Class XI, Vote 1

HC Deb 08 March 1984 vol 55 cc1003-40

Mr. Speaker

As this is only the second occasion on which the new procedure on Estimates days has been used, it might be helpful if I make a short statement on the course to be followed.

The two Estimates down for debate today have been selected by the Liaison Committee, the report of which was agreed to by the House on 29 February. That agreement gives the Committee's recommendations the force of an order of the House, in accordance with Standing Order No. 101.

Debate on the first Supplementary Estimate may not range over the whole of Vote 1 of Class XI, health and personal social services, England. The Liaison Committee has recommended only subhead F5 — compensation payments to National Health Service staff—for debate, and the committee's recommendation has been approved by the House. Debate on this subhead must end by seven o'clock, but the second debate can begin before seven o'clock if the first debate ends early. In either case, the Question will not be put at the end of the debate but will be deferred until ten o'clock, under Standing Order No. 19(2)(c).

At ten o'clock the Question will be put on the two Supplementary Estimates in the order in which they were debated. The House will then move on to the outstanding Votes Nos. 2 to 6 on the Order Paper and the presentation of the Consolidated Fund Bill.

Motion made, and Question proposed, That a Supplementary sum not exceeding £1,000 be granted to Her Majesty out of the Consolidated Fund to defray the charges which will come in course of payment during the year ending on 31st March 1984 for expenditure by the Department of Health and Social Security on the provision of services under the national health service in England, on other health and personal social services including certain services in relation to the United Kingdom, and on research, exports, services for the disabled and certain other services; including grants in aid and international subscriptions.—[Mr. Kenneth Clarke.]

4.12 pm

Mr. Peter Hordern (Horsham)

I wish at the outset to congratulate my right hon. Friend the Member for Worthing (Mr. Higgins) on whose initiative this debate takes place. This is the second debate, and I hope that we shall have many more arising from the Supplementary Estimates because it allows the House to engage in debate on specific subjects, whereas previously we had to content ourselves with a debate on a variety of subjects which came under the Supplementary Estimates.

I should not really be opening this debate. I do so only because the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) is unavoidably absent. He should, and would normally, be opening the debate, as the Chairman of the Committee of Public Accounts. I open it, therefore, in the knowledge that I shall not be able to put the case as he would have done. Nevertheless, this is a unique occasion for us in the Committee of Public Accounts. Normally when we have our debates in the Public Accounts Committee we debate 30 or 40 different reports at a time. On this occasion we are able to debate just one, and I am glad of that.

The debate centres on the question of voluntary redundancies in the National Health Service, a subject which we in the PAC examined as recently as 30 January. We saw witnesses and produced our report in the last few days. Therefore the House has not had the opportunity to consider fully the report or all that flows from it.

In our report on voluntary redundancies in the NHS we pointed out that the last major reorganisation, in 1974, was subsequently recognised as having had a number of weaknesses. Those of us who were present at the time felt that that might be the case, and we said so. Subsequently, when the Royal Commission reported that problems had arisen, mainly from too many levels of administration, we were concerned that the changes in administration that were then to take place would not show a great improvement, either.

In the last reorganisation, as the House will remember, 98 area health authorities were abolished and were replaced by 201 district health authorities. I did not think that the abolition of one form of health authority, to be replaced by almost twice as many, would in itself ease the administrative pressure on the Health Service. Indeed, that has proved to be so. The very weaknesses that were apparent in the original administration of the Health Service before 1974 have remained with us in the latest reorganisation, perhaps in an even more marked form.

In July 1981 the DHSS estimated that by 1984–85 the reorganisation would have resulted in the number of management posts in the NHS in England being reduced by about 4,000. It expected in 1981 that 2,800 of those would go by means of natural wastage, 765 through compulsory redundancy and 435—and only 435—through voluntary and early retirement.

It is worth while recalling exactly what terms were offered to those who wished to seek early retirement. For those over 50 with at least five years' service, applicants whose premature retirements were approved would have their pensionable service enhanced by up to 10 years, subject to a limit of 40 years.

That applied with a minimum of only five years' service. Hon. Members will recognise, therefore, that that was a generous offer made by the NHS at the time. It was added to by a possible redundancy payment equivalent to 30 weeks' pay. That emphasises that the arrangements made for voluntary redundancy were extremely generous by any standards.

The cost of the voluntary early retirements was expected to be £8.6 million by the end of March of this year. When the Comptroller and Auditor General made his investigations, he found that the estimated total number of premature retirements in England alone had risen by 550 per cent., from 435 to 2,830, and that the cost was not to be £8.6 million but an estimated £54 million.

There appeared to have been, on the other hand, no compulsory redundancies of any kind, although the original forecast was that there would be 765. Furthermore, as is the general practice throughout the Health Service, there were wide variations within the regions of the service in the take-up of early retirement. For example, the northern region had approved early retirement only where there would be surpluses, and it was careful to see that no replacements for those surpluses would take place.

On the other hand, the south-east Thames regional health authority allowed 417 cases to go, when the total estimate of voluntary redundancies was 435, so that the anticipated number was filled almost entirely by only one region. In Wessex, every application for voluntary early retirement was approved, and subsequently it was discovered that over 100—I believe that the number was nearer 130—of those who had voluntarily retired early were subsequently re-employed.

The DHSS replied by saying that it had received only rough guidance from the regional health authorities, whose capacity for manpower planning, it said, had been "variable". That is a lovely word to describe what had happened. The Department itself had not the least idea what was happening in the regions and the regions had not the smallest notion of any direction from the Department, because there had been none.

In February 1982—after some time—the Department had become aware of greater regional variations and of a higher number of premature retirements than had been anticipated. In October it instituted a monthly check. The House might well wonder why it took six months before the Department established that things were not going according to plan and before it wanted to know more about it, let alone do anything about it.

The House might justifiably ask about the expected reduction, which was supposed to take place, of 4,000 management posts by 1984–85. The Department was again doubtful whether it would ever be able to give the number of posts actually saved by the 1982 reorganisation. If one could count the number of managerial posts and include them in the number of administrators and clerical staff—it is by no means certain that one could because I do not think the Department knows how many managers there are—one might find that far from going down, let alone by 4,000, the number of administrators and clerical staff has actually risen by over 1,000.

The Department doubted whether it would have been right to try to reduce the take-up of the scheme to the level of the northern region. Therefore, the Department was saying that it neither knew what was happening in the regions nor did it really care, and that the regions might do what they wished about the voluntary redundancy scheme. The finding in our report was that it was clear that the Department had no basis on which to form an idea about how many retirements there would be and that there were never any proper monitoring arrangements of any kind. In the view of the PAC, the Department was not at liberty to treat its responsibility to its taxpayers as inadequately as it did in this case.

Why, we should ask, was there such a difference between the treatment in the regional health authorities as between, for example, the northern region and the Wessex region, which later allowed every application to be accepted? As I have said, so far as one can judge, the number of administrative and clerical staff, according to the latest figures, which go only to September 1983—and that is a story in itself—shows an increase of over 1,000. Perhaps when the Minister is replying he will be kind enough to tell us the latest figures and what progress has been made in the rundown of managerial staff.

As a whole, the Health Service has not suffered from lack of employment, and this is a matter on which I have wearied the House on many occasions. In 1961 there were 575,000 employees and in June 1981 there were 1,250,000. Questions have been asked before about numbers. The numbers that I refer to are those employed in the Health Service and not the figures given by the Department, because the Department's figures are rounded up to what are known as whole-time equivalents. It is strange that any Department of State should use such a statistical method to arrive at the total number of individuals working in the Health Service.

One would think that the Department would be interested enough to know and to display its knowledge of how many people are actually employed in the Health Service. The total is well over 1,250,000. It is the largest service, not only in this country, but in the whole of Western Europe. I urge my right hon. and learned Friend to recognise that this statistical method of arriving at total employment figures for the Health Service is not as good, in the view of many, as saying how many people are working in it, full time and part time.

My hon. Friend the Member for Norfolk, North (Mr. Howell), whom I am glad to see in his place, has taken the Committee of Public Accounts to task. He says that we have not done our job properly. I am the first to admit that there are inadequacies in any group of men, but I do not think it can be said that we have not examined the Health Service on a number of occasions in the past. We have tried to level criticism at the standard of administration. I welcome very much the interest shown by my hon. Friend in our endeavours and I hope that what I have to say will encourage him to intervene, if he catches your eye, Mr. Deputy Speaker.

My hon. Friend has made a serious charge against the Comptroller and Auditor General, based, I think on a total misapprehension of his work and duties. He is not a civil servant and he is unable to answer for himself directly in the House; unlike a normal civil servant, he is not protected by a Minister. Therefore, someone has to say something in his defence, and I think it falls to members of the PAC to do so.

If my hon. Friend criticises the Comptroller and Auditor General, I hope he will be good enough to quote the letter of the Comptroller and Auditor General of 2 December last and his replies to specific queries. As my hon. Friend knows, the Committee of Public Accounts is not an executive body. Serious though our criticisms are, and much as we would like to do something, there is nothing we can do other than to report, to have debates on the subject and to continue to embarrass successive Administrations who fall down on their job of running the National Health Service properly.

Mr. Ralph Howell (Norfolk, North)

I am grateful to my hon. Friend for having informed me that he would criticise my actions in writing to the PAC as I did. He has referred to what has happened in the Health Service over the last 36 years and to how unmanaged it always has been and still is. Over-staffing, now by 700,000, which my hon. Friend has already mentioned, has gone on despite some 33 reports from the Comptroller and Auditor General, followed by another 33 reports by the Committee of Public Accounts. All this time, as things have been getting more and more out of control, the PAC has reported to the House, but it has not been effective. We must in some way try to get public expenditure properly under control and cut out waste, which is good for nobody. When he suggested—

Mr. Deputy Speaker (Mr. Ernest Armstrong)

Order. The hon. Gentleman has made his point and I know that he will be trying to catch my eye.

Mr. Hordern

The truth is that, much to our regret, we have no executive power. We wish we could get our hands on the Health Service. We all feel we could do a better job than those who have handled it so far, and we could scarcely do worse. However, I should draw the attention of my hon. Friend to the report that we made in the 1980–81 Session on the financial control and accountability of the National Health Service. We have considered these matters fully in the past and, if I may say so, we make a much more devastating analysis than any that my hon. Friend has so far made. If he is determined to shoot our fox, it is much better not to shoot at the hounds as well, and better still not to shoot at the master, the Comptroller and Auditor General.

I have read the report that my hon. Friend sent to the Prime Minister. He makes the valid point that National Health Service staff have increased from 565,000 to 1.2 million in the last 20 years. That is a matter to which I have alluded on many occasions in the past. He has contrasted the number of daily beds occupied, saying that in the same period they have decreased from 478,000 to 370,000. I believe that is the only example he has given.

The question is not so much how many beds were occupied but how many cases were dealt with in the National Health Service. The truth compels us to recognise that in 1961 there were just over 5 million discharges and deaths, and the number rose to just over 7 million in 1981—an increase of almost 50 per cent. The number of cases dealt with is a more significant and important statistic than the number of beds occupied, because patients can now stay in hospital for a much shorter time, and on the whole that is a good thing. The average length of stay in 1971 was 14.7 days and in 1981, 10.2 days. The Health Service is not suffering from a shortage of beds. Our reports show that more than 2,000 beds in five different hospitals cannot be used because the revenue costs are too expensive.

It is true that the waiting lists in the NHS have increased. In 1971, there were 596,000 on the waiting list and in 1981 there were 745,000. However, the number of doctors and nurses to deal with the increase in the waiting list has risen as well. The number of doctors—this is an important point—decreased from 2.25 per 1,000 people in 1961 to 2.1 per 1,000 in 1982. Similarly, in the same period the number of prescriptions has increased from 233,000 to 383,000. Everyone must recognise that, in the past 20 years, life expectancy has increased and there is a much lower infant mortality. Most people would say that we should have more doctors and nurses to deal with the increased waiting lists. I must say, in justice to my right hon. and learned Friend, that that is exactly what successive Governments have succeeded in doing. It is not right to say that the waiting lists have increased without pointing to the fact that the number of doctors, nurses and treatments has increased markedly during that period.

I wish to give a slightly larger perspective than my hon. Friend the Member for Norfolk, North has so far done. It is true that productivity has declined in the sense that there are more doctors and nurses to deal with cases, and many would say that is a good thing. Between 1965 and 1979, the ratio of administrators to doctors increased from 1.07 to 1.95—almost doubling. In that context, management costs, which we are told are to be lower as a proportion of total costs, are unconvincing. In the past 20 years, there has been an extraordinary increase in the number of administrators. More management appears to be necessary by virtue of the larger share of public expenditure and greater resources devoted to the Health Service, but that claim is unconvincing in the context of what happened after the last reorganisation, especially with regard to the number of administrators.

What was the proudest boast that the Minister for Health could make in 1976?

Mr. Ralph Howell

Will my hon. Friend give way?

Mr. Hordern

I shall give way to my hon. Friend, but first I shall finish this good point. The Minister's proudest boast was that in three years he had witnessed the largest increase in the number of administrators, from 87,000 to 112,000. Despite all of the Minister's responsibilities, his greatest contribution was more administrators.

Mr. Ralph Howell

My hon. Friend has made a rather strong attack on my publication, and I should be allowed to correct it. My report states: Kenneth Clarke, the Minister for Health, claims that the increase in staff is explained by the fact that considerably more patients are treated now than in 1960—that output has increased both in bed patients and out-patients. This is true and must be taken into account. Also treatment is, in many cases, more complex and advanced than would have been the case in 1960 and there are considerably more intensive care units. In view of that passage, my hon. Friend has made a rather hard attack on what I said.

Mr. Hordern

I know that my hon. Friend will expand on his remarks. I accept that his remahks were balanced. but he made a mortifying attack on the Committee of Public Accounts, from which the Committee must recover as best it can. In 1981, the Committee was told that the Department was developing a computerised system. However, when the Committee took evidence on 30 January, no figures beyond last June were available. What had happened to that wonderful computerised system, whirling and churning out information all the time in those seven months? Absolutely nothing. In 1981, the Committee of Public Accounts report stated: We consider this situation is quite unsatisfactory. The circumstances remain that way.

What about the recent Department of Health circular? I understand that, last September, the Department told England's 92 district health authorities to invite tenders from private contractors and the existing Health Service work force and to accept the cheapest tender offered. The district health authorities were supposed to send their plans for tendering by the end of February to 14 regional health authorities. We are right up to date, and I am sure that my hon. and learned Friend can tell us what happened to that instruction. The Economist says that at least five districts, including Brent, Islington and Haringey, have voted to ignore this instruction. What happens when the Department issues an instruction which is disregarded?

We have found that there is no staff inspection of the Health Service, unlike the position in the rest of the Civil Service where regular staff inspection occurs. That lack of inspection accounts for the wide regional variations in the number of places and the different methods of dealing with treatment within the Health Service. I cannot understand why the NHS and successive administrators have thought it right to ignore the business of staff inspection to ascertain what people are doing in the regions and districts. What is their objection to it? Do they believe that the whole of the Health Service functions so well that it does not sometimes require simple checks to establish what people are doing?

I do not know whether we shall later debate the Griffiths report, which recommended more direct line management and a clear chain of commend. Right hon. and hon. Members interested in the Health Service will recognise that many years ago that process was followed with a much better result than rule by committee, which presently occurs at every stage throughout the Health Service, even to the extent of deciding how many beds there should be in a hospital ward.

It would be helpful if more people with business experience were required in the regional health authorities and the district health authorities. I know that my right hon. and learned Friend is seized of this point, but the Health Service should not be allowed to continue to be run by health authorities, with a large number of superannuated local politicians with no business experience.

In the Beveridge report, it was recommended that much more should be spent on prevention than was spent in those days. This still remains the truth today. If only we could have more prevention and earlier diagnosis, the health of the country would be better than it is. Is it not strange that there should be an MOT test for cars but no compulsory test, or any form of early diagnosis, for human beings? This is a reform that I hope the Government will initiate one day. There should be regular inspections and checks of all employees. If that could be done by firms, they should be eligible for relief against the national insurance surcharge for doing so.

All our reports over many years show that the reform of the NHS has a long way to go. It must start with the Department accepting more responsibility. It is not good enough that it should continue to act just as a funnel for cash, handing it out to the regions and then seeing what a disaster most regions make with the money. The Health Service is charged with the care of the nation's health and it cannot be right that it should be so careless in seeing how this is done.

Several Hon. Members

rose—

Mr. Deputy Speaker

Order. I remind hon. Members that the House has approved a recommendation that we concentrate on the compensation payments to NHS staff. I have allowed the opening speech to range fairly widely, but we should stick to what we have been told to do.

4.41 pm

Mr. Michael Meacher (Oldham West)

I pay a warm tribute to the Public Accounts Committee, to its chairman, my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), and to the hon. Member for Horsham (Mr. Hordern), who opened the debate. This is an extremely revealing and penetrating report, and the hon. Gentleman's speech was balanced and representative, setting out findings that are disquieting to both sides of the House.

On any standards, this report on premature retirement in the National Health Service is a damning indictment of administrative laxity and bungling within Whitehall. As the hon. Member for Horsham said, such retirements in England were originally estimated at 435, but the Comptroller and Auditor General estimates that the total has soared to 2,830. That is a six and a half times increase. Corresponding to this gigantic underestimate of the numbers of staff involved, the DHSS had similarly estimated the cost at £8.5 million, but it turned out, in the end, to be £54 million. Those facts are agreed.

Although this is mainly the result of administrative incompetence, to which I shall address the main part of my speech, there are a number of political issues involved. The only reason for these premature retirement payments, in the first place, was to assist in remedying some of the grosser bureaucratic excesses of the 1974 Tory reorganisation, associated with the name of the then Secretary of State for Social Services, now the Secretary of State for Education and Science. If that reorganisation had not, regrettably, sired upon the NHS a gratuitously multi-tiered structure, there would be no need to pay out millions of pounds in compensation for the abolition of one of those tiers.

Secondly, this expenditure excess of £46 million has been allowed to overshoot uncontrollably by a Government who have seen fit on more than one occasion recently to go to great lengths of harshness towards the poor and deprived sectors of the population simply to save minuscule sums of money—far less than the £46 million to which the Public Accounts Committee has drawn attention as being squandered.

Let me give one or two examples. The Government were prepared to introduce, through their notorious overseas visitor regulations, a new layer of bureaucracy with racist overtones in the NHS to save, theoretically, the miserly sum of £6 million. Of that, only a farcical fraction was saved—£370,000. The Government were prepared to bring in emergency regulations, which were debated only a couple of months ago, to put an instant stop to single payments to those on supplementary benefit—despite the fact that the Social Security Advisory Committee believed that the beneficiaries should have them—to save a few niggardly tens of thousands of pounds.

The Government were prepared to stop disabled persons in long-term care from accruing more than £1,000 in savings, despite their entitlement, like everyone else, and all to save petty hundreds of thousands of pounds. Now the Government, according to the report today are prepared to raise prescription charges, yet again, when they have already been raised by no less than 700 per cent. over the past five years, even though they are a straight tax on the sick, simply to save a few million pounds. I could go on, but bearing in mind your strictures, Mr. Deputy Speaker, I shall not. However, it is important to put in context the sums of money about which we are talking.

It would be a great deal easier to stomach this £46 million overspending blunder if the Government had not been quite so ruthlessly demanding in paring away the meagre livelihood of so many defenceless and helpless groups in the population. It would have been easier to excuse this debacle if the Government had not been insisting, year after year, on so-called efficiency savings from others, such as district health authorities, requiring them to produce the same services next year with less money than this year. A little more rigour by the Government in managing their own operations would not come amiss before they start lecturing others on their failings.

There is another political point that needs to be made clear. I refer to the stark contrast in the treatment—revealed by the Public Accounts Committee—by the Government when they make redundant high-paid managers compared with low-paid ancillaries. Managers losing their jobs are offered extremely generous premature retirement and a superannuation gratuity of about £20,000. One has to compare that with the treatment being meted out to NHS ancillary workers made redundant by privatisation. They are being forced to accept lower wages than the disgracefully low level, under both this Government and the previous Government, of about £1.20 or £1.10 an hour, that they are now receiving. Such people are being forced to even lower sub-poverty wage levels. This lucrative premature retirement scheme reveals that there is one law for the rich and another for the poor, even in the loss of jobs.

The administrative implications of this episode were well displayed by the hon. Member for Horsham.

The Minister for Health (Mr. Kenneth Clarke)

Before the hon. Gentleman leaves his general conclusion and as he is now emerging in a new guise as an enemy of bureaucracy, will he be chastened by the Public Accounts Committee report into changing his stance on these matters? Will he support the Government's proposals to get better management in the Health Service, as outlined in the Griffiths report? Will he also support our efforts to reduce management costs and the number of administrative and clerical staff in the Service? The thrust of the hon. Gentleman's activities as Opposition spokesman has so far been to obstruct the Government's efforts in those directions at the behest of his allies, the trade unions.

Mr. Meacher

I am in favour of reducing management costs, but perhaps the Government could do it a little more effectively than the PAC report reveals.

As to the Griffiths report, I am in favaour of improved management of the National Health Service, greater efficiency and more effective management, as I have always been. However, the reduction in the role of regional and deputy health authority members, the upgrading of the line management position of authority chairmen and the review of consultation procedures point more to facilitating further cuts and the acceleration of closures, to which I am opposed, than to greater efficiency. In principle, however, I am in favour of improved management.

Coming to the administrative implications of the episode, the Department has much to answer for, as was made very clear by the hon. Member for Horsham. We shall listen with great interest to what the Minister says.

The central question is why the DHSS made no precise estimate of the numbers intended to qualify for premature retirement. Why was there no adequate basis for monitoring the use or cost of the scheme? Apparently the DHSS became aware in February 1982 that the scheme was being used far more than had been expected, but why did it then take eight months, until October 1982, to institute regular monitoring?

Such extraordinary administrative practice means, as the hon. Member for Horsham rightly said, that we are never likely to know whether the overall reduction by 4,000 management posts including almost 3,000 premature retirements, has been achieved. We expect to hear straight, informed answers to those questions. As they are integral to the report, must be asked.

The central issue at stake in this deplorable episode is not in dispute. The DHSS has difficulty in reconciling accountability to Parliament with delegation of day-to-day management decisions to health authorities. In Wessex, for example, apparently all the applications from officers in the qualifying age group were approved, although the region accepted that not all such retirements would help to avoid redundancy. In other words, it paid attention only to one of the two criteria laid down by the department and the number of applicants was much greater there than in other regions, such as the northern region, which the Minister used as a comparison.

It is an astonishing administrative oversight that Ministers and their advisers did not reckon—it should be obvious—that excessive cost to the taxpayer would be avoided if the health authorities bore the full cost of authorised premature retirements from their own budgets. Such blatant managerial negligence and incompetence, with such costly consequences, would cause heads to roll in the private sector. We are entitled to ask by what standards of propriety the Secretary of State, the Minister for Health and senior civil servants can lose £46 million and blandly wave it aside as not a resigning matter.

The Secretary of State's only defence, so far as I know, is plaintively to say that the 1982 reorganisation has reduced management costs by £64 million. He made that point in the press notice issued on publication of the report, and I believe that he has repeated it since. That is no defence. There are bound to be substantial savings in management costs in any case if a tier of management is removed. That saving cannot be used to justify a huge cost overrun in offsetting payments.

The Secretary of State claims that the savings of £64 million are more than twice the original prediction, but the earlier £30 million management savings figure, to which the right hon. Gentleman referred, derives from the consultative paper "Patients First". At today's money value, those savings must be approximately £45 million, so present savings on management costs are about 50 per cent. higher than forecast, but there is an enormous overrun on premature retirement payments, which are 550 per cent. higher than forecast. Management incompetence on that scale, coming from a Government who like to pride themselves on their interest in efficiency, is wholly indefensible.

Mr. Eric Deakins (Walthamstow)

Is it not anomalous that the Government are able to estimate savings in management costs but the Department cannot give figures for savings in management posts? There must be some relationship between costs and numbers. If it is not possible to estimate either figure separately, it should at least be possible to get some estimate of both.

Mr. Meacher

That is a very important point, to which I am sure my hon. Friend will refer more fully if he catches your eye, Mr. Deputy Speaker.

It is extraordinary that the Department is able to give a figure only for the reduction in management costs. It is puzzling and bewildering that the reduction in management posts cannot be calculated from costs or found by other means. If the figure of 4,000 management posts is incorrect, what is the true figure? Will the Minister give us his best estimate?

It adds insult to injury to hear that the Comptroller and Auditor General found that more than 100 officers, who had prematurely retired after the 1982 reorganisation, were subsequently re-employed in the National Health Service. The hon. Member for Norfolk, North (Mr. Howell) drew attention to that by tabling a question to the Minister for Health, which was answered in Hansard on 29 February. The PAC, in a report that is excellent in every other way, merely says that it has "misgivings" about it. The Committee is entitled to use its own language, but that must surely be the understatement of the year. To put it somewhat differently, there is an ominous whiff of, not corruption, but very dubious practice when someone who has received £20,000 in total benefits for prematurely retiring is re-employed in the same organisation within a few months. That calls for some kind of explanation, and we want to hear it from the Minister tonight.

The Minister for Health, in a written answer on 29 February, justified that practice only where it was necessary to fill a temporary need that could not be foreseen at the time of premature retirement and that could not otherwise be filled except by recruiting an officer for whom the authority would have no continuing need."—[Official Report, 29 February 1984; Vol. 55, c. 258.] It is difficult to believe that those suitably narrow qualifications would cover anything like 100 cases. The House needs to know how often managers have been reemployed in circumstances falling outside those criteria. I suspect that there has been considerable abuse on those grounds. I hope that the Minister will answer that question, too.

This is a lamentable story of ministerial negligence and Civil Service laxity. The CPA report roundly declares that the DHSS appeared to us to act as little more than a rubber stamp in issuing certificates covering individual cases. The House needs to know how a ministerial regime of such crass incompetence was ever allowed to prevail in the DHSS and, without being fobbed off with such soothing euphemisms as annual accountability reviews, that that massive hijacking of taxpayers' money by already well-heeled administrators will not happen again.

4.59 pm

Sir Michael Shaw (Scarborough)

Perhaps I may deal a little later with some of the points raised by the hon. Member for Oldham, West (Mr. Meacher).

First, I should say how sorry all members of the Committee of Public Accounts are at the absence of our right hon. Friend and Chairman—he is certainly that to all members of the Committee—the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). My hon. Friend the Member for Horsham (Mr. Hordern), however, was far too modest. No one could have led us better on this occasion than he did, and we expected no less, given the great interest that he has taken in this important subject over a number of years. I admired the skill with which he deployed the case. He made it clear that there were enough matters to discuss for at least a whole day and he covered the points raised in our necessarily critical report extremely fully. I wish to consider the report and its conclusions bearing in mind that I entirely support the detailed criticism that my hon. Friend has so rightly brought out.

It is unusual to debate the report so soon after the Committee's investigation. That is especially welcome as so many of our reports have still to be debated — I believe that there are 37 outstanding from earlier Sessions and already 12 from this Session. The force of such reports is bound to be lessened if there is undue delay. Therefore, the early debate on this subject must give added force to the report and the message to be drawn from it.

In examining this problem, I have felt from the beginning that as a result of our experience we must have in mind a general fear of what always happens when changes are made in a major national service—the fact that additional costs always seem to creep in sooner or later. We may set out with the best of intentions, but all too often additional costs become apparent to an alarming extent, sometimes too late for anything to be done about them.

Mr. Frank Dobson (Holborn and St. Pancras)

As most of the predictions about cost savings and reductions in administrative manpower in this case came from the right hon. Member for Wanstead and Woodford (Mr. Jenkin) when he was Secretary of State for Social Services, does the hon. Gentleman agree that there must be some doubt about the right hon. Gentleman's predictions as Secretary of State for the Environment as to the savings that will accrue if he gets rid of the GLC and the metropolitan counties?

Sir Michael Shaw

In the Committee of Public Accounts we have almost entirely got rid of party political points. We study the problems as they are and try to reach a unanimous conclusion. I believe that, if I followed the hon. Gentleman's intervention, the spirit in which the Committee of Public Accounts conducts its business would be lost, but—the hon. Gentleman can make what he likes of this—our experience was borne out in the local government reorganisation and the National Health Service reorganisation in 1974. To some extent, we found the same shortcomings. The present report brings out the case in relation to premature retirement. The estimated number of premature retirements was 435. The actual number was 2,830. The estimated cost was £8.6 million. The actual cost has proved to be about £54 million.

The lessons to be drawn from the report are set out in paragraphs 19 and 29. Broadly speaking, the DHSS has told us that it had no real idea how many premature retirements would result from the reorganisation. It felt, however—this is the interesting point—that it had a duty to make some kind of guess or forecast, but that as such a guess was bound to be extremely uncertain it would have been wrong to confine the reorganisation to the limits contained in the original estimate. I have to say, however, that if that was so there was certainly no reference to the vagueness of the estimate at the time it was made. I therefore draw the general conclusion that, once again, it appears that no adequate financial disciplines were built into the original scheme. I should also say in passing that we have been waiting far too long for the appointment of a successor to Sir Kenneth Sharp. Greater accountancy discipline at a high level is still a great need in the Civil Service and Government Departments so that when actions are planned proper forecasts can be made, proper objectives defined and a pattern established against which the actual outturn can be set so that we can see where we are going all the time.

Let us consider what happened in this case. The regions were given power to grant premature retirements, but the discipline of having to provide the cash was largely absent, as the report makes clear. The Department was left to pick up the bill. The result was hardly surprising, given that the regions did not have to pick up the bill. Secondly, the 1981 estimate was based on various hypotheses and not on ascertainable facts. The Department had received only rough guidance from the regional health authorities, whose capacity for manpower planning at that time was extremely varied. The need for accountancy disciplines to be brought into the Department's various plans, decisions and conclusions is clear. The Department recognised the regions' inability to plan manpower, but was apparently willing to accept their decisions as to who should be granted premature retirement.

Finally, there has been the problem of people who have accepted premature retirement then being re-employed. I see the argument—it is simple, straightforward and basically right — that anyone who has received a substantial sum in respect of premature retirement should not be re-engaged, although I accept that re-employment may sometimes be necessary. I believe, however, that on such occasions the Department itself should sanction the re-employment. I understand that the Department had to authorise premature retirements in the past even though it did not seem to consider the facts very carefully. If that was right for premature retirement, it is also right that the Department should take final responsibility for reemployment. Those points must be taken on board.

As I said at the beginning of my speech, we have had a chance to debate the report far more quickly than is usual. I hope that this will be a good precedent for the future, because I believe that the existing worries in the Department will be more than a little reinforced by the views of the House on the inquiries made by the Committee and the report that we have submitted to the House. I hope that that is the spirit in which we shall conduct this debate.

5.11 pm

Mr. Eric Deakins (Walthamstow)

The House is at a disadvantage in this debate, although we have the report of the Committee of Public Accounts, because it is inappropriate on these occasions that the House should debate a topic on the basis of a Committee report—however however good—without the benefit of a written reply from the Government. No one is to blame. We completed the report only a few days ago. Normally, there would be a Treasury minute—a Government reply—and I have no doubt that the Minister who replies to the debate will be in a difficult position because, in a sense, he will have to anticipate what may be said in the appropriate Treasury minute. That is not the fault of the Committee of Public Accounts.

I congratulate the hon. Member for Horsham (Mr. Hordern) on what he said about the report, and wish to supplement some of his remarks. The whole point of debating Select Committee reports—particularly those that are critical of Government Departments and, indirectly, of Ministers—is that some notice should be taken of them. Lessons should be learnt for the future. We should emphasise to the House and to the public that in discussing the effects of the voluntary premature retirement scheme in the National Health Service we are not discussing a scheme that is dead and buried. It is not the case that the scheme will come to an end on 31 March and that that will be the end of the matter. In paragraph 8 of the Committee's report, we said that the scheme was introduced … to provide a permanent facility within the management of the NHS. We are not discussing a scheme for voluntary premature retirment designed to operate only within the reorganisation in which the area health authorities disappeared. We are discussing a permanent feature of the NHS — a management tool. The scheme was not a one-off arrangement that is over and done with. We cannot therefore simply say that it was a pity that the scheme overran on costs but that there is nothing that we can do about it. The scheme is continuing, and we must be careful about the way in which our criticisms are answered by the Department and the Minister.

The original estimates by the Department were so far out that they almost qualify for some other description. If one asks someone what something is going to cost, he says £9 million and the cost turns out to be £54 million, one is entitled to say that that is not a real estimate but an uninformed, even ill-informed, guess. If the difference had been between £45 million and £54 million, one would have understood, but in this case the margin of error is so substantial as to disqualify the original attempt from being described as an estimate.

The estimate was not merely meaningless; it was misleading. The original estimate of £8.6 million was reported to the House of Commons. Hon. Members probably thought that as something had to be done to smooth over the reorganisation of the NHS, and there would have to be some redundancy payments and some money for voluntary premature retirement, £9 million did not seem too bad a sum. They may have thought, "That sounds about right. Let them get on with it." Had we been told at the start that the cost would be £54 million, could we assume that the House would have adopted precisely the same attitude to the scheme? I doubt it. There is a considerable difference between £9 million and £54 million, and furthermore, for psychological reasons, those right hon. and hon. Members who take an interest in the NHS would have asked more searching questions at the time about the pattern of the scheme.

Parliament is right to express concern about an overrun in take-up of 550 per cent. and in costs of 527 per cent. Hon. Members are used to cost overruns, particularly in defence contracts, but we are not accustomed to cost overruns of that order. We are entitled to be concerned.

The scheme was designed and endorsed by Parliament, as a national scheme applying to England, with a spillover into Wales. There has not yet been a scheme in Scotland. However, the DHSS devolved the implementation of the scheme to the regional health authorities. In terms of the way in which the DHSS has acted in the past decade, that may have been a good thing. We all claim to believe in decentralisation of responsibility and management. The NHS is a vast and complex operation, and perhaps most things should be devolved to management. I do not argue against the DHSS's action in principle. However, the result was that a very different pattern emerged in different parts of the country.

In Wessex, 325 staff took advantage of the provisions of the scheme which, as my hon. Friend the Member for Oldham, West (Mr. Meacher) has pointed out, were very generous. In the north of England only 40 people did so. Questions put to the two regional health authority chairmen concerned failed to show that one region was very different from another. The chairman of Wessex regional health authority told us that there had been three multi-district areas there before the reorganisation, and that that made a difference. However, we learnt that the northern region had also had three multi-district areas. The Wessex chairman, Dr. Thwaites, also said that Wessex was a gainer under the resource allocation working party formula. That was true, but the north of England was a gainer, too. There was no major difference between the two regions. The differences that emerged had nothing to do with the constitution or structure of the regions. They were entirely due to decisions made by the regional management in each case. Under the DHSS decentralisation, those managements made wildly different decisions. That was serious, because the intentions of Parliament were laid down and were mentioned in paragraph 11 of the report, which stated: DHSS also stated that they had made the authorities aware of what it would be proper for them to do in order to administer the scheme in accordance with the intentions of Parliament. Parliament may have intended that all the regions should behave in the same way as northern region. I suspect that that was Parliament's intention. We did not intend that any region should behave like Wessex and one or two others, which did not follow all the criteria that had been laid down but adopted the scheme in a high, wide and handsome manner and gave voluntary premature retirement on very generous terms and conditions to almost any member of the management staff who opted for it. That was a serious blow to parliamentary control of the executive, and parliamentary financial control. The Minister should weigh up that point carefully, and it should be answered either this evening or in the written Treasury document.

Mr. David Crouch (Canterbury)

I do not seek to defend the Department against the charge of laxity of control over the regions in this matter. I am a member of a regional health authority. However, the hon. Gentleman should remember, as he skips his way about the report, quoting paragraphs here and there, that in paragraph 9 there is evidence that the DHSS believed that, had there not been so much voluntary retirement claimed and given, there would probably have been considerably more use of redundancy.

Does the hon. Gentleman recognise that those of us who have worked in the Health Service appreciate what it is for people to be faced with a great change, especially in the structure of management? The going of 98 health authorities personally affected many people. They wondered where their future lay and, presented with an open-door policy by the DHSS, thought that perhaps it would be better to take voluntary retirement while it was being offered. The hon. Gentleman should remember—I hope that the Committee bore this human factor in mind—how individuals at the receiving end approached the problem and applied for voluntary retirement.

Mr. Deakins

I take the hon. Gentleman's point, but I hope that he and the House will also appreciate that that was not the intention of Parliament when it sanctioned the scheme. The Committee of Public Accounts is, rightly, not allowed to debate policy matters—that is for the Government and the departmental Select Committees. The Committee is merely saying that Parliament said certain things some time ago and laid down the scheme and that it was not carried out as Parliament intended. Perhaps Parliament was wrong. I am not arguing that point. However, once the House has made a decision, Ministers, senior civil servants and members of regional health authorities should stick to the principles that Parliament lays down when sanctioning the expenditure of public money. That is what the debate is about.

It is obvious that there was inadequate central control of expenditure under the scheme. Even the DHSS admitted that when questioned by the CPA. Such inadequate control led to a serious risk that turned out to be the fact of overspending. No one can deny that. One of the reasons for the overspending, apart from the inadequate guidelines laid down at the centre, was, as the hon. Member for Horsham said, the fact that there was inadequate monitoring of the progress of the scheme until quite late in the day, when it was almost too late to make much impact on the total. That process was aided by health authorities being exempted from the bulk of the costs that the operation of the scheme incurred in their regions and areas because most of the costs fell on DHSS central funds. That was a crucial error on the part of the DHSS. That was not laid down by Parliament but was a managerial or perhaps, directly or indirectly, a ministerial decision. I suspect that something of this magnitude must have warranted ministerial intervention and therefore a ministerial decision. It will be interesting to hear what the Minister says about that later.

It must have been decided that, although the scheme would operate differently in different parts of the country, because it was a national scheme most of the costs would be borne nationally by the DHSS central fund. By giving that concession to regional health authorities, the DHSS immediately lost financial control. Once the regions were exempted more or less from the financial consequences of the decisions that they took, they could do virtually what they liked within the parameters of the scheme as they would not have to bear more than a small proportion of the cost.

The objectives of the scheme should be linked with the objectives of National Health Service reorganisation. In addition to getting rid of area health authorities and making the service more efficient, one of the main purposes of the reorganisation was to reduce management and bureaucracy. I invite the House to consider the following sequence of events. Paragraph 2 of the PAC's report says: In July 1981"— less that three years ago— DHSS estimated that by 1984–85 the reorganisation would have resulted in a reduction in the number of management posts in the NHS in England by about 4,000. Therefore, in July 1981 there was a firm estimate—I use that word deliberately as it was an estimate that was given to Parliament. I now invite the House to consider paragraph 17 of the report of Comptroller and Auditor General on which the CPA's report is based. He says of the DHSS that, during his investigations in 1982–83: It was too soon for the Departments and the NHS to determine whether the pre-reorganisation estimate that some 4,000 posts would be lost by 1984–85 would prove to be accurate. When that report was submitted, right hon. and hon. Members were still entitled to assume that eventually a number would be advanced to the House on a proper statistical basis, comparing the number of management jobs that would be saved with the original estimate of 4,000. However, if we turn to paragraph 20 of the PAC's report we find the following: DHSS estimated that the 1982 reorganisation would produce a reduction of 4,000 management posts by 1984–85"— here are the important words— but admitted … that it was unlikely that they would ever know what had actually been achieved. Therefore, in 1981 we started off with a firm estimate but when the Comptroller and Auditor General did his investigations in 1983 it was too soon to decide whether the number target had been reached; and now the PAC and the House have been told that it will never be possible to know how many management posts have been saved as a result of reorganisation.

Mr. Michael Morris (Northampton, South)

The hon. Gentleman should know that it is worse than that. If he looks at Hansard for 7 March 1984, at columns 625 to 626, he will see that there were 112,100 NHS administrative and clerical staff at 30 September 198 I and 112,450 at 31 December 1983 so, far from it being a cut, there has been an increase in numbers.

Mr. Deakins

I am grateful for that information. I shall leave that point for the House to consider and for the Minister to reply to in due course. We might not have come to the end of reorganisations of the Health Service. I hope, for the sake of the staff in it, that we have come to the end of major reorganisations for the next decade or so. Nevertheless, I hope that the House will insist that the DHSS and Ministers of whatever political complexion will learn the lessons of this reorganisation, just as the lessons of the local government reorganisation of 1972–73 should have been learnt.

It might be that, as a result of all the changes that have cost us £54 million, the NHS will be a lot more efficient. I do not deny that possibility, but it is surprising that, because of the way in which the scheme was operated, some voluntary premature retirements were accepted and paid for in specialties such as community medicine, in which there is a nationwide shortage. One would have thought that, in such a reorganisation, every effort would have been made to ensure that someone in a speciality who might be made redundant or given voluntary retirement would be given a job, with the appropriate terms, in another part of the country. No such luck.

It was said in evidence to the PAC that the scheme was also being used to get rid of what I would call dead wood. That is my expression. However, I should like to use the wonderful circumlocution that is to be found in paragraph 18 of the Comptroller and Auditor General's report. It says: many authorities had preferred not to rely on the uncertain results of natural wastage but to hasten the departure of existing officers who felt, or were thought by the health authority to be, unable to contribute as effectively and efficiently as required in the changed management situation. Dickens, and the circumlocution office, would have been wonderfully pleased to be the author of those words. However, it stems from what the Comptroller and Auditor General was told by health authorities and the DHSS.

In any other profession or job—as is happening in many British industries—people would be sacked. That circumlocution would not be applied to them. Many prematurely retired people have been re-employed which, as the hon. Member for Scarborough (Sir M. Shaw) pointed out, is disturbing. Why is it that people can get substantial redundancy payments, which include enormous increases in the pension that they will eventually receive, when they retire from the NHS at 60, and then be re-employed in lesser jobs? It suggests that something is wrong with the way in which management operates. One would have thought that there were plenty of people remaining in the National Health Service who could be promoted. If one is getting rid of dead wood there is no point in re-employing it, even in a lesser job, within the NHS.

As the permanent secretary to the DHSS told the Committee, we must have rigorous criteria for reemployment. As a member of the PAC, I doubt whether we have them yet. We need to spend much time on this because the NHS is about to be reorganised in Scotland, where there will undoubtedly be voluntary premature retirement scheme. It is essential that the lessons of England and, to a lesser extent, Wales are learnt by hon. Members, the Department and, above all, by Ministers before that reorganisation in Scotland. It is essential that we get it right for the future because it is a permanent facility within the management of the NHS. Indeed, it is a permanent facility for the management of the NHS because it is such a generous scheme. The DHSS must give priority to satisfying the requirements of Parliament instead of to decentralisation. If Parliament lays down a scheme with financial implications for, for example, premature retirement, the DHSS and especially Ministers have a duty to operate the scheme so that the intentions of Parliament are carried out. They have not been carried out on this occasion.

Finally, there are lessons for any forthcoming reorganisation of local government. I shall play my part as a member of the PAC and of the Labour party to ensure that we do not make the same mistakes — if local government is reorganised—as have been made on this occasion and as were made in the local government reorganisation of the early 1970s.

5.32 pm

Mr. Ralph Howell (Norfolk, North)

I preface my remarks by commenting on the criticism levelled at me by my hon. Friend the Member for Horsham (Mr. Hordern). I am sad that he felt it necessary, because I have the highest regard for him and the great work that he has been doing in drawing to Parliament's attention the inefficiencies in our control of public expenditure, especially in the National Health Service. We have been working on parallel lines.

On reflection, the letter which I sent to the Public Accounts Committee could have been worded rather better and, perhaps a little less bluntly. I underestimated the sensitivity of the PAC. My hon. Friend suggested that I was shooting the hounds as well as the fox. I am merely trying to whip in the hounds. They have been allowed a long leash for years. I therefore stand by my general criticism completely, although it could have been worded better.

Astounding figures have been quoted during the debate, but the figures are even worse than has been suggested. It is obvious that the Department of Health and Social Security had no thought-out plan for the premature retirement scheme. The figure of £8.6 million was pulled out of the air, and there was no substance behind it. No hon. Member could say otherwise. The original intention was to prematurely retire 435 people. When the Comptroller and Auditor General made his report on 4 November 1983, he stated that 2,580 people were early retired and that the total cost would be £45.2 million. The PAC's twelfth report gives the figure as £54 million. That means that since the PAC reported that the total cost would be £45.2 million, the cost rose by a further £8.8 million, which is even greater than the original sum.

It does not stop there. Yesterday, the Department told me that the expected outturn would be about £67 million and that it does not quite know when it will stop.

The average pension payment has been £3,469, with a lump sum of £14,598. The highest individual pension payment was £15,125 with a lump sum of £45,375, plus a redundancy payment of £9,200. Those figures are startling. By 31 October, 115 people had been re-employed. We must question whether such re-employment is fraudulent and whether any measures have been taken to recover the money from those who have been immediately re-employed.

The Comptroller and Auditor General's report of 4 November 1983, in paragraph 18, makes a startling statement: The Departments stated that they endorsed the authorities' approval of the premature retirement of senior regional and specialist officers, including those in disciplines where there were staff shortages. What on earth is going on? The Department has shown appalling negligence.

I first became aware that something strange was happening as long ago as 19 August 1982, when I was informed that the Wessex region has told all the Districts, that there are to be no redundancies, but where people wished to take early retirement, they could, even though their posts were to be refilled immediately at the same, or enhanced, salaries. In other words, in August 1982 the Wessex region was planning to thwart the Department's aims. In 1982 I informed the Department, Sir Kenneth Stowe, Mr. Roy Griffiths and also Dr. Bryan Thwaites, the chairman of the Wessex regional health authority, of what I had been told. However, the PAC did not see him until January 1984. There has been some slackness in the Department and in the PAC.

As to criticism of my attacks on the Comptroller and Auditor General, I have been in touch with him for the past two years and I have made accusations to his face and in letters. It is not correct that he should make a statement such as, "The total cost will be £45 million," when we know that it will be much more. I also believe that there are serious errors in the entire accounts of the National Health Service. The losses cannot be as small as they are reputed to be. In 1980–81 losses through theft and fraud were certified to be 0.01 per cent.; in 1981–82 they were 0.008 per cent.; and in 1982–83 they were 0.007 per cent. They are still going down. They are smaller than any firm in the country could accomplish. The Secretary of State has set in motion an inquiry into the appalling losses reported by the National Association of Health Authorities in England and Wales, yet the Comptroller and Auditor General continues to certify as correct such absurdly low losses. This matter must be drawn to the attention of the House.

Sir Michael Shaw

Does my hon. Friend appreciate that the Comptroller and Auditor General merely audits the accounts of the individual areas and regions, which are already audited by Government officials or by private auditors from the commercial and professional world? When they come in, the Comptroller and Auditor General groups the accounts together. Therefore, he is not the responsible auditor for the detailed regional accounts.

Mr. Howell

I am grateful to my hon. Friend for making that point. I fully realise that that is the position, but the Comptroller and Auditor General is the senior auditor of the entire nation, and he puts his signature on accounts stating that they are correct. I am convinced that they are not correct, and I believe that the House should take this matter very seriously.

It is strange that the Comptroller and Auditor General has no auditing or accountancy qualifications. That is unreasonable, because if anyone masqueraded as a doctor, a solicitor, or any other professional—

Mr. Deputy Speaker

Order. I reminded the House of the narrowness of the debate. The hon. Gentleman is straying a little now.

Mr. Howell

This is a serious matter, because we are talking about the accounts put forward by the Comptroller and Auditor General. The whole force of the law would come down on the head of anyone who pretended to have professional qualifications.

Mr. Deakins

On a point of order, Mr. Deputy Speaker. The Comptroller and Auditor General is responsible to the House through the Committee of Public Accounts. He is being unmercifully attacked without any reference to the subject of the debate. The hon. Member for Norfolk, North (Mr. Howell) is introducing extraneous matter and putting the remaining members of the CPA, who may wish to catch your eye, in an invidious position, because they may be tempted to defend the Comptroller and Auditor General rather than to concentrate on the subject of the debate.

Mr. Deputy Speaker

I have reminded the House and the hon. Member for Norfolk, North (Mr. Howell) that we are discussing compensation payments to NHS staff. He must confine himself to that topic.

Mr. Howell

To return to the PAC report, I must ask why the Committee reported in such a soft, gentle manner. The report is not nearly strong enough in view of what happened. We shall be overspending by about 700 per cent., and some serious questions must be asked. Cases must be examined to discover whether they are fraudulent. It cannot be right for people to accept early retirement payments and then immediately to be re-employed by the same authority. The PAC should have suggested that the Director of Public Prosecutions should examine the matter. I realise that that is a serious thing to say, but we must get proper control of our accounts.

I conclude by quoting the paragraph in my letter that offended the PAC so much: In my opinion, successive Secretaries of State, C & A G's and Public Accounts Committees, including the present incumbents, have failed lamentably to safeguard public funds allocated to the NHS and have failed to ensure that the Nation has received value for money. We always hear a great deal about patient care. Money that should have gone into patient care has been misappropriated in this instance. We are talking about a relatively small sum in the context of total NHS spending, but, if we take the entire NHS, very much larger sums are being used improperly and inefficiently.

It is unfair to say what I said in my letter to the PAC, because I should have included Parliament as well. We are all guilty of allowing such things to happen and funds to be misused in this way. Therefore, I take fully on board the criticism by my hon. Friend the Minister for Horsham.

Several Hon. Members

rose—

Mr. Deputy Speaker

Order. This is a very short debate, and I am sure that the House wishes to hear the Minister's statement. I must ask for particular brevity, since the Front Bench spokesmen hope to catch my eye at 6.15 pm.

5.48 pm

Mrs. Renée Short (Wolverhampton, North-East)

I add my thanks to those of hon. Members who have spoken to the Public Accounts Committee for giving the House an opportunity to debate the matter today, and for speeding its report so that we could debate it earlier than we might have done.

The PAC is concerned with what has already happened. Today the House is discussing a Supplementary Estimate—what will happen—and I am surprised that no one has yet referred to the fact that the Department is asking for another £8 million over and above what has gone before.

The Select Committee looked at the whole of this matter. We actually antedated the examination by the PAC as far back as March 1982. Nobody has yet mentioned that either. It seems to me that the House is not always as well informed as it might be about what goes on under its own roof.

The Estimates laid before the House in March 1982 anticipated expenditure for 1982–83 of £5.8 million in superannuation scheme benefits to those receiving compensation as a result of early retirement following National Health Service reorganisation. The Select Committee sought an indication from the Department of the estimate number of those retiring early. We were told by the Department: about 300 staff will receive lump sums of around £14,000 each and over 350 staff will receive recurring pension payments averaging nearly £5,000. Although the PAC report, at paragraph 19, reveals that the department became aware in February 1982 that the scheme was being used more than expected, the first public sign that something was going wrong was when the Department sought a massive Supplementary Estimate in 1982. The £5.8 million originally asked for became £17.8 million—a phenomenal rise of £12 million. The Select Committee naturally sought information from the Department as to what was going on. We were told in November 1982 that its latest figures showed that to date 1,062 staff had left the Service on premature retirement. That compared with the 300 or 350 estimated for 1982–83 and the 435 total. Half of those retiring were in administrative and clerical grades and a quarter in nursing and midwifery grades. Nobody has mentioned that fact either—that scarce nurses and midwives were taking early retirement.

We were not satisfied with that reply, so we sought further information — in particular, on the issue of redundancy as against premature retirement. We discovered that the issue was really very simple. If a health authority makes an officer redundant, it has to find its statutory share—59 per cent—of the expense. Under the premature retirement scheme, central Government pay the whole whack. That is where the dog lies buried. Therefore, it is not really surprising that the regional health authorities should have been so willing gaily to endorse hundreds of early retirement certificates. They were not footing the bill; the Department was.

Sir Kenneth Stowe told the PAC that there was no question of a kind of piggy-bank at the Department in which they"— the regions— could go dipping their paws". But they were doing that, were they not?

To return to the sorry tale, by January 1983 the Department was estimating 1,600 early retirement cases coming into payment in 1982–83, compared with 300 or 350 10 months earlier. In February 1983 a further Supplementary Estimate was laid. The £17.8 million had risen to £23.5 million. So in a single year the costs had risen from £5.8 million to £23.5 million and the numbers from 350 to 1,600. Clearly there was something very wrong with both those sets of figures.

The Estimate for 1983–84, the current financial year, was presented in March 1983, and £19.5 million was sought for NHS reorganisation early retirement expenses, assuming fewer than 1,000 new cases.

In April 1983 the Select Committee examined the Department's principal finance officer on the subject. He told us that the Department had made the best estimate it could in a "very uncertain area" and that the Department would be charging the cost out to the regions in 1983–84.

At least it now seemed that the Department had the matter under control—the film grip of strong leadership—or that it had an idea of the scale of its origami misjudgment. There would surely be no more Supplementary Estimates.

In the autumn the Comptroller and Auditor General produced a pretty damning indictment of the Department in his report on volume 8 of the 1982–83 Appropriation accounts, but of course by then it was all so much water under the bridge.

Now, however, the House is being presented with another Supplementary Estimate. Apparently £19.5 million is not enough. Adding together the sums under F5(1)(a) and F5(2)(a), it is now £27.5 million. It is that Supplementary Estimate that we are debating to give voice to the dissatisfaction with the Government's handling of the issue from start to finish which the PAC's report expresses and which surely all hon. Members must echo.

The Department was to have spent £8.6 million over three years. The House is now confronted with a bill for £54 million. There will have been almost 3,000 premature retirements, not 435.

PAC's report is properly and expertly critical of the management of the scheme by the Department and by individual regions. An enormous sum of money has been spent already. Was it wasted? The idea of the 1982 reorganisation was to lose around 4,000 management posts. If they had not taken early retirement, there would have been wider use of redundancy, costing the same in the long run, but there can be little regret that the costs of this were borne by central Government, because it left health authorities more resources for providing patient care and enabled the Department to squeeze the additional £40 million out of its existing cash limit. It is worth pointing out that the central funding arrangement meant, as the PAC report puts it in paragraph 16, that health authorities had apparently had a very easy option of encouraging premature retirement and leaving the Department to pick up the bill. It is incredible that the Department should have allowed that to happen. What was intended was that there would be 2,800 posts lost through what we call natural wastage. That turned out to have been wildly optimistic. With the prospect of generous early retirement provisions, why should someone wait a few more years to retire if he was to be encouraged to go now on the same terms, with his pension made up and a substantial lump sum into the bargain? It was money for old rope.

Some even took early retirement and, as we have heard, promptly found other National Health Service employment. The PAC report points out that 135 former employees prematurely retired have been subsequently reemployed. In December 1982 the Social Services Select Committee was told: NHS management has been told that when an officer is receiving compensation, in effect, for being surplus to requirements of the NHS he should not be re-employed save in ad hoc or exceptional circumstances. Is the Minister going to tell us what these ad hoc and exceptional circumstances were?

It is disturbing that there have been 135 ad hoc or exceptional circumstances". The PAC, at paragraph 29 of its report, expresses "misgivings". The House may wish to express rather more than that at the idea of an officer's taking early retirement and returning to NHS employment, with his average lump sum of £15,000 intact and his pension being paid in addition to his salary.

There must be a number of lessons that could and should be drawn from this debacle. Is the Minister going to draw them? One is that the national target of a 10 per cent. reduction in the proportion of NHS expenditure on management set out in HC(80)8 to be achieved by the end of 1984–85 is now virtually meaningless. The original target—that 4.61 per cent. of total expenditure should be on management — has already been achieved. However, that does not take into consideration the expense of the early retirement scheme. The difference between devoting 4.61 per cent. and 5.12 per cent. of expenditure to management is probably less than £40 million—less than the £54 million that the 3,000 premature retirements cost.

In March 1983 the Department told the Social Services Select Committee: as these costs fall almost entirely in the years preceding the 1984–85 management costs deadline, they will not, in any case, affect the outcome of the exercise". That is gobbledegook.

Of course, the present savings in management costs will eventually produce savings which outweigh the costs of premature retirement benefits, but the salutary lesson must be that the savings on management costs to date have been more than eaten up by the costs of early retirement. So where is the benefit? That lesson should be remembered by any Government who contemplate abolition or reduction of public authorities' staff—and that applies not only to central but to local government. This has been a most expensive lesson to learn, so let us make sure that we have learnt it.

This debacle also suggests an inbuilt lack of competence in central Government in managing early retirement schemes. In the 1981–82 Session, the Social Services Select Committee devoted a lot of time to a report on the retirement age. In the course of that, we discovered somewhat surprising facts about the Government's use of the job release scheme for civil servants. Departments were rather vague about how many staff had taken advantage of the scheme. Extraordinarily, even the Department of Employment, which runs the scheme, could not tell us how many of its own staff had used it. It was as bad as the DHSS. We had a feeling that a number of staff, who legitimately could have been asked to retire at 60, were given permission to remain for a few months, and then went on job release with the £50 a week allowance.

The Government's reply to our report took a year. It was only a few hundred words long, and of course it did not deal with this point. Perhaps the Minister will take it away and look at it. It is also slightly alarming that the scheme is not over. It is a permanent scheme that may be used in any eventuality. If it is to be used further, it must be tightened up — for example, in connection with privatisation.

Another lesson to be drawn is that the House does not control public expenditure as it should. That is very clear. The Department and the Treasury fail to do so, and we seem unable to do so. The House has had opportunities: two statutory instruments have been before the House, undebated; and three main and three Supplementary Estimates have been approved, albeit formally, by the House.

My Committee has gathered information, expressed its anxiety to the Department, and even raised the matter publicly in oral evidence, but to no avail. Does the Department not read what is going on in the Select Committee when it debates matters that affect it? As the vast extra sums were found within existing cash limits, in essence, there was no trouble. If one keeps within cash limits, there is no trouble from the Treasury, and one is doing all right. However, the PAC has now completed its inquest. Why did the patient die? That is the crucial question. In castigating the Department, quite properly, for its management failure, we must also draw lessons for Parliamentary scrutiny in future.

Today, interestingly, we have an alliance of two Committees—the Public Accounts Committee and the Select Committee on Social Services—and that is a pointer. It is significant that the first debate on a PAC report since the independence of the National Audit Office should take place on a Supplementary Estimate, with hon. Members outside the PAC taking part. That partnership, and the use of the work of the National Audit Office, may be one of the best things to emerge from this whole sorry business, which shows the Department in a very poor light.

Reference has been made to past reorganisations of the NHS. If we are to have another—I hope we shall not—let us make sure that, before it takes place, we debate the report presented by the Select Committee so that we do not get into the morass of mistakes and damage to the NHS that has happened on this occasion.

6.4 pm

Mr. Eric Cockeram (Ludlow)

I am glad to have this opportunity—albeit a brief one, as time is running out—to express my concern at the developments and handling of the voluntary redundancy scheme in the National Health Service. Having been a member of the Public Accounts Committee, and having listened to and participated in the inquiry, I must say that as the evidence unfolded my fears were not allayed. Rather, they have increased.

Of the original intention to retire 4,000 staff, it was envisaged that 765 staff would take compulsory retirement. The only good aspect of the scheme is that the number of people who were asked to take compulsory redundancy was nil. There the good news ends. The rest is the bad news. The bad news was that 435 people would be asked to take voluntary retirement and, as we know, the figure was exceeded substantially, by about 520 per cent., but as other hon. Members have pointed out, that was only the running total at the time when we took evidence. There were others in Wales, Scotland—the scheme runs a year later there, into the financial year 1984–85—and in England. So the original cost estimated at £8.6 million was, we are told, about £54 million at the time when we conducted the inquiry, but it will be £60 million at least.

When we have increased the number of administrators in the NHS—as the hon. Member for Horsham (Mr. Hordern) told us in opening the debate, the ratio has increased from 1.07 administrators per medical person employed to 1.93, almost double—one wonders why we are authorising the employment of these further administrators if they cannot control the administration of the machine that they are employed to administer.

From the start, the DHSS made no real attempt to control the scheme. It said to the regions, "You take control of this, and we will meet the bill." Not surprisingly, the regions and their staff took advantage of that. There was little incentive in the regions to run the scheme efficiently. The DHSS centrally did not even know whether the target of 4,000 would be met. We know, of course, that it was substantially exceeded. Worst of all, more than 100 of those who took that redundancy payment and early retirement had been re-employed. The DHSS did not even know that that had happened until it was pointed out. It said in its evidence at a later stage that if it were to start again on the scheme it would run it differently.

The National Health Service has been going for 38 years. It has increased its total payroll from about 500,000 to 1,250,000 in 1983. We have increased the ratio of bureaucrats to medical staff from 1.07 to 1.93. The machine is out of control. It is as if one put an engine on the rail, loaded it with coal, lit the fire, got up steam, took the brake off and said, "Now, just go." There was no attempt whatever to control the engine. It is a sorry story.

My constituents cannot understand—I am worried on their behalf, when I read a report of this nature and take part in an inquiry of this nature—why the community hospital in Shifnel in my constituency is threatened with closure of its general medical treatment department, turning it into an old people's home. Similar action is proposed at a community hospital in Broseley, at a community hospital in Much Wenlock, and at a community hospital in Bridgnorth. My constituents ask me to explain the paltry savings made by the closure of such community hospitals while substantial sums of more than £50 million are being wasted in administration of the National Health Service. I am not able to answer that question. I look to the Minister to give an answer that ensures that in future he and his staff, led by Sir Kenneth Stowe at his Department, do not leave the control of the National Health Service to be administered at regions when they centrally—

Mr. Kenneth Clarke

My hon. Friend links these proposals for hospitals in his constituency with the Public Accounts Committee report. I know that he is very concerned about those hospitals, but he would not wish to mislead the House or his constituents. There was a proposal to build a new hospital at Telford, and to provide facilities for the treatment of his constituents. Shropshire has decided that it wishes to build that hospital in Telford, it is being put under pressure to make sure that it provides it within a fair share of the resources available to Shropshire, and it has to look at the future pattern of its services. My hon. Friend must not lead his constituents into believing that they can override the difficult decision about which old services are to be replaced with new services by attributing it to the possibility of administrative savings.

Mr. Cockeram

I do not wish to enter into a debate on that point now, and I do not think you would wish me to do so, Mr. Deputy Speaker. The point I wish to make that the Minister has not answered is that the totality of the National Health Service expenditure is, and has to be, controlled by Parliament. The country has a total sum to disburse. If within the totality £54 million or £60 million is being spent on a scheme that was originally budgeted to cost £8.6 million, my constituents cannot understand why they must make economies at the grass roots I hope that the Minister will address himself, although not in detail, to that point of principle in his reply.

6.11 pmin

Mr. Charles Kennedy (Ross, Cromarty and Skye)

While I am mindful of the time available in the debate hope that the Minister, in replying will remember that discussion of an overshoot of £46 million must surely sit rather uneasily on the conscience of the Minister for Health on the very same day that an announcement is made that prescription charges for some of the financially weaker members of society are being jacked up yet again.

One of the most worrying aspects of the mess that has been created is the fact the House is considering a permanent feature. Given that I represent a Scottish constituency, I bear in mind what the hon. Member for Walthamstow (Mr. Deakins) and the hon. Member for Wolverhampton, North-East (Mrs. Short) said, that the effect of this measure will shortly be felt north of the border. I only hope that, when that happens, the travesty that has occurred in England will not be repeated, and that, for once, the Scots may decide to learn by the English experience—something that has not happened very often in our respective histories—and that, as a result, we shall not have this waste. If we were to have such waste, I would experience the problem that was described by the hon. Member for Ludlow (Mr. Cockeram). In my constituency, small hospitals, or wards of cottage community hospitals, are facing closure to provide for a new unit that has been built elsewhere. However, the new unit is a control of infections unit, and not a geriatric or maternity unit such as those units being phased out. That is a difficult concept for a Member of Parliament to explain or to justify to constituents—not that I am trying to justify the Government's health policies. I fully take the point made by the hon. Member for Ludlow.

In the debate, the House has heard much about the senior officials in the health authorities who have received considerable pay-outs and have possibly been re-employed. There is another category that has suffered, in a different but distinctive way as a result of the scheme. About eight years ago, the opportunity was given to health officers to purchase added years to make their service up to the maximum possible at normal retirement age. One effect of this has been that, since the scheme under debate was introduced, which the CPA has examined, those people, particularly in middle management rather than senior management, have suffered severe anomalies. One of my hon. Friends who represents an English constituency passed on to me one example—I am sure there must be many more—in which the purchase of extra years was described in the following way by the health authority: Although the appropriate agreement entitles individuals to enhancement of superannuable service up to that which they could have earned by age 60, where added years have been purchased, then these must be offset against the premature retirement enhancement. This means that the decision to purchase added years some eight years ago has in effect paid for the enhancements that would have been made to the pension, given that administrators have taken this early option. In other words, as well as those who have benefited rather grossly from the scheme, there are those who have suffered considerably in local health administration, so there are two sides to the equation which should be remembered in the debate.

I do not wish to prolong the debate, because I am anxious to hear what will be said from the Treasury Bench. However, to ensure that these proposals, when their effect is felt north of the border, will be administered properly and successfully, I hope that the Scottish home and health department—and, to be fair, the Minister indicated this last week—will take considerable notice of the report of the Committee of Public Accounts, which has highlighted an appalling problem at a time when the finances of the Health Service—indeed, this applies to other policies of the Government—are being cut and cut again.

6.17 pm

Mr. Roy Galley (Halifax)

In the short time available to me, I should like to emphasise that the report of the Public Accounts Committee is the clearest sign that the House has yet had of the need for a more incisive and better quality management of the National Health Service.

The hon. Member for Oldham, West (Mr. Meacher) referred to "administrative laxity". I prefer to use the term "management laxity", and I welcome the apparent eleventh-hour conversion of Opposition Members to the principles of good management. It behoves hon. Members to be constructive and fair to the Government by saying that, in terms of managing the enormous lumbering elephant that the National Health Service represents, they have made greater attempts than have been made before to manage it in terms of accountability reviews, manpower planning and so on.

The whole episode of premature retirement shows a major lack of management acumen in terms of not having clear objectives, not controlling and monitoring events, and not appraising effectively the available options. However, as the report shows, the central failure has been at regional level. Significant differences have occurred in the performances of different regions. What better indictment is there of the current consensus management in the regions and districts of the Health Service? The sooner the concept of good management and general

Many of the arguments surrounding the Griffiths report and the concept of general management have centred on the illusory conflict between general management and clinical judgment. Doctors have nothing to fear from the concept of general management because it is to matters such as have been highlighted in the report that general managers will turn their attention. There is plenty of scope in the NHS for rooting out waste. The saving of £46 million, and, as was shown in another report this week, some £15 million in transport costs, is significant. That money would be better spent on patient care. It is for those reasons that good management is required in the NHS.

I hope that my right hon. Friend the Secretary of State and my right hon. and learned Friend the Minister for Health will move quickly to bring in general managers on a full-time basis at regional and district authority level with a clear mandate to attack such waste and to manage resources properly. I hope that my right hon. Friend will resist the temptation because of practical problems to go for a nominalist approach by appointing a current official on a part-time basis to be a general manager.

The PAC's report demonstrates the central dilemma of the NHS. Such an organisation cannot be fully managed from the centre but delegation has considerable pitfalls. One region followed the guidelines and dealt soundly on good management principles with premature retirement; others did not. Management needs to be not only good but accountable. I hope that the central management at the DHSS will increasingly ensure that that is the case at other levels.

Finally—I have very little time because of the lengthy contributions from other hon. Members—it has been mentioned more than once that the handling of the retirement arrangements was devolved largely to the regions but funded centrally. Surely here is a crucial principle of management which my right hon. Friend must follow when he is considering changes in NHS management. Budgets and responsibility go together and must go together. Regions and districts must be given firm budgets and, within the overall guidelines of central policy, they must be able to get on with the job. It is the job of my right hon. and learned Friend the Minister for Health to set the central policy. He must then give the budget, let them get on with the job and make the authorities accountable.

This report is the best argument that has ever been produced for implementing general management within the NHS. I pay tribute to the fact that over the past few months my right hon. and learned Friend has increasingly endeavoured to manage the NHS, with its enormous size, more effectively. Acting constructively on the report, he must now take that process further.

6.23 pm

Mr. Frank Dobson (Holborn and St. Pancras)

The most distinguished statesman to be born in my constituency was Benjamin Disraeli, who, besides describing the Tory party as an organised hypocrisy, also counselled new politicians, "Never explain. Never apologise." It might have been as well if he had also counselled some distinguished Tory politicians never to predict.

We are considering today a lot of predictions which were made by Tory politicians about savings that would result from a further reorganisation of the NHS which they had already reorganised once, putting the costs up. We are now looking at the product of the NHS reorganisation undertaken by the right hon. Member for Wanstead and Woodford (Mr. Jenkin), in his role as Secretary of State for Social Services, when he abolished a tier of the NHS which was introduced by his right hon. Friend the Member for Leeds, North-East (Sir K. Joseph). That was intended to save money, to reduce staff and to put more skilled staff "back at the coal face" treating patients.

If we look at those propositions, we find that it did not turn out exactly as the right hon. Member for Wanstead and Woodford predicted. He seems to have a peculiar role at the moment. He was given the task of doing down and setting aside one Tory NHS reorganisation and, as Secretary of State for the Environment, he has now been given the task of doing away with a tier of local government which his Tory predecessors introduced. Indeed, when he goes to the Cabinet he ought to ask which of its members will plead guilty and perhaps they would even ask for certain other offences to be taken into consideration. But he does not do that.

We are faced today with the product of what was done, in a sense, to ease the pain of NHS reorganisation for people who worked in it. The DHSS made an estimate — it was called an estimate at the time and was degraded only when it went wrong — that 435 people would seek early retirement under the scheme at a cost of £8.6 million. Now, an increase of 550 per cent. later, 2,830 people have made use of the scheme at a cost of £54 million. That is not as great as the percentage increase in prescription charges which followed the Government into office, and which is now about 700 per cent., but it is nevertheless a substantial increase.

It is a poor performance by the DHSS, and I am not willing to stand here and let the DHSS headquarters slough off all responsibility for that on to the regional health authorities which made some of the decisions, if only because it was the DHSS which made the original estimate and got it wrong and because every early retirement had to be approved by the head of the DHSS. Every early retirement has passed across the desk of someone at DHSS headquarters. Therefore, it is no good anyone just blaming the regional health authorities. Exactly what was happening ought to have been clearer much sooner than it was.

An impression is created—even, to some extent, in the PAC's report—that only administrators have taken early retirement under the scheme. When the right hon. Member for Wanstead and Woodford was in his predicting mood in January 1980, in a press release he said: We are determined to retain the services of those who are best qualified to see the NHS through the difficult years ahead. Those are his words, not mine. He went on: It would be most unfortunate if precisely those people who we are anxious to see using their experience and talents nearer to the point of patient care, felt that their own interests were best furthered by leaving the Service altogether. He went on to say: One of our objectives is to switch resources from management administration into direct patient care. One certain consequence of the changes is that clinically trained staff, be they doctors, dentists, nurses or other clinical professions, who have over the years moved into management, will be given every help and encouragement, where appropriate, to return to clinical practice. He summarised that by saying: I want to see more of our doctors practising medicine, more of our dentists doing dentistry and more of our nurses engaged directly in the care of patients. Therefore, one needs to ask: who has been retired early under the scheme? In an answer that I received only yesterday, I discovered that no fewer than 103 medical staff, 18 dental staff and 763 nursing staff have retired early under the scheme. Those are from a total of 2,500 officers of health authorities, not the 2,800 that we have been talking about. Therefore, of that reduced total, one third of those who have prematurely retired from the Service—given up, gone away—and whose services are no longer available to the Health Service were exactly those clinically qualified staff that the Secretary of State said that he wanted to retain in the Service.

It goes further than that because, among the people who were qualified medically, if we look at the report of the Comptroller and Auditor General, we discover that the DHSS was later concerned at the loss under the scheme of 80 specialists in the understaffed area of community medicine". So 80 specialists, either doctors or nurses, retired early from community medicine under this scheme, when it is one of the self-same Department's priorities to transfer people into rather than out of that discipline. It shows how absurd this scheme has been for people in the National Health Service and the damage that it has done to the Service.

If we have got rid of many skilled, trained and experienced doctors, dentists and nurses, the odds are that the National Health Service has suffered rather than benefited from the change and that people have taken this option, presumably because they do not like working in a National Health Service run by the present regime.

The Government have got rid of a tier of the Health Service now and they say that they have "cut administrative costs", but, as the hon. Member for Horsham (Mr. Hordern) pointed out, there has actually been an increase in the number of administrators in the National Health Service, despite this early retirement scheme which was trumpeted as a method of reducing the number of administrators. The Government claim that, despite the increase in the number of administrative staff, as the Minister for Health said on 14 November: We appear"— he is very cautious— therefore, to have saved nationally £64 million" — [Official Report, 14 November 1983; Vol. 48, c. 329.] on administration.

I should like the Public Accounts Committee and the distinguished members of it who are here today to think about that. The number of administrators in the National Health Service has actually increased. At least 70 per cent. of the cost of the National Health Service is pay. How is it that £64 million has allegedly been saved in administration? It seems very odd. I suspect that what may be happening is that regions and districts are shuffling a little of what was previously regarded as administration into other budgets so that they will continue to impress the Minister. I hope that the Public Accounts Committee will look seriously into this matter, because it is rather difficult to reconcile an increase in the number of administrative staff with a substantial reduction in the expenditure on administration.

What we have had from this reorganisation is an increase in costs, an increase in the number of administrative staff and a sad reduction in the number of trained medical, nursing and dental staff among those who were the most experienced in the Health Service. It seems to me, therefore, that, despite all the predictions of the Secretary of State, things have not improved quite as he intended when he asked for the removal of the tier. I hope that hon. Members on the Government Benches will bear that in mind when considering his proposition for the removal of a tier of local government.

I challenge all hon. Members on the Government Benches to tell me when and about what the Secretary of State said this. Was he talking about the National Health Service or about local government when he said: Abolishing a whole tier is bound to yield scope for substantial savings. It is not possible at this stage to make precise estimates of savings, or to say in exactly what areas they will be made; much depends on decisions to be taken by the successor authorities. I hope that the Minister will rise to my challenge, that other hon. Members on the Government side will wait patiently and that, when they come to vote on matters relating to local government, they will bear in mind his record on the National Health Service.

6.36 pm

The Minister for Health (Mr. Kenneth Clarke)

This is a debate following a novel procedure. Perhaps the first thing that I ought to make clear, responding to a point made by the hon. Member for Walthamstow (Mr. Deakins), is that we are, in the main, discussing a report of the Public Accounts Committee on premature retirement in the National Health Service which was published only last Thursday. Usually the House would have a written response to the report in the form of a Treasury minute, and I can assure right hon. and hon. Members that that will follow in this case, but what we are doing at the moment is responding as quickly as we can to the report. I am happy to do so because it is obvious that we must take on board these serious criticisms and act as quickly as we can in the light of them.

Whilst I do not accept every criticism in the report, I accept the general drift of the criticisms that it makes and the lessons that it seeks to draw. Here we are, with the benefit of the wisdom of hindsight, looking back on a reorganisation launched in 1981. However, its course has not followed either the course that was predicted or one of which the PAC approves. I will, however, try to put one or two of the criticisms into a perspective somewhat fairer to all those involved.

I accept that one of the main things is to see what can be done to remedy the defects and what lessons we can learn for the future—a question that the hon. Member for Wolverhampton, North-East (Mrs. Short) asked. I draw the same conclusions for the future as did my hon. Friend the Member for Halifax (Mr. Galley). He underlined the continuing need to improve the performance of the National Health Service. We need better and clearer management, better monitoring of management and better control over it. We need improved manpower planning and control. I only hope, given that this afternoon hon. Members on both sides of the House have criticised the shortcomings revealed by the report and sought improvements in performance that when we continue in our efforts to get better value for money out of the Health Service, improve management, eliminate waste and tighten control over manpower, we will continue to have such all-party support for our endeavours as we might expect from this debate.

I should like to put one or two of the criticisms into perspective. There is no room for argument about the difference between the estimates and the final cost. It is quite obvious that the estimates first given were no more than guesstimates based on inadequate information from regional health authorities, which were not at the time in a position to give adequate information and estimates, and that they have proved to be quite wrong.

Mr. Michael Morris

rose—

Mr. Clarke

My hon. Friend has not been here throughout the debate.

Mr. Morris

I have.

Mr. Clarke

I apologise to my hon. Friend. Those who have been here have taken the bulk of the time, and as no one has supported the Government or the Health Service from beginning to end, I should like to make the last 20 minutes to offer some explanation. I am sorry that I did not notice the presence of my hon. Friend earlier.

First, the Committee has not—

Mr. Morris

Will my right hon. and learned Friend—

Mr. Deputy Speaker (Mr. Harold Walker)

Order. The Minister is clearly not giving way.

Mr. Clarke

It is not my hon. Friend's fault that I have even less time left in which to answer than I expected, but it would be foolish to have two and a half hours' criticism followed by no reply.

The criticisms must be put in perspective. The Committee has not expressed any concern about the terms of the premature retirement scheme. It has not said that any individual has taken more than that to which he was entitled under the scheme. It has not said that the scheme was too generous in the terms that it offered to individuals. What it has criticised is the number that were allowed to go and the difference between the estimated and actual numbers, and I have just conceded that that is a well-founded criticism.

I remind the House that the whole point was to forward the reorganisation of the Health Service to which the Government were committed at the time. That reorganisation has achieved benefits for the service by removing a wholly unnecessary tier of administration. I believe that the effects of that abolition of unnecessary area health authorities is, on the whole—although there have been some critics of it—widely supported by those interested in the NHS.

Some have asked whether we can demonstrate how much we have saved by abolishing area health authorities and how far we can show that we have achieved reductions in administrative costs, in particular by simplifying the structure of the service. It is difficult to make an estimate because one is trying to compare what is now being spent on management and administration not with what was being spent then but with what would have been spent had matters continued unchanged.

For that reason, my right hon. Friend who is now the Secretary of State for the Environment set a target—the House knew all about it; it was explained to hon. Members—to achieve a 10 per cent. reduction in the proportion of total health authority revenue devoted to management costs. That has happened. There has been a reduction during our period in office, from 1979 to 1980 and from 1980 to 1983, from a 5.12 per cent. to a 4.4 per cent. proportion of costs absorbed by management.

Mr. Dobson

The right hon. and learned Gentleman cannot prove that.

Mr. Clarke

I accept that I cannot prove it. That is why I wrote into the answer that I gave the hon. Gentleman in November, from which he quoted, "it seems likely" or words to that effect. Nevertheless, it is the best estimate that can be given. We have seen a clear change in the trend of management costs following our beginning the process of tightening up the management of the Health Service by abolishing the area tier.

Taking that estimate, we arrive at the figure of £64 million. Had the health authorities carried on completely along the previous course which they were following, and had they had the funds devoted to them which this Government have devoted to the NHS, that is what it seems likely they would have spent.

I accept that it is not possible to calculate an exact figure for the reduction of management costs compared with what would otherwise have happened. For all the reasons that I have given, I shall not attempt to give such a figure; I would not want to stand on it. Nevertheless, it continues to be our intention to reduce management costs in the NHS to their inescapable minimum; to improve the value for money that we get for those managements costs by introducing a proper structure of management; and to achieve real reductions in administrative and staff numbers, and I shall return to that because that is now beginning to happen.

Problems arose when the reorganisation of 1981 was carried through in 1982–83 and 1983–84 because, as the report says, of the difficulties of delegating authority to the health authorities. The report says: This case well illustrates the problems for the DHSS in reconciling accountability to Parliament with the delegation to health authorities of day-to-day management decisions, to which our predecessors referred in their 17th report for the Session 1980–81. That is right. It was decided by the Government in the new arrangements to delegate responsibility for this matter to regional health authorities. To be fair to all concerned, it was made clear to the House that they were doing that, and that was broadly welcomed. Indeed, I warn our present critics that the next time they accuse the Government of interfering with health authorities, either at regional or district level, when we step in with manpower targets and proposed new forms of management, I shall remind them of the criticisms aimed at delegation when it goes wrong.

I accept that we must delegate day-to-day responsibility to those nearest to the patient, those best able to judge such matters. But we must not abdicate responsibility by leaving it entirely to health authorities. It is our duty to hold them to account and to monitor their performance, and we have made great strides in that direction.

Mr. Dobson

Does the Minister acknowledge that every early retirement covered by the scheme had to be approved by the permanent secretary at the DHSS? That was not delegation.

Mr. Clarke

The PAC describes whoever was responsible as acting like a rubber stamp. That is the PAC's description and judgment—I do not necessarily agree with it—of the way in which the policy was followed through of devolving responsibility for making decisions to regions. It also enabled regions to come to such divergent opinions. It is obvious, for example, that the policy followed by Wessex does not commend itself to any hon. Member, whereas the policy followed by the northern region is perfectly acceptable. I do not think that any hon. Member has said that there should not have been any voluntary redundancies — [Interruption.] We changed the Wessex regional chairman, though not with the approval of the hon. Member for Holborn and St. Pancras, because at that time he was a Labour chairman.

I was speaking about monitoring and holding to account the authorities for what they do. That has been taken a great deal further forward since 1982 by the introduction of regional reviews. I do not have time, and this is not the occasion, to describe fully the process of regional review. It is the system which we have devised, and which is working well, to hold the regional authorities to account, with Ministers presiding personally over a review of their objectives for the coming year, and then their performance in achieving those objectives at the end of the year.

We developed that all the way down the line—with regions holding districts to account and districts holding units to account—once we had developed the system. My right hon. Friend and I are determined to strengthen that system of accountability because we all improve our performance if we are held to account and made to justify our use of public funds, as well as having our achievement of policy objectives monitored in an organised way.

I must however, remind members of the PAC and hon. Members generally that we should not overstate what can be achieved by accountability, nor should we start going back to the central control of all details of management, which would merely lead to our having to recruit more staff at the centre—whereas we are running down the numbers—and result in too many layers of authority.

It never would have been possible in a change of this kind, involving management structures in 192 health districts and 14 regions, with a reorganisation that affected 40,000 posts, for the Department from the centre to have approved each and every detail of that reorganisation. Therefore, it is for the centre to exercise only a general holding to account of the regions in respect of their performance.

I accept what has been said about our retaining the provision for premature retirement for the future. Now that we have the review system fully in operation, it will be important for us to ensure that any future premature retirements are justified and that regions are being held to account for the policy that they follow towards voluntary retirement so as to ensure that what happened in the past does not recur.

Still putting matters in perspective, I should make an elementary point about the cost of the scheme, for almost all hon. Members have spoken as though the cost of the voluntary retirement scheme was £54 million. That is the total amount of money to be paid out to 2,800 individuals by way of lump sum gratuities and pension by the end of March 1984.

The committee's report does not bring out the fact that the greater part of that expenditure represents payments arising directly from the superannuation records of the individuals concerned; in other words, money that was due to them on retirement, irrespective of the premature retirement scheme. Of the £54 million, £40 million represents lump sum payments. About £33 million of that is based on what the individuals had already earned. Only £7 million was compensation for their early retirement. In other words, £33 million would have to be paid out, in any event, in the course of the next few years if the individuals reached normal retirement age.

Pension payments represent £14 million. Of that, almost half the sums paid out to date are earned superannuation rather than compensation. [Interruption.] Hon. Members cheerfully say that we should save local hospitals threatened by closure at a cost of millions of pounds. The fact remains that the compensation element, both in lump sums and pension, amounts to about £14 million, which gives an average cost per employee prematurely retired of £5,000, or little more than one quarter of the figure given in the report. No doubt Opposition Members would have supported an alternative approach with the retention of these staff for whom there were no jobs and the overmanning of administration to avoid the cost of redundancies or premature retirement. Had that happened, they would soon have got through more than £5,000 per head.

Redundancy would not necessarily have reduced costs significantly. In fact, the cost would probably have been the same since all the employees over the age of 50 who were made redundant would have got the same benefits as for premature retirement. Most, if not all, authorities have redundancy agreements which provide that those over 50 must go first. For the over-50s premature retirement is in a sense a polite phrase for redundancy.

The hon. Member for Wolverhampton, North-East hit one bull's eye when she pointed out that one reason for opting for premature retirement was not just because it was an euphemism for redundancy but because the Department centrally paid the full cost as opposed to it coming out of the region's budget in the first year. We have now corrected that.

It is also an irony that what the Department did to pay those costs was to take the money out of the shortfall in expenditure by health authorities. We are talking about 1982 when the strike led to underspending by authorities. Therefore, public funds suffered no loss and there was no over-expenditure on the National Health Service.

The other worrying point is the re-employment of staff who were offered early retirement. We are not remotely defensive about this. As we have informed the House in answer to questions, 135 staff who took premature retirement were recorded on 31 October last as being re-employed, 99 of them part time, 16 whole time and 20 on an occasional consultancy basis. There is nothing illegal about it, but it is the view of Ministers that it should never have happened unless there were exceptional circumstances in each case.

My right hon. Friend has written to the chairmen of regional health authorities asking that in each and every case where the person is still employed they should discover the exceptional reasons for the employment and review the position. They are reporting back to us and when we receive the results of the review we shall consider whether further guidance is needed.

Meanwhile, we have directed the authorities that no further re-employment of people who have accepted premature retirement should take place without the matter being referred for ministerial approval. I can assure the House that that approval will be given only in exceptional circumstances.

Mr. Deakins

Will the Minister make sure that regional health authority chairmen are aware of the strong feelings expressed not only by the Committee of Public Accounts but by the House?

Mr. Clarke

I certainly shall. My right hon. Friend has written on two occasions to chairmen to underline the point. They will have to come to Ministers now in every case where they propose to re-employ someone who had retired prematurely. We shall bear in mind the strong views of the House.

I have described the regional reviews that we are undertaking. My hon. Friend the Member for Horsham (Mr. Hordern), who opened the debate with admirable clarity and very constructively, asked what we were doing about management costs, manpower numbers and general administrative control. Of course, again a great deal has happened since this scheme was launched. Apart from the regional reviews and the accountability process that I have described, we have also begun to introduce proper manpower planning and control to achieve our objectives.

Everyone will recall the manpower targets exercise which was launched in the summer of 1982. I accept that it was a coincidence that it happened at a time when these problems were emerging. By March 1983 we had got up-to-date reporting of manpower numbers, we had reintroduced quarterly returns of how many people were employed, and we had established a baseline on which to base targets. In the summer of last year we set manpower targets for March 1984 and we have agreed them with the regions. I do not remember that that was greeted certainly by the new enemy of bureaucracy, the hon. Member for Oldham, West (Mr. Meacher), with universal support. He was not then so keen on eliminating waste and inefficiency in the Health Service and getting better value for money. In fact, he allied himself with the ridiculous attacks on the manpower arrangements we were introducing.

I should have thought that the report of the committee showed that, if anything, the changes were overdue and necessary. I hope that future developments on manpower planning, control and targets for next year will have the full support of the hon. Member for Oldham, West and the hon. Member for Holborn and St. Pancras (Mr. Dobson), but I suspect that the National Union of Public Employees will make sure that they do not adopt that stance when the time comes.

If I may go back to the point made by my hon. Friend the Member for Horsham, the exercise is beginning to show effects. We are all in favour of better value for money in the Health Service and we all want to maximise the resources that go to patient care and the sharp end of medicine and nursing. The latest figures, for which my hon. Friend expressly asked, can be found in appendix 3 of the report of the Committee that was produced only a few days ago. Provisional figures are given for administrative and clerical staff employed in each region. He quoted the figures at 30 September 1983 as 104,480, using the whole-time equivalent which he dislikes and which I like to use warily but on which I do not go all the way. The figure at 31 December 1983 was 103,880. There has been a reduction of about 600 in the total number of administrative and clerical staff. That is a small reduction and I should think it is the first time within living memory that there has been a reduction in the Health Service. That is what has happened in one quarter, and it is too soon to take trends. It is the first direct result of the manpower targets we set.

We introduced firm targets. When we received their bids, the regions were proposing to increase administrative and clerical staff, although they wanted to cut nursing and other staff. I assure the House that we shall press the need for better management. That will include proper control of management numbers and administrative and clerical costs.

Mr. Dobson

Will the Minister nevertheless confirm that even the figure that he says is going down is still higher than the number of administrative staff before the reorganisation that we are talking about?

Mr. Clarke

I can confirm that.

Therefore, we have been examining the matter continuously and we will have the full support of the hon. Member, I am sure, as we press on to reduce the number of members of the National Association of Local Government Officers employed in the administrative and clerical grades, and to reduce the management tail of the service to the size it ought to be. However, we know that if we produce manpower targets next year, the hon. Member will launch another hysterical assault, saying that this is an attack on the National Health Service and is cutting back on all that was most dear to Nye Bevan and his descendants.

Not only are we getting numbers under control, but we also want to improve the quality of management. [Interruption.] Yes, we are. First, the manpower targets are being achieved; secondly, the regions are, if anything, aiming below the manpower targets for the totality of staff compared with what was set, but we shall not penalise them for that. We shall use the March 1984 figures as the basis for next year.

Regions are finding it more and more possible to make better use of manpower and increase the money for patient care. The achievement of the targets is not reducing the quality of patient care or the quantity of service. Waiting lists are beginning to decrease again. In answer to a question this afternoon, my right hon. Friend gave the latest downward turn in waiting lists and the shorter time that patients have to wait for treatment as a result of the improved efficiency and despite the reduced manning that I have just been describing to the House. Waiting lists increase when we have strikes and industrial action. They go down when we have good management and eliminate waste and inefficiency, and they will continue to go down.

As my hon. Friend the Member for Halifax said, we have not only tighter control of management by holding it to account properly and monitoring performance, but we also need better quality of management. That is the point of the Griffiths exercise to which he referred and which we believe will eventually lead to proposals to establish a general management function. We want to have people in charge who are responsible and answerable for the overall duty of the National Health Service to achieve better value for money in its services.

Despite all the criticisms, we are happy to answer to the Committee of Public Accounts and to the House for the strictures that have been made because they are urging us in a direction that we are already following. We are redoubling our efforts to go ahead with policies to which we are committed. We are particularly happy to answer to patients and to the general public because we are aiming at better value for money so that the standards of patient care can go on improving. I am astonished at the extent to which all-party support has been won for these efforts. I look forward to getting that all-party support as we proceed during the next few years to do something about this matter. I trust that the Committee of Public Accounts has not only held us to account but produced converted men on the Opposition Benches whose approach to the Health Service will be transformed from now on.

The Question was deferred, pursuant to paragraph (2)(c) of Standing Order No. 19 (Consideration of Estimates).