HC Deb 18 June 1997 vol 296 cc285-92 1.30 pm
Mr. Tony Baldry (Banbury)

I am pleased to have the opportunity to raise the matter of the funding of Oxfordshire health authority. I am grateful to the Minister for being present to respond, given his particularly heavy work load. It may be some consolation to him to know that, when I was a junior Minister, I responded to no fewer than 65 Adjournment debates in one year, so he has some way to go yet.

The national health service budget is huge. Spending on the NHS this year will be about £725 for every man, woman and child in the United Kingdom. This year, spending on health will rise by about £1.6 billion, and spending on hospital and community health services will increase by 3 per cent. over and above inflation. I appreciate that we are dealing with substantial sums of money, which for many years have increased in real terms.

In Oxfordshire, total NHS spending this year will be about £325 million. That works out at about £540 for each man, woman and child in the county. Therein lies the problem. The national average is £725 for each person, as opposed to £540 in Oxfordshire—a difference of £185 for every man, woman and child in the county.

There is an agreed national capitation funding formula: everyone understands what it means and how it is worked out. There is no dispute that, according to the formula and its criteria, Oxfordshire is the third most underfunded health authority in England. Having regard to its population, size and other relevant factors, it is £9.6 million below target.

That underfunding is of considerable concern, given that health authorities understandably have limited scope for carrying forward recurring deficits or shortfalls on their budgets. That, straightforwardly, is the thrust of my request to the Government: that, as soon as possible, a way should be found to get Oxfordshire's funding nearer to the sums that it should receive under the national capitation funding formula.

I appreciate that this problem is not new, and that some funding formula or distribution mechanism is necessary to allocate NHS resources to different parts of the county. I also realise that, wherever and whenever a funding formula is used, there are bound to be variations in spend per head to reflect different needs and different demands. However, the position in Oxfordshire is slightly different.

The nationally agreed and recognised capitation funding formula is used to calculate how much each health authority should receive. Some authorities receive more than they should under the funding formula, whereas some, such as Oxfordshire, receive substantially less. Put simply, the Department of Health should ensure as speedily as possible that all health authorities are treated fairly and that, so far as is humanly possible, vhey are funded according to the national capitation funding formula.

The consequence of Oxfordshire health authority's underfunding is that, last year, it overspent by £4 million. It is required to have a sustained financial balance by March 1998. That £4 million overspend for last year must be put in the context of the £9.6 million that it is adrift from what I consider to be a fair target.

In any event, if the health authority is to have a sustained financial balance by March 1998, savings will have to be targeted on managerial and support services just to preserve existing service levels. As a consequence, significant service reductions will have to be made in Oxfordshire during the year in several trusts.

In particular, the community health trust is likely to experience emergency closures of part of one or more community hospitals. Ward closures are likely at the Oxford Radcliffe trust, and the health authority is currently discussing the implications for patient services of financial provisions within the Radcliffe infirmary trust. I am sure that the Minister will not mind if the hon. Member for Oxford, West and Abingdon (Dr. Harris) briefly intervenes in the debate and takes a little of my time to explain the problems affecting hospitals in central Oxford.

Not surprisingly, Oxfordshire health authority is concerned about the relative underfunding of the NHS in Oxfordshire. It is also concerned that future formula changes could further work against Oxfordshire. To that extent, I want to put down a marker, because in my experience all Governments review the funding formula. There is a real danger that, if markers are not put down, more money will move away from shire areas, such as Oxfordshire, and into urban areas.

The impact of high wage and housing costs must be given emphasis in any new calculation, as must the impact of hosting a major teaching hospital. There is a compelling case for the NHS nationally to devote more resources to a movement towards national capitation targets; otherwise, authorities that manage their resources best will continue to be penalised.

Moreover, the financial problems experienced by Oxfordshire health authority have consequences for the whole of the country. Oxfordshire medicine is a national and international product: it attracts a high rate of national and international research income. The Oxford medical school is one of a small handful of schools that gained the highest, five-star ranking from the Higher Education Funding Council for England. If those standards are allowed to slip, the losses will not be solely Oxfordshire's, but will affect the overall advancement of medical practice and research throughout the United Kingdom.

Those worries are shared not just in the county but by the British Medical Association, which has written to me expressing concern that one of the consequences of the financial allocation for Oxfordshire will be a reduction in services provided by the Oxfordshire Mental Healthcare trust. It says that the drug and alcohol addictive behaviours unit may have to close, and argues that, given the Government's understandable commitment to addressing the wider problems of drug and alcohol addiction, it would be inappropriate to reduce such a service. All those points reflect the pressures on the health authority's budget.

I have a further specific concern. My constituency contains Horton general hospital NHS trust. Oxfordshire, with Oxford at its centre, has a huge concentration of medical expertise and experience in the John Radcliffe hospital, the Radcliffe infirmary and the teaching hospitals. For many years, there has been a general hospital in Banbury, the second largest town in the county, which is some distance from Oxford—in the north, on the Warwickshire-Northamptonshire border. That hospital serves not just north Oxfordshire but south Northamptonshire, Warwickshire and parts of Gloucestershire. My hon. Friend the Member for Daventry (Mr. Boswell) and I feel that we share Horton general hospital, because so many of its patients come from south Northamptonshire.

I do not expect the Minister to respond in detail to the points that I am going to make—it would be unfair of me to do so—but I want to put down some markers. Compared with the huge central Oxfordshire complex, Horton general hospital has a very small budget—approximately £22 million a year—but it has a recurring overspend of between £700,000 and £800,000 a year, which, given its small budget, is fairly serious.

Concern has been expressed about the hospital's ability to deliver services and to meet the needs of some of the royal colleges. Consequently, an inquiry was set up last year, chaired by Mr. Arthur Davidson QC, a former Labour Member of Parliament. The inquiry took evidence, and made various recommendations. One of those recommendations was that, in the light of Horton's financial difficulties, consideration should be given to trust reconfiguration throughout Oxfordshire, which might reduce overhead costs and safeguard services.

The Davidson report was, however, very clear about the fact that any reconfiguration involving Oxford providers needed to focus on locally managed services to secure the continuation of an appropriate level of service in the north of the county—that is, Banbury—in the future. A general hospital was needed in Banbury, with services by and large managed in that hospital. Other services might be delivered elsewhere—for instance, by one of the Oxford trusts-but a locally managed NHS trust hospital was needed.

Horton general hospital NHS trust fears, given the way in which discussions about trust reconfiguration are going, that it will be asked to merge with the Oxfordshire community health trust, and that that trust will sub-contract the management of acute services at Horton to the Oxford Radcliffe hospital trust. Alternatively, it might be merged with acute hospitals in Oxford, in which case those hospitals would delegate services more appropriately dealt with by the community health trust. That, too, would effectively mean management being sub-contracted by the community health trust. In any event, the Horton trust board—along with many people associated with the hospital—fears that the hospital will effectively disappear as an entity and that all its services will be managed elsewhere.

There is a third option, which the hospital and others have been pursuing: the "Banburyshire" solution. Horton would take under its wing some services from the community health trust and some from south Northamptonshire. Although aspects of that option are administratively unattractive, particularly in Northamptonshire, a viable general hospital in Banbury would be able to continue to provide the services that it has been providing for many generations.

Horton, and people associated with it, are worried about the fact that other trusts in Oxfordshire are projecting major operating deficits. The Oxfordshire community health trust is projecting a deficit of £400,000, and the Oxford Radcliffe hospital trust one of £700,000, rising to £2 million in the next three years. The regional health authority steering group's proposals seem to have concentrated only on trying to eliminate Horton's deficits. If Horton merged, either partly or fully, with the community health trust or an acute trust that continued to experience financial difficulties, the trust involved would naturally be tempted to balance its books by cutting services at Horton.

I hope that if any proposals are conveyed to the Secretary of State about trust mergers in Oxfordshire, he will carefully consider whether they have the support of the Horton general hospital NHS trust board. The legal position relating to the dissolution of trusts, and the establishment of new trusts, is fairly complicated and it would be quite difficult to act against the express wishes of the local hospital.

As recently as 12 June, the Health Service Journal published a report that stated: There has been no evaluation of the results of trust mergers, nor is there any systematic study of the advantages and disadvantages of integrated trusts or multi-site acute trusts… Experience from…the NHS suggests that mergers based on a shared vision of the future, and by consent rather than hostile takeovers, are more likely to succeed, take less time to produce benefits, and cost less. In April, the university of York produced some interesting research that stated that, although concentrating services through trust mergers or service rationalisation may have been seen as a way of enabling NHS purchasers and providers under pressure to reduce management and operational costs, there is no clear link between hospitals carrying out larger volumes of surgical procedures and having better outcomes; there is no evidence that cost savings are necessarily made by increasing hospital size above approximately 200 beds; concentrating services may reduce access to hospital care for patients living further away, particularly those who are older and poorer; experience shows that hospital mergers do not always result in the financial benefits that were initially anticipated. I have two straightforward requests. First, I ask the Government to consider Oxfordshire health authority's funding overall. I am not asking for extra resources generally in the NHS; I am saying that existing NHS resources ought to be allocated more fairly, so that all health authorities are as near as possible to the national capitation funding formula. It seems ludicrous that authorities such as Oxfordshire should be consistently so far from the mean.

Secondly, Oxfordshire's underfunding is putting pressure on smaller units such as Horton general hospital NHS trust. I hope that if proposals are presented to the Secretary of State, he will have regard to the concerns of the trust board, those who work there and the patients whom the hospital has served, and wishes to continue to serve for many more years.

1.48 pm
Dr. Evan Harris (Oxford, West and Abingdon)

I am grateful to the hon. Member for Banbury (Mr. Baldry) for allowing me time to speak. I am pleased to meet the Minister; I am sure that we will meet again on many occasions, given my interest in health.

As a former employee of the NHS and, indeed, the health authority in Oxfordshire, I have seen some of the problems described by the hon. Gentleman at first hand. I am also a product of the Oxford medical school, to which the hon. Gentleman paid tribute. I think that it is a testament to the ability of its teachers that, despite other interests that I pursued during my medical studies, I was able to graduate and pursue an NHS career.

It is clear that Oxfordshire health authority has a funding crisis, which means that it has a service crisis. My postbag is full of complaints about the time that is taken for people to be seen and about the lack of service provision. The Minister will be pleased to know that I do not blame the current Administration for that, but I add the word "yet".

In its election campaign, Labour committed itself to "saving the NHS". In the light of advice to ask quick questions, I have a one-word question—when? The slogan "14 days to save the NHS" which was used in April is probably optimistic, as is 14 weeks. In the meantime, Oxfordshire may see the precipitate closure of the unit that cares for the young disabled, a tripling of the number of people who have to wait more than 12 months for operations, terrible cuts in the community hospital trust with which Horton hospital is mooted to be merged, and a squeeze on county council and social services spending.

All that causes short-termism. That was alluded to in remarks about threatened cuts at the Chilton clinic, which looks after drug and alcohol abusers in the county. We must also bear it in mind that, when people have to wait for operations, they may enter hospital later as emergencies, which are far more expensive to deal with.

This year, the health authority's crisis was so deep that it almost ran out of cash last month. I did my best to help by taking unpaid leave in April for another purpose, which the House may be able to guess. However, the authority is still £4 million in debt, and it faces increasing pressures and growing waiting lists. As we have heard, Oxfordshire health authority is below its target, and such authorities rely on differential allocation of growth money to move towards targets.

It is important that authorities that have carried out strategic reviews base their future allocation of funding on a presumed rate of growth which is similar to that in earlier years. As Andrew Dilnot of the Institute of Fiscal Studies has explained, we now face cuts in some years, and effectively no growth for the next three years. It will be impossible to develop or preserve services while authorities are under target and there is no growth.

I have three quick questions for the Minister. First, does he accept that, even after the £100 million efficiency savings that have been announced, more funding will be required in the NHS generally to avoid a winter crisis? I disagree with the hon. Member for Banbury on that issue, because I think that more money is needed.

Secondly, in the review of NHS spending and means of resourcing that the Secretary of State is currently undertaking, as new or increased charges are not ruled out, will higher general taxation or perhaps a new top rate of tax for those on very high incomes be considered? Perhaps that is the one measure which has been ruled out.

Thirdly, given the credit card pledge that was made during the election campaign to reduce waiting lists by 100,000, how long must we wait to see that commitment, which we support, being implemented?

1.52 pm
The Minister of State, Department of Health (Mr. Alan Milburn)

I congratulate the hon. Member for Banbury (Mr. Baldry) on securing the debate, and on the terms in which he has addressed important issues about the funding of Oxfordshire health authority. I pay tribute to the hon. Member for Oxford, West and Abingdon (Dr. Harris), not least for making some financial sacrifice to ensure that the health authority was better able to put more money into front-line patient services. I shall return to that theme. As the hon. Gentleman rightly said, the Government inherited extreme financial difficulties, which we do not expect to solve at a stroke.

Our legacy is extremely challenging. For example, waiting lists are rising not just in Oxfordshire but in many parts of the country. That makes our desire to honour our manifesto commitment to ensure that more money is applied to front-line patient services even more imperative.

As the hon. Gentleman is aware, we have already made rapid progress by cutting management costs by £100 million in this financial year. That is just the start, and we expect to continue to bear down on unnecessary bureaucratic costs in the NHS. The Government's priority and that of all hon. Members is to ensure that cash goes to where it is most needed in the NHS—to patient services. We shall certainly honour our commitment to treat an extra 100,000 patients as soon as we are able to do so.

The Government and everyone involved in the NHS know that this year will be particularly difficult and that it will not be possible to do all we would wish to do in an ideal world. That is one reason why I am pleased to have the opportunity to debate one health authority and the issues confronting it in some detail.

As the hon. Member for Banbury rightly said, Oxfordshire health authority has some financial difficulties. For the current year, it has an integrated revenue allocation of about £236 million. In real terms, that is a growth in income from the previous year of about £5.9 million.

As the hon. Gentleman said, despite that increase, under the current formula that is used for allocating the finite pot of available funds, Oxfordshire health authority remains some way short of its target. Last year, it was short by about 5.24 per cent., and this year, following changes to the resource allocation formula and the increase in funding, the authority is about 4 per cent. short of target. As he said, in percentage terms, Oxfordshire is the third most under-target authority in England.

Much has been said about the effect of the resource allocation formula on the health authority, and I know that it is concerned about the possible effects of any future changes. However, I make it clear that much of that concern is based on pure speculation. I should be grateful if the hon. Gentleman would communicate that in clear and forceful terms to those in the health authority. The Government are committed to looking at how resources are distributed to primary and secondary care to ensure that they fully reflect local population needs, and that they operate as fairly as possible.

We intend to allocate resources on the basis of objective measures of need, so as to provide equitable access to care and therefore to reduce inequalities. Therefore, there may be changes to the formula which is used for allocations for the next financial year—1998–99, but at this stage neither I nor Oxfordshire health authority, despite its speculation, know what these changes amount to. As the authority has indulged in some speculation about possible refinements to the formula and about how that could affect local residents, I shall deal rapidly with some of those points.

Oxfordshire health authority is concerned that insufficient weight is allocated to the problems associated with providing a service in a largely rural area. The hon. Member for Banbury spoke about his constituency in that regard. Research has already been commissioned to investigate the possible extra costs that are associated with the provision of accident and emergency services and ambulance services in these areas. A report is expected in the autumn and the results will be carefully considered.

Oxfordshire has a major teaching hospital, the Radcliffe, and there are certainly higher costs in such hospitals than in those that do not teach medical students. Those additional costs are met from the service increment for teaching levy, which is paid directly to the hospitals concerned. Of all the health authorities that host major teaching hospitals, Oxfordshire has received the highest growth in its general revenue allocation.

In the context of the current formula and allocation, I shall now look at how Oxfordshire health authority is coping with the pressures that face it. As I have said, the Government inherited some financial difficulties from the previous Administration, and Oxfordshire health authority is not exempt from that pain. For the financial year that has just ended, the authority has a net forecast outturn deficit of some £2.9 million. Those are the latest figures and they may be subject to revision. The health authority is planning to rectify that financial imbalance during the current year. Consequently, it will have to face some painful decisions.

I understand that the chief executive of the authority has chosen to set the scene for those difficult choices in some colourful language, which was repeated by the hon. Member for Banbury, about the authority potentially "running out of pound notes". That colourful language is unhelpful, not least because it detracts from the serious efforts that are being made by the health authority to achieve financial balance. For example, I was struck by its establishment of a priorities forum, which is a good principle and a good idea. It has already started to reduce costs through the latest round of contracting with local hospitals.

I shall now deal with the issue that the hon. Member for Banbury raised about his local hospital, the Horton. A thorough review of the provision of health services for the people of Banbury and the surrounding areas has resulted in some interesting recommendations and a steering group of wide membership has been established to oversee their implementation. That is a good example of health authorities, trusts and local people working together to find solutions to problems rather than simply calling for more money or jumping to quick and easy solutions.

I hope that the hon. Gentleman and local people will support the review and will participate fully when preferred options are put before them for consultation later in the year. I shall bear in mind the hon. Gentleman's points. He has established firm stakes in the ground and we shall bear that in mind.

It being Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half past Two o'clock.