Health (CSR)

Ian Lavery Excerpts

Thursday 11th November 2010 Westminster Hall

[Grahame M. Morris]

I have a whole series of examples of hospitals and services that are threatened with closure or reductions in services from right across the length and breadth of the country, which was highlighted in a recent report in The Sunday Telegraph. I have the whole list, so I agree with the valid point that my hon. Friend makes forcefully.

After only six months in power, the coalition is putting the proud record of the previous Labour Government on the NHS in jeopardy. On top of this, feedback from the front line shows that the Government are removing the safeguards and patient guarantees that drove down waiting times and assured the same quality of care irrespective of where a patient lived. This is not a Government protecting the NHS. It seems as if this is round 2 of what the Tories never managed to accomplish in the 1980s: to break up and privatise the service.

[Ian Lavery (Wansbeck) (Lab)]

On 20 July, in evidence to the Health Committee, the Secretary of State said that he wanted to

“entrench the sense of greater ownership on the part of patients”—

that is ownership of the NHS. Is it not the case that the reforms will give ownership of the NHS to the private sector, and that only the NHS logo will be left behind?

[Grahame M. Morris]

My hon. Friend makes a valid point. The White Paper “Equity and Excellence: Liberating the NHS” certainly seems to be setting out in that direction.

Certain projects, and particularly one in my area, have suffered as a result of the departmental expenditure limits that I mentioned earlier, which will result in a decrease of 17.9% over the four-year life of the Parliament. A new hospital in the north-east of England at Wynyard was to have served the southern part of my constituency of Easington, as well as the constituents of Stockton North and Stockton South, and those in parts of Sedgefield and Hartlepool, but it was an early casualty of the cuts.

In the longer term, the coalition partners seem to want not a capital budget, but to pursue a roll-out of private finance initiative hospitals. They want to place every privately built hospital into competition in the private sector so that they can be commissioned by GPs controlling the entire health budget in the private sector. The direction of travel for the health policies of the present Government is clear, but it is my belief that the duty of the Government should be to protect essential public services such as the NHS from the distorting effects of the market.

We need to learn lessons from recent history. It is ironic that my party’s efforts in government to incorporate market conditions in health showed that that could drive costs up rather than bring about efficiencies. Such an example was recently cited in the media. The Coventry University hospital was built under a PFI scheme. As we all know, PFI allows private companies to build public sector infrastructure, but although it gives the benefit of delayed costs to the public purse, those companies are entitled to levy huge interest rates, fees and services charges in the longer term. Treasury figures show that when the contract for Coventry University hospital is paid off in 2041, the estimated cost to the taxpayer will be £3.3 billion. If the state had built the hospital, the cost would have been a fraction of that sum. Indeed, the hospital at Wynyard was costed at £464 million—that is an incredible difference. Market discipline and privatisation do not automatically produce value for the public purse.

[Grahame M. Morris]

The Minister is right, but I was making the point that important lessons from history need to be learned. We are reacting to evidence that PFI does not necessarily provide value for money. Each case has to be considered on its merits.

Given the real-terms cut to health spending, an agenda of wholesale management reorganisation and the effective privatisation of the NHS budget, the impact of the comprehensive spending review and the Department of Health White Paper will not only alter the principles on which the NHS was founded, but squeeze health provision, increase costs, allow hospitals to go bust if they are failed by the markets, and create a postcode lottery of health services. There is widespread opposition to elements in the White Paper among health care professionals, including from the British Medical Association, which is not noted as radical left-wing organisation. The BMA states that it has

“opposed the increased commercialisation and competition imposed on the NHS in recent years and there is little evidence of any benefits to patients. It brings with it additional costs as well as disincentives for collaboration and co-operation.”

Staff costs account for more than half of NHS expenditure. Future decisions on pay will have a great impact on the health budget. The Royal College of Nursing has already highlighted short-sighted cuts by NHS trusts to their work force and services. The RCN is aware that about 10,000 nursing posts have been earmarked for removal in anticipation of cuts to front-line services. What consideration has the Minister given to the pressure to increase staff pay in coming years? By 2013-14, GPs will have had their pay frozen for four years; consultants for three years; and NHS staff earning more than £21,000 for two years.

[Ian Lavery]

Is my hon. Friend aware that despite the two-year pay freeze on public sector pay for those earning above £21,000 a year, which was announced by the coalition in the emergency Budget, the King’s Fund notes that the NHS payroll bill is likely to increase by up to £900 million a year due to the increments that are built into most NHS contracts? Does he agree that that reinforces the inadequacy of the NHS settlement for patient care?

[Grahame M. Morris]

I do indeed. My hon. Friend makes an important point. Another is the impact on the NHS budget of the VAT increase that is to be implemented on 1 January 2011.

Kieran Walshe, professor of health policy and management at Manchester business school, has criticised the coalition Government’s approach of making change without evidence. The implementation of the massive reorganisation that is set out in the White Paper will need at least another £3 billion in addition to the sums already identified, such as for wage costs, inflation, and the increase in VAT. That is at least another £3 billion from the NHS coffers, and the plans were still being altered after the coalition agreement was published. The decision to abolish primary care trusts seems more like a last-minute whim of the Secretary of State than a well-thought, evidence-based approach to health service reorganisation.

Professor Walshe said:

“the transitional costs of large scale NHS reorganisations are huge…projected savings from abolishing or downsizing organisations are rarely realised.”

Those of us who have been involved with local government will appreciate how true that is. He continued:

“Closing down or merging organisations produces a round of expensive redundancies, early retirements, and redeployment, while new organisations find new premises and appoint lots of new staff.”

I echo the concerns of Mencap—I am grateful for its briefing—which states

“As the government have still been unclear about the transitional and ongoing costs for moving to the new commissioning arrangements, this settlement may not be sufficient to deliver against needs.”

In contrast, the Secretary of State still believes that he can save money by carrying out the biggest reorganisation in the history of the NHS. Indeed, on 2 November, he said:

“We are cutting management costs in the NHS by 45%. We will cut total administrative costs as well, and in total that will save £1.9 billion a year by 2015.”—[Official Report, 2 November 2010; Vol. 517, c. 759.]

Will the Minister tell us what account has been taken of the unknown costs of the reorganisation?

Professor Chris Ham is the chief executive of the King’s Fund—the Minister’s favourite organisation. He questions why the Government would

“embark upon such a fundamental reorganisation as the NHS faces up to the biggest financial challenge in its history.”

Is it not the case that Ministers should be honest with the public? The impact of the spending review will mean deep cuts to vital services in the NHS. When the Health Secretary delivered his White Paper to the House, he said:

“The dismantling of this bureaucracy will help the NHS realise up to £20 billion of efficiency savings by 2014, all of which will be reinvested in patient care.-—[Official Report, 12 July 2010; Vol. 513, c. 663.]

Coalition Minsters are trying to give the impression that health provision has somehow been protected by a real-terms increase in the health budget, but that myth is starting to unravel. The coalition Government have admitted that current levels of health care will not be maintained. They are undertaking a massive reorganisation and all the evidence suggests that the projected savings will not be realised.

Edward Macalister-Smith, the chief executive of NHS Buckinghamshire, said:

“the amount of money that is available from administrative savings, management savings and the financial back office, is a very small proportion. Most of the money is spent on clinical care. If you want to reduce your spending, make your spending more efficient, that is, I am afraid, where you have to concentrate.”

It is simply not possible to achieve the sort of savings that the Government have outlined. The settlement for the NHS will come no way near maintaining current health care levels. Some £1 billion is being taken to plug the hole in social care. Many more billions are being wasted on a wholesale reorganisation, and the coalition seems to have agreed to take a gamble with the £80 billion NHS commissioning budget.

According to research carried out by the King’s Fund, the VAT rise to 20% from January next year will cost the NHS an additional £250 million a year. Furthermore, additional pressures will be placed on the NHS, thanks to the massive cuts that are being levied on local government budgets. There are also serious concerns that cuts to local government will lead to a shortage of hospital beds as the elderly and vulnerable are left without local care, thus placing even greater pressures on the NHS. The 26% cut in central Government funding for local authorities will pile on the pressure for the NHS. Nigel Edwards, the head of the NHS Confederation, has warned that the pressure on beds could mean that hospitals will be unable to admit patients “who badly need care”.

It is wrong for Ministers to pretend that their reorganisation will improve service delivery or that it is possible to save £20 billion through efficiencies alone. They should be honest about what they are doing to our national health service. The Government are not keeping the promises that they made to patients and staff to protect NHS health care funding.

--- Later in debate ---

[Mr Barron]

I am grateful to my hon. Friend for his intervention. I have to say to the Minister that at no time when members of the Health Committee in the previous Parliament were looking at commissioning did we ever think that the Government would hand it over to GPs in the way being proposed in the White Paper. It has huge implications, not just for the NHS, but for GPs themselves. The only evidence we saw was that GP fund-holding has struggled for nearly 20 years to be a good, proper and efficient way to commission services. Frankly, nobody submitted any evidence to my knowledge for the leap into the dark of handing commissioning to GPs in such a quick period of time. Nobody gave that evidence whatever. There were some arguments about keeping the PCT and adding GPs to it, so that they could get the experience. Frankly, there should be more medical leadership in our national health service; I have no doubts about that. This leap in the dark with GP commissioning is something that, I fear, is unlikely to work. The professionals who work in the health service appear to have that same fear.

[Ian Lavery]

The coalition agreement states quite clearly:

“We will stop the top-down re-organisations of the NHS that have got in the way of patient care. We are committed to reducing duplication and the resources spent on administration, and diverting these resources back to front-line care.”

Now we are seeing the largest ever reorganisation in the NHS. We are seeing the PCTs abolished and GP consortiums looking to take their place, which will inevitably create duplication and require more finance and more resources to be spent on administration. What does my right hon. Friend think about that?

[Mr Roger Gale (in the Chair)]

Order. As hon. Members know, I am the most tolerant of Chairmen, but I cannot help noticing that we are having a significant number of scripted interventions that are rather long. I am not entirely certain that they are in order, but what I am certain of is that the subject of the debate is the impact of the comprehensive spending review on the Department of Health. We appear to be embarking on a debate around the structuring of the health service. I think that, somewhere along the line, hon. Members might like to refer to the comprehensive spending review.