HC Deb 11 December 2002 vol 396 cc269-88 4.13 pm
The Secretary of State for Health (Mr. Alan Milburn)

With permission, Mr. Deputy Speaker, I wish to make a statement about devolution of resources and responsibilities within the national health service.

I am today allocating revenue resources to England's 304 primary care trusts. I have written to all right hon. and hon. Members with details on the PCTs that serve their constituencies.

The NHS today is the fastest growing health service of any major country in Europe. Just six years ago under the previous Conservative Government, NHS budgets were falling in real terms. By 2008, under this Labour Government, they will have doubled in real terms.

The dedication and commitment of NHS staff is turning those extra resources into improved results for patients. Deaths from cancer and heart disease are falling; waiting times are down; the numbers of doctors, nurses and other staff are up; and the biggest ever hospital building programme is under way. There is a long way to go, but real and steady progress is taking place. We can now build on that momentum by coupling record resources to radical reforms.

I can tell the House that I have made three major changes to the method by which we allocate resources to the NHS. First, for the first time, locally run primary care trusts will receive funding direct from central Government rather than through health authorities—that is about devolving power and resources direct to the NHS front line. PCTs will now control 75 per cent. of the total NHS budget. That was an election manifesto commitment and today we have honoured it. Secondly, the resources that I am allocating today are not just for a single financial year but for three years. Short-term funding has hindered long-term planning in the NHS for far too long, so I am distributing to PCTs resources for the years from spring 2003 to spring 2006 to give PCTs the power to plan with confidence and certainty for the longer term. They will be free to commission services from the public, private or voluntary sectors—wherever they can get the best health services—to meet the specific health needs of their local communities. We want them to use their considerable extra resources to achieve a better balance between services in the community and those in hospitals, and to promote prevention as well as treatment.

Thirdly, the resources are being distributed according to a new fairer funding formula. The existing weighted capitation formula has been widely criticised for failing to get health resources to the areas of greatest health need, and has restricted our ability to address the health inequalities which scar our nation. Poverty and deprivation cause excess morbidity and mortality and bring extra costs to local health services, which is why I asked the expert Advisory Committee on Resource Allocation to review the existing formula and introduce a new one. The new formula reflects those costs by using better measures of deprivation and by taking greater account of unmet health needs. It reflects population changes in the 2001 census, and redistributes resources to some of the poorest parts of the country, such as Tower Hamlets, Newham, Barking and Dagenham in London; Tendring, Basildon and Thurrock in the south; Birmingham, Telford and the Wrekin in the west midlands; Ashfield in the east midlands; Liverpool, Knowsley and Manchester in the north-west; Bradford in Yorkshire; and Easington in the north-east.

The new formula, in calculating health need, takes account of the effects of access, transport and poverty in England's rural areas too. In addition, it recognises not just the challenges for the NHS in areas of highest need but challenges in areas of highest cost. We all know that the cost of living in some parts of the country is higher than in others, which impacts on the cost of health care. The new formula takes account of that in a more refined assessment of labour market costs. The allocations also reflect the impact of the recent "Agenda for Change" agreement on regional pay flexibilities and the need to expand capacity in areas where waiting times for treatment are longest. Those changes benefit almost 180 PCTs, including more than 140 in London and the south and almost 30 in the north-west.

The new funding formula is fair to all parts of the country, reflects extra needs and extra costs, and benefits PCTs in both London and the north. The average PCT budget will grow over the next three years by almost £42 million—in real terms, an increase of 22 per cent, in cash terms, of over 30 per cent. No PCT will receive an increase in funding over the next three years of less than 28 per cent. For the information of Members on both sides of the House, the real-terms increase in resources for local health services in this Parliament will average almost 7 per cent. In the 1992-97 Parliament by comparison, it averaged just over 1 per cent—that is the difference a Labour Government make.

The resources, together with our reforms, will make a difference to the care that patients receive. There will be better emergency care, shorter waiting times and improvements in cancer, heart, mental health, children's and elderly services.

The allocations to PCTs include resources to finance the costs of pay reform, new drugs and treatments and additional NHS capacity. They include the commitments that we set out in the NHS plan. However, none of the growth money has been identified for specific purposes. PCTs will be able to use these extra resources to deliver on both national and local priorities. PCTs are about shifting the balance of power in the health service so that while standards are national, control is local.

I am today placing in the Vote Office copies of a document that provides details of the help—in cash and in kind—that the Department of Health will now make available to all NHS trusts to raise standards of service for patients. There will be help, support and, where necessary, intervention to raise standards in all NHS hospitals, from the best-performing to the worst.

We on the Labour Benches reject the internal market idea that NHS hospitals should be left to sink or swim. Equity in health care demands support for all, just as it demands national standards of care, but for more than 50 years uniformity in health provision has not guaranteed equality of outcomes. Sadly, health inequalities have widened not narrowed. Top-down Whitehall control has tended to stifle local innovation, and it has too often ignored the differing needs of different local communities.

Sustained improvements in local services can happen only where staff feel involved and local communities are better engaged—where improvement is something done by local people, not just done to them. That is why devolution is at the heart of our reform programme for the NHS. It is why PCTs are so important, and it is why we now took to reconnect local hospitals to the local communities that they serve.

I am today publishing a guide to NHS foundation trusts—again, copies are available in the Vote Office. These NHS foundation trusts will usher in a new era of public ownership where local communities control and own their local hospitals. NHS foundation trusts will be part of the national health service, providing NHS services to NHS patients according to NHS principles—services that are free, based on need, not ability to pay. They will be subject to NHS standards, NHS star ratings and NHS inspection. They will be owned and controlled locally, not nationally.

Modelled on co-operative societies and mutual organisations, these NHS foundation trusts will have as their members local people, local members of staff and those representing key local organisations, such as PCTs. They will be its legal owners and they will elect the hospital governors. In place of central state ownership, there will be genuine local public ownership. Subject to Parliament, NHS foundation trusts will be guaranteed in law freedom from Whitehall direction and control, so that we can genuinely unleash the spirit of public service enterprise that so many NHS staff share. By putting staff and public at the heart of this key public service, these NHS hospitals will have the freedom to innovate and develop services better suited to the needs of the local community.

NHS foundation trusts will operate on a not-forprofit basis. They will earn their income from legally binding agreements with PCTs based on a national tariff. They will not be able to undercut other NHS hospitals. They will be free to borrow from the public sector or the private sector. They will be able to retain any surpluses and any proceeds from the more efficient use of their assets, where this is for the benefit of NHS patients. They will have the freedom to recruit and employ their own staff. Indeed, NHS foundation trusts will be among the first NHS organisations to implement the new pay system that we recently negotiated with NHS trades unions. Providing they can undertake extra work and make improvements in productivity and performance, they will also be able to offer staff extra rewards.

NHS foundation trusts will operate under a statutory duty of partnership under which they will use these freedoms only in a way that does not undermine other local NHS organisations—for example, by poaching their staff. There will be other safeguards to protect the public interest. NHS foundation hospitals will operate according to a licence, issued and monitored by an independent regulator who will he accountable to Parliament, to guarantee NHS standards and NHS values. The presumption will be light-touch regulation, but there will be intervention powers where they are needed. In extremis, foundation status can be withdrawn.

I can confirm today that the proportion of private patient work undertaken by any NHS foundation trust will be strictly capped to its existing level. Indeed, we will be particularly interested to see applications for NHS foundation trust status that propose to convert existing private patient facilities for the exclusive use of NHS patients.

To prevent any demutualisation or any future Government seeking privatisation there will be a legal lock on the assets of NHS foundation trusts. They are there to serve NHS patients—not just for now but for all time.

The freedoms that NHS foundation trusts have will be a powerful incentive for others to improve. The first round of foundation hospitals will be drawn from trusts rated three star next summer. Forty per cent of existing three-star trusts are in some of most deprived parts of the country—places such as Sunderland and Liverpool, Doncaster and Bradford, Southwark and Hackney. As more NHS trusts improve more will be eligible to gain foundation status. There will be no arbitrary cap on numbers. Over time foundation trust status will become the norm for many, perhaps most, hospitals in the NHS.Subject to Parliament, the first will be in place by Spring 2004.

Today I am announcing large-scale investment accompanied by radical reform, investment to get more resources to the NHS front line, and reform to give more power to the NHS front line.

The Labour Government have an unquestioned commitment to the NHS. It is time not just to invest more resources in front-line services, but to invest power and trust in those front-line services. That is what we seek to do. I hope that it is what the House will support.

Dr. Liam Fox (Woodspring)

I am grateful to the Secretary of State for his statement and for his courtesy in making it available beforehand to the Opposition. It is really two different statements rolled into one, so I hope that the House will understand if I deal with it in two parts. [Interruption.] As usual, the Chief Whip has had her diet of Trill this morning. She might wait to hear what the Opposition have to say.

I must begin by welcoming the move to three-year funding. That is a sensible and overdue move if it is matched by a genuine willingness not to hold money back so that there is a genuine increase in autonomy. However, I have a number of reservations about what the Secretary of State said in the first part of the statement, not least when he said that PCTs will now control 75 per cent. of the total NHS budget. It would be more accurate to say that they will handle 75 per cent. of the NHS budget, because they certainly will not control it given the number of Whitehall interventions that are still in place. Perhaps the Secretary of State can tell us today what working assumptions he has made in the allocation of funding to PCTs about the cost of the GP contract should that contract be accepted in the coming months.

One or two other matters will certainly be welcomed. When the statement says: We look … to achieve a better balance between services in the community and those in hospitals", that is something that all parts of the Opposition have been asking for some time, because those who take those decisions on the ground could not make a worse job of understanding the relationship between the acute sector and what happens in the community. Perhaps the person who best expresses the problem is the Prime Minister when he says that it is about schools and hospitals. The majority of care is not about hospitals but about what happens in the community, and the Government have not understood that.

What is most worrying about this part of the statement is the Secretary of State's assertion that the formula being used to allocate resources is now fairer than it was before, yet we are not told exactly what the formula is. We need to know the basis of any change to the formula so that we can judge for ourselves. There has been no public discussion about this, just a working group reporting in secret to Ministers. It lacks transparency and I hope that we will have a full publication of the reasons and the mechanisms of this particular formula.

As the Minister of State, the right hon. Member for Barrow and Furness (Mr. Hutton), said at Health questions last week, it can never just be about money.Perhaps what is very troubling for many health service workers is the fact that in the past two years the Government have increased NHS funding by 21.5 per cent. Nobody doubts that that increase has been made; yet the figures that the Government produced last night showed that the increase in activity measured by finished consultant episodes was only 1.6 per cent. over the same period and that, in the past two years, admissions to hospital had fallen by half a per cent.

The question to which we want an answer is: where has all the money gone? Those who work in cancer services say that it has not gone there. There is a GP shortage, and GPs say that they have less time to spend with their patients. There are now more closed lists than ever before, 80,000 fewer people are receiving domiciliary care and waiting times in accident and emergency have increased. There are more cancelled operations and readmissions, and 60,000 care home beds have closed. There is a genuine desire to know where those beds have gone and where all that money has been used in the health service, as it is certainly not getting through to those on the front line. The Government need to address that issue.

On the second part of the statement and foundation hospitals, I understand why the Secretary of State feels the need to use as much left-wing rhetoric as possible, given the splits on his own Back Benches—the hon. Member for Wakefield (Mr. Hinchliffe) laughs at that—and he certainly did a good job in using the right words. The Opposition entirely welcome the principle of foundation hospitals, which lays the groundwork for the model that a future Conservative Government would like to see, with greater diversity in provision. As Bill Morris rightly said this week, it is a more market-oriented approach. I know that some Labour Members do not like that concept, but I think it is a good one and that Mr. Morris was right to say that. Such an approach also breaks up the NHS monopoly of supply, which again is a good thing and will ultimately benefit patients. However, it must not be about rhetoric, but about genuine substance. When the legislation is introduced, we will want to ensure that it delivers exactly what the Secretary of State and the Prime Minister claim to want and not what the Chancellor of the Exchequer seems to want for it—an early death.

We have a number of questions for the Secretary of State. On the autonomy of foundation hospitals, how exactly will borrowing limits be set? How will they he monitored, and by whom? What freedom will there be to vary pay and conditions for clinical staff outside the "Agenda for Change" agreement? What will be the freedom to change the configuration of services? For example, will foundation hospitals be able to drop any particular type of clinical service and decide that they do not want a dermatology department or an ENT department, or will such issues be determined centrally on the basis of core services defined by the Government in the legislation?

I find rather odd the concept that the foundations will be locally owned. If I were looking to measure whether I owned something, I would want to know whether I had a financial stake in it and whether it could be taken from me against my will, but it seems that there will be no financial stake and that foundation trust status can be taken away by the Secretary of State.

On accountability, on which the Secretary of State laid so much stress, which councillors will be involved in setting up the running of foundation hospitals? What electors will be involved? What will be the constituencies for elections to the boards that will be playing that role? What powers will the boards have over the configuration of local services?

The statement contained a number of contradictions that are worth looking at. The Secretary of State said: NHS foundation trusts will be guaranteed in law and referred to freedom from Whitehall direction and control", but he also said that the trusts would still be subject to the star rating system. In other words, as the star rating system is dependent on the Government's central targets, foundation hospitals will therefore be subject to those targets. That is saying one thing and doing quite another. He said that the trusts will operate on a not-for-profit basis and went on to say: They will earn their income from legally binding agreements with PCTs based on a national tariff. They will not be able to undercut other NHS hospitals. In that case, what is the point of giving them the freedom to be more efficient, which would allow the same amount of resources to be used to treat a greater number of patients? Why give them the freedom, but not allow them to use it? The right hon. Gentleman said that trusts would not be allowed to undercut other NHS hospitals. What is the point of the reform if not to achieve greater efficiency?

The Secretary of State said: They will be able to retain any surpluses and any proceeds from the more efficient use of their assets, where this is for the benefit of NHS patients. However, he also said that they are not allowed to use the efficiency to undercut other hospitals. What exactly does he mean?

The right hon. Gentleman said that foundation hospitals will operate … in a way that does not undermine other local NHS organisations—for example, by poaching their staff. Who will define that? How is the measure to be policed? It is unworkable. A clinician in a hospital who likes the way in which a foundation hospital is being run and its freedoms might choose to work for it. He would not be allowed to do so because somebody—the identity is unclear—defines that as poaching, which is nonsense. Such a provision would have to be clearly defined in legislation.

I was amused when the Secretary of State said: The presumption will be light-touch regulation". I presume that that is a tacit apology for the sort of regulation that has occurred under the Secretary of State so far. As for the idea that there will be a legal lock on assets to prevent demutualisation, all hon. Members know how meaningless that rhetoric is. Any future Government could change the law. The claim was included simply to give the Secretary of State a little peace from his Back Benchers. It is clearly meaningless in law.

We support the principle of foundation hospitals. Why will only a few hospitals be chosen? Is that a purely practical consideration? Do the Government want all hospitals ultimately to become foundation hospitals? Conservative Members would like that to happen. Is that the destination for the plans?

We will want to study the regulations that are associated with any legislation. That applies not least to the powers for the Secretary of State to expand and strengthen the foundation hospital project, without discussing them with the House of Commons.

When we believe that the principle is right, we will support it. The Secretary of State does not need to worry about problems on his Back Benches when introducing the foundation hospital principle in legislation because he will have the support of Conservative Members.

Mr. Milburn

I enjoyed the hon. Gentleman's contribution for the insights that it provided into the Conservative party's thinking—or lack of it—on the NHS.

The hon. Gentleman mentioned funding for local primary care trusts. It is easy to stand at the Opposition Dispatch Box and welcome three years' funding for PCTs, but when Conservative Members had the opportunity to vote for extra resources for every local PCT they voted against it.

The hon. Gentleman asked about the GP contract. I do not know whether he has negotiated with a trade union—for example, the BMA—but I can give him some advice. In the middle of negotiations, one never declares one's hand.

The hon. Gentleman alleged that discussions on the formula had been conducted in secret and that the information would not be published. It will be published shortly. It is based on information from the University of Glasgow, the Information and Statistics Division Scotland and other universities in York and London. On secrecy, I remind him that, since 1976, every Government have taken evidence about the best way in which to distribute NHS resources through the same mechanism that we used.

The hon. Gentleman went on, in his usual vein, to say that although he welcomed the resources, they never produce results for NHS patients. He asked where they went. I can tell him what happened to them in his constituency. North Somerset PCT is in his constituency. Last year, it used its 9.4 per cent. increase to ensure that no patients waited more than 15 months for a hospital operation and that no patients waited more than 26 weeks for a first out-patient appointment. There has been a drop of one third in the number of people who wait 12 weeks or more. In the Weston Area Health NHS trust, with which he is familiar, no one waited more than a month for breast cancer treatment, elective and non-elective activity increased, a new 15-bed observation ward opened at Weston hospital, and a new endoscopy service began at Clevedon hospital.

What the hon. Gentleman might have said is that he very much welcomes the extra resources that I announced for his local PCTs—an increase for his constituency and his PCT of 32.47 per cent. He had the temerity to welcome the measure, but when he had an opportunity to vote against the extra resources, he did so. He does not believe in the resources; he does not want to see the results. We all know why: he does not want the NHS to succeed; he wants the NHS to fail.

On foundation trusts, to which the hon. Gentleman gives such a warm welcome, I look forward to him and his colleagues voting for an extension of public ownership. I knew that they had wanted to find their own clause IV issue, but I had not quite realised that they wanted to pick up our old clause IV.

The hon. Gentleman asked about borrowing limits for NHS foundation hospitals and who will set them. The borrowing limits will be set according to a prudential code on borrowing, whereby the only way in which a foundation trust can borrow is against its ability to pay. The independent regulator, accountable to Parliament, will determine the borrowing limits for individual NHS foundation trusts.

The hon. Gentleman asked how much freedom the trusts will have in relation to "Agenda for Change". I set that out in my speech. The trusts will be part of "Agenda for Change". I think that he knows fine well that, within "Agenda for Change", there is considerable local flexibility for NHS trusts—foundation or other NHS trusts—to "flex" upwards the rate of pay according to their local labour market circumstances.

In the normal course of events there would have to be consultation on a change in clinical services on the scale that the hon. Gentleman suggests. Local authorities' oversight and scrutiny committees would want to assess it and, if necessary, that would be referred to the independent reconfiguration panel.

The hon. Gentleman gave the game away when he failed to understand one simple thing about NHS foundation trusts: they are part of the national health service; they do not sit outside the national health service. He seemed to be skating very close to the position that he probably advocated in government, and which he now continues to advocate in opposition: that there should be no national standards, no national targets and a local lottery in care, whereby local hospitals are allowed to sink or swim not according to the communities that they serve but according to happenstance or their individual circumstances.

The hon. Gentleman said that he found it difficult to understand the concept—and I perfectly understand why. What these NHS foundation trusts are not about is the sort of privatisation that he and the Conservative party advocate. This is a form of genuine public ownership, which Labour Members want to see.

Mr. Frank Dobson (Holborn and St. Pancras)

Will my right hon. Friend accept that, like everyone on the Labour Benches, I very much welcome the additional funds and the effort to ensure a fairer formula for distributing them? I hope that he accepts that there may be some minor errors in the new fund and that it will be adjustable in the light of experience.

However, does my right hon. Friend also accept that nothing he said this afternoon stills many concerns of Labour Members about the likelihood that giving financial advantages to a limited number of hospitals will put them in a position where they can offer better pay and working conditions, and thus attract staff who are in short supply from neighbouring hospitals? In the case of my constituency, if University College hospital were to become a foundation trust and have vacancies for nurses, how could anyone stop nurses at Great Ormond Street, the Royal Free, the Chelsea and Westminster or Barts hospitals applying to fill those vacancies, which would offer better pay and working conditions?

Mr. Milburn

My right hon. Friend has probably not yet seen the cash figures, but there is an increase for Camden PCT of 31.35 per cent., which is a total cash increase of £76 million. I hope that will help with the real pressures that he and people in the health service have to deal with.

I have a huge amount of respect for my right hon. Friend and I very much enjoyed working with him when he was Secretary of State. On the issue of NHS foundation trusts, however, I believe that he is fundamentally wrong. He says that there is a danger of our somehow having two-tier care, and asks what will prevent a hospital from recruiting another's staff, yet he knows well from his own time as Secretary of State for Health that the national health service is not uniform. Sadly, different hospitals perform at different levels; some do very well and some not so well, while some need to do a lot better. That is the reality of the national health service, as it has been for many years. Of course, staff make their judgments in part according to how well local health services are doing. My right hon. Friend is wrong, incidentally, to say that NHS foundation trusts are just for the few; I want them to be for the many, and I believe that, in time, they can be.

I say in all candour to my right hon. Friend that there are two lines of objection to these proposals, one of which involves an absolute objection in principle. I have listened carefully to what he has said, especially during the debate on the Loyal Address, when he argued cogently that one way forward was to trial and pilot these trusts, so it does not seem to me that he objects to them in principle. [Interruption.] Well, that is what my right hon. Friend said. I heard his speech and I read it very carefully. The second form of objection is that, if the provision is good enough for some, it should be good enough for the many and, perhaps, good enough for all. I agree, but the question is how we get there. We have to ensure that we start with those hospitals with a proven track record of success. We must help to raise standards in all parts of the national health service—my right hon. Friend knows well that we are trying to do so—through inspections, standards, intervention, help and support. That is what we need to do, but we also need to provide some freedoms and rewards for the best-performing organisations, not least as an incentive to others to improve.

Dr. Evan Harris (Oxford, West and Abingdon)

I thank the Secretary of State and welcome his improved performance in providing good time for Opposition spokesmen to read his statement. That is appreciated.

The right hon. Gentleman recognises that, unlike the Conservatives, my party voted for higher funding in the last Budget. Indeed, we called for that five years earlier.

Does the right hon. Gentleman accept that the first job in recognising that we have a sick patient is to accept that the previous treatment was poor? He said that the funding rise under the Tories between 1992 and 1997 was 1 per cent.—1.76 per cent., in fact—and that it was now 7 per cent. under his Government. Does he accept that the 3.5 per cent. funding that he delivered in real terms in the last Parliament was insufficient, and is part of the reason for our not having the capacity that we need?

The right hon. Gentleman recognised that what I have been saying about the freedom of foundation hospitals has been right. They will be subject to so-called NHS standards, so-called NHS ratings and so-called NHS inspections, but those are Government standards, political targets and flawed and distorted ratings. So there will be no change or freedom as a result of the target-driven approach that he is taking for these chosen few hospitals. They will, however, still be able to poach staff from other local trusts, or from developing countries. Will he answer a question that has not yet been answered? Is he satisfied with the fivefold increase in the number of nurses coming from countries such as South Africa, or with the fact that his own code of practice has still not been adopted by more than one third of the private nursing agencies that NHS hospitals use?

On the question of where the money has gone, I hope that the Secretary of State realises that, in the southern region alone, there are forecast deficits at the six-month point of more than £230 million. Does he believe that the extra funding should go towards paying debts that have accrued as a result of previous poor settlements, or that it should be used for front-line staff? Will he also explain why only 75 per cent. of funding is being handled by primary care trusts, rather than 95 per cent? Will he tell the House whether anyone out there supports the version of the star rating system based on his targets, rather than considering it to have a distorting effect on resource allocation and clinical priorities? Furthermore, why will the Secretary of State not get rid of private pay beds altogether from NHS hospitals? They use up vital NHS capacity and are allocated on the ability to pay, rather than on the basis of need.

Finally, will the Secretary of State accept that he must now go back to the drawing board? He has thrown away the baby with the bath water. He has pleased no one with the changes to NHS foundation hospitals because they will still be subject to Government control and will therefore not have the freedom to become new entities, such as public benefit organisations, which we would like to see. He is trying to please everyone, and trying to have it both ways. This is typical new Labour.

Mr. Milburn

Typical new Labour! Babies, bath water and drawing boards—an interesting metaphor that speaks volumes for the confused state of the hon. Gentleman's mind, I fear. On some of those issues, he might have welcomed the big funding increases for his local PCTs—£39 million in south-west Oxfordshire, £38 million in Oxford city and £14 million in north-east Oxfordshire—that range between 29.1 and 31.55 per cent. over the next three years. They have been achieved precisely by the approach to public finances that this Labour Government have introduced over the past few years. My right hon. Friend the Chancellor is quite right to say that it has been prudence for a purpose. If the Liberal Democrats had been in office, or anywhere near it, I fear that we would have gone back to the sad old, bad old days when deficits were out of control and unemployment was rising through the 3 million mark.

The hon. Gentleman raised specific issues and asked why 75 per cent. of funding is being allocated to PCTs. The reason is simple: certain budgets that he is aware of—for example, training budgets for nurses, doctors, scientists and others—are held nationally rather than locally. Indeed, the research and development budget is held nationally rather than locally because it has to be distributed not on an equitable basis but according to where the R and D centres are, and there is a large volume of cash for information technology systems, which we shall distribute in due course. He has been one of the strongest advocates of better IT in the NHS. I agree with him, but to achieve that we must ensure that the distribution formula is right.

On pay beds, when I last attended the Health Committee, or perhaps the time before that—no doubt my hon. Friend the Member for Wakefield (Mr. Hinchliffe) will remind me in a moment or two—I was quite prepared to hear proposals from all NHS trusts, not just NHS foundation trusts. If they would like to get rid of their NHS pay beds, which serve private patients, and if they think that sensible in order to allow extra capacity for NHS patients, I would be delighted to hear from them.

Several hon. Members


Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. I propose to move on at eight minutes past 5, so I appeal to Members for one short question and to the Secretary of State for brief answers.

Mr. David Hinchliffe (Wakefield)

My right hon. Friend has brought us two Christmas presents today. One is his welcome present of increased resources for PCTs, and he should be warmly commended for the deal that he and his team have won for the health service and for securing the ability to plan health care locally, which we have never had before.

I like the wrapping paper that covers the second present—foundation hospitals—but when I open it I am not too keen on the contents. His statement is somewhat inconsistent: on the one hand, we have the devolution of power to local communities and primary care but on the other we have foundation hospitals. Through them, we are rowing back to the tradition, which has been a weakness in the NHS, of empowering the acute sector to drive forward change at the expense of primary care and the community. He ought to address that glaring inconsistency in what he has said today.

Mr. Milburn

I hope that, in time, I can persuade my hon. Friend to love NHS foundation trusts, although I fear that that might be a sticky wicket. He will be aware of the funding increases for Wakefield of between 29 and 32 per cent. for the two PCTs. He was talking to me earlier about some of the considerable pressures that the NHS faces, so I hope that they very much help.

My hon. Friend raises the issue of NHS foundation trusts and the relationship with PCTs. He is on to an important point. Indeed, when he reads the guide, as I know he will, he will see that there are two important roles for the PCTs, particularly to guard against the acute-sector creep that he has talked about. First, for any NHS trust to get the go-ahead to become an NHS foundation trust, it must have the support of its local PCTs. A lock is built in to safeguard the interests of primary care. There is a second lock too, in that the governance structure in a foundation trust includes not just local people, patients and of course members of staff at the local hospital or hospitals, but the local primary care trust.

My hon. Friend is right: we must have a better range of services in the community. I very much hope that the commissioning powers we have given today and the extra resources for PCTs will help to make that happen.

Several hon. Members


Mr. Deputy Speaker

Order. I repeat my appeal.

Mrs. Gillian Shephard (South-West Norfolk)

May we have a little more information about the mechanisms whereby foundation trusts will engage their local communities? How will people qualify for membership of trusts; and if elections take place, how will the electorates be constituted?

Mr. Milburn

The guide that we published today, which is in the Vote Office, sets that out in considerable detail—but I shall not do so given your strictures, Mr. Deputy Speaker.

The trusts will operate on a basis that will be familiar to Labour Members but perhaps not to Conservatives: a basis of co-operative societies and mutual organisations allowing people in an area served by a trust to become its members. Obviously there are different sorts of NHS trust—the Royal Marsden is a very different sort from my local trust—so some flexibility is built into the Government's model. There is, however, one important stricture that I think entirely right in terms of public ownership. Whatever happens, a majority of those on the governing body of a foundation trust will have to be elected by members of the public and by the patients who use the trust.

Mr. Keith Bradley (Manchester, Withington)

I welcome the 31.52 per cent. increase in funds for South Manchester primary care trust, which properly reflects the chronic health needs of the people of Manchester. It will allow the development of new, innovatory services in primary and preventive care at the new £20 million Withington community hospital, to be built next year. May I ask, however, how the foundation status of specialist hospitals such as Christie hospital in my constituency will properly reflect local needs?

Mr. Milburn

My right hon. Friend and many of his Greater Manchester colleagues have lobbied assiduously and made a strong case for precisely the changes in the formula that we have made today in order to recognise the pressing health needs of his community. As he says, the increase in resources is considerable—about £40 million for South Manchester PCT and about £50 million for Central Manchester PCT.

Christie hospital is rather like the Royal Marsden, in that it serves two sorts of community. It serves the local community, but it also serves, as a tertiary centre, a wider cohort of patients. As my hon. Friend will see when he reads the guide to foundation trusts, enough flexibility is built into the system to allow both members of the local community and patients who have recently used the hospital to apply to become members. In that way, services, even in excellent organisations such as Christie hospital, can become ever more responsive to the people who use them.

Mrs. Cheryl Gillan (Chesham and Amersham)

How free will the foundation trust hospitals actually be? For example, will such a hospital be able to enter into its own private finance initiative project? If so, will it be prevented from exchanging surplus assets for new build facilities by the Secretary of State's legal lock on assets?

Mr. Milburn

A foundation trust will be able to enter into a PF I contract in exactly the same way as existing NHS trusts. As the hon. Lady knows, sometimes there are land swap deals, but trusts will have considerable freedom to enter into new sorts of contract as well.

Mrs. Gillan

That is nothing new.

Mr. Milburn

I think that when the hon. Lady bothers to read the guide she will find that a huge amount is new. For instance, the trusts' ability to borrow from both the public and the private sector will allow them to bring onstream precisely the new capital developments for which she and her hon. Friends have long argued.

Mr. Kevan Jones (North Durham)

I welcome the record 28 per cent. increase for Durham and Chester-leStreet PCT, and the 30 per cent. for Derwentside PCT. Although I have reservations about foundation hospitals, I also welcome the opportunity they give local people to have a direct say in their health care. Will my right hon. Friend consider extending that to PCTs?

Mr. Milburn

I am grateful for my hon. Friend's comments on Durham, Chester-le-Street and Derwentside, parts of the country with which I am very familiar. I know of the pressing health needs in those areas. On the extension of a more democratic form of governance to other parts of the NHS, the answer is yes but over time.

Mr. Paul Burstow (Sutton and Cheam)

May I ask the Secretary of State about the financial flow system that is being introduced to recycle £100 million from the NHS into social services so that they can pay fines back to the NHS? Is that money to be top-sliced from the NHS before money is paid to the PCTs, or will it be taken from individual PCTs or acute trusts?

Mr. Milburn

No, it is already being top-sliced and then we will distribute it to social services. On paying fines, if I know local government and social services—at least this is what they tell me and I believe them—they want to spend extra money. The whole case that they have been making is about building capacity, particularly in elderly care services. We have just provided an extra £100 million so that they can do so. I know that that does not always happen in Liberal Democrat councils, particularly ones such as Liverpool, which talk the talk but then fail to walk the walk by cutting back on social services.

Clive Efford (Eltham)

Will my right hon. Friend say whether he intends that people from local communities who represent their communities on foundation trusts will be better known to those communities than, say, local councillors or even local MPs? How are they going to be representative of the views of those local communities, and how are they going to stay in touch with them?

Mr. Milburn

I suspect that those people will be better known than the current non-executive directors of NHS trusts. I may ask my hon. Friend later in private to name the five non-executive directors in his own NHS trust. I bet that he would struggle, and I would too. I believe that this is an imperfect form of governance. It is a public service and it should have greater public input—not just a community input but a staff input. We have important traditions, at least on this side of the House, not just of community ownership but of industrial democracy. We believe that services are better if local people and local staff are involved with them. I do not believe that the current governance structures in the NHS facilitate the involvement of either local staff or members of the local community.

Andy Burnham (Leigh)

Communities in Leigh and across Greater Manchester will today celebrate the passing of a funding formula that has left a legacy of entrenched ill health across the county and a deficit this financial year of about £55 million. I congratulate my right hon. Friend on introducing a formula that better reflects our health needs, but, to ensure that the resources have maximum effect, I ask him to give our PCTs perhaps the full three years to balance their books.

Mr. Milburn

I place on record my thanks to my hon. Friend because, perhaps above all others from his area, he has argued assiduously for a change in the formula and made an extremely reasoned case. Some PCTs have inherited deficits. It is important that those deficits are managed out as quickly as possible, because we must get services on to the front line to improve services for patients. However, three-year budgets give an opportunity to smooth those deficits out over a period of time if that is what is necessary.

Dr. Brian lddon (Bolton, South-East)

Authorities such as mine have bumped along at the bottom of the health provision league for many years far away from target. Can my right hon. Friend say following this welcome announcement that we will be levelled up with PCTs with similar health need?

Mr. Milburn

Yes, I can confirm that. I do not know whether my hon. Friend has been able to see the figures yet, but the total percentage cash increase for the Bolton PCT is in the order of 31.8 per cent., which is well above the national average and recognises the problems of deprivation and poverty that have caused such pressures on the local national health service. It will still take time to meet the targets, but we have an opportunity now, with a better, fairer formula, to ensure that we get the maximum resources into the areas of greatest health need, including his constituency.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)

Is my right hon. Friend aware that elitism has been the curse of the national health service for the 50 years since its creation, and that he now appears to be setting up precisely the kind of division that will encourage that? Will he please accept that there is no legal way in which he can bind those trusts, and make it clear that creating such foundation hospitals will not only damage the interests of patients but will, in the final analysis, create a machinery that any incoming Conservative Government would use to privatise hospitals?

Mr. Milburn

I have a lot of respect for my hon. Friend, but she has been in this place long enough to realise that any incoming Government can do whatever they like in terms of new legislation. If we genuinely want to protect the public benefit purpose of the national health service from future encroachments by any Conservative Government, however far away that might be, the best way of doing so is surely to lodge ownership in the public, among members of the local community. That is one of the main purposes of NHS foundation trusts. Then the Conservatives would not only have to pass a law but actively to take power, resources and assets away from local communities.

Mr. Jon Owen Jones (Cardiff, Central)

I welcome the experiment of foundation hospitals, but can the Secretary of State reassure me that the criteria used to judge the success of the experiment will be whether it delivers more efficient patient care and more choice for patients, rather than the ideological purity of the mechanisms used?

Mr. Milburn

I very much agree with my hon. Friend about choice in our health care system. Of course, there always has been choice in it—provided that people have had the wherewithal to opt out and pay for their health care. Most of us on the Government side—indeed, all of us—believe in choice being available on the national health service. Why? Because we believe that health care should be available according to the scale of a person's need, not the size of their wallet.

Mr. Paul Marsden (Shrewsbury and Atcham)

I welcome the increase, but is not the reality—

Mr. Gordon Prentice (Pendle)

The hon. Gentleman was not in the Chamber for the statement.

Mr. Speaker

Order. The hon. Gentleman should not shout at me that the hon. Member for Shrewsbury and Atcham (Mr. Marsden) was not in for the statement. The hon. Gentleman came to the Chair and gave assurances that he was in for the statement. He is an honourable Member, and he is telling the truth.

Mr. Marsden

Thank you, Mr. Speaker.

As I was saying, I welcome the real-terms increase, but the reality is that for Shropshire, for instance, there will be only slightly more money than there has been in the previous five years. Who will appoint the independent regulator for foundation hospitals, and how independent will that person or body really be? How free will they be from Whitehall constraints?

Mr. Milburn

The hon. Gentleman's muddle on figures is rather like his muddle on politics. The allocation per weighted head in his area in 1997–98 was £438. As a result of the changes that I have announced today, and the extra resources for his primary care trust area, that sum will rise to £1,090. By any measure, that is a huge and handsome increase in resources for his local primary care trust. I will appoint the independent regulator, but he, like the regulators of other parts of the public services, will be independent and report independently to Parliament.

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