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NHS Deficits

I am not being unfair. I shall quote exactly what the chief economic adviser said:"““We shall not, however, engage in lines of analysis which put deficits down to expenditure which turned out, in the estimate of the protagonist, to be ‘wasteful’. Had this expenditure not been undertaken, some other expenditure, hopefully less wasteful would have replaced it, and with identical consequences for the budget””." 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. 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"““the disappointingly flat trend in NHS productivity over recent years.””" 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 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 improvements in the NHS for which people have been paying through their taxes. We will hold the Government to account on that.