Croydon NHS (Financial Losses)

Jane Ellison Excerpts

Tuesday 21st January 2014 Westminster Hall

[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.