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NHS: Financial Performance

Volume 765: debated on Monday 12 October 2015


My Lords, I shall now repeat in the form of a Statement the Answer given by my honourable friend the Parliamentary Under-Secretary of State for Care Quality to an Urgent Question in another place. The Statement is as follows:

“Mr Speaker, I thank the honourable 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 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. This showed that the NHS trust sector ended the first quarter of the year £485 million in deficit. The financial position of the NHS is undoubtedly challenging but it is important to recognise that, despite the difficult decisions we have had to make because of the calamitous deficit we have inherited, this party 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 their 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 this spending and challenge the agencies, which are charging, frankly, outrageous amounts for their staff. To that end, a package of measures, including a ceiling on the amount that each trust can spend on agency nurses and mandatory central framework agreements, was announced by my right honourable friend in June. These measures came into effect on 1 October. If further action is necessary, we will not hesitate to take it.

Furthermore, we have taken action through tough new controls on consultancy spending and executive pay, and in supporting organisations to dispose of surplus land among other initiatives. The impact of all these actions will not have been seen in the quarter 1 figures published last week.

The Government and NHS leaders have taken national action to support local leaders in managing down these deficits. I welcome very much a constructive discussion with the party opposite on where we may 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 this House wish to see”.

My Lords, the Minister is certainly having a busy day. I thank him for repeating the Statement. Obviously, these figures are very worrying. They relate to quarter 1. We are now well into quarter 3. What is the Minister’s latest assessment of hospital finances and his updated estimate of the year-end position? Clearly, there is not enough money in the budget to cover the existing costs of growing pressures, so how on earth is the service to fund seven-day services?

I noted the Minister’s comments about consultancy spend and agency staff. However, does he recognise that the reason so much money has been spent on agency staff, apart from through the actions of agencies themselves, is the fact that his Government cut the number of nurse training places in 2010? Does he also recognise that his Secretary of State’s attitude towards doctors is driving many of them away from this country? We should not be surprised if desperate NHS bodies, beset by criticism from the CQC about the numbers of doctors and nurses they need on the wards, resort to the use of agencies. As far as consultancy spend is concerned, does he accept that the Government’s own agencies—Monitor and the NHS Trust Development Authority—encourage NHS bodies to use consultancies? Will he ask them to try to reverse some of their actions themselves?

I quoted the Daily Telegraph to the Minister earlier. However, I want to say something about a story in the Mail yesterday concerning Sir Thomas Hughes-Hallett, chairman of Chelsea and Westminster Hospital in London. He has said that the NHS is in crisis and has referred to:

“A ‘worsening financial crisis’ leading to a ‘crisis in care provision’; An ‘environment of negativism’ triggered by endlessly critical missives from Ministers and officials; ‘Highly burdensome regulation’ leading to ‘abject confusion, fatigue and short-sightedness’; A ‘climate of fear’ ruling wards … ‘Continued emigration’ of doctors … The risk that these problems will cause an ‘inevitable reduction in quality and patient care’”.

You do not have to believe everything that Sir Thomas said without knowing that most people in the NHS share that view about tackling impossible pressures with limited resources. What are the Government going to do about it?

My Lords, I thank the noble Lord for those helpful comments. His first question was: what is the updated estimate for the full year? There is a general figure out there that the King’s Fund, the Health Foundation and others have come up with—£2.1 billion—as the underlying provider deficit for the year. That figure is largely based on the first quarter’s results because you cannot annualise the first quarter’s results; the first quarter is often much worse than the subsequent three quarters. We believe we can manage that £2.1 billion down quite significantly; interestingly, last year the underlying provider deficit was £1.2 billion. We have other ways of managing that deficit through the surpluses that may arise on the commissioning side and other sources of revenue.

The noble Lord talked about agency staff. I recognise some of what he says but there is no doubt that in the aftermath of the tragedy at Mid Staffordshire, the strengthening of the CQC when I was there has led to greater pressure to increase staffing numbers. I heard the noble Lord say, I think when he was chairman of the Heart of England trust, that if you are going to get shot it is better to get shot for not hitting your financial budgets than for not having enough staff on the wards. There has been a much greater emphasis on higher levels of staffing and that has put pressure on agency staffing. There are actually 8,000 more nurses and 9,000 more doctors in the NHS since 2010.

The noble Lord mentioned the cost of consultants. I recognise the strength of what he says—that it is a bit rich for us to complain about the cost of consultants when, through our arm’s-length bodies, we have been responsible for recruiting them. We expect much of the improvement methodology that has been provided by independent consultants to be provided by NHS Improvement; for example, the fact that we have now taken on Virginia Mason to help us spread best practice in running hospitals in the NHS is a model for things to come. I also hope that chains of hospitals will emerge and develop some of the best practice from hospitals such as Salford Royal, Frimley Park, the Royal Free and others, so that we can spread best practice without relying so heavily on external consultants.

Unfortunately, I have not read the article by Tom Hughes-Hallett. I would say to Tom, who I know, that he might spend more time focusing on his own hospital, which got a “requires improvement” notice from the CQC, than on spreading his views to all and sundry, although I recognise the strength of some of them. Sorry, I am running past my time. I had not realised that time was of the essence.

My Lords, quite clearly there is a crisis of funding in the NHS on an enormous scale and nothing I have heard from the Government indicates that the problem is going to be solved by any single party. This should be of cross-party concern. During the election, my right honourable friend Norman Lamb asked the Secretary of State for Health if he would co-operate with a cross-party commission to look at a cross-party solution to a new settlement for the NHS. He agreed, as did the Labour spokesman, yet five months later nothing has happened. Can the Minister tell me when it will?

In Scotland health and social care have been integrated and are already showing successes because of that. When will that happen in England? The situation in Scotland illustrates the fact that the challenges to the NHS are never going to be solved by the NHS alone. This is a whole-government issue. When will the Government beef up the Cabinet committee on health so that every department can be held to account for whether its policies contribute to the greater health of the nation or not? Until that is done, the NHS alone cannot be expected to solve the looming problems.

My Lords, it is worth reminding your Lordships that there was considerable consensus around the five-year forward view. I think that the noble Baroness’s party wholly signed up to it and, along with the Conservative Party, to committing £8 billion of extra money to the NHS over the lifetime of this Parliament. We stand by that. The NHS, in its turn, agreed to find £22 billion-worth of efficiency savings, which I think the noble Baroness accepted when she was part of the coalition Government. That is still the situation so I do not think that we need a new settlement. There is a settlement: it is called the five-year forward view and we are fully committed to it.

The noble Baroness raised the issue of integration. I agree 100% with her and it is an essential part of the five-year forward view—the vanguards are based on it. I remind noble Lords that the spending in the UK per capita on health is $3,200. In France it is $4,100 and in Germany it is $4,800. The NHS does a remarkable job in delivering world-class healthcare, which is rated by the Commonwealth commission and other independent agencies as among the best in the world, with considerably fewer resources than any other developed system in the world.

My Lords, I declare my interest as chairman of University College London Partners. What assessment have Her Majesty’s Government made of the potential contribution of accountable care organisations to addressing the need to advance quality outcomes in the NHS and its financial performance?

I thank the noble Lord for that perceptive and interesting observation. The accountable care organisation is one whose time has come. A health organisation with a capitated budget is indeed the way forward. It will drive the integration that the noble Baroness was talking about earlier on. It is a key part of this Government’s health strategy to support accountable care organisations.

My Lords, I too welcome the Statement, as did my noble friend. I have to admit that Milton Keynes Hospital, of which I am chairman, has contributed to the £550 million deficit referred to in the Statement. I want to focus on the issue around agency staff. I presume that the Minister has not seen the Evening Standard today—it has only just come out, so that is quite acceptable. In it, however, the chief nurse at Guy’s says very much what all chief nurses are saying: that hospitals are really performing with their hands tied behind their backs and that we have no staff to fill all our vacancies and have to recruit agency staff. We have just had an instruction, which the Minister referred to in the Statement, to reduce our agency staff by 1 October. I think it is from 22% to 17%. We have obviously gone back with some mitigation around that, which has been accepted. That has been very helpful but it does not solve the problem: we cannot get nurses through.

We went to Croatia and got 60 nurses. Five of them have had visas to get through and the rest cannot come, so we have to carry on with agency nurses to cover them. We have more 1:1 nurses than any other trust around London. I am going to wind up but as the chairman of a trust, I am talking about what really happens—the Minister knows that. Can he tell us how he is going to get this other money to reduce the deficit that he talked about and which is going to happen? I would be very interested in that. Also, when is the NHS going to make sure that the people who have that remit for nurses being admitted into our country will do something about it?

I will have to be very quick in replying. Maybe we could discuss this outside the Chamber. There are three ways in which we can find the resources for this. The first is partly through extra government money: there is another £10 billion coming to the NHS over these next five years. The second is driving through efficiency improvements. There are vast efficiency improvements that we must make over the next five years. I regard efficiency as a moral imperative because every £1 that we can save from waste is £1 that we can plough back into patient care. The third way is through new structures of organisations—accountable care organisations are one example; chains of hospitals are another. I think that the days of the independent DGH ploughing its own furrow, or of the foundation trusts structure around the DGH, are behind us.