Croydon NHS (Financial Losses)

Richard Ottaway Excerpts

Tuesday 21st January 2014 Westminster Hall

[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.