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Department of Health

To be honest, I have not mentioned underfunding at any stage. I have not accused the Government of underfunding the NHS; that is not the problem. [Interruption.] Whatever the hon. Member for Beverley and Holderness (Mr. Stuart) has said, he has said. I will stick with what I wish to say. It seems to me that the deficits can reflect a range of factors. They can certainly reflect a lack of previous transparency. We must all acknowledge that. Some trusts have also been slow to adjust to the fact that there is a new ball game, with new rules. Things have happened, brokerage has been abolished and there has been a switch to resource-based accounting and so on. Furthermore, the system lacks transparency at present. The world is not as it seems, and the debts of some trusts are currently disguised by brokerage simply because the SHA accepts that some trusts have a Baldrick-like cunning plan to get out of their current situation. It is an odd fact that in certain areas where there are foundation trusts, it is the PCTs that seem substantially to carry the deficit. There is a lack of financial predictability across the piece. There is no three-year plan, as there was for local government. There is top-slicing, as various hon. Members have mentioned. Even now, the tariff for payment by results is not finalised. There is also a constant stream of initiatives. The initiative to move heart and asthma care is good in many respects, but it will have a substantial impact on acute trusts’ prospects and budgets. There are also some bizarre rules, such as the requirement that certain amounts of work be allocated to the private sector, even where that is not financially advisable. There is a failure to recognise the true cost of new build and private finance initiative in the capital factor. There is a double whammy whereby once a trust runs up a deficit in one year, it starts with a lower budget the following year. That must be the most insane way of dealing with debt since the debtors prison was abolished. In some cases, a deficit will not be due to anything other than poor configuration, but it can also be due to additional costs that are imposed by the correct configuration, but are simply not recognised. What all those issues require is something I think most hon. Members would consent to—a responsible causal analysis. What we have had in part is a knee-jerk blame reaction, whereby the problem is said to be poor management. It is arguable whether we can leave that causal analysis entirely to the consultants and turnaround teams. It is such people who have argued others into PFIs in the first place, and who churn around the same data as is already available. I am certainly not impressed by what turnaround teams have done in my neck of the woods, where they have, by and large, looked at the figures that the hospital already has and told it what it already knew. There is clearly a difference between a deficit that is accompanied by high output and more and better services—what might be called a virtuous deficit, as more work is being done—and a deficit with no additional level of service, which is clearly unacceptable. The reality is, however, that in order to reduce the deficits, very few alternatives are open to people. One can reduce activity, lose staff or increase efficiency; one of those three things must be done. The requirement that each cost centre should work within its own budget embodies a relatively crude principle of rationing. That is bearable only if we know what entitlements individuals and communities have under existing provision. At the end of the day, our entitlements determine our choices. My great fear is that the drive for financial balance across all cost centres will ride roughshod over patient entitlements and lead to damaging reconfigurations, longer patient journeys, trusts crippled by historic debts and a whole lot of political trouble for the Labour party. A better approach, which we should favour and which is true to the NHS ethos, is not necessarily to begin with the question of how we can get existing cost centres into balance so that they can trade solvently with each other, which seems to be the question preoccupying the health service at the moment. Given the money available, we should be asking what citizens are entitled to and how we can best deliver it. We should start with the people, and local people at that, rather than with institutions. We do not have a false choice between an NHS that satisfies the auditors and an NHS that satisfies the citizen—but in the real world it does not follow that the former guarantees the latter. I urge the Secretary of State to proceed with caution, to avoid simple solutions and to recognise that even with reform, one must learn how to reform. I shall close by quoting the King’s Fund, which has made a pertinent, relevant and on-the-ball comment:"““The increased level of deficits forecast for NHS organisations this year . . . is worrying—but not surprising. It is essential that the Government does not respond in an ad hoc way but instead introduces a system of support to enable NHS Trusts to respond to emerging financial problems flexibly.””" The key word is ““flexibly””.