Examination of Witnesses (Questions 820
- 839)
FRIDAY 27 MARCH 2009
Mr Patrick McCartan and Mr Victor Hewitt
Q820 Lord Sewel:
Mr McCartan, would you like to comment?
Mr McCartan: I have to disagree from the other
end, as it were, as a user or sufferer under the Barnett Formula
in relation to health and social care. Health and social care
accounts for 40 per cent plus of all public expenditure in Northern
Ireland. It accounts for 70,000 employees, one in ten is employed
in health and social care here, and is very much dependent on
the allocation of public funds under Barnett. I can give you one
or two examples of that. My own trust is Belfast Health and Social
Care Trust and there are five other delivery organisations, including
an ambulance trust. The Belfast HSC Trust has 20,000 employees,
£1,100 million expenditure each year, which is 12.5 per cent
of all public expenditure that comes through the Barnett Formula
to Northern Ireland, together, the trust boards account for over
£3 billion expenditure per year, but we are very substantially
behind provision in England for health and social care, and the
gap is growing. The only way it can be growing is because the
overall cake that our Assembly has to distribute is not sufficient
to provide us with enough to meet the gap, and when you are talking
there about the squeeze, that squeeze is happening today and causing
problems of reorganisation in our Health Service which are effectively
restricting numbers of employees and our ability to address very
specific need for the elderly, for the very young, the very vulnerable
people in our society, people with mental health and learning
difficulties, and of course acute care. Our acute care is running
at round about 10 per cent cent less funded than similar acute
care in England. Our social care through our social care department
is running at about 36 per cent less funded than similar social
care provision in England. The reason for that is, of course,
that we make bids, they go through our political system, and we
now have 11 major departments all bidding and all saying they
want more. We can measure the effect of that in that under the
Comprehensive Spending Review period we are getting new money
into health and social care, real new money, of 1.1 per cent.
England is getting 4.3 per cent. We cannot address the need or
close the gap with that method of funding, it is wrong and it
does not work. We have four National Health Services in the UK,
not one, and that is the position of the Confederation at national
level. I am a trustee of the Confederation at national level,
I do know the positions on the Scotland-England border and on
the Wales-England border, and they are different. They are caused
because of divergence in policies of the various devolved administrations.
In our case, for our Minister, who happens to be a Unionist Minister,
therefore one of the minority parties, to get more money he has
to convince the other three major parties that his department
deserves it and of course that is a horse trade from which we
suffer, and are suffering increasingly. If Barnett was based on
need, based on an assessment that actually reflects the differences
in health and social care as well as other differences, then we
would at least have a mechanism and a chance of trying to do things
better than we are doing currently rather than seeing health and
social care diverge. I am quite happy to talk about mortality
rates and the differences between them here and in England, for
example, where we are significantly worse off, and I can give
you that hospital by hospital and area by area to show you. Those
are real issues which we want to address and the current Barnett
Formula and the "Barnett squeeze" is not allowing us
to do that. Would the Government accept an argument that there
should be some degree of equality of citizenship particularly
in relation to something as essential as health and social care?
If it does or if you think that it could then surely that should
mean the Treasury should have a different approach to the way
monies are disbursed than they currently are to devolved administrations.
That is the sort of area where we are coming from.
Q821 Lord Sewel:
I think we have got two things here. One, it is possible that
health and social care in Northern Ireland has not had as much
money allocated to it as England and Wales because Northern Irish
ministers give it a lower priority. That is perfectly consistent
with the idea of devolution. The idea of devolution was clearly
that the governments of the three territories should develop their
own priorities and have their own policies, so the money comes
to them in the pot and they decide in terms of their own local
priorities where it should go. That is one thing. The other thing
is that may be one of the reasons why your health and social care
is not doing well or it could be that the pot is getting relatively
smaller compared with the needs you have to address.
Mr McCartan: I have to say efficiency would
be another issue. These issues were gone into in great detail
in 2005 by Professor John Appleby and the Appleby report that
was made to the DFP here, Department of Finance and Personnel,
did address some of the efficiency issues and also the question
of the gap in provision, the under-funding. It did make an argument
for something like 7 per cent additional spend per head in relation
to health and social care over a period of years to address the
imbalance. You are right to say that is a matter for our devolved
administration. They have not taken that matter up and some of
what I am saying needs addressed could and should be addressed
there, but it does not explain overall the whole question of both
capital and recurrent expenditure and the effects of it on a regional
basis in comparison with England or even Scotland or Wales. There
is an under-capitalisation problem and an under-recurrent funding
problem here. If you put yourself in the position of some of our
health and social care organisations, what would you say about
the Barnett Formula. Of course you would say it needs to be based
on needs assessment. Those are not just health and social care
needs, but needs assessment as a formula and a formula that can
be devised on a UK-wide basis with appropriate indicators. My
Lord Chairman raised the question of Australia and when I was
there certainly I was aware of what was happening between the
federal and the state and there are plenty of arguments, particularly
in health, hospital and social care and how they are funded or
not, but we do not enjoy those debates. We would love to be able
to do that. Bear in mind that is where we come from. As representing
the biggest part of government expenditure in Northern Ireland
we want to be able to do more and better and that might mean the
cake needs to grow.
Q822 Earl of Mar and Kellie:
I was certainly interested by what you were saying about the four
National Health Services that we have in the UK because we obviously
do have four. I get the impression that in Northern Ireland you
have done a needs assessment, you know what you want to measure,
but what I would like to ask is have the other three National
Health Services done that? Have they come up with the same criteria
or something different because ultimately this is to be presented
to the Treasury and you have all got to be singing from the same
hymn sheet?
Mr McCartan: I think the answer to that is no.
I am aware of similar approaches and the fact that ministers now
are starting to talk to each other between Cardiff, Belfast and
Edinburgh, but not to the extent that they are making joint plans
or provision. I think what each of those ministers would probably
argue is there is a case for some divergence that you reflect
local needs and local pressures, and that would be our experience.
When it comes to what ought to be provided in overall terms, in
macro terms as it were, for health and social care in each of
the jurisdictions we would no doubt favour—I am not able
to tell you there has been a decision on that—a common method
of approach that allows us to plan on a proper basis to meet the
need and to see some evening up, not totally but some, of provision
in health and social care between the various jurisdictions. Why
I say "not totally" is some services are reliant on
a national approach. You need very specialist services in some
areas of cancer care, transplant or others, and it is right that
we should have one centre, for example, specialising in research-led
approaches in those areas. It is the same in regions where you
need a dynamic. The strategic health authorities in England have
about ten million people to look after and as a result they can
run proper paediatric services and a series of other major services,
cancer services and so on. We have 1.7 million people. There is
a diseconomy of scale that operates here right away. We have to
provide regional services. The bulk of that falls on the trusts,
by the way. That does work in a way which is counter to us being
able to make the best provision. If we have to have our own cancer
centre, for example, it is spread across 1.7 as distinct from
the ten million that a similar centre would serve in the northwest.
Those things work against us in a way. We are more than capable
of managing to do all of that and work in a co-operative way with
the rest of the United Kingdom, which we do, but not with the
current method of funding. Coming from the Barnett Formula, which
is being squeezed, into Northern Ireland, which then squeezes
it again because it thinks, "Here's 40 per cent, we are not
going to give 40 per cent to one minister", particularly
if it is a minority minister, the effect of that, taken with the
Appleby report which looked in detail at the differences in the
cost and efficiencies, brings us to the view that we need to fundamentally
adjust the method of funding devolved administrations. That has
to be much more reflective of need. That is our position.
Q823 Earl of Mar and Kellie:
Your colleagues from the other Health Services, who have presumably
read the Appleby report, have they accepted it or rejected it,
or said, "We will make one or two changes at the margin"?
Mr McCartan: The Appleby report is accepted
on a national basis. John Appleby of the King's Fund does similar
reports for the rest of the United Kingdom from time to time and
his report is robust in that regard. It is not opposed, as it
were, by other parts of the Health Service. It was accepted by
the DFP here. It is the basis upon which a lot of our planning
and commissioning has gone on. The problem is fundamentally under-provision.
Q824 Chairman:
The message we have been getting from those people we have talked
to here in Northern Ireland is on the whole they are reasonably
satisfied with the way in which the present system operates, there
is a feeling that the new government here deserves a period of
calm and reflection to bed in before you have another great eruption
in terms of how the monies are allocated to them and, therefore,
for the time being many of the people we have talked to have said
assessment based on need makes sense and is fairer, so at this
stage they do not think this is the appropriate time to do it.
Is that a fair summary of the position?
Mr Hewitt: The view will differ depending on
the country. I should imagine that the Scots would run a mile.
Q825 Chairman:
I was not talking about the Scots; I was talking about you.
Mr Hewitt: If you are going to have a funding
system for the devolved administrations of the UK it would have
to be a unanimously agreed funding system. If you are going to
change it you do need the agreement of Scotland and Wales.
Q826 Chairman:
Sorry, I was not making myself clear. What I was trying to do
was sum up what the position here in Northern Ireland is.
Mr Hewitt: A lot of people do not really know
very much about what we are talking about today, it is a relatively
small circle of people who have operated in this area so they
know the term "Barnett Formula" but not much beyond
that. It is not really the Formula, it is the way the Formula
interacts with all the other funding rules which apply to Northern
Ireland. I give an example in my paper where the across the board
cut approach can be mixed with the Barnett Formula to either advantage
or disadvantage you. It is not just the formula itself, it is
the wider funding rules. I listened with interest to the discussion
on needs assessment. The Treasury will not accept any argument
on needs assessment which is based upon a difference in policy.
For example, they will not give Wales a penny because of the Welsh
language. If you have a difference in policy that is down to you,
that is a subjective factor, and they will only give it on objective
factors.
Q827 Chairman:
The Welsh are bound to have a different policy on the Welsh language,
I would have thought.
Mr Hewitt: The Treasury says the English taxpayer
is not going to subsidise it.
Mr McCartan: Can we talk about tax for a moment
because there are different methods of funding. There are local
taxes and, of course, national taxation. When it comes to social
care, this is a local authority matter in the UK as distinct from
here where it is a central government matter. Of course, some
scope for raising taxes through council taxes exists in Britain
but not here, and that is a difference which does limit us. When
it comes to needs assessment I think people in Northern Ireland
would generally accept that we should be taxed on the same basis
roughly across the board, no difference, provided it is distributed
on a fair basis based on need. I am quite happy to see our council
taxes go up and our water tax go up, provided it is part of doing
something about the distribution of monies to try and get to this
idea of equity of citizenship.
Q828 Lord Sewel:
Could I just ask, is denominational schooling an expenditure need
or a policy decision?
Mr Hewitt: That is a policy decision. If you
want to maintain five school systems it is a matter for you. What
they take into account is how many children of school age you
have. They break it down into expenditure blocks, so there is
expenditure on schools, primary schools, pre-primary schools,
secondary schools, tertiary schools and so on, and the objective
factor which goes into those is what size of population you are
going to be serving in Northern Ireland as opposed to England.
Running multiple school systems, deciding to keep the water system
as a publicly funded operation, all of these are policy decisions
taken by the devolved administration and the Treasury will say,
quite rightly in many respects, "That is a matter for you.
If you choose to do that, to provide free care for the elderly"
as the Scots have done, "you are going to use your money
for that, but you cannot come back to us and ask for additional
money for other things if you have decided to do that".
Q829 Lord Sewel:
So if in England, say, we moved to an insurance-based health system,
what then?
Mr Hewitt: That would be a very fundamental
change because the whole thing is based upon broadly similar policies
being operated throughout the UK. Devolution does bring the spotlight
on that as well as the extent to which a devolved administration
can depart from what is happening in England without disturbing
its funding.
Q830 Lord Sewel:
That is one of the problems, is it not?
Mr Hewitt: Yes.
Q831 Lord Sewel:
The theory of devolution must be that of the opportunity to develop
local priorities, local policies, local solutions in terms of
local need, yet when you trace the funding that enables that to
happen you come back to English programmes. It is likely, and
certainly happening in Scotland, you will get a greater degree
of programme divergence, if you like, in Scotland from England,
yet the funding is still tied back to an English programme. That
is a strain in itself, is it not?
Mr Hewitt: Yes.
Mr McCartan: I do not disagree with you that
there is this dilemma in devolution. There is still a legacy here
that we like to have someone else to blame, which for 30 or 35
years was the mantra of every politician in Northern Ireland and
now they have to come to terms with some decision-making. We are
never very far away from that sort of system. Of course, we have
the system of a land border with another EU country where there
is an insurance-based two-tier system effectively of health and
social care, which is not a good example. People in Northern Ireland
would not want to go in that direction, that is very clear.
Mr Hewitt: There is an interesting situation
which has developed out of our particular form of devolution.
As you know, ministers hold their positions by virtue of a process
called D'Hondt whereby the size of the party dictates whether
they will hold a ministry.
Q832 Lord Sewel:
We share very fond memories of D'Hondt.
Mr Hewitt: That, plus the consequence that there
is no principal of collective responsibility within the Executive,
means that you cannot really have a budget process except during
Spending Review years when there is more money to be allocated.
There is no mechanism for actually taking money out of departments
in the intervening years. This is something which is slowly coming
to light. The Minister of Finance is not a Chancellor of the Exchequer,
the Chief Minister is not a Prime Minister and the Executive is
not a Cabinet, so the Minister of Finance cannot come along and
say, "Right, well I have decided our priorities require us
to take X million pounds from the roads budget and put it into
the health budget this year" unless the ministers involved
actually agree to do that. They cannot be forced to do it. You
can only really have proper budget allocations when additional
money becomes available and this year, for example, we did not
have a budget, we had a strategic stock take, nothing like a budget
at all. That is an interesting by-product of devolution itself.
Q833 Chairman:
I have to say I have never heard that. How can you possibly run
a government on that basis?
Mr Hewitt: That is a very interesting question.
Q834 Chairman:
It is a question. Are you saying that you cannot have a coherent
budget unless all the ministers agree to the proposals?
Mr Hewitt: Yes. There is a programme for government
and a budget associated with it. It runs for three years and there
is no mechanism for adjusting that except by agreement within
those three years. They adjust within the year because a monitoring
exercise goes on and some people who cannot spend the money during
the year will surrender it in the hope that if in the future they
need more money they will be able to bid it back. There is no
actual budget process going on at the moment.
Q835 Chairman:
I did not know that. You said a little earlier that the Treasury
would not finance programmes which were not basic UK programmes.
Is that an official statement from the Treasury or just your experience?
Mr Hewitt: Essentially it is the practice of
the way the Formula works. The classic example of this for ourselves
is water. Water and sewerage was privatised in England and Wales
some considerable time ago, but it was retained within the government
system in Northern Ireland. What that meant was there was no comparable
public expenditure on water and sewerage in England, hence no
consequential as they call it, no share of that was coming across
to Northern Ireland to help fund a publicly owned system in Northern
Ireland. We had the issue then that water could only be funded
by taking money from other things effectively, including health,
and there has been a very considerable debate about whether water
charges should be introduced and they have decided not to for
the moment. It is an interesting example where the Formula essentially
carries across English policy, or the consequences of English
policy.
Q836 Chairman:
Consequences, yes, I understand that. You would not get the consequentials
if it increased?
Mr Hewitt: That is right.
Q837 Chairman:
How did you manage to finance water in the days before it was
privatised in England?
Mr Hewitt: There were various mechanisms used
for this, including an arrangement whereby we were able to offset
some of the money that we brought in through the rates against
the expenditure on water. There was a process called an appropriation
and aid process whereby rates money was treated as a receipt which
could be offset against public expenditure, hence your gross expenditure
could be bigger than your net expenditure.
Mr McCartan: The popular perception was that
we paid for water through our rates and that perception is still
retained by some.
Q838 Lord Sewel:
But if something like that happens, yes you would lose the Barnett
consequentials from the moment that the service was privatised,
but in the base there would still be an historic accumulation
of public expenditure.
Mr McCartan: True.
Q839 Lord Sewel:
So if you had then privatised water there would have been a lot
of money in the base that you could have used for something else.
Mr Hewitt: True.
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