—the costs of living and accommodation—have an impact on what can be spent on front-line services. Many would agree that such costs are taken into account inadequately. It is no coincidence that the somewhat lengthy Government response that tried to explain NHS deficits mentioned that there was a triangular-shaped area in the south of England that was particularly prone to deficits in the latest financial year.
Mr. Neil Turner (Wigan) (Lab): The hon. Lady mentions the market forces factor and indicates that there are increased costs in the south-east. Although I accept that, that is taken into account in people’s salaries, through the London weighting and south-east weighting.
Mr. Stewart Jackson: It isn’t.
Mr. Turner: Yes it is. People get paid that extra money. The market forces factor is not based on the closed economic cycle of the payments that are made to people in the national health service; it is based on private sector wages. It cannot be right that private sector wages in the south-east are used to decide money for hospitals, which are a public service. A nurse in the south-east gets paid exactly the same as a person in Wigan, with the London weighting factor added on, so why have a market forces factor that is based on private sector wages?
Sandra Gidley: I think that the hon. Gentleman is supporting my call for a review of the market forces factor.
Sandra Gidley: I am glad that the hon. Gentleman agrees. Services cost a different amount to deliver in different areas and some of the factors that influence how the calculations are made are clearly inappropriate for the model. To be fair, the Government have recognised that to a certain extent in their response, but they probably have not gone far enough.
Resource accounting and budgeting has exercised minds greatly. It has effectively led to what is known as the double deficit problem. Calculations have shown
that, as a result of RAB, the in-year deficit for 2005-06 was exaggerated by £117 million. The Government response seemed slightly confused. A little clarification might be helpful, although it may just have been me who was confused. On the one hand, the response appears to agree that
“RAB is not a suitable accounting regime to use within the NHS.”
“As a cross Government system RAB will continue to apply to the Department of Health, and, as confirmed by the Audit Commission, it remains appropriate for primary care trusts.”
It would be helpful if the Minister said whether that it is still the case as we move towards practice-based commissioning. Most NHS managers that I speak to say that they want to work within their financial constraints and within budget. Some of them admit that that has been done poorly in the past. However, it is a bit like fighting with one hand tied behind one’s back, because of the double whammy.
One of the reasons given for not scrapping RAB is:
“It needs to be demonstrated that NHS trusts have the financial discipline to operate outside the RAB regime and will respond appropriately to the incentives and disincentives created by cash controls similar to those applied to foundation trusts.”
That brings me to the problem of poor local management and poor financial management, which has bedevilled the NHS for far too long. When I worked in a retail environment, at the beginning of every week figures were scrutinised to see what was up and what was down. There was real attention to detail. Any trends involving overspending or something going wrong could be identified. The same is true for many businesses in the private sector. It was quite clear when the Committee took evidence from trusts that some managers did not have a clue. We interviewed some who had done well, and some who had done badly. The good ones clearly drilled down into the costs, and knew the financial situation at pretty much every stage. Their approach was more akin to that in the private sector. It was clear from taking evidence from those who experienced real problems that some of them simply did not have a clue from one month to the next about where the money was going and where it was coming from, or even whether all the income streams were going in the right direction. There seemed to be too few financial managers of the appropriate calibre. If we are to make the best use of NHS resources, it is important to get this right, so I fully endorse the comments of the Chairman of the Select Committee, the right hon. Member for Rother Valley (Mr. Barron).
Mr. Sadiq Khan (Tooting) (Lab): I endorse what the hon. Lady said. I was taken aback by the comments of the director of Kensington and Chelsea primary care trust in the report about lack of leadership and management control.
May I tell the hon. Lady about St. George’s hospital in Tooting? Until 2003-04, whenever it overspent, it would simply get extra money from the strategic health authority. In 2003-04, it was given £15 million as a non-recurrent payment to bail it out of its overspend. Since then, it has reduced a budget deficit of £21 million to £4.4 million this year. Next year, the deficit will be nil, and there may even be a surplus, so will the hon. Lady join me in welcoming the Government’s
attempts to ensure that trusts work within their budget rather than overspending and being frivolous in their expenditure?
Sandra Gidley: The hon. Gentleman has probably got himself a press release out of that. I was about to say that I welcome the recent emphasis on financial scrutiny, but the problem is that that has been so long in coming. People may have thought that there was plenty of money in the system, but that reorganisation of many PCTs and probably too little expertise to go round contributed to the problems. However, it would be churlish not to recognise that some attempts at financial scrutiny are being made.
Mr. Stewart Jackson: I thank the hon. Lady for being generous in accepting interventions. Does she agree that it ill behoves the Government to lecture trusts on financial propriety in terms of the skill mixes of their financial directors when the Secretary of State, questioned on 29 November, confirmed that the Government have no idea what the 230,000 administrative and clerical staff in the NHS do or what their contribution to the NHS is, because the data are not collected centrally? On that basis, how on earth can the Government lecture trusts?
Sandra Gidley: I shall come to that point later. There has been a problem with cascading from national level to strategic health authority level to trust level exactly what is required at each level, and I will elaborate slightly on it later.
According to the report on the third quarter financial returns, the aim is to achieve recurrent monthly run-rate balance by the end of the financial year, so it is disappointing to learn that 17 trusts are still not in a position to deliver it. Can the Minister say what else is being done to help those trusts? Although turnaround teams have been sent into some areas at considerable cost, it seems that some trusts have specific problems that are still not being resolved if they cannot balance their books from one month to the next.
My next point is about strategic health authorities. At the last election, our policy was to scrap them, and it seems to have been well justified. What are strategic health authorities for? Let us consider the simple subject of staffing numbers. The Government had a NHS plan. It would have been fairly obvious to subdivide that into different areas so that each SHA would know the numbers of staff who should be taken on. It could then scrutinise the PCTs—given that the bodies were supposed to be strategic, I understood that they were supposed to scrutinise the PCTs. Instead, there was an absolute explosion in staff, with some trusts taking on staff whom they could not afford—the Committee heard evidence to that effect. In many cases, those staff were taken on simply to address a short-term problem or target. Nobody but nobody appeared to have an overview of the system, and no one put the brakes on before it ran completely out of control. We are where we are today as a result.
There have been national problems with the implementation of some policies. No hon. Member
would deny any member of staff a pay increase or a decent wage. The Government reviewed the pay of health service staff through “Agenda for Change”. They also introduced the GP contract—it has become known as the “controversial” GP contract—and the consultant contract. Each of those went over budget by a considerable amount. “Agenda for Change” cost £220 million more than was expected. The GP contract cost £250 million and the consultant contract cost £90 million. The projected figures for 2006-07 suggest that “Agenda for Change” will cost an additional £394 million more than what was expected, while the consultant contract will cost £48 million. Again, it is strange that there was insufficient financial scrutiny at the heart of the Government to make the budgets more reflective of the reality.
Let me outline some particular concerns. The top-slicing of the budgets of PCTs and other trusts has been somewhat controversial. The simple fact remains that it has pushed some trusts into deficit. According to the third quarter financial review, 35 per cent. of organisations are forecasting deficits, but that figure would be only 24 per cent. if the impact of top-slicing and the previous year’s deficit could be ignored. The process seems to be a more formalised way of moving resources around the system than the old-fashioned approach, which the right hon. Member for Rother Valley mentioned, under which who should take the deficit each year was determined by Buggins’s turn.
I have a further concern about education and training. When the Secretary of State was questioned by the Committee about the raiding of the training budgets, she said:
“I am very reluctant to go down the ring fencing route.”
However, doctors who are halfway through their training cannot access courses and the intakes of schools of nursing have been drastically reduced. That has a long-term effect. That approach might seem like a simple one-year solution, but one cannot expect schools of nursing and midwifery to reduce the numbers on their courses by a third or a half in one year and then revert to the previous position a year later. It is not fair to expect a single organisation to deliver in such a way.
The Secretary of State did not appear to have an answer to the situation, although she referred repeatedly to difficult decisions. When the hon. Member for Staffordshire, Moorlands (Charlotte Atkins) said:
“Let us make sure that stealing money from the training budget does not become habit forming”,
the right hon. Lady said, “I would endorse that.” However, it is sad that she does not appear to want to do anything positive and concrete to try to ensure that such a situation does not arise in the future.
The right hon. Member for Rother Valley talked about vulnerable groups. Paragraph 76 of the Government’s response is a little helpful because it says:
“improving financial management does not mean compromising services to patients. To ensure that these services are not compromised the Department of Health has asked SHAs to ensure that local changes to spending plans are equitable across the local health economy, and that NHS organisations providing mental health and learning disability services should not be asked to contribute more in savings or cost improvement plans
than any other service, unless the mental health or learning disability services contributed to the deficit.”
That is all very well, but it only covers the issues of mental health and learning difficulties. As the hon. Member for Peterborough (Mr. Jackson) said, other services have been cut dramatically, too.
The Terrence Higgins Trust has undertaken research that shows that much of the money earmarked for sexual health services has not reached its target destination. The problem, of course, is that not many Members of Parliament have people queuing up, or knocking on their door, to make a surgery appointment because they cannot get an appointment at the local sexual health services clinic. It does not happen; it is not something that people really want their MP to know about. Sexual health services are an easy target, and the Government should do more to ensure that the money for those services stays where it is. Removing that money is a short-term, unhelpful solution, because if people cannot access those services, they will carry on spreading disease, and we will end up with a bigger problem. Is that really what the Government want?
Mr. Willis: One group of people who are queuing up at the surgeries of every right hon. and hon. Member in the Chamber are those with concerns about NHS dentistry. Before my local primary care trust was absorbed into a larger, sub-regional NHS primary care trust, it had some £10 million allocated to dentistry-related activity, yet 10,000 people in my constituency are on a waiting list for NHS dentistry, because all that money has been siphoned off and sent somewhere else to try to limit deficits. Money is transferred between organisations so that we can try to make sure that we mask the problems, and that has a huge effect. [Interruption.] The hon. Member for Newcastle-under-Lyme (Paul Farrelly) says that the money is ring-fenced, but the reality is that it is not, because it is going elsewhere.
Sandra Gidley: Clearly, my hon. Friend feels passionately about the issue. When the contract was negotiated, there was an automatic 5 per cent. reduction in activity, and that contributed to the problem. It is difficult to understand how the Government are improving access to NHS dentistry when they have reduced the dental activity for which they are paying by 5 per cent. Clearly maths has changed since I was at school.
Paul Farrelly (Newcastle-under-Lyme) (Lab): Is it the hon. Lady’s understanding, as it is mine, that the money for dentistry is ring-fenced and cannot be spent elsewhere?
Sandra Gidley: The point that I was making was that the pot of money had been reduced. There are cases of people trying to get a dental appointment but being unable to do so because the PCT has run out of money and no extra funding is available.
I shall bring my remarks to a close so that other Members may speak. I welcome the improved attention to detail with regard to NHS finance. It is long overdue, but sadly it comes at a price; there have been hospital closures, reductions in service and redundancies for
people who have worked long and hard to deliver some of the Government’s improvements. Those people have a bitter pill to swallow.
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