HC Deb 11 May 1990 vol 172 cc571-8

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Nicholas Baker.]

2.36 pm
Mr. Harry Cohen (Leyton)

I am pleased to have this Adjournment debate on health authorities' deficit budgets. First, I congratulate the Minister on his new appointment. I hope that he will have success in reducing the deficits of health authority budgets.

The Government are saddling health authorities with a recurring debt of more than £100 million. That results in repeated cuts in our hospital medical services and patient care and treatment. The figures for 1989–90—that is to say, up to the end of March 1990—will not be available until the end of June. The picture that is emerging is of huge debts caused by the Government's underfunding.

The Chartered Institute of Public Finance and Accountancy asessment of the debt is an underlying deficit for health authorities as at 31 March 1989 of £108 million. That was based on credits and balances in excess of six weeks. Even if the Government take their figure of eight weeks, which is pushing it a bit far, the deficit is still in the region of £70 million to £80 million.

The four London health regions make up a large part of that debt. They are having to cut services as a result. I take a bet with the Minister. I am a betting man——

The Parliamentary Under-Secretary of State for Health (Mr. Stephen Dorrell)

I am not.

Mr. Cohen

What a shame. I would bet him that the figure at the end of June for the year to 31 March 1990 will be higher than £108 million.

There are all sorts of reasons for the deficit. One is the Government's ridiculous 5 per cent. allocation for inflation to health authorities. We have had the figures from the retail prices index today. Inflation is 9.4 per cent. and still rising, yet the Government have allocated only 5 per cent. for inflation.

As Mr. Peter Longden, the chairman of the Healthcare Financial Management Association said at the time of the autumn statement: provided inflation was kept at roughly the levels … the impact of inflation, especially after an Authority has made its plans for the year, can have a major impact on service delivery. Clearly inflation has not kept to the Goverment's 5 per cent. limit and that is having a major adverse effect.

The head of CIPFA's health service division, Mr. Chris Grimes, said, with reference to outturn for 1988–89: Little or no growth in funds had been provided leaving some Authorities with inherited cash flow problems which had been carried forward into 1989–90. That problem is being carried forward into 1990–91.

Mr. Grimes also said: Although the 1989–90 funding provision had appeared generous at the outset, the effects of inherited problems and higher than anticipated pay and price increases had eaten into available resources. When turning to the prospects for 1990–91, he said: It is difficult to see that pay and price increases will be limited to around 5 per cent. in the forthcoming year". his prediction was clearly right: our prediction is that the level will be around 7 per cent. or more. The implications for Health Authorities if our prediction is correct could be significant. It has been significant; it has meant greater debt and cuts in services.

At the end of November, CIPFA produced its "Health Service Trends" booklet, which is a mine of information. It contains many charts and compares inflation in the hospital and community health sectors with the retail price index. It shows that, from 1982–83 to 1988–89, taking 100 as the base figure in 1982–83, hospital and community health service inflation reached a cumulative figure of 149.9. The equivalent in the RPI was only 134.7. Health inflation is greater than the RPI, because wages and prices form 75 per cent. of the Health Service budget. The wages element is rising faster than the RPI because wages in the Health Service start at a low level. The Government are not taking account of health inflation properly in the RPI, let alone tackling the RPI.

CIPFA's "Health Service Trends" booklet refers to the 1988–89 revenue outturn and refers to a new index, the NHS specific pay and price rises index. That index shows the effect on NHS expenditure which increased by an average of 10.5 per cent. compared with a GDP inflator of 7.3 per cent. The booklet states: Health Authorities managed their financial affairs satisfactorily during the year, but made no major impact on the inherited problems of year end accounting. The health authorities have made no inroads into the debt with which the Government have saddled them. That debt has actually increased steadily and health authorities have struggled with it and have made cuts in patient care as a result.

The booklet referred to the implications for 1990–91, stating: even the upper growth levels may be insufficient to meet current plans and targets. Any further deficiency in inflation sums will render the task impossible. It is imperative that any additional sums made available to the service allow for real growth in addition to inflation and the initial costs of implementing 'Working For Patients'. Clearly the money has not been provided by the Government and that is putting health authorities in an appalling position.

There are no figures for the current financial year, but there is a great deal of anecdotal evidence. I shall read the Minister a few headlines. On 14 April the British Medical Journal said: Health authorities predict hard times ahead … Most health authorities are worse off this year". The Health Service Journal said on 19 April: HAs slash budgets to balance books in 1990–91". The Times said on 26 April: Cuts package threatens hospitals' jobs and beds". On 21 April, the British Medical Journal said: Death by a 1000 cuts". On 12 March, The Independent said: 'Model' health authority forced to cut patient care". On 5 April, the Health Service Journal said, referring to the National Association of Health Authorities, NAHA survey predicts a bleak financial future". On 29 March, The Health Service Journal said: Cash crisis scuppers HA development plans". The problem in London is even clearer. A report by Margaret Powell, the policy analyst of the inner London health authorities, showed that the debt of the inner London health authorities had shot up—from £19,823,000 to a projected deficit by the end of this financial year of £29,691,000. That figure will not be met by current plans.

In my north-east Thames region, there is debt in nearly every district. The CIPFA trends booklet shows that, in 1988–89, the region was forced to make service reductions of £7,440,000. In 1989–90 the figure was £8,933,000. My area of Waltham Forest, which is one of severe deprivation, had to make the biggest cut in the region—£2,451,000. No wonder there is still a huge deficit.

The community health council had discussions with Mr. Ian Russell, the district treasurer, who pointed out that the storm damage was not being funded properly and that hospitals and other buildings were being run down, causing immense problems to the authority. Mr. Russell said: The hospital price index is actually running at 8.8 per cent. which is well over the present 7.7 per cent. of the present RPI figure". We know that the RPI figure is now 9.4 per cent. Mr. Russell continued: whilst the Government at first forecast a 5 per cent. rate of inflation to stand still, to stand still this District Health Authority should have really taken account of the number such as 10.7 per cent. He said that the district authority would be in deficit of at least £670,000, which will result in reduction in services in this District over the next year. I tabled a Commons motion, because only 6 per cent. had been allocated by the North-East Thames regional health authority to cover inflation costs in the coming year. The authority said that much of that would have to take account of contingencies. My local community health council planned a deputation to see the Minister about those serious problems. Debts are arising because of inadequate funding and 5 per cent. inflation.

Other health authority costs not properly funded by the Government include "earmarking"; a substantial amount is put aside for AIDS treatment. breast cancer screening, mumps, measles and rubella programmes, but the Government are not providing the necessary finance. Therefore, that increases the shortfall and the debts. There are already thousands of regrading appeals outstanding, for which the Government are not putting up the money.

With effect from 1 July, health authorities must pay VAT on fuel. That is a Government-imposed change, but no money will he provided for it. Then there is the cost of doctors' negligence. With the removal of Crown immunity, the costs fall upon health authorities—another Government change, which they have not funded. The cost of repairing storm damage to health authority property in January this year totalled some £13 million, and although the Government gave some money for the 1987 storm damage, they did not give a penny this time.

On top of that, health authorities cannot make up their deficits from capital sales because of the decline in land sales, falling prices and an inability to sell. They cannot make up the shortfall through cost improvements or income generation, because they are no longer to be had. After following that policy for six years, few cost improvements can be made and little income generated.

From April 1991, the Government intend to introduce their new policy as set out in "Working for Patients", but from the outset that new system will be brought down unless the Government make a huge injection of funds into the Health Service to rid it of debt.

The National Association of Health Authorities produced a chart to show how the Government have underfunded the health authorities. It made an estimate of target spending that included 0.5 per cent. for medical advance, 0.5 per cent. necessary to meet central Government policy objectives and between 0.4 and 1.3 per cent. to reflect the changes in population size and structure. It compared those target figures with the amounts that the Government have put in and shows that year by year, there has been an annual shortfall—in 1989–1990 it approached £490 million. As a consequence, repeated cuts have been made in patient care and in hospital and community health services. Those cuts have sabotaged the Health Service input into community care and resulted in longer and longer waiting lists.

The Minister should get straight to the job of getting rid of those debts.

2.50 pm
The Parliamentary Under-Secretary of State for Health (Mr. Stephen Dorrell)

I congratulate the hon. Member for Leyton (Mr. Cohen) on securing this Adjournment debate and on being in his usual good voice when presenting his case. I also thank him for his good wishes on my appointment. I receive good wishes gratefully from whatever quarter, but particularly from the hon. Gentleman.

The hon. Gentleman may be slightly surprised if I start by saying that he has, in one sense, highlighted a real problem. The problem with his argument, however, is that the difficulties did not begin, as he likes to suggest, in May 1979 or at the behest of the Government. The problem is not unique to the National Health Service; it is simply the difficulty faced by any manager of living within budgets when resources are scarce. It is hard to think of a time when resources have not been scarce.

When addressing the problems of the NHS it is essential to begin by separating two different issues—the political commitment to the future of the Health Service and the management choices that affect the managers of the service and the way in which that service is delivered to patients.

I welcome this debate as an opportunity to state once again on behalf of the Government our unambiguous commitment to the principle of the NHS. The Prime. Minister has said that the NHS is safe in our hands. She did not use those words lightly, nor did they come to her on the spur of the moment. They reflect the Government's deep commitment to maintain and improve the NHS. During the review that led to the White Paper, it was alleged that the Government were considering privatising the Health Service. That never has been, nor is it, our intention.

When I was appointed to this job, I said that I was proud to be associated with the NHS because I regard that service as one of the best things that has happened in Britain since the war. It is a privilege for me to be involved as a Minister in trying to ensure that the principles of the NHS are delivered properly to patients in a way that patients have a right to expect.

The central mission—the jargon much used by people setting out plans these days—of the Health Service is the same as it has always been: to deliver patient care on the basis of need, not on the basis of the ability of the patient to pay for it. I accept that mission unambiguously, but it is important to be clear that we are talking about the principle that patient care should not depend upon the ability of a particular patient to pay for it. That principle does not work if one seeks to extend it to the level of funding of the service as a whole. In a properly prioritised budget, one cannot accept the principle that NHS funding is done purely on the basis of need. It must be done on the basis of a balance between the patients' needs and the nation's ability to pay for the service we want.

For that reason, I do not accept the argument advanced by the hon. Member for Leyton that, in measuring the real-terms development of the Health Service, we should consider the inflation rate of Health Service costs. In the end, it is the taxpayer who pays for the National Health Service, and his ability to fund the costs of the service must, to some extent at least, limit the rate at which patient services can improve in the National Health Service.

Mr. Cohen

If the Minister accepts that it is Government policy not to fund specific inflation in the Health Service, does he accept that it is Government policy that cuts will become part of the Health Service, if the costs are above inflation?

Mr. Dorrell

I do not accept that that is either our policy or our record. I was just going to underline the degree of our political commitment to the Health Service. I pray in aid no better evidence than the history of resource levels that have been committed to the Health Service since we came to power I I years ago. Those resources are up in real terms by more than 40 per cent. We spend more than £500 per head, per annum, on the National Health Service, compared with £360, at today's prices, when we came to power. At today's prices, the level of our commitment to the Health Service has risen from £360 to more than £500—an increase of more than 40 per cent.

It is of interest in measuring the commitment to the service that the equivalent figures between 1974 and 1979 rose from £337 per head to £360 a head—an increase of 6.8 per cent. I am not alleging that the Government, between 1974 and 1979, were not committed to the principle of the National Health Service—that is not part of my argument—but it is not easy, against that statistical background, to suggest that the Government are not committed to the Health Service. As we have been better able to run an efficient economy, so we have been better able to deliver the principle that we share with the hon. Gentleman, a desire for the level of service delivered by the NHS to improve year by year.

It is not just a matter of resources. Direct care staff, who deliver medical services direct to the patient have increased in number since 1979 by 84,000, which is a large figure—larger than most parliamentary constituencies. We have employed the equivalent of a complete parliamentary constituency in extra staff involved with direct care to patients since 1979.

It is not purely a matter of the resources devoted to, or the staff employed in, the National Health Service. The total number of in-patient cases treated in the Service has risen from just below 6 million in 1978 to 7.5 million in the last financial year, ending in April 1989. That is the equivalent of 14,000 cases in every parliamentary constituency in England. Our out-patient treatments have gone up from 16,700,000 in 1978 to more than 19 million in 1988–89. That is the equivalent of 37,000 out-patients treated per annum in every parliamentary constituency. That is not the record of a Government whose commitment to the principles of the National Health Service can be questioned.

I have talked of commitment because I think that it is important for that to be stated and understood. However, it is not just a matter of commitment; I shall now move on to the specific issues of the service management that lie behind some of the points raised by the hon. Gentleman.

A key priority of the Government is to ensure not only that the maximum resources are available to the NHS, but that the service is effectively managed and the resources used as efficiently as possible to deliver health care to patients.

It is important to understand that efficiency should not be an alien concept to a caring profession. Sometimes I am addressed by doctors in my constituency—I suspect that I may be addressed by a few more in the next few months—who, if they do not say it directly, at least imply that the word "efficiency" somehow relates to profit, and is therefore an alien idea in a caring profession. I do not accept that. It is by increasing the efficiency with which we use the resources committed to the NHS that we can do two things, both of which we want to be able to do—first, to increase the living standards of those who work in the service and to keep them in line with those in the economy at large; and secondly, to be able to continue to deliver the improvement in patient services which is what the National Health Service is all about.

If we employ efficient management techniques in the Health Service and draw up properly prioritised budgets and deploy rigorous management those factors will be effective in eliminating waste and ensuring that the NHS can offer patients a better standard of care and continue to improve those standards—as it has done since 1979 and since long before that. The process did not start in 1979; the NHS has a history of improving services.

How have we sought to improve management? First, we have strengthened the organisation within the Department of Health. We set up the National Health Service management executive, a group within the Department committed to the principles of ensuring effective management in the NHS. Secondly, we have introduced simple techniques such as the extension of contract tendering, which has released £100 million to improve patient care. That process is also designed to use resources more effectively.

Thirdly, and more fundamentally, there is a programme to which the Government are deeply committed, known as the resource management initiative. Launched in 1986, its intention is to ensure that resources in the large acute hospitals are more effectively managed than has been possible in the past, particularly by using the facilities that are now available for modern information technology.

We announced in the White Paper a commitment to extend resource management to 260 major acute hospitals in the country. I was rather jealous of my immediate predecessor who was able to announce, just before he left the Department, the extension of that programme, so that we have now committed a list of hospitals covering half the objective of 260 acute sites. We now have firm plans to introduce resource management in 130 hospitals and a clear commitment to do that in the other 130 as quickly as we can. That is a big investment in management to improve the services to patients.

This commitment to management in no sense undermines the commitment to extending the resources available for direct care in the service. Indeed, since 1978 we have increased the proportion of NHS employees devoted to direct care from 58 per cent. to 66 per cent. So, for the first time in its history, more than two thirds of the people employed by the NHS work in direct patient care, not in ancillary and support services—important though those are.

Finally, and most fundamentally, our commitment to improving the management of the service informs the reforms that were set out in the White Paper, which constitute the purpose of the Bill that is going through Parliament. All these programmes of savings and of improved management in the Health Service have, in the past five years, released £1 billion to improve patient care.

That money is not going back to the Treasury. As I have shown, the Treasury has been increasing the resources available to the National Health Service and within that increasing budget £1 billion has been released to improve the quality of the service that is delivered to patients. That is the purpose of the exercise.

Health authority deficits illustrate the pressure that we are putting on managers to ensure higher and improving levels of efficiency in the delivery of the National Health Service. It is the nature of budgets that they are not easy to live within, but I think that the great majority of health authorities will find ways to live within those budgets.

It is essential in achieving the objective of the efficient delivery of patient care that budgets are fixed and adhered to. It is only by doing that and by continuing the commitment to improve management techniques that the total care delivered to patients will continue to improve in the years ahead as it has in the recent past.

Question put and agreed to.

Adjourned accordingly at four minutes past Three o'clock.