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Debate on the Address

My Lords, the Benches here warmly welcome the appointment of the noble Lord, Lord Darzi. We welcome it so strongly that we would like to think that he can spend his entire time concentrating on the clinical and medical implications of the National Health Service without any distractions from the business around him of the national health in the wider context. At the moment, we find ourselves very confused as to the state of the National Health Service's finances, largely as a result of the not entirely helpful filing of the year-end accounts at the end of the past fiscal year. As it stands, they are showing a surplus of £515 million, which would be very welcome after a total expenditure of £391 billion in the past six years and aggregate over-runs of £1.419 billion in that time, all of which have been recovered by the Chancellor's golden rule of recovering against the following year. However, the £515 million does not quite look to be exactly what it represents itself as. When we go into it, we find that the whole NHS last year was subject to an acknowledged £450 million contingency, which was centrally imposed at the DoH level. The noble Lord, Lord Hunt of Kings Heath, emphasised that clearly to the House on the last occasion that he spoke to us on the forecast, when he was forecasting a £90 million to £115 million surplus for the year. That was very close to the end of the past fiscal year. In the remaining days that fell to expire before the end of the fiscal year, the figure has gone up from £115 million to £515 million, which represents a going rate of improvement at the EBITDAR level of about £6 billion, which would make it the most profitable enterprise ever in the history of this country. At the present level of enhancement, if the noble Lord, Lord Darzi, can continue that for another three weeks, he will have paid for the 2012 Olympics out of his own spare cash. That would be welcome to us all. However, that does have a slight credibility problem and one looks back at the numbers that have been filed to see if we can find out how good this £515 million is. We find that, in addition to the £450 million central contingency, something else was not declared to us—a further contingency that is not a contingency of £825 million. This is a strange fish indeed, unlike anything that I have seen before. The £825 million was apparently imposed after deducting the £450 million from the total central funding. It was decided by the Department of Health that a top slice should be imposed on the rest of the budget after the budgets had been allocated and compiled by all NHS trusts. It was decided that that figure of £825 million should be imposed wholly on primary care trusts, and it was taken from them and deposited with the strategic health authorities. This raises huge questions and, frankly, starts every nerve in my body going as a warning signal. First, where is this £825 million? What is it doing today? How did the primary care trusts manage to function with their budgets deprived of £825 million in the year? What cuts have been made? Apparently, they will get the money back in 2009, and, therefore, they will be without it for two years. They are short not only this year but next year already. If you add the £825 million to the £450 million, you come up with a total contingency of £1.275 billion. Deducting the £515 million from that figure—the surplus—implies that the National Heath Service has used by the end of the fiscal year £760 million more than the budgeted level of the entire trust structure of the NHS at the outset of the year. That sounds to me like a £760 million deficit masquerading as a £515 million surplus. I would seriously like a better explanation of those figures and how they work. Other questions accompany that. Is the £825 million real money or is it a balance-sheet adjustment? We would not know, because we have never been given a consolidated balance sheet for the National Health Service, which, again, I plead for us to have, backed with a source and application account. Then we might see this matter much more clearly. If the £825 million is real cash, has it been placed effectively on some form of bond or yield, because the interest on that in two years alone would buy at least one or two hospitals and goodness knows how many scanners? If it is on some form of deposit, if I was running the primary care trusts—God forbid—I would immediately go to the strategic health authority to obtain a letter on nice, government-headed paper saying that I owed them £825 million in two years. I would hare off to the nearest bit of the sub-prime banking market I could find, borrow the £825 million all over again and spend it, just to meet my targets for the year. If that has happened, that money is clearly not in the contingency. If it has not happened, is that money securely placed with a triple-A-rated bond yield for the two years to come and will there be money that can be directed back into some other asset? Meanwhile, what cuts have been made? We know of one big cut made last year, when 22,363 nurses were culled from the National Health Service. If you want a visual image, that is almost exactly the same as filling Lords cricket ground on a major test match day with nurses only and telling them at the end of the day to go home and never come back to work again. Thank goodness it was not Wembley—otherwise it would be 88,000. That is an awful lot of nurses to be going without. How does the system function without them? Looking at what is coming up, 50 hospitals are in development and production for the NHS in this country, with another 30 queuing for development behind them. Their aggregate cost is said to be £53 billion, with front-end loading on their financing. That would imply a minimum of £3 billion a year that would need to be funded out of the existing NHS budget for the best part of the next 30 years. Will that money be replaced with like-for-like funding from the Treasury, and, if so, is that another hit for taxpayers' pockets? Where will that money come from? Can an administrative burden be removed to cope with that? We do not seem to have a feel of where this is going in the long term. We deeply wish the noble Lord, Lord Darzi, to succeed in all his objectives, but all the factors that I have mentioned have a clinical impact because they will curtail the usefulness of what he can do, unless there is a financial structure within which he can operate. Finally, we understand that at the moment PFI subjects do not appear anywhere on balance sheets as future liabilities. That is beginning to be a real problem because at present PFI costs are reaching the point where they have virtually repaid the capital cost of the equipment and facilities that they purchased and now have to go on as an enormous revenue outflow on behalf of the NHS for years to come. We ought to know the impact of that. It is time that we had a consolidated balance sheet and source and application accounts to show that. I welcome the noble Lord, Lord Darzi, to his position, but I cannot imagine that he ever woke up one day and said, ““My goodness me, I want to run the biggest business in Europe with all its financial issues””. He probably woke up and said, ““It would be a lovely idea to reform the whole National Health Service””. We hope very much that he soon has the financial stability to enable him to do so.