Croydon NHS (Financial Losses)

Tuesday 21st January 2014 Westminster Hall

11:00

[Sir Richard Ottaway (Croydon South) (Con)]

It is a pleasure to serve under your chairmanship, Mr Hollobone, for what is probably the first time. I speak today in a desperate bid to get some answers on a matter of grave importance that has brought my local national health service trust into disrepute. An internal audit, an external audit, an independent report and a council investigation have been unable to provide those answers. The debate concerns the huge sum of £28 million that was mis-stated in Croydon primary care trust’s financial accounts of 2010-11. I hasten to add that the issue does not apply to the present board.

Croydon PCT, now known as NHS Croydon, posted a £5.5 million surplus, despite sitting on an estimated £23 million black hole. More than two years after that mis-statement was exposed, we are still no closer to finding out exactly how much, how, who and why. Our best idea is that it was the result of a combination of incompetence bordering on neglect and cover-up. A significant lack of documentation and a conspiracy of silence from the people in charge have made it all but impossible to ascertain the truth.

Other people and I have tried time and again to hold the people in charge to account; many of those people have moved on to other lucrative jobs in the NHS. Rules shield them from answering to the people they have failed. Those of us trying to get to the bottom of this financial fiasco have discovered, to our dismay, that they are beyond the reach of not only NHS England’s chief executive, but the Secretary of State as well. That is quite baffling. The implications, not only for Croydon and its NHS cluster, but for the NHS as a whole, are deeply disturbing. That a health trust can lose such enormous sums of money without anyone noticing, and without anyone accepting responsibility subsequently, is frankly unacceptable. The people of Croydon and the NHS deserve better than that.

Allow me to recap the events that led to today’s debate, which has the full support of my hon. Friend the Member for Croydon Central (Gavin Barwell), who shares my frustration. In February 2011, NHS Croydon merged with four other primary care trusts in south-west London to form a cluster. Four months later, when the final accounts were signed off, a £5.5 million surplus was reported for 2010-11. By that time, however, a new financial director had begun to identify issues regarding the budget-setting for the 2011-12 financial year. The budget was indicated, but the figures lacked detail and transparency. For example, there were unpaid invoices that were not budgeted for.

In October 2011, the cluster’s chief executive sent an e-mail to staff informing them of a

“change in our understanding of NHS Croydon’s financial position”.

NHS Croydon, it appeared, had been living beyond its means and other PCTs in the cluster would have to cough up with their reserves. Suspicion fell on the previous year’s finances, even though an external and internal audit had signed them off at great expense; Deloitte charged £60,000 and the Audit Commission charged £250,000. The matter was referred to NHS London, which commissioned an independent review by Ernst and Young. The final report, published in May 2012, confirmed that the final accounts had been mis-stated by at least £28 million. It also highlighted limited scrutiny by the trust board and audit committee, a lack of leadership in the finance team and the move from PCTs to clusters as contributing factors to the multi-million pound black hole.

The report found that an unqualified accountant, Mark Phillips, who had been left in charge of a finance department where 50% of the staff were on interim appointments, had made unwarranted adjustments to the accounts. He reported directly to Caroline Taylor, the trust’s chief executive, yet NHS London concluded that

“no individual was entirely at fault”,

and that there was

“no need for any further inquiry into what had happened.”

It said that the priority was to ensure that lessons learned were applied across the NHS in London. Let me translate that—it is called a whitewash.

Washing one’s hands of a problem does not mean that it ceases to exist. The financial liabilities of NHS Croydon became the financial liabilities of the health care services throughout the cluster. Local authorities within the cluster were unhappy with NHS London’s verdict and set up a joint committee to investigate. The management, who had by now moved on to other parts of the NHS, showed utter contempt for that inquiry.

Of 11 people whom the joint committee identified as being significant to their investigation, only three dignified it with an appearance. Key officers from NHS Croydon snubbed it, including the chief executive, Caroline Taylor—she moved on to a top job in charge of PCTs for NHS North Central London before becoming administrator of the failed South London Healthcare NHS Trust on a salary of £165,000 a year. The interim deputy director of finance, Mark Phillips, who was effectively in charge of the finance team, also snubbed it, while his boss Stephen O’Brien, who also refused to give evidence, was off on sick leave. Other key players who refused to answer questions were the Croydon councillors David Fitze, who was in charge of the audit committee, Toni Letts, the former chairman of the trust and Labour leader Tony Newman. The committee also sought to speak with the authors of the report, but NHS London was not able to confirm who they were. Too many failed in their duty to give evidence.

Those who did oblige presented damning indictments of the culture at NHS Croydon. Dr Peter Brambleby, the trust’s director of public health at the time of the scandal, said that officers were under immense pressure to achieve a balanced budget at the end of the year and were therefore reluctant to challenge the sums as long as they added up. He also contested the claim that the poor finances had not affected the provision of local health services, identifying an early screening scheme for high-risk patients that had to be pulled in 2010-11.

Ann Radmore, chief executive of the south-west London cluster, told the committee that she believed that the mis-statement of accounts was deliberately hidden. John Power, former chairman of the audit committee, who briefly replaced David Fitze—a year before Mr Fitze was reinstated as chairman, he was deemed not to have sufficient financial qualifications—claimed that the £22 million deficit was largely, if not entirely, avoidable.

There were just three witnesses, so there was not a lot to go on, but the joint committee concluded from the scraps of information presented to it that the multi-million-pound mis-statement might have occurred due to individuals acting to safeguard their occupations and that that was to the detriment of NHS Croydon. Even if the overspend went on health care within Croydon, the committee said that it was

“unlikely to have been spent efficiently or in accordance with agreed priorities.”

That is not a good result. Crucially, the committee raised concerns that no one had been held to account for the financial mis-statement. It stressed that that was not to attribute blame, but to ensure that such behaviour was not repeated or left unchallenged within the NHS.

What about the future? We have not made much progress. We are left mulling over the shameful legacy of a local health care system that lacks transparency and accountability, rewards people who do not challenge inconsistencies, puts the interests of staff before those of patients and taxpayers, and flies in the face of justice. It cannot be right that the chief executive did not properly manage and scrutinise her team, the interim financial director did not have the proper accounting qualifications, the Audit Commission did not carry out thorough auditing, the board did not ask the right questions, and inquiry after inquiry failed to get to the bottom of the scandal.

NHS London said that there were “lessons to be learned”. It is a hackneyed cliché. How can we learn if we fail to understand what went wrong and how, and who was responsible? I am delighted that the Health Minister is here; I should like to think that she will be as alarmed as I am about the conduct in this case. When I asked her during oral questions last week for an assessment of its causes and effects, I was told that

“NHS London in June 2012 identified a systemic failure of financial management within NHS Croydon”.—[Official Report, 14 January 2014; Vol. 573, c. 709.]

What does that mean? Does it mean that there is a problem with the system at NHS Croydon, or in the NHS at large? An organisation “living beyond its means” is not systemic failure, and nor is the making of “unwarranted adjustments” to the accounts, a reluctance to challenge the sums as long as they have added up, the deliberate hiding of accounts, or a deficit that was largely if not entirely avoidable. It sounds like obfuscation to me, and I believe that Ministers are receiving bad advice.

There is a systemic failure that has not yet been resolved. Neither Sir David Nicholson, the chief executive of NHS England, nor the Secretary of State can force the likes of Ms Taylor—on a six-figure salary courtesy of the public purse—to respond to questions about the catastrophe that she presided over. No one has the power to compel senior NHS officers to co-operate fully with scrutiny if they have already moved to a new job, even if that job is within the NHS. That seems equivalent to telling a suspected thief that they can burgle a home and avoid court by moving on to the next property.

The system is broken. I have said this before, and I say it again now to the House:

Ms Taylor and senior executives should be forced to give evidence about the huge scale of the losses. If their bosses cannot make that happen—I do not challenge the idea that they want it to happen—and if the Government cannot make it happen either, perhaps the Department of Health should get specific statutory powers to deal with former officials who have moved on. I hope that the Minister will do everything in her power to get to the bottom of the mess.

The Health Secretary has made a lot of positive noises about accountability and transparency in the NHS. I applaud that, whether it is a question of doctors and nurses saying they are sorry when they make mistakes, or of NHS managers being warned that they cannot expect to keep their jobs if they preside over failings in care. However, the Department may be interested to hear that members of the finance team at the former Croydon PCT have transferred to the south-west London cluster and others may have transferred to other NHS bodies. In the words of the joint committee:

“It is very possible that those who were possibly doing wrong things in all innocence, are now scattered throughout the wider NHS with who knows what consequences.”

Does the Minister agree that it is high time we got some answers and accountability? If she is unable to hold Ms Taylor and her senior colleagues to account, the responsibility will have to lie with her Department.

11:14

[The Parliamentary Under-Secretary of State for Health (Jane Ellison)]

I tell my right hon. Friend the Member for Croydon South (Sir Richard Ottaway) at the outset that if I cannot respond today to some of the concerns he has outlined, I will be happy to follow them up later. I have already had a couple of meetings about the details of the matter and my officials tried to contact him yesterday.

I congratulate my right hon. Friend on securing the debate. I know that the issue is a big one in his constituency; as he said, it is also a big issue for the NHS. I share his frustration at the catastrophic situation that arose at the former Croydon primary care trust. As we have heard, a stated surplus of £5.4 million in NHS Croydon’s accounts for 2010-11 was revealed to be a deficit of £22.4 million, so there was a funding gap of £27.8 million.

I understand that the gap arose from an overspend on the provision of health services, but my right hon. Friend makes a fair point when he says that such an overspend, in as much as it is not controlled, is hardly likely to have been directed to the most beneficial places. It is probably fair to say, and the Ernst and Young report pointed out, that patient care was not compromised as a result of what happened. The situation is slightly different from money being misappropriated and not spent on health care. That does not make the situation better, but there is a difference.

I am not going to try to defend the indefensible. The Government position is clear: overspends are not acceptable and all NHS organisations must live within their means. As my right hon. Friend is aware, an independent review commissioned by NHS London was published in spring 2012 and it identified a series of failures in financial management. I realise that my right hon. Friend is not happy with the use of the word “systemic” but I would dispute his view slightly. There were several systems, none of which picked up the problem, so to that extent “systemic failures” is a fair description. The question is what we have done to change the systems and make it more likely that such a combination of circumstances cannot occur again. I think that we have made progress on that, but there are probably further things we can do.

The failings in question, together with substandard financial processes and poor management reporting—and, indeed, poor management—led to an inaccurate picture of the organisation’s financial position. The report highlighted contributory factors, including limited scrutiny and challenge by NHS Croydon’s board and scrutiny committee; a lack of leadership in the finance team during the finance director’s sick leave—as my right hon. Friend said, the interim finance director was insufficiently qualified—and difficulties with leadership and operational continuity during the move to the cluster.

The PCT commissioned an internal audit and the Audit Commission commissioned an external audit, both of which failed to uncover the significant financial irregularities. That is extraordinary. One of the audits was conducted by a well known firm of auditors; in a discussion of the matter yesterday with officials there was a feeling that that money was not well spent and should ideally have been refunded, given that it did not uncover the issue. The Ernst and Young report found that no individual was entirely at fault—rather than that no individual was at fault—but clearly there were people who performed poorly. It also found no adverse effect on patient care and no evidence of personal gain.

As I said in the House last week, it is important to note the measures that have been taken to prevent what happened at Croydon from happening again. Understanding what happened will give us an understanding of prevention methods. Following publication of the report, NHS London wrote to all primary care trusts outlining the lessons to be learned, as one would expect. In south-west London, the joint boards of the PCTs established a work programme to ensure that all the recommendations from the independent report would be addressed. That programme was overseen by the audit committee of the joint boards, implemented by management and assured by internal audit.

Furthermore, since their establishment the clinical commissioning groups have adopted a harmonised ledger system, ensuring that they all approach their accounts in a similar manner. That will make it more difficult to conceal irregularities, and will allow more effective scrutiny by NHS England and others. Someone coming to look at the books of another CCG would not be thrown by a different ledger system but instantly encounter a familiar system, making it more likely that they could spot what was going on. Problems would not be concealed by a particular version of the system.

I know that my right hon. Friend is frustrated about the fact that no former officers of NHS Croydon have been held to account, and I understand that. He wrote to my right hon. Friend the Secretary of State in support of a recommendation, from the joint health overview and scrutiny committee in south-west London, that such committees be given powers to enable them to compel former employees of NHS bodies to appear.

As my right hon. Friend knows, the Secretary of State was unable to accept that recommendation. Employees attend before local authorities to answer questions on behalf of the relevant body and not in a personal capacity. Accordingly, the Local Authority (Public Health, Health and Wellbeing Boards and Health Scrutiny) Regulations 2013 do not impose duties on people who are no longer employees of the NHS body in question. Where employees have moved, we would expect the relevant body to have appropriate handover arrangements and to identify another suitable person to attend. It should not be the case that people can move on and no one else will attend as a result; someone else should be able to respond as part of the handover arrangements.

The Department of Health will, however, publish new guidance shortly on local government health scrutiny, and I am happy to ensure that it is discussed when available. In addition to supporting local government, the guidance will help to ensure that NHS organisations are aware of their duties and responsibilities. We want to start to tackle the culture that my right hon. Friend describes of people being able to move on without their mistakes catching up with them.

It is extremely unfortunate that Croydon’s clinical commissioning group is now operating with a deficit as a result of overspending by the former primary care trust. It is important, however, to concentrate on what has happened since, such as the measures being taken to bring the local health economy back to financial balance.

My right hon. Friend is rightly concerned about the impact on his constituents and others in Croydon. I have already touched on some of the steps being taken to minimise the risk of such a situation arising again, but there are other steps to take and further questions to ask. The CCG has developed a five-year financial improvement plan and is working closely with NHS England to help to achieve its target. I understand that NHS England’s London regional team is meeting the CCG monthly to track delivery against the plan. Furthermore, Croydon will be receiving budget growth of around 3.5%, compared with the national minimum of 2.1%. Setting aside the problems of the past, that reflects Croydon’s being some 7% below target and the growth, which is above average, should help to ease its return to financial balance and to close the gap faster.

I am also advised that the Croydon financial management team has been restructured with new leadership, clear accountability and new team members in post since April 2013. NHS England has retained reporting oversight through the national financial reporting system, which is another substantive change since the unfortunate events took place. I am pleased to assure my right hon. Friend that, as I mentioned briefly in the House last week, when CCGs were established all chief financial officers were subject to a rigorous independent assessment and appointment process. I hope that he agrees that that is a welcome development.

Furthermore, NHS England has been involved in the appointment of all substantive chief financial officers in London. I have asked officials to consider the appointment of interim CFOs, as it was clearly a real weakness in Croydon. I have not yet received assurance that there is the same level of scrutiny for interim CFOs, so I have asked for more work on that. NHS England and NHS London are looking at how to bring in more oversight in the same way as they have with substantive chief officers. Going right to the heart of what my right hon. Friend says, I have also asked how we can prevent people from popping up in another position where they could repeat the mistakes that they made in the past. Some such systems are in place, but oversight of appointments is critical, so more work must be done there.

The clinical commissioning group has established a finance committee, as part of its membership constitution, to oversee the financial performance of the organisation and to provide additional time for board members to scrutinise the financial position. I am assured that Croydon CCG’s governing body remains committed to achieving its financial targets—I would hope that it would say that, but I have no reason to believe otherwise and know that it is taking the matter seriously—based on clinical and quality led service improvement programmes.

I understand and share the frustration of my right hon. Friend. I think that I have picked up on some of the points made in his very good speech, but we accept that others need further investigation. I am happy to discuss those with him after the debate, so that he can feed through any other questions or concerns.

It is not enough just to say that we have learned lessons; we need to do everything in our power to reduce the chance of such things happening again. I have met NHS England specifically to discuss the issue and, obviously, I communicated my concerns. I will follow that up after this debate and look at what more can be done to ensure that such catastrophic events cannot happen again. I hope I have given my right hon. Friend some reassurance, although I accept that he will continue, rightly, to campaign for more satisfaction.

11:25

Sitting suspended.