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NHS Deficits

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.””" But on the other, it says:"““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).