Education and Health

Lord Lancaster of Kimbolton Excerpts

Wednesday 2nd June 2010 Commons Chamber

[Mark Lancaster (Milton Keynes North) (Con)]

It is a pleasure to be able to contribute to this debate. I am certainly seeing the benefits of the election, as I think that this is the first time that I have been called to speak before 9 pm in the five years that I have been here. It is also a pleasure to follow the right hon. Member for Rother Valley (Mr Barron), who was an excellent Chair of the Health Committee in the last Parliament. I regard him as a friend and he did a sterling job.

I wish to thank my right hon. Friend the Secretary of State for Health for coming to visit Milton Keynes hospital yesterday. I said during my election campaign that I would make health my priority and, in the past two years, we have had some particular problems in Milton Keynes at the maternity unit. It was very reassuring to have my right hon. Friend visit yesterday and to see that the hospital, which is desperately trying to do the right things to put matters right, will have the full support of the Department of Health in trying to deliver the positive change that we all want to see.

I shall address three issues—the funding formula, targets and waste. NHS funds are allocated to primary care trusts on the basis of a complex weighted capitation formula. The allocation is based mainly on the number and age distribution of a PCT’s population and then adjusted for a large variety of other factors, including the type of population; deprivation; mortality rates; and, controversially, the difference between previous allocation and formula results.

The formula leads to a marked difference in per capita allocation by PCT across the country. For example, in the current year the PCT with the lowest funding was Leicestershire with £1,330 per head, and the highest was Liverpool with £2,140 per head. This year, Milton Keynes PCT received £1,410 per head, the 12th lowest in the country. In other words, if Milton Keynes, with a crude population of approximately 240,000, had received average national capitation, it would have an extra £51 million more than the £349 million it actually received, and had it been funded at the average rate of a northern PCT, it would have received £74 million pounds more. Just to underline this point at a regional level, South Central strategic health authority received £5.8 billion for its 4.1 million people. Had it received a typical northern per capita allocation, it would have received an extra £1.2 billion.

Given those numbers, perhaps it is not surprising that the NHS in the south of England struggles to make ends meet.

[Caroline Flint (Don Valley) (Lab)]

What are deprivation levels like in the hon. Gentleman’s constituency? How much longer do people in his constituency live compared with men in Doncaster, Liverpool, Newcastle and other northern areas? We recognise that there are health inequalities and we have to fund the necessary measures to ensure equality in living as long as possible.

[Mark Lancaster]

The right hon. Lady makes a valid point. The whole point is that we have the health formula to take those factors into account, but despite that the last Government artificially adjusted the funding to upgrade certain PCTs. If she listens to my speech, she will understand what I am trying to say.

Northern SHAs have surpluses approximately three times the size of South Central. Yorkshire and Humberside enjoys a surplus of £49 per head. However, putting the inequality of this to one side, it means that the weaknesses of the current NHS structures are likely to appear first in the south rather than in the north of England. But given that the allocation formula attempts to fund broadly according to need, why have the funding formula at all if we are going to ignore it? The answer, in part, appears to lie in an extract from the Health Committee’s report, “Health Inequalities”, published in March 2009. Paragraph 96 says that

“not all areas currently receive what they should receive according to the resource allocation formula. This is because historically many areas have received less funding than they need, but rather than taking away large amounts of funding from some over-funded areas to compensate more needy areas, the Government has adopted a more gradual approach to shifting resources over a number of years, meaning that some PCTs are still receiving funding below their ‘target’ amounts.”

The development of the weighted capitation formula is continuously overseen by the independent Advisory Committee on Resource Allocation, or ACRA. Given the inequalities in funding that currently exist, I would like to suggest some minor changes of my own. First, the allocation formula should adequately address the costs of providing health care to the elderly, especially in areas with high life expectancy. Secondly, the allocation formula should adequately reflect the fact that the majority of an individual’s lifetime costs of health care are incurred in the last two years of life, whatever the age of death, and—crucially—regardless of the local level of deprivation. Finally, the key area in which the formula could be improved—I make no apologies for the fact that as a very diverse community Milton Keynes would benefit from this change—is by basing allocations on individuals’ health, rather than the blunt tool of populations being aggregated at the PCT level. However, I accept that the principal problem with that is getting sufficient data.

Process targets sometimes yield perverse incentives when coupled with the inappropriately named “payments by results” scheme, which actually seems to reward activity rather than results. I shall give just two brief examples. The first is the four-hour waiting time in accident and emergency. Say that after three hours 55 minutes a patient is waiting for a blood test result. The hospital will take them in as an in-patient—perhaps only for 10 minutes until the result arrives—so that it does not miss the target. That means that rather than being charged £70 for out-patient treatment, the PCT will be charged £700 for in-patient treatment. Is that really the best use of scarce financial resources?

Hospitals have no incentive to discharge people from out-patients as they are paid for activity. Indeed, in Milton Keynes, less than half of first out-patient appointments are the result of GP referrals. For example, lots of patients attending accident and emergency or the assessment unit will be given a hospital-initiated out-patient appointment rather than being discharged back to their GP. If a hospital can see a patient several times, generating a bill on each occasion, where is the incentive to organise care so that everything can be done at one visit if it can then only bill for that care once? I support limited targets, providing that they are based on clinical need and are not process driven—and do not lead, like the examples that I have just given, to scarce financial resources being squandered.

It is widely recognised that the NHS, in common with health care systems in every developed country, wastes possibly 20% or more of its resources on overuse, misuse and underuse of health care. Many feel that the current configuration of hospitals and community services in England does not readily allow clinicians to offer the highest quality of care at lowest unit costs.

There is an argument that the rigid demarcation between primary and secondary services and the role of the district general hospital needs to be allowed to evolve to meet the needs of the 21st century. That is particularly true where administrative boundaries and top-down planning have stifled local developments. For example, the Milton Keynes and south midlands growth area has a rapidly growing population. The growth area straddles three strategic health authorities and government regions. It has a population of nearly 2 million, but is served by several small hospitals close together, each of which is struggling both financially and to provide the quality and range of services that the population needs and expects. The challenge in and around Milton Keynes is to allow local communities and hospitals to think beyond and across artificial bureaucratic boundaries to find new ways of improving value for money and quality of care.

Taken together, if health services were held to account for the outcomes that they produce, rather than the numbers of patients treated, the services of the future, and particularly hospitals, might need to look very different from those of today. However, if we allow changes to be led by clinicians in consultation with the public—a bottom-up approach rather than the top-down approach advocated by the last Government—we can be confident that, most importantly, the services will be of a higher quality. I believe that the measures outlined in the Gracious Speech are a step in the right direction, and that we can achieve those aims.

In the final 20 seconds left to me, I simply want to wish all those about to give their maiden speeches the best of luck.