I beg to move,
That this House has considered King’s College Hospital finances.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I am pleased to have secured this debate on the finances at the King’s College Hospital NHS Foundation Trust, which I have been seeking for some months. It has been clear to me that the trust has been heading towards a crisis, which came to a head shortly before Christmas, when NHS Improvement took the trust into financial special measures. The debate is therefore timely.
To date, the Government have responded to the crisis at King’s as if the problem has arisen suddenly in the short term. I want to use this debate today to set out clearly the causes of the problems at King’s, which can be traced back to 2010 and 2013. I also want to ask the Minister to take seriously the complexity of the current situation at King’s and to take action now to allow it to stabilise and rebuild. There is ample evidence of a crisis across the whole of our NHS this winter, and I want to emphasise that the situation at King’s is a warning sign for the NHS that the Government must heed.
My relationship with King’s goes back 20 years. I have been a surgical patient and an out-patient at the hospital. I gave birth to my children there. Both were delivered by the same amazing midwife, whose name we chose as a middle name for our second daughter. My mum worked at King’s for 10 years until she retired. The situation at King’s is as personal and as important to me and my family as it is to tens of thousands of my constituents.
King’s is an extraordinary hospital. As a major teaching and research hospital, it undertakes world-leading work across more specialisms than any other hospital, including liver transplants, maxillofacial surgery, foetal medicine, neurosurgery, neonatal intensive care, cardiology and sexual health. As a major trauma centre, the emergency department saves the lives of critically ill and injured patients every single day. The work of its trauma surgeons is pioneering. Together with the specialist nurses, anaesthetists and other clinical staff, they were at the frontline of treating critically injured victims of the Westminster and London Bridge terror attacks and the Grenfell Tower fire.
In south London, we are enormously proud of King’s specialisms and its major trauma centre, but it is also our district and general hospital, where people have antenatal scans, give birth, have their appendix removed, have hips and knees replaced, have broken limbs fixed, have cataracts removed, recover from strokes, and receive help to manage diabetes, sickle cell disease and many other health conditions. King’s has a very special place in our community. I pay tribute to the extraordinary skill, commitment, dedication and care of the 15,000 staff at King’s. I have spoken to many staff in recent weeks. All of them, including the consultant with 32 years of experience I met yesterday, say that things have never been tougher. I want to put on the record my gratitude for everything they continue to do.
My constituents are desperately concerned about the plight the hospital currently faces. King’s has been on a journey over the past 20 years. Back in 1998, when I was an in-patient, it was a struggling, failing hospital, where patients were treated in overcrowded conditions and waited on trolleys in accident and emergency. Years of Labour investment transformed it, so that by 2010 it was meeting all of its main clinical targets, had recruited many more staff, and was consistently achieving a small financial surplus each year.
I am concerned that, despite the incredibly hard work of the brilliant staff at King’s College Hospital, that journey has come full circle—the days that we thought had been left behind at King’s have now returned. The hospital is regularly more than 100% full, with meeting rooms and storage space being used for beds; it has been consistently failing to meet the four-hour waiting time target in A&E, or the 18-week referral-to-treatment target; and it is not meeting its key cancer targets.
I want to be absolutely clear with the Minister that the causes of the problems at King’s have roots that go back to events in 2010 and 2013, which could have been predicted by the Government and Monitor, and which absolutely should have been prevented. I draw the Minister’s attention to four key issues. First, the rate of funding increase for the NHS was significantly cut from 2010, from 3% to 4% under the previous Labour Governments to 1% under the Tory-Lib Dem coalition Government. There was therefore no way that the funding was ever going to keep pace with inflation, let alone increases in drug and treatment costs and increasing demand. The fact that we are all living longer is a positive thing, but since older people use health services far more than younger groups in the population, it creates an entirely foreseeable increase in the need for health services. That can be managed and minimised when good-quality social care is available to everyone who needs it, but over the same period £6 billion has been taken out of social care. At the Princess Royal University Hospital, which is part of the King’s trust, 20% of older patients are clinically fit for discharge but have nowhere to go—a direct example of the extra burdens that the Government’s inadequate approach to social care is having on the NHS. The false economy cuts are simply adding to the pressures in our NHS, as people who should be able to maintain their health at home with good support end up requiring acute care.
The second key issue affecting King’s is a result of the 2013 decision for it to take on two hospitals—the Princess Royal University Hospital and Orpington Hospital—from the failing South London Healthcare Trust. Following that decision, the Government and Monitor should have insisted on a review period to ensure that the new expanded trust had the right level of support and resources to run the hospitals, but they did not do so. From that moment on, the finances of the new trust deteriorated rapidly. The situation at the Princess Royal was far more complex than anticipated, but there was no review of funding in the light of new and more detailed information about the level of investment required. That 2013 decision fundamentally destabilised the finances of the trust.
The third issue is the challenge of the competing responsibilities of emergency care, including the trauma centre and elective surgery. The King’s trauma centre generates its own demand, which increases year on year, but the funding for emergency medicine is by way of a block grant. There is no increase in funding that is in any way responsive to that demand. It cannot be right that, when King’s staff step up to the plate in response to terror attacks or the Grenfell Tower fire, there is no additional funding to cover the costs of the additional work. Elective surgery is paid for by procedure, so when the demands of emergency admissions, whether because of an increase in flu cases, or a major incident, force elective operations to be cancelled, there is loss of income in addition to an increase in costs. That creates knock-on financial consequences for the trust as a whole.
Fourthly, the limited capital funding since 2010 has meant that staff at King’s have not been able to plan strategically for the facilities the hospital needs to cope with increasing demand. The King’s College Hospital site at Denmark Hill is very constrained for a major hospital, and it has been developed piecemeal over many years. Large parts of the hospital estate are no longer fit for purpose, and additional ward space is urgently needed. King’s will open a new state-of-the-art critical care unit later this year, the largest in the country, but the trust has not been able to expand its general ward capacity, which will potentially result in additional pressures as patients leaving critical care compete with emergency admissions and elective surgery patients for insufficient beds.
The four challenges I have described have been evident for some time, but the Government’s approach, rather than to undertake a review of the finances and agree a sustainable funding settlement, has been to set more and more unrealistic targets for financial savings; to refuse King’s the sustainability and transformation funding that other hospitals have been awarded; and to fine King’s for being in a challenging financial situation.
Since 2015, at the behest of Monitor and later NHS Improvement, vast sums of money that could have been spent on patient care have been spent on management consultants. At one stage the trust was paying a single firm of management consultants more than £1 million pounds a month. The trust has been asked to make punishing savings when it has no control over the demand for its services or some of its costs, but the management consultants have not been judged on their ability to deliver sustainable, lasting improvements—theirs has been a one-way street of throwing good money after bad.
It is absolutely the case that the Government have known about the financial situation at King’s for some considerable time, yet on top of an already unmanageable financial situation, the Government proposed completely unrealistic control totals, in essence setting the hospital an unachievable target for making savings, then punishing it with financial penalties for failing to do so. Since last year, King’s has been under enhanced regulatory oversight by NHS Improvement, technically a similar situation to being in financial special measures, with NHSI staff permanently in the hospital and a high level of scrutiny.
Over the past three years King’s has made savings of more than £200 million, more than twice the average level of savings of trusts across the country over that same period. King’s has done that while maintaining standards of care that are on the whole very good. The Government have known about the financial situation at King’s for three years, the Government have been directly involved with the situation at King’s, and the Government are culpable, yet instead of taking responsibility for the situation and acting to ensure that King’s has the resources it needs, the Government have required King’s to do the impossible and punished the trust when it has been unable to deliver.
The Government must now take responsibility for the situation and ensure that the King’s College Hospital NHS Foundation Trust is not allowed to fail any further. I therefore ask the Minister to do the following: to undertake a full review of the finances at King’s, starting with an analysis of what is required to deliver safe and effective care across all areas of treatment and responsibility; to make a commitment that financial special measures will not mean just forcing through the proposed control totals, which simply cannot be met without jeopardising patient care; to guarantee that there will be no threat to any of the services provided at King’s on which my constituents and residents in the wider south London and the south-east area rely; to agree a capital funding settlement to enable King’s master plan for Denmark Hill to be implemented, so as to deliver the space and facilities the hospital needs now and for the future; to guarantee that financial special measures will not mean an increase in the interest rate that King’s is charged on its deficit; and to revise the funding formula so that King’s is not hit financially when it steps up to respond to major incidents and London-wide emergencies.
I will end with this: King’s is a special trust and some attributes of it are unique, but the pressures and challenges it faces can be found in NHS hospitals up and down the country. Until the Government recognise that and choose to make a long-term commitment to fund the NHS to provide the services our ageing population needs and to stop the outflow of NHS funds into private profits, our NHS is not safe in their hands.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I draw your attention and that of Members to my declaration in the Register of Members’ Financial Interests. It is probably worth pointing out, too, that I had the pleasure of being a medical student at King’s many years ago.
I pay tribute to the hon. Member for Dulwich and West Norwood (Helen Hayes) for securing this important debate. King’s certainly crystallises a number of the challenges faced by the NHS more generally in terms of financial pressures and those pressures manifested by difficult finances in the ability of hospitals to care appropriately for patients.
I want to pick up on a couple of the points that the hon. Lady made. I was the Minister who took through the Care Act 2014, together with the right hon. Member for North Norfolk (Norman Lamb). Through the Act, we considered and learned lessons from some of the problems in the reconfiguration of the South London Healthcare NHS Trust that failed in 2013. I am sure that the hon. Lady is absolutely right that we could learn lessons about how not to do hospital reconfiguration from how that reconfiguration was done.
I again reference the Register of Members’ Financial Interests. At the time, there was a natural synergy, in medical school terms and in other terms, developing between King’s, Guy’s and St Thomas’, and the King’s Health Partners. There is a shared local health economy between those hospitals and a shared interest in patient care. Each of those hospitals are centres of international excellence and tertiary centres of care, and are important local general hospitals for their communities. That synergy would have been a much more natural alignment of healthcare interests in that area but, unfortunately, that did not happen. Lessons have been learned from what occurred.
One of the major issues was the inheritance by King’s of the huge private finance initiative debt of the Princess Royal University Hospital, which in 2017-18 I believe amounts to about £37 million a year—about half the King’s deficit. It would be wrong to blame those running King’s for that deficit. It was very unfortunate for Lord Kerslake—I will come to him later—as chair of that trust, to inherit a de facto deficit due to that huge PFI cost.
The hon. Lady was right to talk about the rate of funding increases for the NHS being at a record low for many years. We had a very difficult economic situation in 2010, but I do not think that anybody expected austerity to last for the best part of a decade. Certainly, many of our public services are now feeling the squeeze as a result of the funding pressures that they face.
The funding pressure on the social care system has an impact on the NHS. Local government finances are in a challenging situation in many areas. Pressures on the social care system reduce the ability of the NHS to work in an integrated, joined-up way with social care and reduce the ability of hospitals such as King’s to discharge patients effectively into the community, because the resources are not there to look after them. There are also additional pressures on admissions, because there is not the preventive care in the community that a well-funded, properly integrated health and social care system would be able to provide.
There is welcome talk from the Secretary of State of a Green Paper on better integrating health and social care—I am sure the Minister will be involved, too, and I welcome him to his place and to his role. Having a sustainably funded, fully integrated system must be part of that and must be part of dealing with the challenges faced by King’s, by the local health economy and nationally.
I had not intended to speak for very long, but as I said, the example of King’s College Hospital crystallises and pulls together the overwhelming challenges faced by NHS trusts. The overwhelming majority of NHS trusts and foundation trusts are in debt. That was not the case five years ago. As in the case of King’s, many of those trusts have worked very hard to bring those annual deficits under control and to manage the additional challenges of increasing patient demand and pressure from more and more patients with multiple medical comorbidities. In 2018, there are around 3 million patients with three or more long-term conditions in England. It is a very big human challenge to look after those patients, but it is also a very big financial challenge.
The percentage of GDP in this country spent on health and social care falls well below that which is spent in many comparable western economies on healthcare. I know that the Government will look at that as part of their plans for the sustainability of the health and social care system in the Green Paper. I do not expect the Minister to talk about that in detail today, but it is well overdue and I know he will pay keen attention to that.
I had the pleasure of working with Lord Kerslake when I was in Government. He and the board did a lot to reduce what the hospital paid out in temporary staffing costs; some good work was done to reduce unnecessary expenditure on agency and other costs. It is a great shame when a very distinguished and long-standing public servant feels that, despite all their experience and their best efforts to grapple with some of the challenges of King’s finances, they need to stand down from their role because there is no other option. I am sure that Members from all parts of the House will echo that sentiment.
Some good efforts were made in 2015-16 to begin to tackle some of the hospital’s deficit and debt, but in this financial year the finances have worsened and as a result, as the hon. Lady outlined, the hospital has been put on special measures. It seems extraordinary that the hospital and the board have been put in that position when, as I mentioned earlier, one of the reasons for the hospital’s deficit is the PFI, which effectively they had no choice but to accept when they merged with the PRUH. As I mentioned, in 2017-18 that amounts to an estimated £36.9 million, which is a substantial amount of money. Without that PFI debt, the hospital would not be in robust finances but it would be in a better state to meet some of the challenges.
The problem faced by King’s and other hospitals is that when their finances become pressurised, they have to meet annual targets and the financial situation becomes paramount, patient care begins to suffer. That is not because the staff want it to suffer—staff always do their best to look after patients—but because they are not necessarily given the resources to deal with day-to-day care. There are winter pressures, but for many hospitals in debt such as King’s, there are year-round pressures.
We do not want to see more distinguished public servants who bring a vast wealth of experience to hospital boards, such as Lord Kerslake, being put in a positon where they feel that their only option is to resign. We need a better way of supporting hospitals that are in financial difficulty. In this case, part of that has to be to help King’s with some of those PFI debts. PFIs lock hospitals in for a long period of time to sometimes eye-watering and escalating repayment regimes. Sometimes the maintenance costs for the buildings are driven up even further when problems arise.
I hope that the debate provides the opportunity to look at King’s and other hospitals that have large PFI debts that are causing ongoing financial problems. I hope that that issue is looked at to help this hospital and other hospitals around the country that are in a similar position. I hope that the Minister, who I know will take to his post with great vigour, will want to make sure that some of the longer-term challenges that the NHS faces are looked at in the Green Paper for a sustainable, integrated health and care system that is properly funded. I hope that he will take that message away from the debate.
It is a pleasure to follow the hon. Member for Central Suffolk and North Ipswich (Dr Poulter), who made a thoughtful contribution to which I look forward to hearing the Minister’s response.
I thank my hon. Friend the Member for Dulwich and West Norwood (Helen Hayes) for introducing this debate. She has proved herself a real champion for her constituents. She fully recognises and champions King’s College Hospital, which many of her constituents need to use and where many others work. She is my constituency neighbour, and my constituents find themselves in the same situation. King’s is enormously important. It is an organisation of international excellence but also of local necessity. It sits at the heart of GP, primary care and social care services, and of mental health care services, both at the Maudsley Hospital and in the community. It is a pivotal part of the local community.
I will confine my remarks to two key points. The first is about the tenor of the debate. I hope Members do not treat King’s like a recalcitrant teenager who has overspent their allowance, or argue that its managers, chair or board are somehow profiting or salting away public money into offshore tax havens. King’s is doing its very best, in good faith, and all its people want to provide the very best service they can. That must always be at the heart of our debates. A tone of blaming King’s sometimes creeps in, but we should be grateful to it and thank it. On the deficit, it may be inconvenient for the Government to see figures with “King’s” written next to them going in a particular direction, but they should understand what is going on there, not tell King’s off as if it is at fault. It is doing one thing, and one thing only: trying to provide the very best care to people who use its national specialties, to regional referrals and to local people who need it. Let us always start on the footing that it is doing its best and that we are grateful to it for that.
My second point is that we need always to concentrate—I do not mean this in a cheesy way—on actual people. I baulked when I heard the Prime Minister talk about cancelled operations being “part of the plan”. Please, let there never be a plan with cancelled operations as part of it. Let us think of the situation for people. For anyone who has an operation booked, there are all sorts of things around that operation. Quite apart from the fact that it screws up their confidence and courage, they have to get time off work and, if they have a young family, their mother-in-law might have to book time off work, too, so that she can come and stay when they go in to have their operation.
An operation looks like one little entry in the Department of Health computer, but for the individual concerned, quite apart from the psychological effect of gearing themselves up for an operation and then finding it cancelled, everything is organised around it. We must not mess people’s lives around by assuming that cancelling an operation, of all things, is normal and can be used as a management tool. I hope that the Minister says that that is not at all what the Prime Minister meant, and that we will not manage our hospitals by booking operations and then cancelling them.
We must remember the human impact of longer waiting lists and cancelled operations. Someone’s hip replacement operation being postponed might be the thing that ultimately causes their job to be given to someone else. They might take sick leave and then take more, and their manager might finally say, “We’ve tried our best, but we just can’t carry on like this. We’re going to have to get somebody else in.” People lose their jobs while they are waiting for hospital treatment. Prompt treatment allows people to get on with their lives. An elderly person who is waiting for a cataract operation, for example, will not go out much, because they cannot see. They will not have the confidence to go out and meet their friends. If the operation is heavily delayed, by the time they have it they may have lost their social circle, lost what they do and become de facto housebound. For every single person who has to wait or whose operation is cancelled, there is a human cost. It is important to focus on that.
There is also the question of accident and emergency. I have watched the TV programmes and have visited King’s A&E on numerous occasions. The odd person is there just because they want to spend four hours sitting somewhere, but most people are there because they have had an accident or they have an emergency. They might have tried to find somewhere else to be seen, but they are there, and they are worried. They are often in pain, and they often have worried relatives with them. We must not drift back to the situation we had before 1997 under a Tory Government. I remember that well. People routinely spent all night on trolleys in King’s accident and emergency. I know what that situation was like, and we must not drift back to it. That would be really unfair on people. In this day and age, when much of the hospital has been rebuilt, we should not go back to that situation.
I hope the Government recognise people’s concerns. I hope that they are generous not just with their money but with their commitment to King’s; that they help it to go forward; and that they do not talk euphemistically about savings. Everyone knows what cuts are—cuts are when more people are coming through the door and there is less money per person. I thank Bob Kerslake for his work as chair, and I am disappointed that, because of the circumstances, he felt he could not stay on. I will meet the new interim chair shortly, but I hope that everyone at King’s—the staff, the management and the chair—feels that the Government are on their side and want to help them sort out the situation rather than blame them, make an example of them and talk about King’s as if it is anything other than the wonderful hospital we believe it is.
It is a pleasure to serve under your chairmanship, Mr Hollobone.
I pay tribute to my hon. Friend the Member for Dulwich and West Norwood (Helen Hayes) for securing the debate. During her time in this place, she has developed a reputation as a real champion for her constituents on a range of issues. This is not the first time that she has raised concerns about the funding crisis affecting our NHS and her constituents. Back in June 2015, she used her first contribution following her maiden speech to raise concerns about the worrying financial situation at King’s College Hospital. That makes a mockery of attempts to pin blame for the current situation on the most recent chair, who started only that month. My hon. Friend showed great foresight and prescience when she warned:
“The deficit is kept from being significantly higher only by a series of creative accounting steps taken in a vain attempt to reduce the number of negative press reports about such disastrous performance.”—[Official Report, 23 May 2016; Vol. 611, c. 355.]
My hon. Friend described her constituents’ experience as a warning sign with respect to the wider issues across the NHS about which we have heard so much in recent weeks. She highlighted that King’s College Hospital provides a wide range of specialties as well as being a trauma centre and a district general hospital for her constituents. She reported that a clinician with 32 years’ experience had said that things have never been tougher. We have heard many NHS professionals make that comment in the past couple of weeks. It was disturbing to hear that the hospital has recently been at more than 100% capacity on a regular basis. Before we entered the winter crisis this month, we knew that bed capacity across a number of trusts was beyond recommended levels. Using meeting rooms for patient care, as we heard, is not a road we should be going down.
My hon. Friend said that four key issues were affecting the current situation at King’s College. The first was the funding allocation since 2010. As we know, an ageing population increases demands on expenses in terms of medication, which means that the NHS really needs a 4% settlement on average, but in the past eight years we have had about 1% a year. She is right that the increases in demand on the NHS have been entirely predictable, and that the challenges set out as a result of austerity have been exacerbated by the cuts to social care we have seen since 2010.
My hon. Friend’s second point, on which I will expand later, was that the trust took on two failing hospitals in 2013. Thirdly, there are competing responsibilities in the trust between emergency treatment funding and elective surgery. She gave the examples of tragedies such as Grenfell and the Westminster terrorist attacks in the past 12 months, which placed additional pressures on the trust but were not recognised by central Government in terms of funding or support. Fourthly—this point applies to the wider NHS—the capital funding allocations have not been there to allow the trust to plan strategically for the future.
We also heard from the hon. Member for Central Suffolk and North Ipswich (Dr Poulter), who has considerable experience—he has several hats to put on. He did not blame the individuals running King’s for the current situation. He also highlighted well the multiple issues that arise from an underfunded social care system, and was right that patient care can suffer when trusts are under financial pressure. That is not to say that anyone who works in the NHS is using that as an excuse—that is not where anyone wants to be.
The hon. Gentleman mentioned PFI debt. In a debate on another trust issue, the Minister’s predecessor but two said that the Department was looking at PFI debts in various individual trusts and whether anything could be done to ease the burden on them. I do not know whether that work has been completed. Can the Minister update us on whether the many trusts saddled with PFI debt will get any relief?
We also heard from my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman), who made two central points. First, she did not want the situation to turn into a characterisation of a recalcitrant teenager who is overspending. I know a great deal about that from my own family—not because I am a teenager. She also does not want the situation to turn into a blame game. I will return to that later in my remarks.
My right hon. and learned Friend’s second point, which was pertinent, was that we must think about the people who are affected by the situation a little more. She said that when the Prime Minister described the cancelling of operations throughout January as planned, that underplayed the human consequences of such a decision and showed a lack of empathy and compassion for their implications. Cancelled operations can have a psychological impact and, as we heard, they can have financial impacts. People could lose their jobs as a result of delayed operations. She also gave the example of older people losing their social circle while they are awaiting cataract operations.
My right hon. and learned Friend was right to say that we do not want to drift back to a situation where patients spending all night on trolleys in corridors is part of people’s routine NHS experience. We do not want to see any more of that.
My hon. Friend the Member for Dulwich and West Norwood gave some interesting statistics about the amount of money spent on management consultants advising the trust and said that, at some points, £1 million a month was being spent on such advice. I would be interested to hear if the Minister feels that that has delivered value for money for the trust. Has any analysis been done about the savings derived from that advice? That gives us food for thought about whether the money has been best spent—perhaps it could have been better directed to the frontline.
My hon. Friend also said that the trust has recently been subject to enhanced regulatory oversight. Does the Minister believe that that regime has delivered particular benefits? She rightly requested assurances from the Minister in terms of funding, patient safety, treatments and capital allocations. We will hopefully hear from the Minister on that.
I join my hon. Friend in paying tribute to all the staff working across the trust who, as the public face of our service through the series “24 Hours in A&E”, make the nation proud of what the NHS can deliver. They are outstanding and committed individuals who go above and beyond the call of duty each day to deliver the best possible care for their patients. Indeed, their dedication is replicated by staff all over the country, and their good will is all that stands between a crisis and a complete collapse.
As we know, an urgent question was asked before the Christmas break, and I would like to pick up on a couple of comments made by the then Minister, the hon. Member for Ludlow (Mr Dunne). In his initial response, he said:
“There has been a consistent pattern of financial projections by the trust that have not been met during Lord Kerslake’s tenure as chairman.”—[Official Report, 12 December 2017; Vol. 633, c. 177.]
He also said:
“I am happy to look at the circumstances surrounding what happened in 2013, but they are not as relevant to today’s situation as the way the trust’s financial management has deteriorated in recent months.”—[Official Report, 12 December 2017; Vol. 633, c. 181.]
I put on record my appreciation for the constructive and respectful way the former Minister conducted our business. Although we disagreed on many things, we did not do so in a disagreeable manner. However, I must pick up on those comments, because it is a matter of fact that the trust’s financial issues predated Lord Kerslake’s involvement.
The root of the problems facing the trust can be traced back to the collapse of South London Healthcare NHS Trust back in 2013, as my hon. Friend said. I welcome the new Minister to his place, and I hope our exchanges will be equally as courteous. However, I hope that in responding he will correct the record, because there is the disturbing trend that has been referred to of blame being personalised, which encourages a “hire and fire” culture in the health service. At the bottom of it is financial and quality issues at the Princess Royal University Hospital, which were significantly worse than identified during the due diligence process undertaken at the time of transfer, and which led to a much poorer deficit position than forecast in 2014-15. Of course, that was a year before Lord Kerslake took up the role of chair. As a former Minister set out in a Westminster Hall debate in March 2015:
“At the time, South London Healthcare NHS Trust was the most financially challenged in the country…Repeated local attempts to resolve the financial crisis at the trust had failed.”—[Official Report, 25 March 2015; Vol. 594, c. 549WH.]
The trust’s 2015-16 annual report set out that £56.5 million in efficiencies were delivered during the financial year—a considerable amount—but despite that work a £65.4 million deficit remained. The report states clearly that the final figure was arrived at after taking actions, many of which were one-off in nature.
In 2016-17, the trust delivered savings of £92 million and was forecast to deliver a deficit position of £1.6 million. However, that was dependent on £30 million of funding through the sustainability and transformation fund and an additional £9 million of cover for external funding pressures being provided. Unfortunately, that Government funding did not materialise. The final out-turn was a deficit of about £48 million. The trust’s financial report for that year said again that many of the savings made during that year were of a one-off nature.
I point out at this juncture, as others have done, that despite starting each financial year with an extremely significant underlying deficit, the trust was still expected to deliver annual savings though the tariff, as with all hospitals, at a level that Chris Hopson, the chief executive of NHS Providers, has described as “impossible.” He also said that the amount of savings required
“risks the quality of patient care and places an intolerable burden on staff.”
The Nuffield Trust has pointed out that the savings that have been asked of trusts are
“the equivalent of spending…£750 in real terms on a patient that you would have spent £1000 on in 2010”.
Against that backdrop, is it any wonder that we are where we are now?
It is true to say that the forecast position at King’s has again deteriorated this year, but it is completely false to portray that as a story about one trust or a particular chairman. It should also be pointed out that King’s had cut costs by 8% to 2016-17 and was aiming for a 5.8% reduction in the current financial year. As we have heard, there are issues relating specifically to King’s, dating back to 2013, that have never been fully addressed, not least because the underlying deficit has been consistently understated. The trust, like so many others, is facing pressures from the top to massage the figures with one-off savings and accountancy wheezes. I believe that that short-term, illusory approach is endemic across the NHS. As the head of the National Audit Office, Sir Amyas Morse, told us:
“The NHS in England remains under significant financial pressure which is demonstrated in its accounts. It has again used a range of short term measures to manage its budgetary position but this is not a sustainable answer to the financial problems which it faces.”
He went on to say:
“The Department and its partners need to create and implement a robust, credible and comprehensive plan to move the NHS to a more sustainable financial footing.”
The Health Committee, the Nuffield Trust, the Health Foundation, the King’s Fund and many others have all reported on the one-off measures, including vast transfers of capital funding, that are being used to understate the true level of deficit. Will the Minister rule out using such measures again this year and commit to providing an honest picture of the state of NHS finances?
As the hon. Member for Central Suffolk and North Ipswich said, the trust deficits we are hearing about in this debate are replicated across many parts of the country. By September 2017, 83% of acute trusts were in debt, to the tune of £1.5 billion. Can the Minister tell us how many will be in deficit at the end of this year? How many will, like King’s, fail to meet the deficit level agreed with NHS Improvement, and what will the consequences be for them?
Before the November Budget, NHS leaders exercised their duty of candour to argue publicly for an extra £4 billion in revenue each year for the NHS. That was the minimum they said would be needed to maintain standards. It has been made clear that many of the NHS’s constitutional targets will not be met within the current funding envelope. Can the Minister explain whether, by failing to give the NHS the money it has asked for, the Government have accepted that the rights of patients set out in the NHS constitution have effectively been abandoned?
In conclusion, with King’s as with the rest of the NHS, the Government seek to abdicate responsibility and to blame the systematic failings over which they are presiding on individual parts of the NHS rather than on their own funding decisions. They are desperately seeking to characterise King’s as an outlier rather than what the Nuffield Trust has termed
“the canary down the coal mine”.
The truth is that, like every trust, it is struggling with the longest and most sustained financial squeeze we have ever seen in the history of the NHS, yet the Government are not facing up to their own culpability for the situation. The Secretary of State is behaving like the worst kind of football chairman—the kind who takes no responsibility for their own actions but instead calls for the manager’s head after a spell of poor results, when the underlying problems were there long before that manager started, because there had not been the required investment for many years. That kind of short-term, personalised approach has failed King’s, it is failing our NHS and it has to change.
It is a pleasure to serve under your chairmanship once again, Mr Hollobone, albeit in a different role. I begin by paying tribute to the hon. Member for Dulwich and West Norwood (Helen Hayes) for securing the debate and for the powerful case she set out on behalf of her constituents. I recognise the importance of King’s not just to her family but to the community she serves, to other hon. Members present, and more widely.
In her remarks, the hon. Lady drew out three specific points, suggesting that the Government have responded to this situation as if it had arisen suddenly, that it is reflective of other hospitals and that the roots go back to the Princess Royal decision in 2013. I will seek to address each of those in the course of my remarks, but at the heart of this matter is the concern that the board and King’s have lost or eroded the confidence of the regulator by the manner in which the deficit target has significantly deteriorated, and the concern that the cost improvements are an outlier when pitched against comparable trusts. That is really the crux of the issue.
My hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) brought the value of experience both as a clinician and as a former Health Minister. I was very taken by his remarks. Specifically, on the point he raised about the PFI debt, it is helpful to remind colleagues that support was agreed by the Department at the time, in 2013-14, for the additional costs of that PFI financing. That was taken into consideration by the board, which agreed to it at that point. It is not the case that the PFI has been a material contributor to the current deficit.
My hon. Friend makes a fair point, although it is difficult for a board that has effectively had a merger foisted on it to appreciate fully how a hospital will run across two sites—or even three sites, with Orpington as well. I am sure the Minister will go away and think about that in the context of the PFI and whether something more could be done to help with the PFI debt.
Indeed, I am happy to give consideration to the point my hon. Friend makes, although if one looks at the deficit for this year, which I will come on to in my remarks, one will see that the bulk of the deficit is not from the Princess Royal but from the other sites, so it does not pertain to the 2013 decision. I will come on to that more fully as I develop the case.
I will also say to the right hon. and learned Member for Camberwell and Peckham (Ms Harman), who recognised that the staff at King’s want to deliver, that I agree with her on that point. It is not about apportioning blame to those members of staff. Indeed, the financial special measures are about giving additional assistance to King’s to address those points, rather than seeking to blame them. I think there is a shared desire from both sides of the House to get the right outcome for King’s. I am very happy to agree with her on that.
It is a fact that King’s is a challenged organisation. We are putting a lot of effort into supporting it. King’s is receiving substantial financial support from the Department. The trust has received more than £100 million of support to maintain frontline services, the second-highest level of support to any individual trust across England. Placing King’s in special measures for financial reasons is a regulatory action to bring about swift improvement and address the trust’s financial challenges. NHSI is working with the trust to undertake a rapid review and agree a financial recovery plan.
Under the financial special measures programme, the trust will receive extra help and oversight, with the appointment of a financial improvement director. The organisation will also be required to draw up and deliver a plan to improve its finances, which NHSI will closely monitor. That will include support from peer providers where appropriate. On top of those special measures, NHS Improvement has also appointed Ian Smith as a new and experienced interim chair for King’s, to take control of the organisation’s position. He was appointed, as I am sure the hon. Member for Dulwich and West Norwood is aware, on 21 December and took up that role with immediate effect.
It is a fact that some profound financial issues at the trust need to be addressed. The trust agreed a budget deficit of £38.8 million in May 2017, yet just five months after the board had agreed that deficit it submitted a re-forecast deficit of £70.6 million, and a further two months later, in December 2017, the trust informed NHS Improvement that its current mid-case projection had worsened again to around £92 million. So, an agreed board position of a deficit of £38.8 million had within seven months gone up to a deficit of £92 million. That is really at the heart of this. When measured, that level of deterioration is an outlier, which is why the chief financial officer and chief operating officer both resigned in November 2017, and the chair resigned, as hon. Members have pointed out, in December 2017.
When announcing the financial special measures, Ian Dalton, the chief executive of NHSI, noted of other hospitals that
“none has shown the sheer scale and pace of the deterioration at King’s. It is not acceptable for individual organisations to run up such significant deficits when the majority of the sector is working extremely hard to hit their financial plans, and in many cases have made real progress.”
The extent of the financial challenge facing King’s is well documented, and I recognise the figures that the Minister quotes. However, he has not yet recognised the extent of financial savings that King’s was already making. It is not an organisation that had been resisting the need to make savings; it has been making, on average, double the level of savings of any other trust in the country. That points to a situation in which the level of resource afforded to the trust is simply not enough to deliver the day-to-day responsibilities of keeping patients safe. Will the Minister recognise the extent of the effort that has gone into saving significant amounts of money out of the trust’s finances?
I am happy to recognise the hon. Lady’s point that significant savings have been made. However, the regulators found that there had been an over-reliance on non-recurring savings, rather than on delivering the cost improvement programme. For example, King’s has the highest cleaning costs per square metre, at £71, compared with the median of £41 per square metre. Indeed, in her remarks the hon. Lady talked about the cost of bringing in consultants such as McKinsey, which the King’s board itself brought in. The concern is the slow pace at which those cost savings and efficiencies have been delivered on the back of those reports.
The trust has also been in breach of its licence for financial governance since April 2015. That followed an investigation by Monitor in March 2015 after the trust was unable to resolve long-standing problems at the Princess Royal University Hospital, which it took over, as Members have pointed out, in October 2013. As part of Monitor’s enforcement action, the trust was required to produce and implement an effective short-term recovery plan and a longer-term plan to ensure that patient services were improved and that they were provided in a sustainable way for the future.
The trust does not routinely report its financial performance by site, but analysis shows that the trust confirms that the losses by service are across many services and across both main sites. As I remarked in my opening, while the deficits at the Princess Royal are proportionally, as a percentage, higher than at Denmark Hill, in absolute terms the majority of the deficit is at Denmark Hill. That speaks to the point raised by my hon. Friend the Member for Central Suffolk and North Ipswich, who is not in his place, about the legacy from the Princess Royal.
The trust also faces a number of other challenges. King’s has not met the referral to treatment standard—RTT—since January 2015, at which point the board took a decision to suspend its performance data reporting. The trust resumed reporting of the RTT performance data again in March 2016. Following the deterioration in performance throughout 2016-17, NHSI undertook an investigation into the RTT governance and the drivers of the deterioration, which was completed in July 2017. An action plan based on recommendations from that investigation was subsequently developed by the trust and agreed by NHSI. Again, while the hon. Member for Dulwich and West Norwood says that this is a sudden, late intervention by the Government, a chronology of action and support can be shown.
Taken together, these challenges are the reason why NHSI has invested a lot of time and effort in supporting the organisation. It has provided a member of staff on secondment to the trust for two days per week to support the delivery of the action plan and to strengthen governance around RTT performance and reporting. Delivery against the action plan is monitored by NHSI through its formal monthly provider oversight meetings with the trust, and it is working closely with the trust to agree an appropriate timeframe for the sustainable return to compliance.
King’s has received more than £350 million-worth of working capital since 2015-16, and was also successful in securing a £47 million capital loan in April 2017 relating to Windsor Walk. Along with other trusts, King’s has also benefited from £21 million of public dividend capital funding since 2013, covering many central programmes including cyber security and digital care. In the last three years, King’s has invested in new capital assets in excess of the level needed just to maintain their asset base and above the average across all foundation trusts and NHS trusts.
The Department of Health commissioned Deloitte to review the trust special administrator’s analysis of the split of South London’s deficit, pertaining to when the Princess Royal came within the trust, and to provide an updated view of the split of the forecast out-turn deficit for 2013-14. Its assessment of the Princess Royal University Hospital’s share of the deficit for the full year was approximately £22 million. The trust reported deficits in the three subsequent years, despite significant other integration cost and bridging support revenues. It brought in PwC in the autumn of 2014, and appointed a turnaround director to initiate a financial recovery plan process. The trust then had McKinsey in during 2016-17 to drive a transformation programme, which has been very slow to yield the significant benefits that were promised.
The trust has been subject to enhanced financial oversight since March 2017, which includes the following support from NHSI: a senior financial adviser embedded at the trust; monthly financial oversight meetings with NHSI; participation in the financial improvement wave 2 programme; and, since April 2017, the trust has also received dedicated support from NHSI’s transformation and turnaround team as part of its enhanced financial oversight. More recently, in 2017-18, the trust has had external support from PwC, Ward 20/20, and Bailey & Moore. We need to be clear about what has caused the recent problems at King’s, including its recent rapid deterioration, and what has not, but it is not a lack of support and consultancy.
The argument that the cause of King’s problems can be found in the merger with Princess Royal, which several Members raised as a contributory factor behind the subject of the debate, does not stand up to scrutiny. In October 2013, King’s College Hospital Foundation Trust completed a transaction to acquire Princess Royal University Hospital and Orpington Hospital on the back of the trust special administrator’s recommendations regarding South London Healthcare Trust. The trust also took over responsibility for additional services at Beckenham Beacon, Sevenoaks Hospital and Queen Mary’s Hospital, Sidcup.
In the summer of 2013, King’s presented a five-year integration plan that showed small net surpluses of £2 million to £4 million in each year from 2013-14 onwards. The plan was assessed to be of medium risk by Monitor’s assessment team, but was none the less plausible thanks to generous support funding agreed by the Department of Health and NHS England at the time. The trust’s current financial problems reflect, as I said earlier, a continued overreliance on non-recurring savings, instead of delivering recurring benefits through cost improvement programmes and especially a failure to improve medical productivity at both the Denmark Hill and Princess Royal sites.
Model Hospital data, which is available to the trust, suggests that the trust has significant opportunities for efficiencies in areas such as orthopaedics. NHSI is supporting the trust to develop its cost improvement plan programme for 2018-19, which includes developing schemes based on validating those potential opportunities.
While there is never a single cause in such cases, and while we have acknowledged the pressures being felt across the system, the clear conclusion to draw from the evidence is that King’s was an outlier in financial terms and had lost its grip of its finances in recent months. I spoke with the trust’s chief executive yesterday and he acknowledged that there had been a serious problem with the trust’s financial planning process. Defects in the way the trust’s plan was put together eroded the regulator’s confidence in the trust, and it is for that reason that the trust has entered into special measures for its finances. The financial special measures regime has a proven track record of success in supporting trusts, as shown with North Bristol NHS Trust, which recently exited the special measures regime.
In losing control of its finances in the way that it has, King’s has effectively taxed others in the NHS, which is why it is right that NHSI took action in the way that it did. This organisation got itself into a very bad financial position and now needs a great deal of help and support. As the right hon. and learned Member for Camberwell and Peckham set out, we can agree on both sides of the House that King’s needs support. It is for that reason that the regulator has intervened to put it into special measures.
I thank the hon. Member for Central Suffolk and North Ipswich (Dr Poulter), who is not in his place, for bringing his experience to the debate. I am pleased that, having looked at the issue in some considerable detail when he was a Minister, he recognises, as the Minister seems not to, the problems that the merger of King’s with the Princess Royal and Orpington Hospital has caused for the trust.
The fact of the matter remains that the trust’s finances were stable and it was performing well on every measure until that merger took place. It has never been the same since. The combination of the drop-off in the increase of funding year on year, which has affected the finances at Denmark Hill and the organisation’s resilience to carry across costs to the Princess Royal and Orpington, with the irresponsible lack of a review mechanism for the funding settlement post-merger has, in my view, played a major role in destabilising the finances.
I thank my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman), who has been a formidable champion for King’s for more than 35 years. She knows very well from direct experience exactly how bad things have been in the past at Denmark Hill, and how close we are to seeing once again those terrible circumstances of patients waiting far too long in A&E to receive the treatment they need so badly.
In summing up, I want to highlight two points on which I disagree with the Minister’s analysis. First, notwithstanding the support that the Government are putting in, they maintain a punishing approach to the finances of NHS trusts that are in financial difficulty. A system for funding our NHS that takes a trust that is already under financial strain, fines it and charges it additional interest for failing to meet impossible targets is a system that makes no sense at all. A system for funding our NHS that funds on a block grant basis emergency admissions, the volume of which hospitals have no control over, and then cancels elective operations, which deliver the revenue into our hospitals when pressures come through the front door of accident and emergency, is a system that makes no sense. The Minister has not addressed that conflict and the perversity in the funding system for the NHS.
Finally, I urge the Minister to consider very carefully the need for substantial capital investment in King’s at Denmark Hill. I am concerned that when staff at King’s hear talk about failures in efficiencies, and when the Minister talks about the failure to improve medical productivity, the inference is that staff are somehow not working hard enough.
I am grateful for that clarification, but that needs to be communicated very clearly to staff, who are feeling the pressure of this crisis. When we talk about efficiencies at King’s, they are in a lack of buildings, ward capacity and fit-for-purpose facilities to deliver when facing the challenges that are coming through its front door every single day. That matter urgently needs to be addressed as part of this turnaround process.
Question put and agreed to.
That this House has considered King’s College Hospital finances.