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NHS: Financial Performance

Volume 600: debated on Monday 12 October 2015

(Urgent Question): To ask the Secretary of State for Health if he will make a statement on the financial performance of the NHS.

I thank the hon. Lady for giving me this opportunity to come to the House and make a statement on the financial performance of the NHS.

On 9 October, Monitor, the regulator of NHS foundation trusts, reported that foundation trusts ended the first three months of the financial year with an estimated net deficit of £445 million. Monitor’s publication noted that performance in the first quarter of the financial year is usually worse than it is over the rest of the year. The NHS Trust Development Authority also published that day the financial position of NHS trusts for the first quarter of 2015-16, which showed that the NHS trusts sector ended the first quarter of the year £485 million in deficit.

The financial position of the NHS is undoubtedly challenging. It is important to recognise that, despite the difficult decisions we have had to make as a result of the calamitous deficit we inherited, it is the Conservative party that has chosen to prioritise funding for the NHS. That is why we are committing an additional £10 billion over the lifetime of this Parliament, starting with £2 billion this year.

However, additional Government spending is not the only answer to the challenges faced by the NHS. The Government have taken action with our arm’s length bodies to support local organisations to make efficiency savings and reduce their deficits. In the first three months of this year NHS trusts spent £380 million on agency staff, while foundation trusts spent £515 million. That is nearly £10 million a day across the NHS. We need to reduce that spending and challenge the agencies that are charging, frankly, outrageous amounts for their staff. To that end, a package of measures, including a ceiling on the amount each trust can spend on agency nurses and mandatory central framework agreements, was announced by my right hon. Friend the Secretary of State in June.

The Government and NHS leaders have taken national action to support local leaders in managing down those deficits. I very much welcome a constructive discussion with the Opposition on where we might be able to go further in driving the efficiency savings that the NHS must find if it is to provide the exceptional standard of patient care that we all, on both sides of the House, wish to see.

I thank the Minister for that response. Where possible, I hope that we can have a mature and constructive relationship. However, he should make no mistake that when responses are as poor and lacking in detail as the one we have just heard, I will provide strong and robust opposition.

Ministers are accountable to patients, and their silence on the growing black hole in NHS finances has been deeply disappointing, as is the absence of the Health Secretary today. Not a single Minister was available to be interviewed about the NHS on Friday: it is not good enough. The deficit for the first three months of this financial year was larger than the deficit for the whole of 2014-15.

So, first things first: what advice has the Minister issued to hospital chief executives and finance directors about managing these pressures? Does he honestly think it is still possible for hospitals to balance the books, maintain current services, and deliver safe patient care? Given that the figures relate to quarter 1 and we are now in quarter 3, will he provide his latest assessment of the NHS financial outlook?

There is clearly not enough money in the current budget to cover existing costs. How on earth does the Minister plan to fund more services spread over seven days? The Conservatives’ election promises of more money have yet to materialise, and now their commitment to transparency in the NHS is looking decidedly shaky. For someone who prides himself on being open, the Health Secretary has been suspiciously silent about the delayed publication of these reports. Let me quote what a senior official in Monitor said just over a week ago:

“We are being leaned on to delay them and I have a suspicion that the sensitivity would be less after the Tory party conference”.

Will the Minister say whether these allegations have been investigated? The figures were presented to the board of Monitor on 30 September, so when was he told? Was it before the Tory party conference?

It may be an inconvenient truth for the Health Secretary and his Ministers, but the public have the right to know what is going on and what the Government plan to do. People across the country depend on NHS services, and Labour Members will stand up for them.

First, I welcome the hon. Lady to her place. Although he is not in the Chamber, I pay tribute to her predecessor, the right hon. Member for Leigh (Andy Burnham), who occupied her position, both as shadow Secretary of State and as Secretary of State, for a considerable period. I hope we can develop our relationship as constructively as possible in the months and years ahead.

The hon. Lady rightly said that Ministers are accountable to patients. That is precisely why we will not make the same mistakes as her predecessors in trying to trade off patient care and patient safety with the finances of the NHS. That is why we have been entirely open not only about the size of the deficit but, in a manner that the previous Administration were not, the failings of care in the NHS when they occur.

The hon. Lady said that the deficit is larger than it was in the whole of last year. That is not accurate. The deficit is traditionally larger in the first quarter of any one year. [Interruption.] She questions that, but it is a statement of fact.

We took action as soon as we came into office to give providers the opportunity and ability to bear down on deficits: it was one of my right hon. Friend’s first actions in coming into government. In three specific areas—agency staff required because of our need to take urgent action following the calamitous and scandalous events at Mid Staffs, the high and excessive pay of NHS managers and consultancy spend, and NHS property—we have given trusts the ability to bear down on deficits. We expect to see the use of those new tools in the past few months bear fruit in the months to come.

The hon. Lady asked if it is possible to balance books and deliver safe patient care. I point her in the direction of the trusts that are, and have been, successfully balancing their books and providing exceptional patient care. Indeed, it has been observed not only by me and other Ministers, but by those outside the Department of Health, that the trusts that best manage their finances and the efficiency of their hospitals also tend to provide the best patient care.

The hon. Lady made an interesting statement about there clearly not being enough money, but she will be aware that the NHS itself asked for £1.7 billion in this financial year and that we responded not with £1.7 billion, but with £2 billion. We have met the NHS’s own funding requests with more than it has anticipated. For the remainder of this Parliament the NHS itself has requested £8 billion of funding, and we have pledged to give it every single billion—a pledge that was not matched by the Opposition and that they tried to undermine at the last election. They pledged to give only £2.5 billion, as opposed to the £8 billion we promised the electorate. The hon. Lady says that promises have yet to materialise, but the money that we promised, not at the last election but in the previous autumn statement, is already flowing through the system.

The hon. Lady asked specifically about the relationship and the nature of the release of the figures. I completely refute her suggestion and I am certainly looking at investigating why such comments were made. I speak for the ministerial team when I say that we did not put on pressure as she might have suggested.

Finally, the hon. Lady says that the public have a right to know what is going on. We have been completely straight, and I have been direct, about the financial challenges facing the service. The reason for those financial challenges is the extraordinarily challenging situation resulting from the demographic changes in our country. On the Government’s part, that requires making very big decisions about the transformation of the service. We best do that not by making the NHS a political plaything, but by working together to deliver precisely the plan that the NHS has delivered for this Government and that we intend to deliver for the patients and people of this country.

I welcome the Minister’s statement, particularly the confirmation that the £8 billion will be forthcoming. He says that the money is already in the system, but what the NHS really needs is to be reassured about how much of that £8 billion will be front-loaded in the spending review. Will he reassure the House that he will set out in the clearest possible terms that it needs to be delivered as early as possible?

When my right hon. Friend the Chancellor made his commitment in the autumn statement on this year’s spending, he said it was a down payment on the five-year forward view and expressed his determination to ensure that the NHS is protected and promoted in all areas of Government.

The Minister mentioned successful trusts, but fewer than one in five predict reaching the end of this financial year in balance. That does not leave an awful lot of successful trusts. I echo the call for the funding to be front-loaded. Where are trusts meant to find staff if they are not allowed to use agency staff or nurses from overseas? Given that the deficit started to appear only in 2013—after the Health and Social Care Act 2012—does the Minister not feel that the Conservative party should review the direction of travel? The NHS was in balance from 2009 to 2013 and it has been on a downward slope ever since.

I will address the hon. Lady’s final point first, if I may. The previous coalition Government’s 2012 Act has saved considerable numbers—billions of pounds—which we would now have to make up if we had not made difficult decisions.

That allows me to address the hon. Lady’s first point. We have a choice: we can take the traditional view of politicians, which is to try to paper over the cracks and pour money into an unreformed system, or we can take the difficult decisions that will mean that we deliver patient care in the long term. That is what the Conservative party is willing to do: we are not only providing the commitment to funding, but taking the necessary, difficult decisions.

On the specific issue of agency nurses—one such example of difficult decisions—it is not so much the number of nurses available as the scandalous rates at which they were hired out to NHS trusts. We have taken action on that to ensure that NHS providers can procure agency staff when and how they need them at a reasonable rate.

Will my hon. Friend confirm that there have been no cuts in expenditure on the health service and that there have been no cuts in the total level of service? The problems at the moment are caused by the extraordinary pressures of an ageing population, clinical advances and rising public expectations. Will he continue to get the right balance between the needs of greater efficiency and responsible public financing, putting patient interests first and resisting short-term lobbying from trouble spots, which is a permanent feature of the politics of the NHS? In particular, will he resist any attempts by organisations such as the British Medical Association to turn controversy into yet another pay claim?

I thank my right hon. and learned Friend for his assurances on what needs to be done: he, more than anyone in the House, knows how to do it. Had the Government taken the Opposition’s advice and cut the money going into the NHS, we would not have achieved record numbers of doctors and nurses; we would not have halved MRSA and clostridium difficile rates; we would not have eliminated mixed-sex wards; and we would not have achieved record high cancer survival rates. All that has been made possible because of the funding commitments that the Government have made, to which the Opposition failed to commit at the election.

The Minister will be aware that failure to finance social care adequately has a significant knock-on effect on NHS finances. He will also be aware that the finances of NHS organisations are deteriorating rapidly, and that senior people across the system do not believe that the system can achieve the £20 billion of efficiency savings that are required. Before the election, I proposed a non-partisan commission engaging with the public, burying our political differences and working together to safeguard the NHS. I welcome the fact that he has indicated the need for that sort of approach, but will he now commit to it? The Secretary of State agreed to it in the election campaign, so will the Minister commit to work with all parties to come up with a new settlement making the necessary changes but also coming up with the necessary finances?

I thank the right hon. Gentleman, who was an exceptional care Minister in the coalition Government, but I am a little confused by his question. He was in post when the five-year forward view was delivered by the chief executive. Within that five-year forward view is a commitment to £22 billion of efficiency savings, and he did not raise his concerns at that stage. It is precisely those efficiency savings, presented by the NHS itself and on which we have embarked, that will allow the transformation to better care that we know is possible within the service.

We all have huge admiration for all the staff who work in the national health service. Visiting two community hospitals in my constituency in the past week, I saw that work at first hand. However, we are baffled by the bureaucracy that still exists in the NHS. Does my hon. Friend agree that we can go much further and be far more radical in cutting bureaucracy, not least, for example, by cutting the number of trusts? Is that going to be looked at as a whole to see if we can provide more money for front-line services?

My hon. Friend is entirely right. Every penny that we can save in bureaucracy and administration is a penny that we can spend on patient care, which is why the Secretary of State commissioned Lord Carter to look at the administration and bureaucracy that surrounds hospitals especially. Lord Carter has identified many billions of savings that can be made, and I anticipate that there will be more to come.

The university hospitals trust in Birmingham, Edgbaston is balancing its books, but the neighbouring hospital, Heartlands, ran up a deficit of £5.6 million last year. In the first five months of this year, the deficit has reached £29.4 million. GPs in Worcestershire recommend that their patients are not referred to Worcestershire hospitals but to University Hospitals Birmingham NHS Foundation Trust. What action has the Minister taken to prevent those few hospitals that are balancing their books from being pushed over the edge?

The right hon. Lady makes the important point that exceptional hospitals such as her own not only balance their books, but have a management culture that allows them to deliver some of the best care in the country. She is right that there is a continuing challenge for all trusts, whether they are well managed or poorly managed. The measures that we have brought in, especially those on agency nurses, are designed to enable the chief executive of her trust to continue with that exceptional management in the years to come.

I note with interest that the new Leader of the Opposition has said that the Welsh model for the NHS should be expanded to encompass the whole of Great Britain. I am interested to hear my hon. Friend’s views on that, seeing as Labour has significantly cut funding to the NHS in Wales.

My hon. Friend is entirely right that the new Leader of Her Majesty’s Opposition made that point. It is surprising because, as a representative, I would not like our A&E targets to be missed for seven years in a row, as has happened in Wales. If we replicate what has happened in Wales here in England, we will see worse care for patients. I am sure that Members from all parts of the House would not wish to see that happen.

Comparable developed countries spend a substantially higher proportion of GDP on health than we do. In my view, that means that our health service is substantially underfunded. Will the Minister report back to the House on those comparisons and explain why we spend so much less than those countries on health?

The hon. Gentleman is right that, in the past, the NHS has not had the funding that it requires. That is exactly why the Government have committed £10 billion to the NHS at a time when efficiency savings are being made across all other Departments. That is the mark of a party that believes in the NHS and the reason why only this party can fairly claim to be the party of the NHS.

I suggest to my hon. Friend that one way to reduce the pressures on the service would be to make greater use of health professionals who are regulated by the Professional Standards Authority, which covers 13 mental health and wellbeing professions. What is the point of people getting statutory oversight, regulation and registration if the health service does not employ them to reduce the demand for its services?

My hon. Friend is right to point to this area of health policy as one that is of interest. That is why the Law Commission reported on professional regulation before the last election. It is being kept under close review within the Department.

We are straying a tad from the relatively narrow terms of the urgent question, to which I know colleagues will be eager to return, and none more so than the hon. Member for Strangford (Jim Shannon).

I thank the Minister for his statement. This is a question for Members across the whole of the United Kingdom of Great Britain and Northern Ireland, where there are pressures on the NHS, because while we all have passion and love for the NHS, we must ensure that there is enough money for it. Will the Minister confirm the amount of money that will be there for accident and emergency departments and say what will be done on waiting lists?

The hon. Gentleman will know that funding for the NHS in Northern Ireland is not within my bailiwick. I therefore point him in the direction of the Northern Ireland Office and his Assembly. As far as England is concerned, I confirm that we will deliver not the £8 billion that the NHS has asked for, but £10 billion over the course of this Parliament.

The policy of advancing a new urgent care hub at Kettering general hospital has united politicians of all parties in north Northamptonshire, as well as the public. Does the Minister agree that we need more of that in our country—rather than petty bickering, people getting together to find solutions to these problems?

Conservative Members disagreed with my hon. Friend’s predecessor on many points, but he did great cross-party work with Members who were not of his political persuasion to find a good solution for urgent care in his area. I hope that we will follow that model on a larger scale across the country. If we can do that, there will be a much better resolution to the challenges facing the NHS. Patients and people want us to address those challenges without turning the whole thing into a political circus.

I agree that the use of agency staff places a great cost on the national health service, and I am sure the Minister will accept that cutting the number of training places for nurses and doctors at the beginning of the previous Government will have had an impact on that. St Helens and Knowsley teaching hospital is currently recruiting in Spain because it cannot recruit here. Recruitment and retention are crucial, and more than 50% of doctors now apply to practise abroad. Does the Minister think it sensible to further punish trusts that are in financial deficit—there are many across the country—by reducing their quality pay if they do not balance the books this year?

The hon. Lady asks about nurse training places, and this year the number of places is consistent with the number in 2010. The key point is not just the number of nurses in training, which is determined by NHS providers, but the number of nurses in hospitals serving patients and the public. The number of nurses is currently at a record high thanks to this Government’s actions.

My hon. Friend may have missed the speech to the Labour party conference by the hon. Member for Lewisham East (Heidi Alexander). He may therefore be interested to know that she said that the Labour party would not be enforcing any efficiency savings in the NHS, including the £22 billion that the NHS itself has identified. Will he confirm that efficiency savings must be a concomitant part of NHS funding?

I saw the comments by the hon. Member for Lewisham East (Heidi Alexander), and the thing that confused me most is that she imagines that efficiency savings are a creation of this Government. They are not; they are the product of the “Five Year Forward View” that identifies the need to create £22 billion of efficiency savings over the next five years. Had she read the “Five Year Forward View” she would be aware that those efficiency savings are essential if we are to get the patient care and quality that Simon Stevens identified as a necessity for the service.

The House of Commons Library estimates the cost to the NHS from falls this year at around £2.45 billion. At a round table that I chaired last week with our local NHS trust it was clear that although the will is there to tackle the cost of falls, the resources are not. Is that a good example of how the under-resourcing of the NHS is harming patient outcomes and undermining the efficiencies that the Minister hopes to achieve? How will he address that and wider inefficiency in the NHS?

I point the hon. Gentleman to parts of the country such as Torbay, Greenwich and the soon-to-be-devolved Greater Manchester authority where the relationship and integration between social care and hospitals is producing exactly the kind of linked up action that he identifies for falls. If we can achieve that at local level we will have a truly integrated health and social care system that is not imposed from above but created by those who deliver care on the front line.

I welcome the Minister’s statement. A comprehensive economic evaluation conducted last year by the London School of Economics and the Centre for Mental Health calculated that the annual cost of perinatal mental illness to the NHS is £1.2 billion, and the total cost to society is £8.1 billion. The Minister will know that on Wednesday I will introduce a private Member’s Bill that is supported by the Royal College of Psychiatrists and will save lives and costs. Will the Minister ensure that that is fully considered?

My hon. Friend raises an important matter that has also been raised by my hon. Friend the Member for South Northamptonshire (Andrea Leadsom). Given my responsibility for maternity services, I am particularly focused on the need to do better in perinatal mental health and maternity care, and I hope to say something about that in the not-too-distant future.

As far as I am aware, the Minister has not answered the question about the delay in issuing the report. If he cannot answer now, will he put a note in the Library and explain the reason for that delay?

I answered that point entirely accurately and categorically, and on behalf of the ministerial team I refute the allegation.

My local trust in Nottinghamshire, Sherwood Forest, is in a very bad financial position—one of the worst in the country. The primary reason is the appalling private finance initiative deal we inherited from the previous Labour Government, which consumes 17% of the trust’s annual budget. Would a new Parliament be an opportunity for the Government to look again at those appalling PFI contracts, particularly those that affect trusts such as mine that are in special measures?

Across the country, trusts are struggling under the load of poorly negotiated PFI contracts. It is worth remembering that when the Labour party speaks about all the money it put into the NHS, a large part of it was borrowed via PFI—that part which was not borrowed as part of Government debt. The important point about PFI is to try to address each contract in turn. The Department is looking at this on an ongoing basis, not only as it concerns old contracts but in the letting of new ones.

Salisbury hospital enjoys an excellent reputation across the constituency. On a recent visit, having completed a number of easily found cost reduction programmes, the management expressed their determination to continue with patient-level costing service by service and to pursue electronic patient records reform. They asked me to raise their concern about obtaining visas for specialist scientists at the hospital and the need to have a better joined-up service between primary, secondary and tertiary elements of the NHS.

I thank my hon. Friend for bringing the attention of the House to innovation at a local level. This kind of innovation, which will allow us to transform the service into an even better NHS in the years to come, is being repeated in many trusts across the country. If I may, I will reply to him by letter on the specific issue of scientists after I have investigated the points he has made.

In addition to needing extra funding, which the Government have rightly committed to provide, the NHS could and should make better use of its resources through better procurement, the use of technology and the employment of permanent rather than temporary staff. The challenge is how to do this at the necessary pace and scale. Will my hon. Friend advise what steps the Government are taking to drive the pace and scale of the changes that are important not only to improve productivity but for better outcomes and patient experience?

My hon. Friend identifies precisely the action we in the Department need to take. It would be a dereliction of duty to pour money into an unreformed system, as it would mean money being spent on administration, bureaucracy and waste, and not on the changes we need to improve patient care. We need to move at pace to bring in the changes necessary to transform the system if we are to get the NHS we all want to see.

I congratulate the shadow Secretary of State on an excellent urgent question and the Minister on how he has responded. It is interesting that there are more Government Members who want to ask questions. With regard to deficits, we have very expensive and highly paid management and accountants. They set their budgets and then a deficit develops. What action can be taken against these highly paid individuals for not keeping to their budgets?

My hon. Friend raises an important point. There are trusts that are being managed exceptionally well which hit the budgets they set at the beginning of the year. That is the normal course of business for other organisations. This is why my right hon. Friend the Secretary of State introduced the clawback on new chief executive contracts, which mean that if they do not perform according to plan then a proportion of their salary will be docked at the end of the year. That is an important reform, one not introduced by the previous Administration but by us, the party of the NHS.

May I echo the comments made by my hon. Friend the Member for Newark (Robert Jenrick)? Parts of the Royal Blackburn hospital and Burnley general hospital were rebuilt by private companies in 2006, under the previous Labour Government, at a combined cost of about £140 million. East Lancashire Hospitals NHS Trust will have to pay back almost £1 billion by 2041 because of the PFI contracts signed at that time. Does the Minister agree that the toxic PFI legacy is one of the biggest challenges facing most of our NHS trusts?

A considerable number of PFI contracts were poorly negotiated under the previous Labour Administration. They need to be looked at one by one, and the Department is committed to doing that again to see whether we can reduce the burden on trusts. My right hon. Friend the Secretary of State will have more to say about that in the course of the transformational changes that we are helping the NHS to make.