HC Deb 17 October 1995 vol 264 cc254-62

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

10.32 pm
Mr. Charles Kennedy (Ross, Cromarty and Skye)

I am grateful for an opportunity so early in the reconvened Session of Parliament, before the beginning of the new Session next month, to raise an urgent matter—the financial crisis that has struck the Highland Communities NHS trust.

In August, the trust discovered that it was carrying a potential deficit in the current financial year of £1.8 million, £1 million of which was due to an apparent unallocated sum in its contract with the Highland health board. Health board finance officers and accountants take the view that the sum was not noticed on their purchaser side of the contract, as the total figure involved seemed in line with the previous year. Trust management acknowledged error on its provider side, and in consequence, the then director of finance departed; but the problem has not gone away.

Sir Russell Johnston (Inverness, Nairn and Lochaber)

As a result of the mistake, redundancies are likely. Nursing staff are likely to lose jobs. However, the chief executive and chairman are unaffected. Does my hon. Friend think that that is fair?

Mr. Kennedy

Inevitably, the question of the apportionment of blame will have to go wider than the previous director of finance at the trust. Indeed, I think that it would be wrong in principle if the eventual outcome of the controversy simply established a benchmark—not just in this context, but elsewhere in Scotland—that difficulties run into by management over the operation of their budgets in hospital trusts or community trusts could be dealt with by recourse in the first instance to redundancies at staff and ward level. I hope that the Minister will give serious consideration to that issue of principle. It would be an extremely damaging precedent if it were set.

I want to make two immediate observations. First, the eventual agreeing of the contract between the health board and the trust seems to me to have been too long drawn out. That cannot have helped early anticipation of and dealing with potential problems. In my discussions with senior representatives from each side, I have heard criticisms of the other. Accordingly, I repeat my call tonight for an independent assessment of the way contracts are drawn up between the purchaser, the health board, and the provider—the health trust.

Secondly, there appears to be, as my hon. Friend has just made clear, no disagreement over the morality of the situation. Had these confusions not arisen, that £1 million should and would have gone to the trust. The board has a policy now—I endorse it—of not holding on to budget surpluses until near the end of any given financial year: instead, releasing steadily such sums for specific projects over the course of the year. As such, the bottom line is crystal clear: the money is simply no longer there.

Last month, the trust identified a hit list of potential cuts and savings, by way of response—what both it and central Government euphemistically label "the recovery plan". Among the possible recovery indices are the closure of a ward at the Royal Northern infirmary in Inverness, between 35 and 45 redundancies, as well as a cross-section of smaller items.

The Minister responsible for health, who will reply to this debate, confirmed his status as euphemist extraordinaire when he wrote to me on 22 September to say: What is recognised and accepted by all concerned is the importance of formulating a plan which maintains the level of quality of service previously provided for patients and that proper systems are put in place to ensure that the need for change is more adequately planned for in the future. Quite. The next question, therefore, is: what steps have been taken in that direction so far? On 28 September, on BBC Radio Scotland's "Drive Time" programme, the Minister described these planned service and personnel cuts, along with the parallel difficulties which by then had erupted in the Grampian area, as "minor difficulties". They may seem minor problems to him—

The Minister of State, Scottish Office (Lord James Douglas-Hamilton)

Does the hon. Gentleman accept that two out of 47 trusts in Scotland were having their problems, and that, in the context of the general situation, these matters could be resolved? I shall say why in a few moments.

Mr. Kennedy

In terms of the arithmetic, the Minister is correct. But these two trusts were at the head of the queue, and became trusts before most others in Scotland, and if I were the Minister I would be worrying that they might be the tip of the iceberg. How many of these difficulties may arise with the other 47 trusts? The time ahead will be difficult, not just for the communities liable to be affected, but for the politicians who will have to deal with the problems during the run-up to the election.

The difficulties are not viewed locally as minor problems by the patients facing closed wards, or by the health service employees facing redundancy. I want at this point to say a word about the distinct but related problem represented by the closure of ward 3 at Invergordon's county hospital, again with attendant staff redundancies. It too is covered by the trust, although this controversy has been separate.

On Saturday last, I joined the local march and rally about this matter. It was characteristically well organised by Mrs. Gary MacLennan, the Unison regional officer, and extremely well supported by staff and local community alike. I also pay tribute to the work done by Councillor Isabel Rhind to advance the interests of those in the area on this issue.

Tonight I ask the Minister to require the trust to halt further moves towards redundancies at the hospital, and to require it to sit down at senior level with staff and union representatives, as well as the health board, to consider a better way forward. I also seek a statement from the Minister that, if required, he will be prepared to meet me and a small representative delegation on this subject.

Returning to the broader picture of the trust, in the past 24 hours, two significant developments have taken place. Last night, the Minister issued a press statement welcoming the decision in principle by the health board—incidentally, this applies similarly to the position in Grampian—to make additional funds, amounting in the context of the trust to £500,000, available to help ease the trust's plight. Describing this as "very good news", he said that this will ensure that patient care is not affected while the trust works on its recovery plan.

I appreciate that the new Secretary of State for Scotland is keen to sharpen media awareness of his ministerial team, and to improve its street-fighting capabilities. Equally, I know that, on the day of the Skye bridge opening, the Scottish Office would be glad to trumpet any grain of good news from a Highland perspective. The only problem is that, last night, the Minister was welcoming a decision that had not yet been announced.

This evening, the general manager of the Highland health board has issued a statement of his own, and I should like to read it in full: To avoid any detriment to either the range of quality of patient care, I am prepared to recommend to the Board that additional finance be provisionally allocated to Highland Communities Trust. Such finance would be for schemes agreed with the Board. It must be recognised that any additional finances for Highland Communities Trust would come from money already earmarked for service maintenance and development in a number of Trusts. This means that the Board would not be in a position to enhance services to the population of the Highlands to the extent intended. The sound that one hears there is of teeth being pulled, and understandably so. By his pre-emptive press release last night, the Minister has admitted that he has responsibility here, yet he has so far refused to progress from being a commentator on the scene to being a contributor towards a solution. He is being passive, where we need active participation.

In conclusion, the Scottish Office should make good the deficit. It should not be squeezed from existing health care provision at local level. 'There should be an independent inquiry into the contract negotiations and finance overviews regionally. That refers also to the point that my hon. Friend the Member for Inverness, Nairn and Lochaber (Sir R. Johnston) made in his intervention.

Crucially, the requirement on the trust to secure a 6 per cent. net return on its £50 million asset base is proving too great a burden to deliver. At present, it is on line for a return between 3 and 4 per cent. The Minister must accept that for this year, and show flexibility over the next three to four years.

This sorry tale, I fear, reflects systemic shortcomings in the national health service reforms. Tonight, we can seek only short-term palliatives. The real solution, I suspect, lies in the ballot box.

10.42 pm
The Minister of State, Scottish Office (Lord James Douglas-Hamilton)

I congratulate the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) on his success in obtaining this Adjournment debate, and on being so generous as to give me plenty of time to reply. Of course, health boards receive their funding from the Scottish Office. We are in constant touch with the health boards, and the management executive gives advice to trusts and health boards in situations of this nature.

Turning to the specific problem of the Highland Communities NHS trust, we have here a trust whose costs are currently higher than its incomes by 2.85 per cent. approximately—£1.4 million. Let me make it clear that the trust is not bankrupt. It is perfectly able to continue providing a high level of service for the people in its region and to keep paying the salaries and wages of its staff.

So that the House will be in no doubt, let me repeat that the Government, the health board and the trust are determined to ensure that patient care is not, and will not be, compromised while the trust recovers from its financial difficulties. Furthermore, I wish to pay tribute to the many innovative schemes that the trust has introduced for the benefit of its patients. Those include new facilities for the treatment of Parkinson's disease, and a new drug and alcohol dependency centre. The trust has also begun upgrading Belford hospital in Fort William, as well as completing new community health centres in Gairloch and Dundonnell, and I could continue with other examples.

Trusts receive the bulk of their income from contracts with the health boards, which in turn receive their funding from the management executive. In 1995–96, the Highland health board received from the management executive a 3.65 per cent. increase in its base allocation compared with 1994–95 against a national average increase of 2.44 per cent. There is therefore no question of the highlands being inequitably treated in the distribution of NHS resources—quite the reverse.

In examining the trust's financial situation, I should explain that the trust has contract income for 1995–96 of some £48 million, and, as the hon. Member for Ross, Cromarty and Skye said, when its forecast deficit first came to light, it was projected at £1.8 million.

In responding to the specific financial points raised by the hon. Gentleman, I should explain that the shortfall arises from a combination of factors. The largest single issue relates to non-recurring developmental moneys being used to finance recurring day-to-day expenditure during the last financial year. In essence, the trust delayed implementing certain developmental measures, and did not fill staff vacancies immediately they arose. That had a knock-on effect into the current financial year.

In addition, the trust was unable to make the necessary financial planning and accounting adjustments to compensate for the resources being transferred by the health board from the trust to Highland regional council for the care of mentally ill patients under the care in the community programme. The trust has not achieved its cash-releasing efficiency targets for 1994–95 and 1995–96. These efficiency targets are set for all trusts requiring them to generate improvements in efficiency in the way they deliver their services. That is good management practice, which is embraced throughout the private and public sectors.

I can assure hon. Members that there is simply no question of the Highland health board having retained money not claimed by the Highland Communities trust. The fact is that the trust never had the expectation of the £1 million error quoted in the newspapers as the sum which should have been forthcoming from the health board. It is the imbalance between the trust's expenditure and its anticipated income which is at the root of the problem. The trust had, in effect, managed to contain the problems it faced last year by using non-recurring funding from the health board to fund recurring developments, and the trust is having to meet these recurring costs this year.

My officials in the management executive have been in regular contact with the trust since it first became clear that the trust was going to be unable to balance its books in the current financial year. The first round of discussions and action which followed identified measures which have reduced the shortfall to £1.4 million. Scottish Office officials have earlier today received details of the trust's recovery plan and that is being examined.

I can reassure the hon. Gentleman, in answer to one of his questions, that flexibility on the 6 per cent. rate of return will certainly be considered in the context of the trust's recovery plan.

Mr. Charles Kennedy

I very much welcome that last point. It is a crucial block in this difficulty. In the detailed points being made by the Minister, some of which I have heard before in the discussions I have had with the health board and the trust, he is confirming the point I made. There is a great deal of allegation and counter-allegation going on at regional level in Inverness about who was carrying what forward, who was anticipating what, and who was contracting for what. One would need to be not just an accountant but a psychiatrist to understand all that. Does that not underline the need for a proper outside look at the way in which the discussions and negotiations have been conducted?

Lord James Douglas-Hamilton

The hon. Gentleman is taking me out of sequence, but I will answer him now. I do not see the need for an inquiry into contracting, and I shall say why. Contracting is not an annual event: it is a continual and continuing process. The board and the trust meet regularly to discuss contractual difficulties that may arise. In addition, the management executive is giving advice and will continue to do so on contractual issues, and it will mediate in the event of any dispute. So this is a continuing process. It is not my purpose tonight to apportion blame. I am determined to ensure that patient care does not suffer, and to get properly in place the necessary recovery programme and plan.

Sir Russell Johnston

Will the Minister give way?

Lord James Douglas-Hamilton

I will come back to the hon. Gentleman in a moment, as I want to answer some further points raised by the hon. Member for Ross, Cromarty and Skye.

Against the background of the trust's financial difficulties, I welcome the recent decision in principle by the Highland health board to make additional funds of £0.5 million available to the trust in the current financial year. That will ensure that patient care is not affected while the trust works to deliver its recovery plan.

I should explain to the hon. Member for Ross, Cromarty and Skye that these are funds that the board had earmarked for future service development, as he suggested, and that are likely to become available later this year. We were aware from our contact with the Highland health board that, given the circumstances of the trust, the board had it in mind to agree that this funding could be used to assist the trust with its recovery plans. I am sure that this additional resource—and it is additional—will be appreciated by the trust, but it will have to produce a sound and viable financial plan.

Our officials in the management executive will be keeping in close contact with the trust in the days and weeks ahead, and. together with the health board, will be considering whether there are any other avenues of support available to assist the trust. By that I mean that there is a possibility of further funds being made available by the health board.

However, we are only halfway through the year, and the trust still has to deliver its financial recovery plan. I will monitor that closely, as will Scottish Office officials. It will remain our top priority to ensure that patient care continues to be delivered to very high standards.

Several hon. Members


Lord James Douglas-Hamilton

I will give way to hon. Members in a moment, but first I want to answer a few more of the points raised by the hon. Member for Ross, Cromarty and Skye. He raised a significant point. He said that he was concerned about the possibility of redundancies arising from the recovery plan. However, the planned reductions across the whole of the trust arise not from the trust's present financial difficulties but from changes in the reshaping of services.

For example, with the move from long-stay hospitals into care in the community—a policy which is widely recognised to be in the best interests of patients—it is inevitable that adjustments to staffing levels will have to follow, and many trusts across the country are having to plan for those changes. The Highland Communities trust is no different from many other trusts in that regard. Of course, more jobs are being created in the coming year as a result of the care in the community programme, and some staff will have the opportunity to switch to community care posts.

However, in relation to those planned reductions, I can assure the House that the trust will first be seeking reductions by a process of natural wastage, which will include voluntary early retirements and staff prepared to go under a voluntary scheme. If there are any proposed compulsory redundancies arising from the recovery plan, I would have to be convinced that they are entirely necessary. In the meantime, I will monitor the position and keep it under close consideration.

The hon. Member for Ross, Cromarty and Skye also, quite properly, questioned the way in which the trust has managed its affairs. In the first instance, it is the responsibility of the trust's director of finance to ensure that financial systems and controls meet the requirements of propriety and good financial management.

As the hon. Gentleman is aware, the finance director has already resigned, but of course financial accountability is a corporate responsibility of the trust board. Scottish Office officials have met the trust board, both executive and non-executive directors, and I can assure the hon. Gentleman and the House that the trust board is very concerned about the financial position which has arisen.

The strength of the trust's recovery plan will be indicative of the extent to which the trust board has addressed the position effectively.

I assure the House that the Scottish Office, the Highland health board and the Highland communities NHS trust are working hard to ensure that the trust can return to a sound financial base, and that it can do so without any detriment to patient care.

I am aware of the points made by the hon. Members for Ross, Cromarty and Skye and for Inverness, Nairn and Lochaber (Sir R. Johnston) about the county hospital in Invergordon, and the Royal Northern infirmary.

Sir Russell Johnston


Lord James Douglas-Hamilton

I shall just deal with this point before giving way to the hon. Gentleman.

With regard to the proposal to close a ward at the county hospital in Invergordon, my information is that the hospital is under-occupied. I can give the hon. Gentleman the undertaking that there will he no loss of services to patients, but there might be a need to transfer patients from one ward to another in the same hospital. The same applies to the Royal Northern infirmary.

Sir Russell Johnston

It seems from what the Minister has been saying that he concedes that there has been a major financial bug-up, but is unwilling to allocate any responsibility for it at all in a plethora of words.

Lord James Douglas-Hamilton

The facts speak for themselves. Obviously, matters got into a state of disorder. I specified very clearly at the outset of my remarks that the extent of that disorder is that the trust's costs are currently higher than its income by 2.85 per cent. Relative to its total income, that is not an insurmountable problem, but it needs to be addressed urgently by all those concerned. We are doing that. As I mentioned, an extra £500,000 will enable a substantial step in the direction which is required. We are giving further guidance, and will continue to do so.

The hon. Member for Ross, Cromarty and Skye asked about the position of the chairman and the chief executive of the trust. The trust board corporately, and the chairman specifically, are accountable to the Secretary of State for Scotland for delivering patient services and meeting the financial targets. The trust board is taking the situation seriously.

I should go on to make it clear that there is no question—

Mrs. Margaret Ewing (Moray)


Lord James Douglas-Hamilton

I shall give way to the hon. Lady.

Mrs. Ewing

The Minister has said repeatedly that he is going to monitor the situation following the announcement that additional funding will be provided by the Highland health board, which also of course applies to the Grampian area. When he speaks about monitoring, how will he relay to hon. Members who represent those areas and to the public exactly what is happening?

There is a genuine concern that that money was earmarked for future developments in other trusts. We want to know what will happen to those other proposals. How will the situation be monitored, and how will we he able to tell our people at home exactly what is happening?

Lord James Douglas-Hamilton

The hon. Lady will be well aware that the NHS trusts have been very successful in bringing in innovative measures throughout the length and breadth of Scotland. For example, I was in Glasgow the other day, where 7,000 patients have been treated through day surgery. That is a wholly new concept, and I mention it as one example.

Of course, the trust cannot get on as quickly with its developmental plans if funding has not been applied with the strict rigours that it should have been. The recovery plan must he put in place with all possible speed. An extra £500,000 has been allocated for this purpose. We believe that it will be forthcoming. I have also mentioned that there may be the possibility of further funding, but the trust must get that recovery plan properly in place in a way which will safeguard the interests of patient care and all those concerned.

There is no question of the NHS being underfunded, nor is there any so-called cash crisis. Such suggestions are nonsense. Gross expenditure on the NHS is Scotland in 1995–96 is planned at £4.3 billion. That is an increase of some £190 million, or 4.6 per cent., over 1994–95, and an increase in real terms of 1.5 per cent. after taking account of movements in pay and prices.

There are 47 trusts in Scotland, and in the past financial year they not only met but frequently exceeded their targets in delivering an increased amount and quality of health care. That includes meeting their financial targets and staying within their operating budgets. We are only halfway through the current financial year, but I assure the House that the vast majority of trusts are in a healthy financial state, and are delivering an increasing standard of health care for the people of Scotland.

Mr. Charles Kennedy

That was apparently true of the trust in question until July; it was only in August that the balloon went up publicly. I have rarely experienced anything so complicated at a constituency level. It depends on whom one speaks to, but well-placed sources—accountants and other finance people—have widely differing views about the extent of the problem, and that is the big worry. Some people say that they do not think that there is any deficit at all. That is why there is so much concern.

Lord James Douglas-Hamilton

If the hon. Gentleman reads my remarks tomorrow, he will see that each one will stand the test of time. What is important is that we work out an effective recovery plan. Once that is in place, I shall of course be happy to see the hon. Gentleman and a deputation. However, the recovery plan must be in place first. The hon. Gentleman has made his views and those of his constituents clear, and they will be of assistance.

Competition between trusts serves to raise the standard of health care, and gives patients and general practitioners real choice. The hon. Member for Ross, Cromarty and Skye expressed concern that trusts were turning former compatriots into competitors, but surely he is not suggesting that inefficiency and poor-quality service should be accepted. The challenge for the trust is to improve efficiency and quality for the benefit of the most important people in the health service—the patients.

The objective of our reforms is, of course, to put people first, the aim being to provide better health care, improve services to patients and give staff in the NHS greater job satisfaction. Changes have been made in the structure of the service, but the underlying principles of the NHS are the same—services are available to all, paid for out of general taxation and are and will remain free at the point of delivery. There is a great deal to recommend our reforms.

I look forward to having further discussions with the hon. Gentleman in due course. His comments will be borne in mind. We are absolutely determined to see the recovery plan effectively in place with all possible speed.

Question put and agreed to.

Adjourned accordingly at one minute past Eleven o'clock.