Health Funding

Tuesday 22nd June 2010 Westminster Hall

[Mr Mike Weir in the Chair]

14:30

[Andrew George (St Ives) (LD)]

I am particularly pleased to have secured this important debate on health funding. I know that the allocation of funding has an impact on a large number of colleagues, particularly those from the north, the midlands and the south-west. I welcome the Minister of State, Department of Health, the hon. Member for Chelmsford (Mr Burns) and the shadow Minister, the hon. Member for Kingston upon Hull North (Diana R. Johnson), to their new posts, and I look forward to their responses.

Although the title gives the impression of a wide-ranging debate, I shall concentrate on a more narrowly drawn issue—the decisions that lie behind the way in which funding allocations for primary care trusts are made. In doing so, I refer to a debate in this Chamber on 18 March 2009 led by the then Member for Wigan and a debate in the House on 17 June last year that was led by me, both on this and related subjects.

When talking about health funding allocations, we speak of the NHS as a national service. The assumption is that funding is provided according to need, and most assume that it is allocated fairly and according to need; but as I have found during my years in Parliament, we may be assuming too much. The funding allocation formula has been reviewed and finessed over time since the inception of the NHS in 1948. However, 13 of the 52 PCTs in the country now receive funding at the floor of 6.2% below target funding. That is many millions of pounds. For example, the Cornwall and Isles of Scilly PCT receives at least £56 million less than the Government admit is needed or should be allocated. The funding formula was most recently altered for the year commencing April 2009.

The purpose of the allocation formula is to make changes on the most objective basis and, as far as possible, to take the matter out of the hands of any political influence. I admit that funding allocation—the weighted capitation formulas and so on—are some of the most dry areas of political debate one can imagine, but I do not apologise for briefly relating their history from the creation of the NHS. Then, of course, people made allocations as best they could in the circumstances, given the uneven pattern of hospital building in the previous century.

In 1970, the Labour Government’s Green Paper on NHS reorganisation included a commitment to a new method of resource allocation. The basic determinant of funding allocation was to be the population served by the area, modified to take account of relevant demographic variables and underlying differences in morbidity. That led to the development of the so-called Crossman formula. Over time, the formula changed to one in which allocations were made according to population, weighted by age, sex and the number of beds and hospital cases. That was further reviewed in 1974 by the resource allocation working party; the result was the transfer of resources from regional health authorities in the south-east to those in the north. The formula was further revised in the early 1990s, and that change resulted in resources being shifted back from the north to the south-east.

One significant element of the formula that has always caused concern to those in parts of the country such as mine was the market-forces factor. It was introduced in 1976, but was significantly altered in 1980 by the advisory group on resource allocation. That informed allocations from 1981-82. It based its recommendations on the new earnings survey, the annual assessment of average wages and salaries in all parts of the country. Cornwall has been at the bottom of the new earnings survey ever since.

What vexed us and others concerned about the allocation of health funding under the market-forces factor was that the poorest-paid areas received the least money. Salaries accounted for about 70% of the market-forces factor, which meant that they had a significant impact on the overall allocation and weighted capitation. Those areas with lower wages therefore suffered; salaries in an area would drag health funding down if they were low.

Throughout the entire debate on the change, we told the Government’s advisory committee on resource allocation that that was clearly unfair, especially as most of those employed by the NHS were paid according to national pay scales. Even those working in the grounds, including those doing building maintenance work, were receiving good money. We felt that the premise on which the calculation was made was unsound. Over the years, we have argued with the Government over the matter. Latterly, however, we persuaded the Government to review the market-forces formula. That review resulted in a change in the funding formula from April 2009.

There is one major element that adds to costs in places such as my area of west Cornwall and the Isles of Scilly. The area includes five inhabited islands—six including St Michael’s Mount—and two substantial peninsulas. It is difficult to provide access to services in that area; providing ambulance services, NHS dentistry and other health services in such a rural context is clearly a great deal more expensive than in suburban or urban areas, but that aspect is not properly taken into account in the funding formula.

On the social side, the impact of salaries and so on, we were pleased that the review resulted in a change in the funding formula for 2009. However, it identified a new set of losers—the 13 PCTs to which I referred earlier, which are currently at the floor of 6.2% below the national target.

Cornwall is £56 million below its target. In the south-west, Somerset is nearly £21 million, or 2.6%, below its target; Plymouth is £26 million, or 5.9%, below target; Devon is over £12 million, or 1%, below target; and Torquay is nearly £9 million, or 3.4%, below its target. Other areas with substantial, gross gaps in funding—those in the minus 6.2% league table—include Derbyshire, which has nearly £73 million less than its target; Lincolnshire, with £74 million less than its target; Nottinghamshire, with £65 million less than its target; and South Staffordshire, with £57 million less than its target.

In contrast, other PCTs receive more than their target and are overfunded in comparison with that target. The vast majority of those fall within the south-east. Surrey receives £171.5 million, or 11.6%, more than its target; Westminster receives £81 million, or 20%, more; Lambeth receives £78 million, or 14.8%, more; Wandsworth receives nearly £65 million, or 14.4%, more; and Kensington and Chelsea receives more than £60 million, or 20.4%, above the target funding. That contributes to health inequalities across the country. I would like the Minister, whom I am looking forward to hearing, to respond to the question of how we are going to ensure that the allocation of funding meets those targets, and does so as soon as possible.

Health Ministers in the previous Government made it clear that we need to be careful not to make catastrophic funding changes to PCTs receiving more than their allocated funding target. Withdrawing funding too rapidly would seriously impact on the health services in those areas. Nevertheless, a formula must be put in place to ensure that those places currently under target are not disadvantaged by remaining under target. For example, this financial year, Cornwall was 6.2% below target and remained there, so we are not moving very rapidly towards our target.

In the previous Parliament, the then Minister of State, Mike O’Brien, said:

“We are committed to moving all primary care trusts (PCTs) towards their target allocations as quickly as possible. In 2009-10 and 2010-11, we have ensured that the most under-target PCTs benefit from the highest increases in funding. Over those two years, the allocation to Cornwall and Isles of Scilly PCT will grow by…12.1 per cent., compared with the national average of 11.3 per cent…The rate at which PCTs will move towards their target allocation in future years will need to be considered in light of a number of factors including population changes, cost pressures and the overall resources available to the national health service.”—[Official Report, 30 November 2009; Vol. 501, c. 529W.]

This financial year, Cornwall has not moved one iota towards its target, which does not really amount to PCTs moving to their target allocations “as quickly as possible”.

[Sarah Newton (Truro and Falmouth) (Con)]

It is marvellous that Andrew has secured this debate so early in the new Parliament, because this is an important issue for everyone living in Cornwall. I applauded the previous Government’s efforts to focus on closing inequalities in health. However, their measure of success, which focused on average life expectancy, did a great disservice to people in Cornwall, as it masks a lot of the problems there. On the face of it, the average life expectancy is way above the national average—

[Mr Mike Weir (in the Chair)]

Order. I remind the hon. Lady that interventions have to be brief.

[Sarah Newton]

I shall wind up, then. The crude measure of average life expectancy covers up many problems of poor health and the cost of providing services in remote, sparsely populated areas to an ageing population.

[Andrew George]

I am grateful to my hon. Friend. She rightly highlights that many factors, including life expectancy, rurality and age profile, need to be taken into account, and we must get the balance right. The history of the changes to the allocation formula—not something I would recommend as bedtime reading—shows that all the factors have been conjured with and balanced over time. It is difficult to arrive at a formula satisfactory to all people.

I want to emphasise the fact that we need to identify and make the allocation formula clear. We need to be able to show that it takes into account the health inequalities across the country and, above all, does not further impoverish the most deprived areas. I represent the poorest region in the UK, yet its poverty was used as a reason not to give it additional funds. Its poverty acted against its best interests, which would have been additional funds, as I explained in my description of how the market-forces factor operated and the impact that it had in some areas.

It is difficult to assess what impact the Budget will have on the future of the PCT allocation formula so soon after the statement, which was made in the Commons today. The NHS Confederation recently estimated that the announcements made by the coalition Government indicate a real-terms reduction of between £8 billion and £10 billon in funding to the NHS in the three years from 2011. According to the King’s Fund, a rise in VAT will lead to an additional cost of £100 million per annum to the NHS budget overall.

My hon. Friend the Minister will no doubt ask where we will find the money to provide additional resources for deserving areas such as Cornwall and the Isles of Scilly, Bassetlaw, and South Staffordshire, and the other places that receive allocations that are further below their target than those anywhere else.

[Mr Iain Wright (Hartlepool) (Lab)]

Will the hon. Gentleman give way?

[Andrew George]

I will happily give way, because I asked myself a difficult question and I had better sit down.

[Mr Wright]

I am grateful to the hon. Gentleman for securing the debate and for giving way. He has been an extremely tenacious campaigner on health inequalities and housing, a subject on which I used to speak for the Government in a previous life. What are the hon. Gentleman’s views on the relationship between resource allocation and capital spend? It is an important subject to bear in mind when trying to iron out health inequalities. He mentioned the Chancellor of the Exchequer’s Budget statement, which said: “Well judged capital spending by Government can help provide the new infrastructure our economy needs to compete in the modern world.” If we put that in the context of reducing health inequalities, is it not important to have good capital spend in health? Does the hon. Gentleman share my disappointment at the £463-million cancellation of a new hospital for North Tees and Hartlepool?

[Andrew George]

I thought that the hon. Gentleman would use a local matter as a sting in the tail in his intervention. Let me commend his work on housing, which deserves a great deal of credit. With regard to capital spend, I was never terribly enamoured of the previous Government’s enthusiasm for the private finance initiative projects that were put in place across the country; they did not represent value for money. Having said that, I acknowledge that some difficult decisions need to be taken. I am sure that the hon. Gentleman’s point about his hospital will be heard by Ministers, and that he will be as tenacious in mounting a campaign to ensure that the right decision is taken as I have been on the issue of health funding, and on other issues.

As far as the health allocation formula is concerned, Hartlepool’s funding was 4.3% below its target, so the hon. Gentleman may wish to join the campaign to ensure that the areas furthest from their target achieve their target as quickly as possible. The PCT and the health community in that area may well be able to address their need for capital investment by ensuring that their revenue and allocations are increased by means of our campaign.

The difficult question that the Minister will be asking himself is where will the additional resources be found if areas such as Lambeth, Richmond, Westminster and Kensington and Chelsea are not to have the rug pulled from under them. Part of the answer lies in looking at how the last Government spent their money. There was an obsession with centralised, top-down and quite expensive projects, such as the alternative providers of medical services—or polyclinics, as some people have called them—and the independent treatment centres built across the country, which have never given value for money. A lot of money has also been committed to the NHS information technology programme. I urge the Minister to look at that, and at other such areas, to find the funding, and to give that funding to the PCTs. The PCTs can then decide how best to use their resources, rather than having decisions made for them in Richmond House.

Many issues in Cornwall need a great deal of further investment and support, including ambulance response times. Of course, given our geography, we do not expect to have the quickest ambulance response times in the country, but we would like resources to be put in place to ensure that the ambulance service can at least begin to address some of the deficiencies in the service at present. The NHS dentistry service in Cornwall is one of the most threadbare in the country. Given how difficult it is to see an NHS dentist in most of my constituency, and in many other parts of Cornwall, there would be massive benefits to improving the service there. Other such areas include: cancer screening and prevention; better support for the rehabilitation of stroke patients; improving the functionality of mental health services by ensuring greater availability of therapists and a greater ability to meet demands for treatment; improvements in psychological therapy support for armed forces veterans—provision is clearly insufficient in Cornwall, as in other areas—greater support for dementia; expanding physiotherapy; and improving and investing in the midwifery services in Cornwall, which are overstretched.

In closing, I want to ask the Minister a few questions that hit the bull’s eye of the issue. Bearing in mind that the NHS budget will be protected, how soon will the Government ensure that the funding shortfall in the most underfunded areas of the country is removed? I mentioned the 13 PCTs that are 6.2% below their target; do the Government see those targets as genuine targets to hit, or just as something for the Department to take note of? What is the Government’s policy on the pace of change in the most underfunded areas, and what will be the pace of change in future?

I know that a number of other hon. Members wish to contribute to this debate, so I will resume my seat now. I look forward to the Minister’s response.

14:55

[Sarah Newton (Truro and Falmouth) (Con)]

I add my support for all the things that Andrew has said. I should like to touch on two ways in which my constituency is affected by the underfunding of the NHS in Cornwall. First, there is the considerable debt that has been acquired by the Royal Cornwall Hospitals Trust. Andrew and I have three hospitals in our constituencies.

[Mr Mike Weir (in the Chair)]

Order. Let me remind the hon. Lady that she should refer to a Member by their constituency, not their name.

[Sarah Newton]

I am very sorry. You will have to forgive a new girl, Mr Weir. I will try much harder next time I speak. It is the first time that I have had the opportunity to speak in a debate, so I apologise for my mistake. As I was saying, the hon. Member for St Ives (Andrew George) and I share, in our constituencies, the three hospitals that are part of the Royal Cornwall Hospitals Trust. It is interesting to note that there has not always been below-target expenditure in Cornwall.

[Mr Mike Weir (in the Chair)]

Order. I am sorry to intervene on the hon. Lady again. She did say that this was the first time that she had spoken in a debate. She cannot speak here unless she has made her maiden speech in the main Chamber. Has she made her maiden speech in the Chamber?

[Sarah Newton]

It was my understanding that the rule had been waived because of the huge number of new Members waiting to make their maiden speeches. I have not yet made my maiden speech.

[Mr Mike Weir (in the Chair)]

I thank the hon. Lady. That has not been communicated to me, but if that is the situation, I will let her continue.

[Sarah Newton]

Thank you, Mr Weir. I appreciate your generosity, because the issue is of vital importance to my constituency.

It is interesting to note that there has not always been below-target funding in Cornwall. If we go back to 1997-98, we find that the funding allocation was just below the average and the hospital trusts in Cornwall were not in debt. A great gulf has arisen over the past 10 years, as has the debt that has accumulated at the Royal Cornwall Hospitals Trust. There are issues and problems at the trust, but the severe financial pressures that it has had to bear because of the unfair funding allocation over the past 10 years have definitely contributed to them, and those pressures are standing in the way of it acquiring foundation status, which would enormously improve its ability to provide excellent care to the people in Cornwall.

The other factor that I should like to mention arises from our geography. It is difficult for people in Cornwall to get to a dentist or a hospital. We have good access to GPs; most people can access a GP within a couple of miles from their home, but not a dentist or hospital. As part of a recent survey undertaken by Citizens Advice Cornwall and Age Concern, 411 people filled in questionnaires on how easy or otherwise it was for them to get to hospitals. The survey showed that a significant number of people are prevented from attending hospital by the costs involved. Of the 411 people who responded, 35 reported that the cost of getting to a hospital stopped them from attending a clinic; 28 said that it prevented them from accompanying someone to hospital; and 115 said that it stopped them from visiting friends or families.

Although I welcome the Secretary of State’s revision of the NHS operating framework yesterday, I hope that future revisions will include an examination of the whole issue of hospital transport. I say that because there is significant evidence to show that the current scheme is not always widely understood by constituents, and that some aspects of it do not work very well for people in remote rural areas who struggle to gain access to a car or public transport to get to hospital. Also, the costs involved are quite considerable for the large numbers of people living on low and fixed incomes in our part of the world.

15:00

[Mr Iain Wright (Hartlepool) (Lab)]

I want to reiterate what I said earlier in an intervention and congratulate the hon. Member for St Ives (Andrew George) on securing what I think is a very important debate; it is important not only in the south-west but across the country.

I also want to congratulate the hon. Member for Truro and Falmouth (Sarah Newton) on what I think might be her maiden speech, although I am not entirely certain that it was. [Laughter.] I imagine that she will be as tenacious as the hon. Member for St Ives, her close parliamentary neighbour, in ensuring that she stands up for the interests of her constituents.

I want to make two or three key points about health funding issues that are affecting my constituents. The first point relates to something that the hon. Member for St Ives said; he has obviously done his homework and knows his brief incredibly well in this area. As he said, despite great improvements in recent years Hartlepool primary care trust is still some distance from its funding target. It is about 4.3% below its funding target, which is about £7.7 million. In the last two years, 5.5% more funding was provided year on year, but we still have some considerable way to go. I just want to press the Minister on the question asked by the hon. Gentleman—how far and how fast can we move to get to the funding target for deprived areas such as Hartlepool?

The second issue that I want to mention is access to health care and funding for health-care-related transport. The hon. Member for Truro and Falmouth made a telling point about how important it is that people should have access to transport in rural areas, to enable them to access health services. I certainly have that situation, to some extent, in my constituency. Hartlepool is a very urbanised constituency—one of the most urbanised in the country. However, we have outlying villages, such as Dalton Piercy, Elwick and Greatham, which I am thinking about in particular. In the last 12 months or so, Greatham’s nurse-led clinic has been closed, largely on clinical grounds rather than because of cost-cutting exercises. Nevertheless, I think that finance has still had a role to play. I have tabled a number of parliamentary questions about the provision of nurse-led clinics in rural areas and the Government, in their written responses, have said that they are very much committed to those clinics. But I want to know from the Minister what extra assistance will be given to residents of Greatham and other rural areas, which can really help communities to have access to health care—both preventive health care and care related to reactive clinical outcomes.

The third issue that I want to mention is the appalling health inequalities that we still have in Hartlepool, despite the improvements that we have made in recent years. A person is more likely to die earlier if they live in Hartlepool than if they live anywhere else in the country, with the possible exception of Easington, which is next door to Hartlepool. In certain parts of my constituency, particularly Stranton ward, the difference between the local life expectancy for men and the national life expectancy for men is 11 years; a man living in one of those parts of my constituency will die more than a decade earlier than if he lived in other parts of the country. That issue needs to be addressed, not only through funding but through reconfiguration of services so that they are really patient-led.

That brings me to my final point, which is my most relevant point at the moment. It is about the announcement made by the Chief Secretary to the Treasury on the Floor of the House last Thursday about the cancellation of the £464 million new hospital for North Tees and Hartlepool. That hospital was something like a decade in planning; it was not thought up in the last two months before a general election campaign. There has been an awful lot of pain with regard to reconfiguration of health services in Hartlepool. The issue dominated the by-election that I won to come to this House. It has been extremely painful for the community to get to this position, but with one swift swish of a pen we are back to square one, with no real vision about where we go to for hospital services north of the Tees in my area. With the co-operation of neighbouring primary care trusts, we are embarking on what is known as the momentum programme, whereby we are pushing services closer to the community. That has an impact on health funding allocation. What reassurance can the Minister give that we will receive additional services and additional resources, so that the momentum programme can go further and faster in pushing health care into the community?

Also, with regard to the cancellation of that hospital and with regard to the idea that we do not have a plan B—there is nothing in place—can the Minister provide me with a degree of reassurance that support will be able to maintain the existing North Tees and Hartlepool hospitals? Is that the way that his Department is suggesting that we are going? If so, that would be at odds with the clinical recommendations from the independent reconfiguration planning of a number of years ago. It was recommended that we should have a new world-class hospital, which could serve the communities of Hartlepool, Easington, Stockton and Sedgefield.

I hope that the Minister will agree to meet me and my neighbouring MPs, so that we can discuss these issues and ensure that the health inequalities and the uncertainty that has been created by the announcement last Thursday can be addressed; so that the concerns of my constituents and those of people in neighbouring constituencies can be addressed; and so that we can really begin to address health inequalities in the north-east.

15:05

[Diana R. Johnson (Kingston upon Hull North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Weir. I congratulate the hon. Member for St Ives (Andrew George) on securing today’s debate. From my reading in preparation for the debate, I know that this is an issue that he has taken up over many years during his time in Parliament and that he is a very committed campaigner for health funding for his local area and the wider area of Cornwall. I welcome the Minister of State, Department of Health, the hon. Member for Chelmsford (Mr Burns), to his role and wish him well in his new position.

It has been very interesting to hear the contributions of the two Members who have also spoken in the debate today, the hon. Member for Truro and Falmouth (Sarah Newton) and my hon. Friend the Member for Hartlepool (Mr Wright). As my hon. Friend said, I want to congratulate the hon. Member for Truro and Falmouth on her maiden speech, if that is how it is going to be seen. Like the hon. Member for St Ives, she is making a very strong case for her constituents and ensuring that there is an advocate for them in this House who stands up for the real health funding that is required for people in her constituency.

It was also very interesting to hear what the hon. Member for St Ives said about some of the different criteria that have been used to allocate funding and about some of the tensions that exist when one looks at some of those criteria. I hope that I shall have an opportunity to say a few words about those tensions shortly.

My hon. Friend the Member for Hartlepool made some very pertinent points about the need to get to the target for health funding for primary care trusts. I noted that he said that his constituency was 4.3% below the funding target. As a result, I had a quick look to see where my primary care trust was in terms of being on target. It is actually 6% below target, so we are just above the group of PCTs that the hon. Member for St Ives referred to, which are 6.2% below the funding target.

It was also very pertinent to raise the issue of access to health services, and of course there is a funding implication to that issue. If we want to have services out in the community, there is a need to look at how funding is allocated and at the issues related to health inequalities. It is not acceptable that there are still parts of this country where the mortality rates show that men in particular will live for fewer years than men born in the south of England. I know that in the north there are real concerns about that issue.

Very importantly, there is also the issue of hospitals and capital funding. I know that that is mainly about PCTs’ revenue funding, but we need to keep an eye on what happens to capital funding. Of course, the hospital at Hartlepool that my hon. Friend the Member for Hartlepool mentioned has been in the planning for a very long time and there has been a huge investment in it, through the PCT and other people and other organisations in that area ensuring that it was really going to deliver for local people.

Therefore, I am particularly concerned about the cancellation of that hospital, especially in the light of the reassurances that were given by the new coalition Government that the cuts that they would make this year would not to be to front-line services and that, as I understood it, they would protect hospital builds. So it would be very helpful if the Minister could say a little more about his view of how the cancellation of the Hartlepool hospital fits in with the agreement not to cancel front-line services.

The main thrust of the debate is the funding of health services in Cornwall, and I have looked with interest at what the hon. Member for St Ives has said about it previously. Today I also had a quick look at his website, where he trails the debate and says that he is looking to secure an additional £56 million of funding for his area. He also says:

“The Conservatives created a system of endemic underfunding. Now they are in Coalition they can put this right.”

The press cuttings prepared by the Library for the debate also include an article from The West Briton of 10 May, in which he says:

“The coalition is already starting to deliver many outcomes which Cornwall has craved.”

I admire his positive view of what the new Government will deliver for him and his constituents and I very much hope that he is correct.

What the coalition Government have said so far about the NHS is quite limited. Section 22 of the coalition agreement sets out their priorities for the NHS, and the first bullet point says:

“We will guarantee that health spending increases in real terms in each year of the Parliament”.

Paragraph 21 of the revision to the operating framework for the NHS in England for 2010-11, which was published just yesterday, reiterates that commitment, and I have just heard the Chancellor of the Exchequer make it clear in the Budget debate on the Floor of the House that the commitment remains.

Of course, that is just the headline, and we do not actually know what it will mean for services in the NHS in England in the coming years. Obviously, the Minister will be working hard on the comprehensive spending review over the summer months. He will be looking at how he can make sure that his Department secures all the resources that it needs to ensure that the view of the hon. Member for St Ives that he will get his £56 million comes to fruition. The written reply to a question that the hon. Gentleman tabled to the Minister contained a commitment just to increase spending

“in real terms in each year of the Parliament.”—[Official Report, 7 June 2010; Vol. 511, c. 47W.]

We really need to have the detail. I accept that it is very early days for the Minister, who has been in office a few weeks, and that the coalition Government are still trying to sort out their policies on NHS funding.

The hon. Member for St Ives made a clear and effective case for raising the funding for his constituency and primary care trust. There have been many written questions and debates on the issue, and I pay tribute to everybody who has been involved in the campaign to get additional resources into the primary care trust and into Cornwall. I also pay tribute to the staff, who are working hard day in, day out with the resources that they have.

Funding is obviously a key issue. The hon. Gentleman has given us quite a detailed canter through the historic reasons why we are where we are on funding, which was very interesting, but many of the views about why there is underfunding in certain constituencies and areas point to the 1970s as the time when allocations perhaps did not work in quite the way that they should have. That is the view that comes out of the debates and explanations about the current funding criteria.

At this point, it is worth reflecting on how the NHS has changed over the years. Patients now want access to high-tech, specialist services with the best nursing and clinical advice. There is also a tension around the fact that people want services much closer to home—in their local GP surgeries or at home if at all possible.

[The Minister of State, Department of Health (Mr Simon Burns)]

I was just reflecting on what the hon. Lady said before she got to this section of her speech. I must gently remind her that her party was in power for 13 years and introduced the funding formula that the hon. Member for St Ives (Andrew George) is complaining about. Having put that on the record, I beg to ask why the last Labour Government did nothing in those 13 years to remove the problem facing Cornwall and the Isles of Scilly.

[Diana R. Johnson]

I am grateful that the Minister intervened on me, because I am coming to that. I recognise, as the hon. Member for St Ives probably does, that where we are today might not be perfect, but the previous Labour Government made huge strides in terms of putting money into his area and others that were underfunded. The statistics show that there have been significant improvements since 2003-04, when some PCTs were 22% below target; now the figure is 6.2%, so there has been movement. I am not saying that everything done under the Labour Government was done as fully as we would have liked, but it would be interesting to hear what plans the Minister has to target the pace of change and how soon he feels we will reach the target level for all PCTs. We have to recognise, as I am sure the hon. Member for St Ives does, that taking money from other areas of the country in one fell swoop is not the best way to have a stable national health service.

[Andrew George]

If the hon. Lady rereads what I said earlier, she will see that I very much acknowledge that. Just to reassure her and, indeed, the Minister, let me say that it was in fact 1980 when the impact of the market forces factor changed quite significantly and created the detrimental impact that I described. Yes, I did make some disparaging remarks about the then Conservative Government and I welcomed the additional funding that the Labour Government put in, which I voted for and the Conservatives did not; that is a matter of record. However, I simply urge the hon. Lady to recognise that the formula change, which I fully applaud the last Labour Government for introducing, puts a responsibility on whichever party is in government to ensure that underfunded areas receive their target funding as quickly as possible.

[Diana R. Johnson]

We can probably agree that history is history. We are where we are today, and we need to make sure that we move forward as quickly as possible to get to the point that we all want to be at—an NHS that is funded fairly across England and that addresses some of the issues that the hon. Gentleman raised about rural constituencies and rural areas.

I want to address the rural nature of the hon. Gentleman’s constituency, the primary care trust and the patients that it serves. The issue of islands and peninsulas is also quite unusual, and few primary care trusts have to deal with it, so there needs to be some recognition of that. Clearly, the influx of people during the summer months must swell the demands on the national health service; all that must be recognised and factored in. There is also the issue of poverty. There can be pockets of poverty in rural areas; they are not just in urban areas, although we recognise that there might be different solutions to poverty in different parts of the country.

Let me reiterate that 80% of NHS spending is at primary care trust level, which means that the best solutions for an area can be put forward, debated and agreed at that level. I want to remove the myth that seems to exist that everyone is being told that certain areas have to do things in a certain way. That is wrong. Primary care trusts have much more capacity to design local services to meet their area’s needs. I understand that the new coalition Government will introduce directly elected representatives into primary care trusts to increase the level of local involvement and accountability. I hope that I have that correct, because the Minister is looking at me as if I do not.

[Mr Burns]

No, I am not doing anything.

[Diana R. Johnson]

I just wanted to make sure, because that was not a Conservative manifesto policy. As I understand it, such engagement and increased accountability in the NHS was one of the Liberal Democrat policies; but it is part of the coalition agreement.

[Mr Burns]

May I just reassure the shadow Minister that I am just listening intently to what she has to say.

[Diana R. Johnson]

I am delighted to hear it.

I now want to move on to the matter of health spending. I recognise that the hon. Member for St Ives would like more money for his constituency, but I think he recognises that since 1997 the relevant spending on St. Ives, and on Cornwall, has increased. This year the allocation for all PCTs is £164 billion. As I said, 80% of the entire NHS budget is now in the hands of PCTs—the highest proportion ever. That means that local decision making is possible. The PCT for Cornwall and the Isles of Scilly is this year receiving £856.2 million and its budget has increased by 12.4%, but we recognise that it is still 6.2% away from the target.

I am grateful that the hon. Member for St Ives has recognised the work of the independent Advisory Committee on Resource Allocation, which is made up of GPs, academics and health service managers, to develop a new funding formula to determine each PCT’s allocation. That has built on previous formulae to meet the objectives of providing equal access for equal need, and a reduction in health inequalities. Of course, a huge debate has raged about the tensions between the criteria used for allocating resources. For instance, there has been a debate about age versus deprivation, and the Conservative party in opposition would often argue that it was not deprivation but age that should be given more weight. The Conservatives also criticised the weighting of health inequalities in trying to remove those inequalities.

I hope that we now recognise that a series of criteria must be considered. Since last year a new formula has been introduced. We can clearly see how far the PCTs’ actual allocation is from their target allocation. The previous Government’s commitment was to move towards the target, while recognising that that would have to be done over a period of time, ensuring that it did not cause major problems to the smooth running of the NHS throughout the country.

When I looked again at the figures I found that the PCT that was the furthest over its target was Richmond and Twickenham; it was 23.4% over the target. I thought that it would make an interesting example to consider, as the relevant MPs are the Secretary of State for Business, Innovation and Skills, who is a member of the Liberal Democrats, and the hon. Member for Richmond Park (Zac Goldsmith), who is a member of the Conservative party. I can just imagine the tension and debate in that case about chopping the funding allocation for that PCT. Perhaps it would add some strains to the tensions within the coalition.

[Andrew George]

The hon. Lady makes a reasonable point about Twickenham and Richmond PCT, and about all those PCTs that receive significantly more than their target, because of the change in the funding formula. If she reads what I have said, she will notice that I recognise that it would be catastrophic to pull the rug out from under those PCTs, and we cannot do that: over a period of time, which I hope would be as short as possible, we need to find ways to ensure that if there are constraints on NHS spending, the areas that are now below their targets should not suffer.

[Diana R. Johnson]

I hope that the Minister will enlighten us with his thoughts on the pace of change in approaching the target and tell us whether he thinks the Department should adopt a target, with deadlines and dates. I know that he is not keen on targets, as we have seen from announcements in the past few days, but it would be helpful if he would explain his thinking about how we can arrive at a situation in which the hon. Member for St Ives gets his £56 million for his PCT, and other PCTs also receive the money that they feel they need.

The hon. Member for St Ives made a strong case for his constituents. I am grateful for his acknowledgment of the work of the Labour Government to deal with the problem; it may not have gone as far as he would have liked, but an attempt was made to deal with it. I look forward to hearing the Minister’s comments on NHS funding in this context. I wonder whether he will also discuss the issue of capital spending, which is preying on the minds of many hon. Members.

15:26

[The Minister of State, Department of Health (Mr Simon Burns)]

I congratulate my colleague, the hon. Member for St Ives (Andrew George), on securing this debate on NHS funding allocations. I also congratulate the shadow Minister, the hon. Member for Kingston upon Hull North (Diana R. Johnson), on her appointment to the Health Front Bench. In Government she was a Minister with other responsibilities, and a Whip, and I assure her that she will find serving as a shadow Health Minister tremendously rewarding, because of the important role of such matters in our lives and those of our constituents. I also congratulate my hon. Friend the Member for Truro and Falmouth (Sarah Newton) on her almost but not quite maiden speech.

I pay tribute to the NHS in Cornwall, which provides an excellent level of care to the constituents of my hon. Friend and those of my honourable colleague; he has long campaigned on how best to distribute resources and has argued that PCTs should be moved to their target allocations. Before I respond in detail to his points, perhaps I might set out the general principles of the system of funding allocation; that may help the hon. Member for Kingston upon Hull North.

The Government believe in an NHS that is free to all, irrespective of need or ability to pay; in which professionals are freed from the shackles of centralised targets and empowered to take responsibility for their patients; where better access to services is matched by improved quality and greater efficiency; and which provides value for money and health outcomes that are second to none. That is our vision for the national health service, and the coalition’s programme for government sets out how we will achieve it.

First, the Government will increase spending on the NHS in real terms for each year of this Parliament, as the shadow Minister acknowledged. It is a commitment that reflects a deeper belief: that the NHS must be protected and properly resourced to continue its vital work. We must focus our resources where they are needed most. That means stopping the flow of resources from the front line to the back office, giving front-line staff the responsibility and resources to improve outcomes for patients, and entrusting local professionals—and local people—with the means to improve local health. By committing to cut the costs of health bureaucracy by a third, we will release resources that can be reinvested in front-line services; by giving GPs the power to commission services based on need, we will push decisions about health care provision close to patients; and by giving local communities more responsibility for public health, we will create a more flexible national health system—one that is responsive to local demand for health services, and is able to react to changing health needs and to direct funds towards emerging priorities.

Secondly, we will establish an independent NHS board to allocate resources and provide commissioning guidelines. The board will ensure access to health services that are designed around the needs of the patient, not the needs of the bureaucracy. It will set standards based on clinical evidence, not political micro-management. The aim is to achieve the best outcomes for patients, instead of simply ticking boxes and meeting targets.

[Mr Iain Wright]

I congratulate the Minister on securing his post. I know that he is passionate about health, and I wish him all the best as a Minister in the Department of Health. He mentioned the establishment of an independent NHS board whose focus will be on clinical standards as opposed to political micro-management. Bearing in mind health services north of the Tees, a clinically led, independent reconfiguration panel recommended that a new hospital should be built. Is that not something that the Government should be doing?

[Mr Burns]

I have to congratulate the hon. Gentleman. I remember that as a Minister he was extremely helpful, within the confines and straitjacket of his remit. He was tenacious both in that job and this afternoon, and is using his skills to try to tease out an answer beyond the one that was given to him in my letter to him last Thursday explaining why that capital project was cancelled as part of the public spending review. However, to be helpful, and if he would like it, I will repeat basically what the letter said. Facts are facts, and I am afraid that the situation has not changed since I wrote to him.

When this Government came into power in May, we were faced with the largest deficit and debt that any Government had ever inherited from an outgoing Government. The debt is a financial problem that must be addressed urgently. Therefore, the incoming Government announced a review of spending commitments that were made by the previous Government after 1 January 2010—that is, in the run-up to the general election. As a result of the review, which has been carried out over the past seven weeks or so, an announcement was made on 17 June in which the coalition Government announced the go-ahead of four major hospital programmes, ranging from the Pennines to Liverpool and to St Helier in south-west London. Unfortunately, the North Tees and Hartlepool project did not get permission to go ahead. I am afraid that that is the answer. It is because of the economic situation and debt in which we find ourselves.

[Mr Wright]

The Minister is gracious in giving way a second time. On that basis, and given what the Prime Minister said about NHS funding increasing in real terms despite the financial problems that we find ourselves in, capital spends will be provided elsewhere in the country, but seemingly not in my constituency. Are my constituents’ health outcomes not to be thought of because of financial considerations?

[Mr Burns]

The hon. Gentleman knows the answer to that question. That is not why the hospital was not given the go-ahead last week. I can appreciate his frustration. As a constituency MP myself, I too would be frustrated, but the hon. Gentleman, who is a generous man, must not try to reinterpret the decision for other reasons. Sadly, the decision was taken simply because of the urgent need of this Government to take decisions to start curbing the ballooning debt problem, which needs to be addressed. That is the reason, I am afraid. It has nothing to do with our commitment to reducing health inequalities and spending more money on providing health care and services for people throughout the country.

I hope that the hon. Gentleman is satisfied with that. If he is not, and if it would be of any help to him, I would be more than happy to meet with him and, if he wants to bring them along, his colleagues from the Hartlepool area and the surrounding constituencies. They can discuss the matter with me—my door is always open. I would be more than happy to do that, if we can arrange a meeting, and if he thinks that it would be helpful.

Let me return to Cornwall and the general position on health funding allocations. I was saying, before discussing Hartlepool again, that we will establish an independent NHS board.

[Andrew George]

On that point, I would be grateful if the Minister would clarify whether the board will replace the Advisory Committee on Resource Allocation.

[Mr Burns]

I can reassure my hon. colleague that it will not. It will be something completely different. It will be a stand-alone body that will be the driving engine of the NHS, in its required field.

By strengthening the link between investment and outcomes, the board will enable the NHS to deliver improved quality, higher productivity and better value for money. I am sure that my hon. colleague will appreciate that I cannot yet discuss the precise functions of the board, nor its composition, but our proposals underline our central belief that resources should be allocated according to need, without ministerial interference.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

Perhaps the Minister can touch on another hospital situation. I understand that the Secretary of State visited Bury on Friday and overrode a clinically reached decision on maternity units. He said that, in his judgment, Fairfield General hospital’s maternity unit could remain open, against a clinical decision made in the “Making things better” reorganisation in Greater Manchester.

[Mr Burns]

I hope that the hon. Lady is aware of the announcement that my right hon. Friend the Secretary of State made shortly after he assumed his current position, in which he laid down new criteria for determining the reconfiguration of hospital services. Prior to the general election, when he was the shadow Secretary of State for Health, he made it a priority that, in particular, maternity units and accident and emergency units would be looked at far more closely than they had been looked at. That is why, on assuming office, he strengthened the criteria for carrying out consultations on proposed reconfigurations, and brought in four new criteria that will apply to any future reconfigurations, and current ones that are still in the process. They will have to abide by the new strengthened criteria, which include ensuring that the wishes and views of GPs, clinicians, local stakeholders and the general public are taken into account. Decisions that affect local communities and people will have the input of local people, rather than simply being imposed on communities which, for a variety of reasons, do not want what is being proposed.

[Barbara Keeley]

Those of us in Greater Manchester who are affected by the decision and the new process that the Minister is outlining are struggling to understand how to square the clinicians’ recommendation, which was based on things such as the number of doctors available, doctor training and the experience that has to be gained in maternity to deliver a safe service—a clinically led decision was made in that case—and the community’s wish and desire always to keep maternity and A and E units. It is hard for local people to understand how such things can be squared. Most constituency MPs understand that no one ever wants to lose an A and E or maternity unit. Does that really mean that clinically led decisions, such as those in Hartlepool and Manchester, will be overridden if local people do not want them?

[Mr Burns]

No, it does not mean that. What I said when explaining the criteria that the Secretary of State has laid down is that it will strengthen the consultation process leading to decisions, but obviously there will be a number of processes thereafter. The different processes of assimilation before a final decision must ensure that the Secretary of State’s criteria for greater input of clinicians’, GPs’ and local communities’ wishes are taken into account. In the past, reconfigurations have too often left the impression among local communities that they have not been consulted or listened to, and that decisions have been made by managers or others based only on their narrow point of view without taking account of other people’s views.

[Barbara Keeley]

Will the Minister give way?

[Mr Burns]

No. I have been generous, and I want to make progress.

That is the principle for the criteria, but it will not mean automatically that there will never be any changes because there is a block. We are strengthening the process to take account of local wishes and needs. There is a balance to be struck, which will emerge during the reconfiguration process.

[Mr Andrew Turner (Isle of Wight) (Con)]

Is my hon. Friend aware that we have a unique arrangement for health, and that a single organisation is responsible for both commissioning and delivery—the local hospital? That works for the Isle of Wight, and it has turned round a deficit of £3 million and broken even in the past three years. Can he assure me that the forthcoming White Paper will allow the success of the island’s health services to continue?

[Mr Burns]

I am grateful to my hon. Friend for that intervention. I assure him that the White Paper will be aimed completely at improving and enhancing the provision of health care throughout the country—not just on the Isle of Wight, but on the mainland from Cornwall and the south-west up to Hadrian’s wall in the north. That will be based on a principle of putting patients first and at the heart of health care provision so that they drive the national health service and so that it is there for them and their needs, rather than the needs of management bureaucracy or of politicians micro-managing the system from Whitehall down the road. However much affection and respect I have for my hon. Friend, I cannot be tempted to outline in detail now the White Paper’s contents, but I assure him that when it is published he will share my enthusiasm for the way in which the Secretary of State will unveil his vision for the national health service, not simply for the next five years, but thereafter. I trust that that satisfies my hon. Friend, if not the hon. Member for Worsley and Eccles South (Barbara Keeley).

My honourable colleague the Member for St Ives mentioned the current pace of change, and particularly the distance from target measurements used to assess relative progress towards target allocations. His constituency is in Cornwall and Isles of Scilly primary care trust. It received an allocation of £808 million in 2009-10, which increased to £856 million in 2010-11—an increase, as he knows, of 12.4% above the national average of 11.3%. However, under the formula established by the previous Government, and as many contributors to the debate have noted, that is still 6.2% or some £56.3 million below its target allocation for 2010-11.

I hope that my honourable colleague will appreciate that until the spending review is complete, I cannot comment on specific time scales or the future plans for NHS allocations, nor on the financial standing of specific local health services. I trust that he will be reassured that his partners in Government share a common assessment of both the problems facing the NHS and the solutions available to us.

During the spending review, we will examine rigorously all areas of health spending to identify where we can make savings—for example, by maximising the NHS’s buying power, renegotiating contracts and improving financial accountability throughout the system. The picture that I have painted is of an NHS in which decisions on resource allocation centrally are made by an independent NHS board. But although I cannot give the hon. Member for St Ives the commitment and promise that he wants now, the matter will be examined as part of the spending review between now and the autumn. When our reforms become reality, the NHS board will be responsible for the allocation of spending and will consider a whole range of areas.

[Andrew George]

I want to raise a point for clarification. The Minister described the role of the NHS board and made it clear that it will be remote from political micro-management. He also said that he cannot give me or the PCTs that are a long way below their targets any answer until after the spending review. Will the decision on the pace of change towards achieving targets be made by the spending review, or will that decision be made ultimately by the independent NHS board? If he cannot say which of the two, or which combination of the two, when will I and other hon. Members receive a clear answer on what will happen and who will make the decision on the speed of change?

[Mr Burns]

I believe that I can help my honourable colleague. The ultimate decisions will be made by the NHS board when it is established, but he will appreciate that primary legislation will be required and that that will take time. In the meantime, the allocation of funding for health care throughout the country will be done initially following the spending review, but when the board is established on a statutory basis and operating, it will take over that function. I hope that has cleared up the matter for my honourable colleague.

[Diana R. Johnson]

I am wondering about the time scale for the board’s establishment. When will the Minister be in a position to provide some dates for when it will come into existence?

[Mr Burns]

That is a reasonable question, and I shall be reasonable in my response. The date will be determined partly by Parliament because primary legislation will be required, as outlined in the Queen’s Speech last month. Speaking as an ex-Whip rather than a Minister for Health, I anticipate that the legislation will make progress through Parliament this Session and receive Royal Assent in July next year, or perhaps September, depending on whether there is a spillover in September or October next year, which I do not know at the moment. That is my guess as an ex-Whip for the timetable for the primary legislation. We will then have to wait to see at what point after that it will be up and running, but my guess is that it will be as soon as is feasible.

[Andrew George]

Given the state of flux and the uncertainty of the spending review, which will be followed by the creation of the independent NHS board, there will be a vacuum because decisions have yet to be made in this two-stage process. Will the Minister agree to meet colleagues from Cornwall and me to discuss the progress of that review, either at the time of the review itself or immediately afterwards? We would find that very helpful, because we know that the NHS budget in Cornwall is under tremendous pressure at the moment.

[Mr Burns]

I reassure my honourable colleague that there is not a state of flux. There is a state of potential change, yes, because there is a new Government with an important vision for the future of the health service. That is a difference, but there is not a state of flux because there is stability there. I am not criticising him, but I wanted to reassure him, so that he did not get the impression that there was a state of flux, with the connotations that that has. There is no state of flux. We have a vision, which will be unveiled shortly, but we have things in place to make sure that the system is running properly.

The other thing I would like to repeat—it is so important that it does not matter if it is repeated again, because the issue has featured frequently during today’s debate—is that the Department of Health budget is, of course, protected, which means that in every year of this Parliament, it will increase in real terms. There will be pressures on the Department of Health budget but, under the coalition agreement and the commitment that my party gave prior to the general election, which has been upheld by the coalition agreement, there will be a real-terms increase in that budget. That gives a degree of stability to the health service because it knows that, in every year of this Parliament, it will receive that money.

I thank my honourable colleague for his earnest and informed contribution to today’s debate. As a constituency MP myself, I respect and appreciate the tremendous battle that he has fought over a number of years for Cornwall. I am thrilled to see that my hon. Friend the Member for Truro and Falmouth is also joining in fighting for her constituents to ensure that they, too, get the best health care possible. That is something that all hon. Members want and fight for on behalf of their constituents.

At its most basic level, allocation is a question of measuring need and distributing resources accordingly. To the outsider—and some insiders—funding allocation is a dense and sometimes opaque subject. As the former health editor of The Times wrote,

“only the brave or foolhardy venture into some areas of NHS management. Resource allocation is certainly one”.

I can safely say that my honourable colleague falls into the former category. I trust that he is reassured that although it is too early to comment on specific funding allocations, the coalition’s programme for government shows that we share the same basic belief in the importance of both independence and local decision making when it comes to setting funding levels for the NHS.

[Mr Mike Weir (in the Chair)]

As the Minister is not present for the next debate, I suspend the sitting until 4 pm.

15:53

Sitting suspended.