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Earl Howe: My Lords, the House will be grateful to the Minister for repeating the Statement.
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The announcement reflects huge dedication and clinical success by doctors, nurses and other NHS staff, and commendable hard work by NHS managers. I am the first to join the noble Lord in paying tribute to their tremendous public service. However, the fact that the NHS should be in deficit to the tune of half a billion pounds at a time of unprecedented public resourcing is in itself astonishing.
The Minister is, of course, right to point out—as he did—that the deficit comprises less than 1 per cent of the revenue budget. But it is still an astonishing figure. There are a number of reasons for it, but by common consent one of the main ones is that the Department of Health lost control of its budget. In layman's language, it got its sums wrong. It underestimated the cost of the GP contract, of the consultant contract, and of Agenda for Change by hundreds of millions of pounds. Those additional costs were not discretionary for trusts; they had to be funded because the Government's own waiting time and A&E targets—the very things for which the Minister has just claimed success—have required significant extra resources to ensure their delivery.
Furthermore, not all those targets guarantee a proportionate improvement in patient care. To increase the four-hour A&E target from 96 to 98 per cent required substantial additional resources, but has given rise to practically no clinical benefit. It is estimated that some 5 per cent of A&E attendances will receive just as good care by remaining in A&E as they would elsewhere in a hospital. The overspends at a gross level were £1.27 billion. As the Minister said, those were offset by underspends. Will the Minister confirm that the underspends by strategic health authorities were achieved only by dint of cutbacks in training budgets—cuts which postgraduate deaneries are expecting to continue into 2006–07, to the tune of 4,000 fewer training posts? That is a short-term gain but it carries a long-term cost. Will the Minister say, too, to what extent the financial outturn announced today has been the result of access to the contingency reserve and to underspends on Connecting for Health? By how much have central budgets been reduced, and in what areas of expenditure?
The comparatively low number of trusts achieving a surplus provides the best indicator of the systemic nature of the problems we are now seeing. We know that up to 2004–05 the problem has been getting worse. In 2002–03, six strategic health authority areas were in net deficit; the following year it was seven; and in 2004–05, 12 out of 28 were in net deficit.
The issue now is how such deficits can be avoided in the future. In many areas of the country, we are seeing a top-slicing by the Department of Health of PCT budgets, and the Statement referred to that. It amounts to a clawback to the centre of much of the PCTs' growth money. Will all PCTs have that money repaid to them eventually, or only some? The Minister also referred to the Government's aim that all organisations with deficits should have a monthly balance of income and expenditure by April 2007. What exactly does that mean? Does it mean that those
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organisations must aim to be in balance for the year 2006–07 as a whole, or merely for the month of April 2007 and thereafter?
The joint report of the National Audit Office and the Audit Commission on financial management in the health service, which was published today, gives rise to concerns. It highlights a disappointing reduction in the quality of accounts submitted for audit in 2004–05. In the light of that, it casts doubt on the quality of local decision-making. It speaks of systemic issues that have contributed to the deterioration in financial performance, and also of local failings. It speaks of inappropriate adjustments or omissions in more than one-fifth of the accounts submitted for audit by NHS bodies. It will be difficult enough for trusts, with growth money cut back, to meet the demands of patients and commissioners, but without sound accounting practices and robust and timely reporting, the challenge will be doubly great. Is the Minister confident that deficits of the order seen in the past year will not recur in the current year? If he is confident, why is he confident?
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Baroness Barker: My Lords, I, too, thank the noble Lord for repeating the Statement and I, too, pay tribute to the staff of the NHS, not least because the report describes in a striking way the chaos in which many of them are struggling to continue their jobs and to promote the integrity of their services. I find this an extraordinary Statement, both for what it says and for what it does not say. I say to noble Lords who wish to make some sense of it that to go to the source documents referred to by the Minister is very revealing, because they give a great deal of detail.
In the interests of transparency, could the Minister address two questions? First, on page 10 of the financial performance report, it is stated that the deficit for primary care trusts for the year was £476 million, which is £200 million worse than the previous year, and that the deficit for the NHS trust sector was £561 million, compared with £322 million for 2004–05. As the Statement made clear all the way through, those figures do not include foundation trusts. Will the Minister tell us what the position would be if NHS foundation trusts were included, so that we could have an accurate figure with which to compare the previous year?
Secondly, in 2004–05 the deficit in the NHS grew by £100 million between the point at which the unaudited accounts were made available and the point at which the audited accounts were made available. Does the Minister accept that there is a strong likelihood that by July 2006, when those figures will be completely audited, the position will in fact be worse? It is extremely important that we understand exactly what the position is, so that we can make judgments. The report is extremely selective when it comes to trying to make some sense of why these deficits have occurred at a time of unprecedented investment in the NHS. Dr Paul Miller of the BMA this morning was clear and in no doubt that there were a number of specific reasons,
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first of which were the effects of PFI. He cited among other things the two-month ministerial delay to the building project at Barts, which was responsible for £35 million, and the increased use of independent-sector treatment centres, sometimes when they are neither needed nor used.
Much has been made throughout the report about the assistance given to the number of trusts in deficit. What is the budget within the department for the turnaround programme? What is the budget for the national programme office, which was announced in 2006 to oversee that? Will the costs of it be borne by the department or the individual trusts? That is not commercially sensitive information and I see no reason why it should not be made available to the House.
At a time of investment in the NHS such as there has been, it is some feat for there to be both simultaneous feast and famine. We are witnessing the result of NHS targets and pay, and the cost of NHS treatment, being centrally determined. What is going on at the moment is not a planned and rational vision for the NHS based on the knowledge of front-line staff; it is short-term emergency thinking inside the centre of Government. As we can see from the report, we are being presented not with a national health service, but with an increasingly disparate one that is being forced at a remarkably rapid pace to adopt market mechanisms in which there will be winners and losers. What comfort does the Minister have for the people who live in the south-east of England and East Anglia, who will by today's report most definitely be losers?
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Lord Warner: My Lords, I shall try in the time available to respond to the points made by the noble Earl and the noble Baroness. I thought that he was pretty good on synthetic outrage. He ought perhaps to remember 1996–97—
Earl Howe: My Lords, has this got anything to do with the Statement?
Lord Warner: It has a great deal to do with the Statement, my Lords. The deficit in 1996–97 was 1.5 per cent of turnover, which is about double the deficit that we announced today. It was £460 million. The idea that this is a new phenomenon is misleading to the House. That is what is relevant to the Statement.
The noble Earl also suggested that the Department of Health had lost control of the money. We have not; we acted when it became clear that the NHS was heading for deficit, and he will recognise that the figure announced today is less than the figure at the six-month point in the year. He raised central contracts; yes, the contracts cost us more than we or the trade unions and professional associations anticipated. But staff are getting paid more for doing more, particularly GPs under performance-related pay. I am proud of the fact that we are now paying NHS staff, particularly nurses, appropriately, because we were not doing that
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in the past. The latest GP contract—it started in April—has a zero-inflation uplift. That is part of a process of employing only the number of staff you can afford and using them to their full ability. This has been a set of arrangements agreed with all the staff negotiators in their professions and groups.
The noble Earl raised the issue of the contingency reserve, but the Department of Health has not gone to that reserve. We are consuming, in that hackneyed phrase, our own smoke in this area with the NHS. We are working with those challenged parts of the NHS to return them to balance. Of course, year-in year-out on such a big programme as Connecting for Health, some years there are underspends and in others there are overspends. I recall, although I do not have the details, that there was a small contribution from Connecting for Health because of a slowdown of expenditure in 2005–06.
As I said in the Statement, we wish to ensure that everyone in the NHS is within monthly balance by the end of this financial year. Some will be in monthly balance for longer periods than others, as is inevitable, because they start from different points. Overall, as I said in the Statement, the NHS will not be in deficit.
The noble Earl referred to the Audit Commission and the low quality of financial reports. It is true that there have been concerns about the 2004–05 reports in a minority of NHS trusts, but that is why we are now working with the NHS turnaround teams and others to improve the financial performance of the NHS.
The noble Baroness, Lady Barker, raised the issue of the contribution made by foundation trusts to the deficits. That is the responsibility of the independent regulator/monitor, which published its report on that issue on 5 June. I will ensure that a copy of the report is placed in the Library. It shows that there is a small deficit overall but that the overwhelming majority of foundation trusts are in surplus or balance. But I shall make that report available to the House.
The noble Baroness also said that the accounts were unaudited. That is absolutely true; we made that clear in the Statement. When the audited accounts have been received and fully compiled they may show that the position is worsening; but they could also show that it is improving. So we will not know the position until later in the year, when those reports are available.
I was interested to hear the noble Baroness mention Dr Miller and his views on what is wrong. He seems to have greater clarity than the Audit Commission, the National Audit Office, the director of finance, our financial advisers and some of the turnaround teams. They show that a much more mixed and complex set of arrangements in certain trusts has caused things to go wrong. There are no simple, overall explanations of why things have gone wrong in certain places. We must address the particular circumstances of those places to put them right. I do not have the budget for the turnaround teams in my brief or in my head but I shall write to the noble Baroness and copy it to other noble Lords as soon as I can lay my hands on that information.
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I am always glad to hear the noble Baroness and her colleagues bash targets. It is interesting to bash centrally driven targets. However, I should like to quote a short extract from Sir Ian Carruthers's report, which shows that these terrible targets have actually improved care for patients. He states:
He says that A&E departments have improved considerably and that,
"lives are being saved through reductions in deaths from cancer, circulatory disease, coronary heart disease".
Such improvements have happened partly because there has been commitment from the NHS to deliver changes that have clearly been set out in targets which the NHS has embraced and put into practice to improve patient care.
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