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The hon. Lady made an important point about nurses’ pay, which the Minister might want to explain. Since 1984, Governments have had independent pay reviews, and it has always been understood that one of the constraints on pay reviews is affordability. The Government went to the pay review body and said that 4 per cent. was the maximum affordable and that a 4 per cent. increase in average earnings for nurses in particular was consistent only with a 1.5 per cent. basic pay increase. The Committee then asked the Department for evidence that pay drift would be 2.5 per cent. so that it could see the justification for the case. If Labour Members read the relevant paragraphs of the report, they will see that the pay review body says that the Department could not produce the evidence and could not justify its case. The Department’s financial mismanagement is so profound that it cannot even justify its own arguments on pay.
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The Department ignored the pay review body and substituted its own belief, which is one reason nurses are angry. They were promised an independent pay review on the basis that it would not be overridden, but it is being overridden.

Mr. Jenkin: Is it not an insult that the Government claim that nurses are getting a higher increase on the basis that they will receive seniority increases? The Government are pretending that the pay increase is higher than it is because the average nurse will receive incremental increases, which they deserve anyway.

Mr. Lansley: My hon. Friend is absolutely right, and the pay review body used robust language, both this year and last year, when it said that the Government had tried to treat the framework for rewarding proper changes in knowledge and skills, increases in overtime, incremental progress through scales, and so on as a justification for a low basic pay award, but if the basic pay award does not keep pace with the need to ensure recruitment and retention there will be serious problems in years ahead.

I have not done justice to the debate, but I want to turn to some specific points. It does not make sense to spend a long time examining why we have arrived at the situation we are in, not least because the Government do not know. On 20 February, the chief economic adviser to the Department published the report to which the Chairman of the Select Committee referred. He said that he was asked to complete it within 20 weeks, so it should not be supposed that analysis of the various issues is definitive and complete in any sense. His report does not complete the conclusions, and he made some peculiar comments. He seemed to say that it does not matter whether some money was wasted because it might have been spent on something else, so it would not have had an impact on the budget overall. I shall offer Ministers an example, because it does matter if money is wasted.

Mr. Barron: That is not fair.

Mr. Lansley: I am not being unfair. I shall quote exactly what the chief economic adviser said:

I am not being unfair.

We talked about independent sector treatment centres. We are not against using the independent sector, but we object to using it in this way, because it does not make sense that the independent sector receives 11 per cent. above the tariff and is paid for 100 per cent. of treatments even if it is not delivering them. The last answer that I received from Ministers was that treatments were running at 83 per cent., yet centres are paid for 100 per cent. Some of that money, instead of buying treatments that are not being provided by independent sector treatment centres, could have been used to buy additional capacity in NHS hospitals, which clearly exists. That would not have been wasteful and would have made a difference to budgets because PCTs would not have had to spend so much on them.

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A number of hon. Friends said that the issue comes down to productivity. The chief economic adviser to the Department of Health referred, interestingly, to

We all know that that is true, but that was the first time I heard such an admission from the Department.

One of the lessons that the chief economic adviser said should be taken is that enthusiasm for making productivity improvements is diminished in an environment of rapid growth and resources. That is bureau-speak for saying that if people are given a load of money, they will not have to try so hard. He continued to say that, therefore, mechanisms for driving through productivity improvements should specifically be strengthened at the time extra resources are made available. Yes. Absolutely. Where were they? The point is that enormous amounts of money were coming in, rightly so—9 per cent. real terms increase, including next year—and payment by results is a valid means of ensuring that resources are deployed to buy additional activity, but it must be in a context of genuine competition for those resources, which it was not, and of effective demand management in commissioning them, which it was not. In places such as south Yorkshire, where a foundation trust economy was established and where PCTs had not previously had a problem with deficits, the hospitals were incentivised to undertake activity and to do more, as in 2004 and again in 2005, with no effective demand management. What is happening throughout the country is not effective demand management but financial crisis management. Instead of GP commissioning—much more effective demand management—deals such as marginal pricing to use hospital capacity are ignored.

Where do we go now? What about the review of resource allocation? Ministers, particularly the hon. Member for Leigh (Andy Burnham), are trying to escape from the fact that was clear in evidence to the Select Committee, which rightly had a long discussion about it: the present resource allocation formula does not accurately reflect the real incidence of need. That is why the Committee said that the Government should look at actual need rather than proxies of need. That is our view. We are not arguing for a specific formula. We are arguing for a formula that more accurately and fairly reflects actual need, not a formula that tries to deal with health inequalities through ever larger distortions in the availability of NHS services, as though inequalities in health outcomes were principally the result of changes in NHS expenditure. Everyone knows that that is not true—we have debated the matter in detail—and everyone knows that it is about relative economic deprivation, environmental circumstances, housing, poor education, diet and so many things that are unconnected with the level of NHS services. We should make NHS allocations relate to need. That will, of course, include a consideration of deprivation, but deprivation and health inequalities are not principally dealt with by NHS allocations, because a separate allocation is needed for that purpose. When will the Minister deliver the review of resource allocation? Why cannot that be done sufficiently quickly to try to influence resource allocation before April 2008?

We talked earlier about resource accounting and budgeting. Clearly, it must be in the interest of NHS trusts that action is taken in time for the 2007-08 financial year, but Ministers are still not explaining why
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they cannot achieve that. I am told that the Government were going to include a measure in the operating framework for 2007-08, but that it was taken out at the last minute. Why will they not do so?

Does the Minister think that NHS trusts that are not yet foundation trusts, but meet the criteria under Monitor for becoming a foundation trust, should have their historical debt turned into public dividend capital? We could then give them, at least, all the advantages of escaping from their historical debt, which they could manage as equity on their balance sheets. Of course, they would escape from RAB if they were to become foundation trusts.

Will the Minister tell us the top-slicing proposals for 2007-08? We heard, not least from my hon. Friend the Member for North Essex, that top-slicing is going to happen, and it will continue to penalise primary care trusts that have managed their finances well. This year and next will be the last two years of the Government’s planned major increase in NHS funding, yet all the resources for growth are being taken away to deal with the problems of deficits. There are problems due to cuts in some parts of the country, but the problem in most places is that the expected improvements in services cannot be funded at all. Will the Minister restore to PCTs that are in good financial health the ability to spend their resources on improvements in services in their areas?

We have bitterly criticised Ministers on several occasions for the scale of the cuts in education and training. If one asks any normal business how it gets out of its financial problems, one will always hear, “People are our most important resource, and investing in our people will be one of our priorities to enable us to escape from the problem.” However, that does not apply to the Government or, apparently, the NHS under them. Will the Minister tell us that the cuts in the education and training budgets in 2006-07—some £350 million, or thereabouts—will not happen again in 2007-08? Will he thus, by extension, make it clear that the options for the future to deal with unemployment after graduation among nurses, midwives, physiotherapists and other therapists can be implemented with those resources? At the moment, the problem is not being tackled because of cuts in the budgets. Ministers will not come to the House to explain themselves about modernising medical careers. However, the budgets clearly will matter next year to the ability of the multi-profession education and training budget to support additional training posts to ensure that the junior doctors who have been supported up to now in this country can continue to fulfil their vocation by entering training posts in the NHS. Will the Minister give a commitment on that?

We have had a good debate in which important points have been made. However, the robust nature of the Select Committee’s report was not reflected in the nature of the Government’s response. The response was not robust but a response from a Department that is still in confusion with Ministers who have no idea about how to move the situation forward, except by simply cutting budgets to try to save their jobs, even if that is at the expense of the jobs of NHS staff. That is not acceptable to the people of this country. The Government should be setting out as a response how they will achieve not only financial stability, but the
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improvements in the NHS for which people have been paying through their taxes. We will hold the Government to account on that.

7.24 pm

The Minister of State, Department of Health (Andy Burnham): It says in my notes that I should congratulate my right hon. Friend the Member for Rother Valley (Mr. Barron) on securing the debate. However, when I settled down yesterday afternoon with a file on NHS deficits, I nearly scored that bit out. However, he did save me from Watford versus Plymouth, so perhaps he did me a favour in the end.

We have had a very good debate. The Health Committee, which is chaired by my right hon. Friend, has produced an extremely comprehensive report on deficits in the national health service. I put on record the fact that we value his contribution and that of his colleagues on the Committee, many of whom are in the Chamber and have contributed intelligently to the debate. As we said in our official response to the report, we are pleased that many of the Committee’s recommendations resonate firmly with the actions that the Department already has in hand to improve financial management both centrally and throughout the NHS. We believe that those actions will lead to a sustained return to financial health by the end of this year.

May I begin by answering a question put by several hon. Members? We have heard the refrain, “Where has the money gone?” from the hon. Members for Hemel Hempstead (Mike Penning), for Romsey (Sandra Gidley), for Peterborough (Mr. Jackson) and for South Cambridgeshire (Mr. Lansley), so let us talk about where the money has gone. I accept that Health Ministers often speak at the Dispatch Box about the new buildings that we have put in place in the NHS, but I noted that during the long contribution made by the hon. Member for Peterborough, he did not mention once the new private finance initiative scheme that is going forward in his constituency. It seemed that the good things were miles from the thoughts of Conservative Members and that they did not want to give credit for anything that had happened.

We often talk about more staff, better pay for staff and more operations. All those things are justified, but the crucial thing that matters is the relative improvement that we are securing to the health of people not only in the more deprived parts of the country, but throughout the whole country. Let us consider the coronary heart disease mortality rate among males. When we came into government, 126.6 people per 100,000 population died from CHD before they were 75. The rate in England is now 74.5. That represents a huge improvement throughout the country, and the improvements in some of the more deprived parts of the country have been even greater —[ Interruption. ] Conservative Members should listen before dishing out criticisms and comments.

Mr. Stuart: Will the Minister tell us what the trend was before the Government came to power and what it has been since?

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Andy Burnham: If the hon. Gentleman is arguing that the national service frameworks on the big killer diseases and the money that has followed them have had no impact at all on the acceleration of health improvement, he is mistaken, even though he takes such an interest in health matters.

In 1997, the death rate from stroke among males in England was 29 per 100,000 population, yet the figure today is 18.2. Cancer mortality among males was 155 people per 100,000 population in 1997, yet the rate today is 129. I cite those figures because they are not just statistics on a page. One cannot put a price on the lives saved and the improvements made due to the investment. Conservative Members dismissively say, “Where has the money gone?”—that is where the money has gone, and I am proud of that fact.

Mr. Khan: May I invite the Minister to come and speak to one of the 6,000 people—my constituents and those of other south-west London Members—who have had endoscopies over the past year thanks to a £4.6 million new unit in St. George’s hospital? Would he say to them that that £4.6 million could have been better spent or spent elsewhere?

Andy Burnham: Clearly, I would not do that. My hon. Friend is right to raise that point because the consequences of the Conservative party’s policy of sharing the proceeds of growth would be to take money out of the national health service. Conservative Members do not want to talk about that, but that is clear from their position. My hon. Friend is right to cite a real improvement in people’s lives about which we are deeply proud.

Several hon. Members rose—

Andy Burnham: I want to make some progress, so I will not give way. We are 19 days away from the end of what I accept, and what everyone in the Department would acknowledge, has been a difficult year for the national health service. Painful decisions have been made, but it is clear to us that the NHS will be stronger as a result. The NHS has grasped the nettle on overspending, which has been tolerated for far too long. Despite that, and despite our having brought more rigour to the health service’s financial system, key financial objectives will be met this year, and I will mention those in a moment. Key service standards will not be jeopardised, and as a result of the action taken, the NHS is in a much firmer position for the next financial year. It is building on a much stronger platform as a result of the changes made.

Let me remind the House of the three clear objectives that my right hon. Friend the Secretary of State set for the national health service this year. The first is to deliver a net financial balance across the NHS as a whole by 31 March 2007, the second is to ensure an improvement in the financial performance of all organisations that reported a deficit in 2005-06, and the third is to achieve recurrent monthly run rate balances across as many organisations as possible by the end of the financial year. 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 it remains firmly on
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course to end the year in net financial balance. In fact, taking account of the £450 million in savings that strategic health authorities have identified, overall, the NHS forecasts a year-end surplus of £13 million at the end of the third quarter of the year.

On the in-year position for this financial year, when the impact of deductions for prior overspending is ignored, the NHS forecasts an in-year surplus of some £269 million. That is a remarkable achievement, and it bears witness to the hard work of NHS staff across the country who have sought to deliver savings, increase the efficiency of working practices, and reduce deficits.

Mr. Jenkin: The Minister is talking about getting the NHS into financial balance, but in paragraph 107 of the Select Committee report, the Secretary of State is reported as having

What did she mean by that, and what are the implications of that for Government policy?

Andy Burnham: The hon. Gentleman should look at the detail of the Select Committee’s report. It is clear, as everybody acknowledges, that the overspending is concentrated among a minority of organisations, and they are predominantly in the east of England, London and the south-east. Those are facts.

Hugh Bayley (City of York) (Lab): I thank the Department for the assistance that it has given north Yorkshire in getting to grips with its deficit. It is worth noting that in north Yorkshire, the waiting time for in-patient and out-patient treatment, as well as diagnostic tests, is less than the average for the region, but a number of GPs in York have pointed out to me that most of the PCT deficits are in rural or mixed rural areas. The Select Committee on Health examined the issue and called for the funding formula to be reviewed. The Government are reviewing it, but will they specifically consider the costs of providing health services in rural areas, so that the formula fully reflects those costs?

Andy Burnham: I can give my hon. Friend an assurance that we will. We keep the formula under constant review, and I will deal with some of the specific points that my right hon. Friend the Member for Rother Valley made in a moment.

Our analysis shows that 82 per cent. of trusts and 69 per cent. of PCTs are forecasting an improved in-year position compared to 2005-06. As I say, deficits continue to be concentrated among a small minority of organisations. The great majority are in balance or better and continue to deliver service and quality improvements. On achieving run rate balance—that is the third of our key financial objectives for this year—I am pleased to say that a healthy majority of all NHS organisations reported a positive run rate balance in the third quarter. In fact, our analysis indicates that only a small number of organisations—some 17 of them—are not likely to achieve that objective by the end of March.

Mike Penning: rose—

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Andy Burnham: I will not give way. I shall now turn to the points raised by my right hon. Friend the Member for Rother Valley and will deal with some of the important issues that the Committee raised. He began by mentioning the overall effects of RAB, or resource accounting and budgeting. If I heard the hon. Member for South Cambridgeshire correctly, I think that he began his remarks by saying that the Treasury must take responsibility for the effects of stopping planned support and for brokerage; he used that exact word. Am I right to take that as an indication that the Conservatives would not follow the disciplines of the resource accounting system?

Mr. Lansley: No.

Andy Burnham: Well, I have set out what the hon. Gentleman said. Let me quote the very beginning of the Select Committee’s report:

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