With permission, Mr. Speaker, I wish to make a statement about the NHS chief executive’s report and NHS finances for 2005-06.

Sir Ian Carruthers, acting chief executive of the NHS, today publishes his first report on the performance of the NHS, including the provisional financial out-turn for the last financial year. A copy has been placed in the Library, together with a more detailed report on the finances from the Department’s director of finance, Richard Douglas. This information also forms part of the Government’s evidence to the Select Committee on Health, which is conducting an inquiry into these matters.

I should like to begin by reminding the House of the context. Following decades of growth averaging around 3.1 per cent. a year, since 1997 the NHS has received annual average growth in funding of 6.4 per cent. The NHS budget, which has already doubled compared with 1997, will have trebled by 2008. That unprecedented investment has enabled the NHS to employ an additional 307,000 staff, including 85,000 more nurses. I am sure the whole House will want to express our thanks to all NHS staff for their outstanding dedication and hard work. With that investment has come reform, giving patients more choice for elective operations, using the independent sector to add to the capacity and innovation of the NHS, and establishing NHS foundation trusts with more freedom to respond to local people’s needs.

Sir Ian’s report shows that NHS staff are continuing to improve patient care. Waiting times are continuing to fall. Virtually no-one now waits more than six months for an operation, compared with 270,000 patients who were waiting more than six months for an operation in 2000. The majority are treated much more quickly—the average wait for an operation is around just seven and a half weeks. There is now a maximum 13-week wait for an out-patient appointment. Again, the average wait is much shorter, with four out of five people getting their first out-patient appointment within eight weeks.

Nearly 99 per cent. of people with cancer are treated within a maximum of 31 days of diagnosis, and more than 91 per cent. are treated within 62 days of an urgent referral from their GP, compared with only 75 per cent. one year ago. Early deaths from coronary heart disease, cancer and suicide continue to fall. Patient care is improving everywhere but some parts of the country face significant financial problems.

The provisional unaudited figures for 2005-06 show a net overspend across the NHS, excluding foundation trusts, of £512 million. That is made up of a gross deficit of £1.27 billion, offset by surpluses of £765 million. Although we clearly cannot allow that position to continue, we also need to put it into perspective. The net deficit in the NHS is less than 1 per cent. of the NHS revenue budget and is concentrated in a minority of organisations.

Seven out of 10 hospitals and other NHS organisations are not only improving patient care, employing more staff and paying them better than ever, but doing so within their budget. Two out of 10 have relatively small levels of overspending and only one in 10 NHS hospitals and other organisations account for more than two thirds of the overspending.

My decision to publish those unaudited financial figures, together with the director of finance’s report to me, reflects our commitment to greater transparency in the NHS. In future, we will publish quarterly reports on NHS finances.

In the past, because the focus was largely on the overall financial position of the NHS, overspending organisations had little incentive to improve their performance but relied on other parts of the service to bail them out. The system was unfair because most of the overspending occurred in better-off areas with a generally healthier population and most of the underspending was in places with far greater health needs and health inequalities. We are not prepared to allow that unfairness to continue.

By the end of the financial year, we will return the NHS as a whole to financial balance. The turnaround teams that I announced to the House in January are helping organisations with the biggest financial problems to implement recovery plans that will allow them to maintain and improve patient care within their budgets. As most of the NHS demonstrates, and Sir Ian confirms in his report, there should be no trade-off between improving patient care and sound financial management. They go together.

We are aiming for all organisations with deficits to reach monthly balance of income and expenditure by the beginning of April next year. However, there will be some exceptional cases when an organisation needs longer to make the necessary changes while maintaining patient care. However, because overspending in one organisation has to be balanced by underspending elsewhere, we will continue to challenge and expect that minority of organisations to return to monthly balance as quickly as possible.

We have also asked the new strategic health authorities to establish a regional reserve that will support organisations while they return to balance. That means asking primary care trusts that have stayed within their budget or delivered a surplus to contribute some of their growth money, which averages 9.2 per cent., in the current year and to postpone some of the improvements that they were planning to make for their patients. However, that money will not be lost to those communities. It will be repaid, normally in the three-year allocations period. I have stressed to the health authorities that the areas with the greatest health needs should be repaid first.

There will be difficult decisions to make, especially in the minority of trusts with substantial deficits. In some cases, that will mean work force reductions and we all understand the anxiety and uncertainty that that causes for staff who have dedicated their lives to the NHS.

However, there will not be the wholesale redundancies across the NHS that some commentators have forecast. In most cases, as Sir Ian stresses, work force reductions will be achieved by natural turnover, reduced spending on expensive agency staff, redeploying staff and freezing some posts. Compulsory redundancies will be kept to an absolute minimum and those affected will, of course, be given as much support as possible to find a new post.

The NHS is treating more patients and saving more people’s lives than ever before. Of course there is still more to do to meet the public’s rising expectations, as people are living longer and a revolution is taking place in medical care and scientific knowledge. But Sir lan’s report today shows that the NHS is on the right track, and I commend it to the House.

I am grateful to the Secretary of State for giving me the opportunity to see her statement and the financial performance report 40 minutes ago. After her excursion into a parallel universe, it is about time we came back down to earth. She has come to the House today to admit that, for the fourth year in a row under this Government, the financial situation in the national health service is deteriorating, and that the deficit is a great deal larger than in the previous year. She says that there was a net deficit of £512 million in the last financial year. On a like-for-like basis, it was £216 million in the previous financial year, so it is now more than two and a half times greater.

The Secretary of State’s policy has failed, but of course it is the civil servants and the managers in the NHS who will get the blame. Trusts will be singled out and told that they are responsible for the deficit. Sir Nigel Crisp resigned in March. If everything was going so well in March, I wonder why the chief executive of the NHS had to leave in those circumstances. Since then, there has been an exodus from the Department of Health, with people either jumping or being ejected from the sinking ship. Many of them have rightly said that the NHS is suffering from the void of leadership in the rudderless Department of Health. The growing gap between the hard-working staff in the NHS and the leadership that ought to be coming from the Department of Health is causing a crisis of confidence.

The Secretary of State’s statement purported to give us financial information about the past year. She gave us the unaudited figures, and mentioned a sum of £512 million. Did she go on to tell us that the unaudited figures last year were out by 80 per cent. compared with the audited figures? The audited figures were £112 million higher than the unaudited figures. We do not yet know what this year’s audited figures are going to be.

The Secretary of State told us that the gross deficit was £1.27 billion. That is about 1.5 per cent. of the total NHS allocations. She then said that that was being offset by surpluses. Well, yes indeed—there are £760 million of surpluses. But she did not tell the House that more than £500 million of those surpluses have been generated by the strategic health authorities. That means that they have cut their budgets, and they are planning to do so again this year. Most of those cuts will involve training budgets, which will mean fewer posts for doctors and nurses coming into the profession seeking to pursue their vocation. If there is a 10 per cent. cut in training budgets this year—as postgraduate deans across the country expect—that will affect 4,000 training posts for doctors. In Stoke yesterday, a lecturer in nursing at Keele university told me that—[Interruption.]

Order. The hon. Member for South Swindon (Anne Snelgrove) must be quiet. It is not her function to sit there and heckle.

That lecturer told me that 120 student nurses who are finishing her course at Keele university will not find jobs.

Did the Secretary of State mention that deficit switching has led to cuts in mental health services that have been deplored by her own national clinical director? Actually, she did not say anything at all about mental health services. She talked about the reductions in waiting times, but did she mention the waiting times for diagnosis? Her own figures, to which she did not admit, now show that waiting times—including waits for diagnosis—can be up to four years for trauma and orthopaedics.

Did the Secretary of State admit that, but for the strategic health authorities cutting their budgets, the deficits would be more than £1 billon—precisely the amount that we predicted last November? In December, the Secretary of State told the Health Committee that the deficit would be managed down to £200 million across the NHS by the end of the financial year. Actually, she said £250 million, but she had to be corrected by her officials because she did not have the figure in her head. However, the deficit has not been managed down to £200 million. It is now two and a half times greater than the figure to which the Secretary of State committed herself in front of the Select Committee.

Did the Secretary of State come here with any apology? No, she did not. Did she come here with any clarification of what will happen this year? No. There may be a chief executive listening to this out there. Are chief executives required to achieve balance over the whole of the current financial year? We do not know. Are they required instead to achieve what the Department is now calling—we shall hear this term again—“run-rate” balance, which means balancing monthly income and expenditure in the last month of the financial year? That is a very different discipline. Perhaps they are expected to achieve such a balance; perhaps they are not. Are they required in all cases to recover earlier deficits? We simply do not know.

The Secretary of State is promising that by the end of this financial year the NHS will have returned to financial balance. Will she tell the House that if by the end of this financial year the NHS is recording a further net system-wide deficit, she will resign?

Yesterday the Prime Minister told the public service to speed up reform, but it is the mismanagement of reform that is holding the NHS back. Public servants want to deliver better services continuously, year by year—of course they do—but they cannot do that under a Government who have let them down. It is policy that is failing. It is not only consultants in the British Medical Association who are saying that. We have a Government who fail to allocate resources in line with the real burden of disease and demand across the country, with the result that some health economies are going into serious deficit.

The Government grossly miscalculated the cost of new contracts, and failed to link those contracts to productivity or reform. They are spending billions on the NHS IT programme, but it is over two years late and is not delivering the system that the NHS wants. Last year the Government imposed central targets—the Secretary of State did not mention them—which cost hundreds of millions, distorted clinical priorities, and caused some of the deficits. The Secretary of State talked of 300,000 extra staff for the NHS, but she did not tell us that 106,000 of them were administrators. She has doubled the number of managers, and financial management in the NHS is clearly woefully lacking.

This is a Government who have let the NHS down. Policy failures and mismanagement have left the NHS in serious and growing deficit. Hard-working front-line NHS staff deliver good, indeed excellent, care to patients, but they complain bitterly—and with justification—that that is not because of the Government, but in spite of them. They want to be free of damaging interference by Labour Ministers.

I find it extraordinary that the hon. Gentleman made no mention at all of the dramatic improvements in care that have been delivered in the NHS over the past eight years and, indeed, the past 12 months. I am very surprised that he did not choose to mention that whereas in 1997 the number of patients in South Cambridgeshire who were waiting more than six months, in pain, for operations that they needed was 1,790, the figure in March 2006 was zero. It is extraordinary that the hon. Gentleman failed to mention improvements in his constituency and elsewhere, but I have to say—[Interruption.]

Order. Members on both sides of the House must pay attention to the Secretary of State’s reply. We cannot have Opposition Front Benchers shouting across at the Secretary of State.

Thank you, Mr. Speaker.

Not only did the hon. Gentleman fail to mention the improvements in care for patients; he was clearly very disappointed that the deficit was not higher—that it had not reached the levels that he had predicted. In fact, it is lower than the forecast figure that we published at the half-year point.

The hon. Gentleman asked specifically about surpluses in the strategic health authorities. Many of those surpluses come directly from primary care trusts and other NHS trusts; but instead of being transferred directly to the accounts of overspending organisations, where in the past they have served to conceal the real problem of overspending, they have been held in strategic health authorities.

The hon. Gentleman said that newly qualified nurses and other staff were finding it difficult to obtain jobs. Of course, with more staff in the NHS than ever before—85,000 more nurses alone—it is more difficult for newly qualified nurses to find jobs than it was in the days when it was scarcely possible to find nurses to fill the vacancies that so desperately needed to be filled. What we are doing in response is ensuring that much more effort is made throughout the country to match our newly qualified staff to the vacancies that exist for every kind of staff in some parts of the NHS.

Let me make it clear once again that I am determined that the NHS as a whole will be back in financial balance by the end of March next year. Of course, as Health Secretary I will be accountable to the House and the public for achieving that goal. We have said that we expect individual organisations to sort out their problems and achieve monthly financial balance as quickly as possible. A small number of them—largely those that have been overspending for several years and have large accumulated deficits—will not even be able to get to monthly financial balance by the end of next year. However, as I said, we will go on helping them to make the difficult but essential changes so that they get back into balance and deliver the best possible care within their budgets without expecting other parts of the NHS and other patients to bail them out.

My final point is that the hon. Gentleman needs to decide whether he wants the NHS to deliver the best value possible for the money—the increased money that he and Opposition Members voted against—that the public have put in. Does he really think that poorer areas, which typically are those that have been underspending, should go on bailing out better-off areas that have been overspending? Does he agree with the right hon. Member for Witney (Mr. Cameron), who wrote to the Prime Minister on 18 May asking for the deficit in Oxfordshire—one of the overspenders—to be wiped out? Does the hon. Gentleman recognise that in that area funding has risen by more than £38 million in the past three years? Does he recognise that it will increase again by more than £36 million in the next two years? Does he believe that south-west Oxfordshire, to take one example, which has 64 GPs per 100,000 population, should be given money from, for instance, Sedgefield, with 52 GPs per 100,000 population? Does he really believe that money should be taken from the poor to bail out the overspenders, or does he, like us, believe in fair funding across the NHS, and the best care and value for money everywhere?

I thank the Secretary of State for her statement. Will she confirm that she just told the House that the NHS deficit has doubled in the past year? Will she confirm that one in three trusts are in deficit and that one in 10 are in serious deficit, which is more than last year? Will she confirm that the scale of the deficits is so much that the deficit trusts between them have run up a deficit in excess of £1 billion, which they will have to sort out, including paying back any assistance that they get from other trusts? The Secretary of State gave figures excluding foundation trusts. What are the figures including foundation trusts?

Who is responsible for the financial crisis? If the Government set the pay rate for GPs, doctors and consultants, set “Agenda for Change” and NHS staff rates, set the tariff for how much trusts get and set all the targets, is it someone else’s fault or is it the Government’s fault if the sums do not add up? Will the Secretary of State take responsibility for the deficit in the NHS? How much of it is due to Department of Health mistakes, creating bodies that get abolished a few years later and negotiating contracts that result in overspending—the GP contract and the consultant contract? Is that her fault or someone else’s fault? Can we believe her when she says that the NHS will be in balance at the end of the year when Sir Nigel Crisp said in December that the deficit this year would only be £200 million and then, just a few months later, she told us that it would be two and a half times as big? Why should we believe her when she says that she will get the deficit under control this time around?

The surpluses in the NHS are in different places to the deficits, so the gross deficit of £1.2 billion is huge. Is not it the case that it takes incredible mismanagement to spend record sums of money on the NHS and to come to the House admitting the worst deficits in years? How has the Secretary of State achieved that? How did she manage to do that?

Is not it the case that what is going on is breakneck NHS reform, because the Prime Minister said that he will not go until the NHS is sorted out? How quickly will it be sorted out? Is not it the case that what we are getting is not measured organisational change, with long-term planning and rational reorganisation, but emergency cuts packages to deal with a short-term financial crisis? Does the Secretary of State accept that that is no way to run the NHS?

I have already given the specific answers to the questions that the hon. Gentleman asked initially. I have made it clear, and I shall make it clear again: seven out of 10 NHS organisations are in balance or delivering a surplus. Two out of 10 have a relatively small deficit, which is quite manageable. One out of 10 organisations, many of which have been overspending for several years, have serious financial problems. The financial figures for the foundation trusts were published earlier this week by Monitor. Their overall deficit is £24 million, making an overall deficit of £536 million, which is still significantly less than 1 per cent. of the overall NHS budget.

If the cause of the deficits was pay rises for staff or targets for better care for patients, there would be deficits everywhere, and there are not. The majority of trusts in the NHS are employing more staff and paying them better, treating more patients faster than ever before, and saving more people’s lives—and they are doing it within their budgets. It is entirely reasonable—I am surprised that the hon. Gentleman does not support this—to say that the NHS should be doing that everywhere.

I am proud of the fact that we are paying our staff better than ever before. I am sure that they will note with interest that the Liberal Democrats are not so keen on that. It is perfectly true that the GP contract cost more than we and the British Medical Association initially anticipated. There is a very good reason for that: it is a performance-related contract and the GPs have delivered more and better care than we and the BMA expected. The additional costs in the GP contracts—somewhat below £300 million—have delivered better care for patients. Indeed, thousands of people are alive today as a direct result of that GP contract.

I stress—I tried to make this point earlier—that in the past the financial reporting systems within the NHS had the effect of concealing persistent overspending in a minority of organisations. In some cases, the underlying financial problems were wholly unclear even to the organisations themselves. We have stopped that. As a result of the changes and reforms that we are making, we have much greater transparency right across the NHS as we give patients more choice, as money follows the patients, and as hospitals, particularly foundation trusts, have greater freedom to respond to what patients need while taking responsibility for their performance and for delivering the best possible patient care within those increased budgets. In other words, our reforms are helping to reveal the problems and to deal with them, rather than causing them.

As Health Secretary, I take responsibility for the NHS, for getting the policy framework right, and for ensuring that we have got the right support within the Department of Health to make sure that our front-line staff go on doing a superb job for patients. I regret that the hon. Gentleman, like the hon. Member for South Cambridgeshire (Mr. Lansley), failed once again to acknowledge all the improvements taking place in the NHS for patients.

Does my right hon. Friend agree that the statistic that she just quoted—that seven out of 10 NHS organisations are improving patient care and employing more staff and paying them better—belies the siren voices of both Opposition Front Benchers, and of the BMA consultants this morning? Would not they do better to find out why three in 10 organisations cannot do what the majority can do?

I entirely agree with my right hon. Friend and I know that he, in his capacity as Chair of the Health Committee and in the inquiry that he is undertaking, will help us to do exactly what is needed, which is to ensure that we deliver the best value and the best possible care for patients everywhere—within the enormously increased budgets that we have given to the NHS.

Does the Secretary of State accept that it is not a surprise to anyone that every Member present wants a health service that is fair, effective and improving? She says that money will follow the patient, but will she look into what is happening in Worthing—in my constituency and that of my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton)—where the hospital trust is expected to save 8 to 10 per cent. of its budget in-year, with an option of moving accident and emergency services far away from Worthing, which is the largest town in West Sussex? Would that be a case of moving the patients and the money following them—or would it be better to bring the money to the patients and to let them be treated in their own town?

I am sure that the hon. Gentleman will readily acknowledge that in his constituency, as everywhere else in the country, far more money than ever before is going into the NHS. I am not aware of the specific proposals for changes to the accident and emergency services to which he refers, but I will look into that and, if necessary, write to him with further information. I stress that such changes in NHS services have to be subject to full public consultation before decisions are taken and changes made.

rose—

Order. It is clear that a lot of hon. Members wish to respond to this statement. I therefore hope that they will limit their contribution to one question, perhaps followed by a short reply, so that more of them can be successful.

Brokerage was clearly the drug to which the NHS should never have become addicted. Anyone who has run a large public organisation will recognise the need to drive out overspends on a continuing basis. Where trusts still have to recover debts and the financial recovery plans that protect patient services take perhaps two years, rather than one, to take effect, will the fund that the Secretary of State hopes that strategic health authorities will hold enable trusts—where such a fund is available—to deliver over the longer term, rather than the shorter term?

Yes, but as I stressed earlier we want that to happen only in exceptional cases and for the reason that I gave, which is that, where an organisation is taking longer to return to balance, another organisation will have to underspend and thereby postpone improvements that they want and need to make for their own patients.

Barking, Havering and Redbridge Hospitals NHS Trust is entering a year of great change, in which services and patients will have to be transferred from two old hospitals to one new one. That in itself is an enormous management challenge and has cost implications. Does the Secretary of State agree that it is almost too much to ask the trust to achieve that and to recover its budget deficit in one year? Will she seriously consider allowing the trust to recover its budget deficit over two years, or even three, in order to protect services to the public?

I am sure that the hon. Lady and her constituents will warmly welcome the new hospital and the far better facilities that it will offer patients. I have no doubt that the point that she makes is also being made by many hospitals that have been overspending. The chief executive and chair of her local hospital will of course be discussing this matter with the London strategic authority, which has a reserve power; it has the discretion—but only in exceptional circumstances—to allow longer for that recovery to take place.

I appreciate my right hon. Friend’s acknowledgement that some trusts and local health economies will have serious problems in coming to terms with the deficit. I ask her to continue to take a keen interest in our efforts to move the north Staffordshire health economy out of deficit, which will take longer than the time that the Government are allocating. Will she make sure that, in addition to the £60 million that has just been announced for the new building programme, we can get early closure in respect of the fit for the future project and an early decision on the North Staffordshire community hospital?

My hon. Friend has been assiduous in supporting staff and her constituents in the very difficult situation that North Staffordshire hospital faces. I will continue to stay closely involved as their hospital and health community are supported in returning to balance, and I am sure that she will wish to join me in thanking the new chief executive of the hospital, the primary care trust and the acting chairman of the hospital for the work that they are doing with front-line staff to ensure that difficult decisions are taken in a way that has the least possible impact on patients, and that any staff affected are given all the support that they need.

Let me explain one of the reasons why there is such a problem with finances in West Hertfordshire Hospitals NHS Trust, which is in my constituency. Sedgefield, for instance, gets £1,210 per head, whereas last year in Hemel Hempstead, Dacorum primary care trust received £960 per head. There is a clear problem across the country in this regard. On Monday night, the health trust announced, in essence, the closure of Hemel Hempstead hospital, as it is facing £450 million-worth of debts. My constituents will be astonished at the complacent and patronising way in which the Secretary of State has addressed this problem. Their hospital, which was built for their community, is to close.

As the hon. Gentleman knows, the deficit and overspending problems not only in Hemel Hempstead but across Bedfordshire and Hertfordshire are extremely serious. They have to be tackled, and there has been lengthy debate and full consultation on the changes that are needed in respect of different hospitals in that area. He talked about funding, but I should point out that in his constituency there are 65 general practitioners per 100,000 population, which is significantly more than the average and significantly more than in a constituency such as Sedgefield. I am sure that the entire House and the public will be interested to hear that what the hon. Gentleman is asking for is less money for areas such as Sedgefield, which have far greater health needs, and more money for his area. However, his area has already received enormous increases in its NHS budget, and, on average, it has a healthier and wealthier population than the areas from which he would seek to take money.

I say to the Secretary of State on behalf of people such as me and Ronnie that age does not travel alone, and that we use the national health service. He has got a brand new knee—and he is proud of it—and I have been in the cardiac and cancer wards and the rest, and, like Eartha Kitt, I am still here. I have got the national health service to thank for that.

It is high time that there was some balance in this debate. If the Rover plant had had financial figures of the kind referred to today, it would still be open. If Peugeot had been able to produce the same results, its workers would still be at work, and if the National Coal Board had been able to produce those results, there would be 200 or 300 pits open today. The truth is that this is nothing other than a success story for people like me and the 30 others who had open-heart surgery. But the BBC, which joined with the Tories, refused to come to Brompton hospital and do a success story about the 30-odd people who had open-heart surgery and managed to survive.

My hon. Friend is absolutely right and I certainly could not have put it better myself.

At 12.30 pm today, the National Audit Office published the summarised accounts for 2004-05. The Secretary of State has announced today an unaudited deficit for 2005-06 of £512 million. For foundation hospitals, that will rise to £536 million. However, if we look at the audited accounts for 2004-05, we see that the audited account deficit was almost twice as much as the unaudited deficit. In light of what has happened in the last year, what credence can we give to these figures, which are unaudited, and how much trust can we have in financial management in some parts of the NHS?

I made it clear that the figures are unaudited, but I thought it right to publish them for the House, as I undertook to do and as I did last year, rather than wait for the audited figures, which are some months away. The hon. Gentleman is quite right: last year saw a significant shift between the unaudited figures and the audited accounts. Obviously, we do not yet know what the audited accounts will show this year, but for several months the finance and turnaround teams have been crawling over the accounts of the organisations with the biggest financial problems, which has revealed problems that had not been acknowledged or discovered at the point of the mid-year accounts.

The hon. Gentleman mentions the National Audit Office report, of which I have had early sight, and I am grateful to the NAO and the Audit Commission for their recognition that our reforms to bring about greater transparency in the NHS are helping to uncover, and therefore to tackle, some of the longstanding problems.

But it is true, is it not, that a major cause of some of the deficit is unfunded or underfunded centrally imposed initiatives or wage settlements? What is my right hon. Friend doing to take that into account for the future?

As I said earlier, I am proud of the fact that we are paying our staff more. “Agenda for Change”, in particular, has been a huge step forward, ensuring that we can guarantee our staff equal pay for work of equal value and reward them for taking on greater responsibilities. We have put more than £1 billion additional funding into the NHS simply to fund “Agenda for Change”. The great majority of NHS organisations are meeting those obligations, paying staff more and employing more staff, but doing so within their budgets, which we expect the rest of the NHS to do.

Is the Secretary of State aware that it has been announced today that Royal Cornwall Hospitals Trust—it covers not a better-off area, but the poorest region in the UK—has an estimated deficit of £15.7 million, which is double what was announced only three months ago? Will the Secretary of State inform the House who is responsible for that? Is it the trust, which is appointed by her; is it the perpetual and expensive Government gimmicks endorsed by her Department; is it the funding formula that leaves Cornwall at the bottom of the earnings league table; or is it, in fact, the Secretary of State herself?

There are different specific reasons for the deficits that have arisen in a minority of organisations—there is no single cause. If it were the targets or the pay rises, the deficits would arise everywhere, which is not the case. The Royal Cornwall hospital and the health community there must look into the same issues as other parts of the NHS are having to look into. For instance, are they doing enough day case surgery? Are they doing enough in the community to reduce the number of emergency admissions? Are they carrying out all the proven measures that are being used in other parts of the NHS to deliver better care to patients, with better value for money? The hon. Gentleman mentioned the funding formula, which we have made fairer. It now takes account of issues such as the demands of a rural economy, the proportion of elderly people living within the community and, above all, social and economic deprivation. That is why, over this year and the next, the poorest areas with the biggest health needs that are furthest from their target funding will get the biggest increases. I think that that is fair, and I regret the fact that the Opposition parties do not agree.

I welcome today’s statement, not least because my own strategic health authority and two primary care trusts are in reasonable financial positions. However, can the Secretary of State guarantee that people in Denton and Reddish and elsewhere in Greater Manchester—areas with real health inequalities and real health needs—will not lose out to other areas, often more prosperous, which have run up financial problems?

My hon. Friend raises an extremely important point, which is why I stressed to strategic health authorities that money contributed by primary care trusts such as my hon. Friend’s to help manage the deficit in a different part of the north-west will be repaid, and it should be repaid to areas with the biggest health problems and the poorest populations before it is paid to others.

I gladly acknowledge the improvements, particularly in cancer and cardiac care, but I am completely puzzled by why morale is so low among NHS staff. Why are so many medical staff counting the days to retirement?

I am grateful to the hon. Gentleman for acknowledging the superb work that is being done. He reflects the fact that an enormous amount of change is and has been going on in the NHS for some years, and of course that is enormously demanding for staff. The reason that change is continuing is, first, because it is working. I am sure that the hon. Gentleman would, like me, welcome the fact that the latest survey of patients showed that 90 per cent. believed that their NHS care was good, very good or excellent—the highest-ever level of patient satisfaction. That places demands on staff and we have to continue to change within the NHS in order to meet all the challenges of which the hon. Gentleman is so well aware, including the need to release resources for the new drugs and treatments that are becoming available, which patients quite rightly want to receive as quickly as possible.

Does my right hon. Friend agree that it would be unacceptable if deficits created a new postcode lottery whereby patients from one area had to wait longer for treatment than patients in a neighbouring area? Selby and York primary care trust has the worst deficit by far in the north of England. If it had been required to balance its books in a single year, it would have had to cut spending by more than 15 per cent., which would have had devastating consequences for patient care. I welcome my right hon. Friend’s decision that some PCTs with the worst deficits will have longer than a single year to balance their books, but would she be prepared to meet me and senior health leaders from York and Selby to discuss the recovery strategy and reassure herself that she is not imposing conditions that would lead to an unacceptable postcode lottery?

Let me stress that our targets—the six-month maximum wait, or for dramatically improved cancer care—apply everywhere. We expect them to be achieved even in organisations with serious financial problems. Of course, I readily agree to meet my hon. Friend to discuss those matters in more detail.

I welcome the increased investment in the NHS, but is not the introduction of practice-based commissioning, payment by results, patient choice, the merger of the primary care trusts, the abolition of the strategic health authorities, the roll-out of foundation trusts and the introduction of a new IT system simply imposing too much change at the same time? The people trying to manage those changes are currently having to bid for their own jobs. Does not the NHS really need a period of stability and fewer initiatives from Whitehall?

When the Minister of State, Department of Health, my hon. Friend the Member for Leigh (Andy Burnham) recently announced, in my unavoidable absence, changes to the primary care trusts, they were widely welcomed. I know from my own city of Leicester that people have felt for some time that it was wrong and unnecessary to have two PCTs when one PCT, coterminous with social services, could do even better than the existing organisations. I believe that those changes were necessary. The right hon. Gentleman mentioned practice-based commissioning, and I am delighted that already a number of GP practices are signing up to it. That work will continue because it provides a way of ensuring that we can deliver better care more conveniently for patients and closer to home. We want to provide better care and better value for money as well.

My right hon. Friend will be aware that South Birmingham primary care trust is one of the better-managed PCTs that has kept to budget and contributed to improvements in patient care. Indeed, some of the local hospitals, such as University hospital, also have a good financial record. Although they and I understand the logic behind the reserve and the fact that they will need to contribute to it, does she understand that they need some more reassurance that, while the much-needed improvements that they have planned may be delayed somewhat, they need to come on stream, so that their health needs and the needs of those communities, which are often uneven but nevertheless very severe, will be addressed and so that they will not have to wait an unreasonable time for that to happen?

I can certainly give my hon. Friend that reassurance. One of the reasons I am being so tough on the overspending organisations is that I am not prepared to allow the areas with the greatest health needs, such as his constituency, to go on bailing out overspending in areas that often have more NHS services than those poorer areas. I know that he and his constituents very much welcome the recent announcement that University Hospital Birmingham Trust will have a badly needed new hospital, which will enable it to go on improving the care that it offers to the people of Birmingham and the west midlands.

By the Secretary of State’s own admission, three out of 10 NHS organisations are in deficit. Although she tried to diminish the importance of that figure by making excuses, the reality is that 30 per cent. of NHS organisations are in deficit, the impact of which is felt by thousands and thousands of people who receive less treatment than they would otherwise. It is regrettable that the Secretary of State cannot bring herself to admit that failure under her stewardship, but it is worse still that she cannot bring herself to apologise to those thousands and thousands of people. I invite her to review the position and to consider apologising to the thousands of people who are suffering.

The hon. Gentleman, whose party voted against the increased investment in the NHS, really ought to acknowledge the fact that thousands of patients who were waiting in pain for months—sometimes years—for operations under the Conservative Government are now being treated better and faster than ever before. It is high time that he acknowledged that and praised the NHS staff for those achievements.

What extra resources will my right hon. Friend provide to those areas, such as my constituency in Hull, whose PCTs are in balance and well managed, despite the huge health challenges that they face?

The extra funding that is going into the NHS this year and next year will be more than 9 per cent. of budget, and because of the fair funding that we are introducing, the areas with the greatest need will get the greatest funding increases. I know that that will be welcomed by my hon. Friend and her constituents.

There has undoubtedly been a massive increase in expenditure on the NHS, but in some areas, particularly in Northern Ireland, substantial and significant problems remain. Will the Secretary of State confirm that the Government will undertake a comprehensive and radical review of NHS funding, along with many more preventive measures aimed at the higher risk groups in society?

The NHS in Northern Ireland is, of course, a devolved matter, but we have already undertaken a substantial review of NHS funding; the report of Sir Derek Wanless, in particular, made it clear that we have the fairest and the most efficient funding system in the world. Labour Members would certainly never want to depart from the basic values of the NHS: funding from general taxation and treatment based on clinical needs, not on ability to pay.

The James Paget health care trust, which runs my local hospital, has no deficit. It has met and, indeed, exceeded all its waiting list targets and every other target that it has ever been asked to meet. That is why it is a well-managed, three-star hospital. Waveney primary care trust has a small but manageable deficit. We are delighted that we are about to be merged with Great Yarmouth PCT. I thank my right hon. Friend for that decision. The Great Yarmouth PCT has no deficit, but the strategic health authority is requiring it to loan about £3 million to other trusts. Will she guarantee that we will get that money back? Can we be in the first group of trusts to get it back, bearing in mind our levels of deprivation and health inequality?

My hon. Friend, as ever, makes a powerful case on behalf his constituents and his local NHS. The James Paget hospital has achieved some outstanding innovations in the organisation of its surgeries. That is one of the reasons why it is performing so well. He refers to the reserves and the contribution that his PCT is making towards them. Of course, as I indicated earlier, those in his health community will have the ability to spend restored to them. That will be done as quickly as possible, and I have made it clear to the SHA that the areas in the greatest need should get their money back first.

My constituency has never had a higher level of health care than we have at present. That is partly due to the funding coming from the Government, but is mainly due to the dedication and professionalism of the staff. However, what would the Secretary of State advise me to tell my constituents who are seeing a ward close—not as the result of inefficiency; the hospital is run effectively—while the salaries of the foundation trust’s chairman and board members are being doubled? Right across the country, every foundation trust’s non-executive members’ salaries will double. Sometimes, those people are earning more than £50,000. How can we justify sacking nurses and closing wards when we are paying unelected people those huge salaries? What added value do they bring to the system? Will she look radically at their work?

Board members’ salaries are entirely a matter for foundation trusts. The hon. Gentleman’s foundation trust, like others, will have local members and a local governance arrangement, and it is up to the members and the governing council to decide what those salaries should be. He refers to ward closures. There are many reasons why a hospital might want to reorganise wards. It might need and want to reduce the number of beds. For instance, if it is doing more day case surgery or if it is bringing people in for an operation on the morning that it takes place rather than the day before, that is better for patients, but it has the effect that fewer beds are required and therefore resources can be released for use on other improvements in care for other patients. I thought that he would welcome that, as well as the strong leadership that is provided by those on the good board of any well-performing organisation, rather than criticising them in the shallow way that he did.

I am fed up to the back teeth with siren voices talking down the NHS. I have a lot to thank the cardiothoracic centre in Broadgreen hospital and the Countess of Chester Hospital Foundation Trust for my health. I have been looking around at the fantastic work that has been done on GP referrals for cancer patients in my constituency. The figure is now up to 99.9 per cent.—a fantastic result. Let us talk up the NHS. However, on the PCTs in my area, will my right hon. Friend ensure, as part of her commitment to the more disadvantaged areas, that there is no disproportionate slicing of resources from mental services in the recovery programmes?

My hon. Friend is absolutely right about the first point that he makes, and I can assure him that there will be no disproportionate impact on mental health services; they are being treated exactly the same as other services.

Last week, the chief executive of my hospitals trust announced 150 sackings. Yet, only four years ago, the same chief executive told The Daily Telegraph:

“The NHS is people-hungry. It needs skilled and qualified people and that is why we are scouring the world.”

Employment has gone up immeasurably in the past four years, only to have 150 sackings announced last week. Is that not a clear case of Labour’s boom and bust in the NHS?

The hon. Gentleman has fallen into precisely the trap that so much of the media have and that I warned against earlier: those are not sackings. [Hon. Members: “Yes they are.”] The hospital is making difficult but necessary decisions because it has a serious financial deficit and it is part of a broader health community in north-west London that accounts for a very large part of the deficit across the country, as he will see when he looks at the more detailed figures. Hammersmith hospital and the other hospitals in that part of London need to consider whether they are doing enough day-case surgery and organising their services in the best possible way, and they are already telling us that they can organise those services more effectively and continue to deliver patients very good care indeed.

On a point of order, Madam Deputy Speaker. I should be grateful for your guidance on a point of order about the future of the Nuffield speech and language unit, which I raised with the Secretary of State on Tuesday 9 May and in which I declare an interest as the parent of a two-and-a-half-year-old boy who might in future require its services. I am not trying to make this point in a partisan way: I am simply anxious. The Secretary of State promised on 9 May to write to me directly, but has failed to do so, and I have still not heard from the Under-Secretary’s office about the meeting promised to me. It is most unsatisfactory when Ministers make promises and then do not keep them. [Interruption.]

Order. I understand that the hon. Gentleman has raised this situation on more than one occasion. Ministers from the Department of Health are present and I am sure that they will have heard what he said. It is, of course, not a point of order for the Chair.

Further to that point of order, Madam Deputy Speaker. I wrote a letter six weeks ago to the Minister of State, Department of Health, the hon. Member for Doncaster, Central (Ms Rosie Winterton) , asking for a meeting to bring local mental health charities to visit her to discuss cuts in my local mental health service. What can I do to secure a positive response and advance that meeting?

That is not a point of order for the Chair, but the hon. Gentleman has made his point and Ministers from the Department of Health are present to hear it.

I beg to move,

That leave be given to bring in a Bill to align cigarette manufacturing standards with international best practice so as to reduce the number of fires and fatalities in the home caused by cigarettes.

This Bill would require that tobacco firms modify their cigarettes so that they have a reduced ignition propensity. Essentially, that means that such cigarettes go out if left without being drawn on for more than a few seconds. The House is of course well aware of the toll of premature death and disease caused by smoking. As a result of recent debates, if nothing else, we are also now well informed about the damage that breathing in other people’s smoke can do to one’s health. However, there is a third element of the misery caused by smoking that is perhaps less well understood, and that is the number of deaths and injuries from fires started by cigarettes. I commend the Fire Brigades Union and Action on Smoking and Health for the work they have done to highlight the continuing risks associated with smouldering cigarettes.

Despite some success with “stub it out” campaigns, the number of tragic and avoidable deaths in such domestic fires has proved hard to drive down. The Government report “Fire Statistics for the United Kingdom” shows that in 2004, 3,500 fires in dwellings were caused by smoking materials, not including cigarette lighters and matches, and a further 1,600 in other buildings. Over the previous 10 years, the number of such fires totalled more than 60,000. Fires in dwellings caused in that way resulted in 114 deaths in 2004 and 1,260 non-fatal casualties. Smokers’ materials are the most frequent source of ignition causing accidental dwelling fire deaths, accounting for around a third of such deaths every year. The vast majority of those fires were caused by manufactured cigarettes.

The victims of those fires are more likely to be from low-income households and of course they include non-smokers as well as smokers, children as well as adults, and firefighters as well as members of the public, so this is no trivial matter. If the dry statistics are not enough, the human stories behind them are all too evident. For example, the Edinburgh Evening News of 16 May this year reported on a fire that left a child aged less than 18 months with burns over almost half his body, requiring the amputation of two of his toes. It also left his family without a home. By great good fortune, and thanks to the presence of a smoke alarm, no lives were lost. Investigators believe that that fire, like so many others, was most likely to have been caused by smokers’ materials.

Tobacco manufacturers have long dismissed the link between cigarettes and fire deaths as “merely a public perception”, but for more than 20 years, as internal industry documents clearly show, the tobacco industry has known full well that many of those fires could be easily prevented. It argues that the introduction of cigarettes with a reduced propensity to ignite would lead to more negligent behaviour, but that is not a valid argument as the changes needed to the cigarette are slight and unlikely to be noticed by smokers. There are also many examples of safety standards being imposed on consumer products to protect public health without triggering dangerous or irrational behaviour, such as seatbelts and airbags in cars. If that argument were accepted, nothing would be accomplished by any attempt by the authorities to impose safety standards on consumer products. To avoid misleading descriptions, I suggest the use of the term “reduced ignition propensity”—as used in Canada—rather than “fire safe” or “self-extinguishing”.

In January 2000, the tobacco firm Philip Morris introduced a reduced ignition propensity cigarette into the market, using small speed bands on special paper, which ensured that the cigarette rapidly went out if not actively smoked. In August 2000, New York state passed fire safety regulations requiring that all cigarettes sold there had to meet reduced ignition standards by June 2003. Early figures suggest that that may have reduced the number of fire deaths from smoking materials across the state by at least a third. Similar standards now apply in Canada, and the regulatory impact assessment there forecasts a reduction in the number of fires caused by manufactured cigarettes of up to two thirds. In the US, Illinois and Vermont have already followed the example of New York.

In this country, a fire research report done for the former Office of the Deputy Prime Minister estimated that, had cigarettes in the UK conformed to the highest standards in New York, the number of fires caused by cigarettes would have fallen by nearly two thirds. The ODPM figures suggest that that would have meant 78 fewer deaths in 2003 alone.

Such standards could be introduced across the European Union, under the general product safety directive. Indeed, the European Commission is believed to favour such a move. Therefore, I hope very much that we can now discount early rumours that officials at the Department of Trade and Industry might not support further progress on this issue, when the relevant Committee meets in Brussels on 13 and 14 June next week. I understand and accept that the DTI rightly seeks to protect business from unnecessary regulation, but I do not accept that the bulging bank accounts of the tobacco industry really need such diligent defence by Government officials. Surely the experience of that child in Edinburgh and the thousands of other victims of fires caused by cigarettes merit a little consideration.

If DTI officials are really so worried, let me reassure them that reduced ignition standards could be introduced at minimal cost to business and without threatening sales. Many of us may say in relation to cigarettes that that is not something to be given undue priority in any event. I hope that, now this matter has been drawn to the attention of Ministers, they will instruct their officials to take a more constructive approach. However, this House does not need to wait for the cumbersome processes of the European Union and the internal workings of Whitehall Departments to bear fruit. My Bill would require this simple and overdue measure to be introduced in the United Kingdom.

Smoking is a lawful activity in a free society, but it brings with it terrible problems and it is surely our job as legislators to ensure that they are minimised as far as possible. In this case, we could introduce reduced ignition standards without affecting anyone’s freedom to any significant extent. The number of fires would be reduced. The number of deaths and serious injuries in fires would fall too, and insurance costs would fall with them. The Department of Health would be assisted in its hugely important aim of reducing health inequalities. The Department of Communities and Local Government would be helped to meet its equally crucial public service agreement target of cutting the number of deaths from fires in the home by a fifth by 2010. And fewer young children like the Edinburgh toddler would be exposed to horrific accidents and injuries.

In my own county of Leicestershire, a 55-year-old Anstey man would still be alive today if this Bill had been on the statute book, as would a 70-year-old woman from Fleckney. Residents in Thringstone and Ravenstone, wards that I have represented at various stages in my local government career, would not have had some serious fires occur in their homes—so it is not surprising that the Bill is supported by firefighters who, all too often, have to risk their own safety to deal with fires caused by cigarettes. That is especially true for those in the Leicestershire fire service, whom I thank for their research into one element of the Bill.

In short, everyone would gain from my Bill—and even the tobacco industry would barely notice its effect. The recent historic votes in this House on the Health Bill show that there is overwhelming support for action to reduce the burden of death and disease caused by smoking. We must disregard the rather odd conclusion reached yesterday by the Economic Affairs Committee in the other place, which suggested that we should have legislated to prevent passive smoking in the home—how on earth would we do that?—instead of taking the historic step of eliminating it in workplaces and enclosed public spaces. I chair the all-party group on smoking and health, and I respectfully suggest that their lordships are somewhat detached from reality on this issue.

I recently tabled early-day motion 2290, which draws attention to the hundreds of lives being lost in fires caused by smoking-related materials. I am gratified at the extent of support already shown by parliamentary colleagues for that motion.

Where we cannot persuade people to quit smoking altogether, we can—and must—act to reduce the harm caused by that habit and addiction. My Bill is a simple and overdue measure that is designed to achieve precisely that. I commend it to the House.

Question put and agreed to.

Bill ordered to be brought in by David Taylor, Norman Baker, Mr. Kevin Barron, Mr. Peter Bone, Colin Burgon, Mr. David Drew, Dr. Ian Gibson, Mr. Lindsay Hoyle, Helen Jones, Mr. Gordon Prentice, John Robertson and Bob Russell.

Fire Safety (reduced Ignition Propensity in Cigarettes)

David Taylor accordingly presented a Bill to align cigarette manufacturing standards with international best practice so as to reduce the number of fires and fatalities in the home caused by cigarettes: And the same was read the First time; and ordered to be read a Second time on Friday 20 October, and to be printed [Bill 192].

I must inform the House that Mr. Speaker has not chosen either of the amendments tabled to this motion.

I beg to move,

That this House notes the overpayment, fraud and incompetence in the administration of the tax credit system; is concerned about the impact of this incompetence on the most vulnerable members of society; and calls upon the Chancellor of the Exchequer, the author of the tax credit policy, to explain to this House what measures are being undertaken to address these problems.

The incompetent administration of tax credits touches the constituents of every Member of this House. This debate could not be more timely: last week, the Inland Revenue revealed that almost half of the 6 million people in receipt of tax credits were paid the wrong amount. That is a staggering level of error, and an increase on the previous year.

I welcome to the debate the Chairman of the main Treasury Select Committee, and his counterpart on the Treasury Sub-Committee. The Treasury Committee, of course, is made up of Members from all parties. Yesterday, it published a report identifying Government error as a key cause of the overpayments. In its briefing for this debate, the National Association of Citizens Advice Bureaux reminds us that, four years after the introduction of tax credits, it continues to see

“thousands of families who face hardship and genuine confusion as they have been told that they have been overpaid but given no explanation and no warning before payments are suddenly cut”.

Yet the Chancellor of the Exchequer still lacks the courage to defend a policy that he designed and implemented. We are told that he is at ECOFIN—the first such meeting that he has attended since December. Two days ago, he was planning to send the Paymaster General. We know that because we have the list of the week’s events produced by No. 10 Downing street. It clearly states:

“EU ECOFIN Council meets in Luxembourg — Paymaster General Dawn Primarolo attends.”

Then this debate was called and, for some reason, the Chancellor of the Exchequer changed his mind. Is it not strange how the right hon. Gentleman is always around to take the credit if things go well, but always happy to let others take the blame when things go wrong? Not once in the past year has he made a statement, taken part in a debate or even answered a question on tax credits. It is the policy that dares not speak its name, from a Chancellor who dares not open his mouth. Prime Ministers need many qualities, but political cowardice is not one of them.

In the Chancellor’s absence, we have the poor new Chief Secretary to the Treasury. He, at least, must know something about the chaos in the tax credits system as he happens to represent the constituency with the largest number of people who are overpaid and the largest number who are underpaid in the entire country. Half of all the hon. Gentleman’s constituents in East Ham who claim tax credits receive the wrong amount from the Department that he helps to run.

The Chief Secretary will undoubtedly tell us that the amount being overpaid across the country has fallen a little, to a mere £1.7 billion. When he does so, perhaps he will confirm that the number of people being overpaid has risen, with almost 3 million people getting the wrong award. When he tells us that help is going to the poorest families, will he also confirm that more than 100,000 of the poorest families—those on incomes of less than £5,000—did not receive the level of support to which they were entitled? When he tells us about what he has called in the past couple of days the “improved performance” of the tax credits system, will he explain why the number of people in his constituency being overpaid has doubled in a year? Why did NACAB tell me yesterday that there was no sign of a reduction in the number of families contacting it?

Will the hon. Gentleman give way?

In a moment.

The tax credits system is a shambles. The Chief Secretary knows that, as does every MP in this House. The millions of people caught in the system’s web know it, too—it is a shining monument to the incompetence of this Government. On that note, I give way to the Chief Secretary.

The hon. Gentleman referred to the report published yesterday by the Treasury Committee and to the remarks made in the introduction by the hon. Member for Sevenoaks (Mr. Fallon), who said that tax credits were right in principle. Does he agree with that?

Yes, I believe that tax credits are right in principle, but I want a system that works. The present system does not work, and that is why we are having this debate.

Will the hon. Gentleman give way?

I am happy to give way to the right hon. Gentleman. I do not know whether he has checked the figures for his constituency produced by the Inland Revenue, but 5,200 people there received the wrong payment.

Does the hon. Gentleman accept that the Treasury Committee is an all-party Committee, and that its report supported the principle of tax credits? The next question is, does he support a flexible system or a fixed system for tax credits?

My hon. Friend supports a system that works.

As my hon. Friend the Member for Buckingham (John Bercow) suggests, I support a tax credits system that works. Towards the end of my speech, I shall speak specifically about whether the system should be flexible or fixed. I note what the Treasury Committee report says about the variability of low incomes, and its request that the Chancellor keep an open mind about moving to a more fixed system.

The hon. Gentleman has said that his party supports tax credits in principle and that it wants a system that works. However, does he accept that the variability of low incomes is bound to mean that a substantial number of claims will have to be adjusted at the end of the financial year, under any system? I used to be an accountant, and I speak as one used to dealing with complex forms. Does the hon. Gentleman also agree that, to understand the statements that people receive, one needs a post-graduate qualification in encrypted Sanskrit?

The hon. Gentleman makes his point extremely well and I had better support his ten-minute Bill now.

Today’s debate should focus not just on the mistakes of the past, but the prospects for the future. I have four questions for the Chief Secretary to answer when he responds. They lie at the heart of whether the Chancellor’s tax credit system, designed by the Economic Secretary, can ever be made to work in future. First, can the Chief Secretary confirm that the huge annual overpayments—almost £4 billion in two years—are not the result of what the Paymaster General once dismissed as “teething problems”, but are now a permanent feature of the tax credit system? He admitted as much last week when he set out the latest emergency reforms to the way in which the credits operate. He said—this is a striking statement—that once the changes are

“fully implemented, we expect them to reduce overpayments in future years by around one third”.

So, even if the reforms work as well as he hopes—let us face it, nothing else that the Government have promised on tax credits has worked—two thirds of the overpayments will remain. Almost 2 million people a year will go on receiving the wrong tax credit payment and will face having the money clawed back off them, with all the hardship that we know that brings.

Will the hon. Gentleman give way?

I am happy to give way because I have been checking on the figures in the hon. Lady’s constituency. In Northampton, North, 1,800 people were underpaid and 3,800 people were overpaid. That is almost half of all the people in her constituency who received tax credits.

Yes, and quite a lot of them came to see me. I helped them with that, which has given me a good understanding of the tax credit system. [Interruption.] It was a special surgery. Does the hon. Gentleman accept that the reduction of one third would follow from the change in the income disregard, but that the other overpayments should also be reduced by the changes to the reporting requirements? That was another really important recommendation made in the pre-Budget report.

As I understand it—there is an opportunity for the Chief Secretary to clarify this—the reduction of a third would occur if all the changes, both the reporting requirements and the increase in the disregard, were to take place. The increase in the earnings disregard simply reclassifies overpayments as disregarded income. That is one of the ways in which the Government are dealing with the problem.

As I said, the Chief’s Secretary’s admission was extraordinary. As the Child Poverty Action Group reminded us last week:

“behind these figures are thousands of families struggling to survive when the overpayments are clawed back”.

Not that we need reminding—we see that every week in our constituency surgeries. A disabled young constituent of mine told me that she was

“at the point of despair”

because of the clawback of tax credits that were rightfully hers. The chairman of the Inland Revenue wrote to me about the case earlier this year. He said:

“I am sorry to say that when we processed your constituent’s claim we missed including her new income details”.

How can one possibly miss including the income details when one processes a tax credit claim? That reveals a deep flaw in the system.

The new changes announced by the Government include new obligations on claimants to fill in more forms and to file them more quickly—any bureaucracy’s answer to any problem. Why do not the changes also include new obligations on the Treasury? The parliamentary ombudsman recommended a year ago that the Government introduce a statutory test for the recovery of overpayments that gives people a right to appeal to an independent tribunal when they think that the Revenue has got things wrong. That is the same test that exists for other benefits. The parliamentary ombudsman said that the test would

“strike the right balance between the obligations on the part of the administrators and those on the part of the recipients”.

NACAB says today that the test would

“build confidence in…the decisions being made”.

Why have the Government refused to introduce that statutory test? Why are they instead imposing new obligations on the recipients that are not matched by new obligations on the administrators?

Surely the impenetrable complexity of the system is such that it is understood only by the Chancellor of the Exchequer, if at all. Is it not distinctly shameful for him to have devised a system that is even more complicated than the Schleswig-Holstein question? At least three people understood that—even if one of them went mad, the second died and the third forgot what the answer to the question was.

Believe it or not, I studied the Schleswig-Holstein question at university, but I am not going to go into it. My hon. Friend makes a telling point. It is a remarkable achievement of the Chancellor that he has made the tax affairs of the poorest almost as complex as the tax affairs of the richest.

I was interested in what the hon. Gentleman said about the new forms. What good is there in changing forms if part of the problem is that the information does not seem to get on to the computer system in the first place? The people who return forms still end up with overpayments or the wrong payments because the information goes missing, does not get put on to the computer or the computer seems unable to recognise it.

That is one of the rare issues on which I agree with the hon. Gentleman.

The other question for the Government on overpayments is, why have they not implemented their own promise last year to pause before proceeding to recover an overpayment so that they can work out whether it is the Revenue that has made the mistake? Again, the parliamentary ombudsman recommended that approach. So, too, did NACAB. The Select Committee said in its report yesterday that that was

“crucial, in the interests of natural justice.”

However, the Committee also said that it feared that the Government promise had been “sidelined”. Why have the Government reneged on that promise? Perhaps the Chief Secretary can explain.

If multi-billion pound overpayments affecting millions of people are to be an annual feature of the tax credit system, the Government need to implement the changes needed to protect the rights of our most vulnerable families. That brings me to the second question—when will the ongoing fiasco of the computer system be resolved? Again, I recently dealt with a case in my constituency of a single parent who repeatedly tried to tell the Inland Revenue that she was being overpaid. She was ignored for months, only for her tax credits suddenly to be suspended altogether two weeks before Christmas. She wrote to me to say that she could not buy her two young children presents because she was struggling to provide them with even the basics. A month later, after Christmas, the Revenue wrote to me admitting that it had got the case wrong because of

“a technical fault we are experiencing with our computer.”

That was this year. That was the same computer that the Paymaster General told the House a year ago was “stable and performing…well”. Does the Chief Secretary still think that the computer is stable and performing well? Will he repeat that phrase when he gets up to speak?

The Government amendment says that the IT problems affected only

“the early stages of implementation”.

If Ministers really think that that is the case, I am afraid that they are living in a fantasy world. Certainly the Select Committee does not agree. It says in its report that IT error remains a “significant” cause of the tax credit mistakes. Do Ministers not realise what is going on in their own Department? The report goes on to talk about the Paymaster General’s evidence. It states:

“The factors cited by the Paymaster General…as contributing to the problem of overpayments do not appear to give us a comprehensive account of the reasons why overpayments have arisen”.

It continues:

“It is obvious to us that the Paymaster General’s account makes no reference to causes which have arisen as a consequence of the Department’s own processes—for example official error and IT error”.

Does my hon. Friend agree that the position on information technology is even worse than he has set out? Is he aware that in my constituency I have a case in which a lady was overpaid repeatedly? She told the authority that that was happening and the reply was, “Yes, we know, but the computer won’t let us put it right.”

It is an extraordinary example—one of many. I suspect that every Member could produce similar examples of computer errors.

The Government finally sacked EDS, the company that provided the computer, and announced triumphantly that the company would pay them compensation. However, as yesterday’s Select Committee report shows, the deal done by Ministers means that—this is truly incredible—full compensation is paid only if EDS wins other Government contracts. In short, the company that Ministers believe is guilty of messing up the tax credit computer will pay full compensation to taxpayers only if it is given a chance to mess up another Government computer system. Only this Government could negotiate such an incompetent deal, and now they refuse to discuss the details of the deal on the ground of commercial confidentiality. The Select Committee is right—Ministers should be accountable for the mistakes that they make and subject to parliamentary scrutiny on the arrangements into which they enter on our behalf, instead of hiding behind commercial contracts.

Of course, it is not only the computer that has cost the taxpayer millions of pounds, but fraud, which brings me to my third question—what is the true cost of tax credit fraud and what are the Government doing to tackle it? The Government refuse to tell us the true extent of tax credit fraud. According to the Paymaster General, there have been

“persistent attempts by organised criminals to obtain tax credits by using stolen or fictitious identities”.

We know that the Government had to abandon their online application system six months ago after systematic abuse. We know, too, that although Ministers say that they are acting tough, there were just 211 prosecutions for tax credit fraud, with only two for organised tax credit fraud, out of 6.5 million applications. However, we do not know when Ministers knew for the first time that systematic fraud was taking place or how much money has been lost. Does the figure run into hundreds of millions of pounds, or even billions?

Ministers were warned about the possibility of fraud before the tax credit system was introduced. Why did the Chancellor ignore the series of security checks that was proposed by the right hon. Member for Birkenhead (Mr. Field) when he was Minister for welfare reform? The right hon. Gentleman said earlier this year:

“After I resigned … the counter-fraud measures were not carried out and now it shows in the figures”.

Why were those counter-fraud measures not carried out?

What about stopping fraud in the future? Surely the Select Committee is right when it warns that increasing the earnings disregard to £25,000 creates an incentive for further fraud as people deliberately fluctuate their incomes from year to year, but the Government have done nothing to prevent that from happening. Will the Chief Secretary address that problem today, too?

The Paymaster General promised the House that the Treasury would provide

“more comprehensive information on the level of claimant error and fraud … in spring 2006.”—[Official Report, 10 January 2006; Vol. 441, c. 551W.]

I know that winter has descended early on the Labour party and it is getting its seasons muddled up, but it is now June. Where is the information that we were promised for the spring?

For the second year running, ministerial incompetence and computer chaos have caused hardship for hundreds of thousands of people and cost the taxpayer billions of pounds, so I ask my final question—is it not time that the Government looked at the design of the tax credit system? The Government say that money has got to the poorest, but after spending more than £15 billion a year, it would be extraordinary if it had not. However, that comes at a price. In the words of the right hon. Member for Darlington (Mr. Milburn), a great friend of the Economic Secretary to the Treasury, in the Budget debate in the House:

“poverty has become more entrenched.”

The right hon. Gentleman said:

“the number facing marginal tax rates of 60 per cent. or more has increased by nearly 1 million, largely as a consequence of the workings of the tax credit system.”

Will the hon. Gentleman give way?

I am happy to give way. I do not know whether the hon. Gentleman agrees with the right hon. Member for Darlington.

I do not, and my constituency is West Bromwich, West, if the hon. Gentleman wants to tell me how many overpayments there have been in my constituency. Something like 8,000 families in my constituency are benefiting from tax credits, but over the past three years, just 37 people have come to my surgery with tax credit problems. Will the hon. Gentleman tell us what comparable reforms he would introduce that would allow families with children on an average income to be £1,500 a year better off, with those who are poorest being £3,500 a year better off? That is the true nature of the issues about which he is talking.