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  The financing of health services
in Norfolk


This speech was given on 14 December 2004 in Westminster Hall, as part of Richard's adjournment debate on the financing of health services in Norfolk.

Mr. Richard Bacon (South Norfolk): Mr.Deputy Speaker, it is a great pleasure to introduce the debate under your magnificent chairmanship, [Hon. Members: "Creep!"] Better to get one's creeping in first, eh? It is also a pleasure to speak about England's greatest county, particularly when so many hon. Members who represent Norfolk are here. Such occasions always seem festive, even when the subject is as serious as the one that we are about to discuss. I note that my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) has even dressed in Christmas colours, and that some representatives of old Labour are present, too.

The debate is about the financing of the health service in Norfolk, a serious subject. It will be partly about the funding itself, and partly about the uses of the funding and the pressure on it. At present, there is a serious deficit in the Norfolk health economy. According to recent figures supplied to me on 9 December by the Norfolk, Suffolk and Cambridgeshire strategic health authority, national health service bodies in Norfolk have forecast the following year-end positions in their most recent financial returns. Norwich primary care trust forecasts a deficit of just under £1.8 million. Southern Norfolk primary care trust in my constituency forecasts a deficit of £9.2 million - a reflection of the fact that it is by far the largest primary care trust in Norfolk. North Norfolk primary care trust forecasts a deficit of £3.1 million, Broadland primary care trust one of £4.8 million, and West Norfolk primary care trust one of £1.7 million.

Alone among the primary care trusts, Great Yarmouth PCT is running a more or less balanced position, with a small surplus of about £100,000. Perhaps that is a reflection of the extra money that goes into Yarmouth. I shall not say that that is attributable to the hon. Member for Great Yarmouth (Mr. Wright), although I am sure that he would like me to do so. There is no doubt, however, that Great Yarmouth is well funded compared with some of the other primary care trusts. Having projected a much bigger deficit earlier in the year, the Norfolk and Norwich hospital, our new flagship private finance initiative national health service trust, is now projecting a deficit of about £2 million. The Norfolk and Waveney mental health partnership has a break-even position. The King's Lynn and Wisbech NHS trust has a deficit of £7.9 million. The James Paget NHS trust, again in the constituency of the hon. Member for Great Yarmouth, has a break-even position and the East Anglian Ambulance national health service trust has a surplus of £750,000, although that is mainly due to a one-off asset sale of the ambulance station at Newmarket.

The total deficit is about £29.7 million. That includes the repayment of deficits from the previous year of £6.6 million, of which £5.2 million is at King's Lynn hospital. It is worth noting that in each of the three previous financial years; 1999/2000 to 2002/03. NHS bodies in Norfolk were in overall balance. The financial problem is relatively new to Norfolk, but not confined to the county—it is common throughout the national health service. However, it might be worse in Norfolk than elsewhere, which is an issue that I want the Minister to examine.

I refer to an estimate based on board papers published by the West Midlands strategic health authority. I commend the Government on the number of board papers now available across the country on the internet. If only central Government took the same attitude to the most interesting information about Departments. I certainly commend the Department for the guidance that it has given health authorities, hospitals and PCTs on what information should be made available to the public. At a meeting on 17 November, a strategic health authority assessment of the national position was that there was a deficit of £499 million in NHS organisations across the country. A board paper notes that 75 primary care trusts and 73 NHS hospital or other trusts forecast deficits.

One must acknowledge that the problems are complex and that there are no simple headline answers, but it is not enough for the NHS to say that it always needs more money, as more money has being going into it. Plainly, in some areas, including Norfolk, there has been a lack of tight management, which has led to extra financial problems. An obvious example of where problems have arisen, which has been widely referred to in the county, is the learning difficulties pooled fund. In that case, it is possible that managers took their eye off the ball, or, more probably, designed and developed a service without having enough regard for what was affordable in the context of all the other priorities.

Mr. Anthony D. Wright (Great Yarmouth) (Lab): I understood the hon. Gentleman's point about learning difficulty services, but is it not true that the county council is in charge of the financing of that service? The truth is that there has been overspend in the past two years, and although that was not down to the PCTs, in the end they had to pick up a proportion of the tab, 55 per cent., I believe, without having had direct input into the way in which the budget was run.

Mr. Bacon : The hon. Gentleman makes a fair point.

Mrs. Gillian Shephard (South-West Norfolk) (Con): Of course services for people with learning difficulties depend heavily on co-operation and on part-funding in social services, but I remind the House that Norfolk social services department is seriously underfunded because of the way in which the present Government have dealt with the funding of rural shire counties, because of the regulations that the Government have imposed on all aspects of social services and because of the Government's determination to ring-fence funds within social services, which means that there is almost no flexibility. The hon. Member for Great Yarmouth (Mr. Wright) is absolutely right: the problem in local government funding has been transferred to the health services.

Mr. Bacon : I am grateful to my right hon. Friend, and I agree with everything that she said. Of course, the hon. Member for Great Yarmouth is right to say that one should not blame the PCTs for the issue. The problem is complex, with some of the roots lying in Government provision of funding to the shire counties. There is also a more general problem relating to what the hon. Gentleman says: with joint working and joint funding arrangements, one has to make sure that the proper management is in place.

On a slightly separate subject, but one that makes my point. I was in Northern Ireland recently looking into a project for the Public Accounts Committee, and the person before us, the accounting officer, was pleased to say in the first 30 seconds of her evidence that her department was responsible for only 2 per cent. of the budget that we were discussing and the other 98 per cent. was funded by a series of other agencies and Government bodies, yet it was she who had to account for it. The learning difficulties pooled fund run by PCTs and social services was to some degree an innovation; there is nothing quite the same elsewhere. However, when joint or partnership working arrangements are made, one has to be sure that one has adequate management arrangements in place. I do not think that that has always been the case.

When problems are identified it is not enough simply to say that the NHS always needs more money. Although the problems have complex causes, some of them are Government-inspired. Equally, it is not enough for the Government to say, "We've given the NHS some more money; now let it get on with it," as if to suggest that they have no responsibility for the extra pressures at present. The truth is that the Government have imposed a whole series of extra initiatives that have extra costs attached to them. There is a complex interplay between the money provided and what the Government insist that the NHS does with it. The Government are good at willing the ends, but not necessarily the means, and some of their initiatives are making life more difficult and expensive.

Perhaps the most striking such initiative is the so-called "Agenda for Change", which is bringing about a series of new pay arrangements, conditions and terms of employment for NHS staff under one heading. I talked to a finance director in Norfolk who said that

"we simply don't know how much this is going to cost".

Paul Kemp, the finance director for Norfolk, Suffolk and Cambridgeshire SHA, said that

"the main financial risks are that the cost of Agenda for Change will exceed planning assumptions, and that growth in emergency activity will continue to rise above planned levels, putting pressure on the delivery of elective targets".

There is a series of other pressures. The European working time directive has an impact on hospital junior doctors' hours. Everyone understood that it was sensible to do something about the hours that such doctors were forced to work, which in some cases were ridiculous. It is good that junior doctors are working more sensible hours, but has the cost of implementing that reform been properly calculated?

The costs of the new GP contract were supposed to be paid for out of GPs taking somewhat less—on average, I think, £6,000 per GP. That was to lead to the funding of the out-of-hours service, but there are many reports from primary care trusts that the implementation of the new GP contract has been underfunded or, in some cases, unfunded. In addition, out-of-hours cover is patchy, with some very good and some less good. A senior manager in the Norfolk health economy told me that he thought that the main thing that had been achieved in out-of-hours cover was the creation of confusion, so that in some cases people simply did not know where to go because of the profusion of options.

In an e-mail that others might have seen this morning, Waveney primary care trust talks about the 10 top tips for staying healthy in winter. It lists different things that people can do, including calling NHS Direct, looking things up on the internet and Lord knows what else. However, many people think that, although there is always a winter peak, the huge, aggressive increase in emergency admissions throughout the country is directly related to, among other things, the confusion surrounding out-of-hours cover and the fact that many more people turn up at accident and emergency departments than would have done otherwise. That is particularly true when there is a shiny new flagship hospital that offers 24-hour cover—a hospital that always has its lights on, is always open and whose location people know. We have such a new hospital and despite the fact that the Government managed to build it without building an adequate road to get to it, it is still in some cases easier to drive to than the old Norfolk and Norwich hospital in the centre of town, simply because there is less traffic and one does not get blocked in quite the same way.

There is no doubt that emergency admissions have increased, and that is partly because of the out-of-hours arrangements. The Government have been experimenting with putting GPs into accident and emergency departments. Sir Nigel Crisp spoke about that recently and primary care trusts in Norfolk are talking about funding a full GP practice at the hospital. That is an interesting development and I look forward to seeing how it goes. Finally there is recognition of the fact that, rather than tell people what they should do and where they should go, we should follow what people are doing, and enable them to be seen in a way and at a time and a place that suits them, without the attendant costs that would normally arise if they were actually treated by the accident and emergency department. People arrive in the hospital, but are treated by GPs at GP costs.

There are many other cost pressures, such as the increasing cost of specialist mental health treatments. That has been made worse in Norfolk because it has been sending people out of county, in some cases to London, at very high costs. There is also the cost of the new consultant contract. Again, the Government may have underestimated the cost of that and may well have been out-negotiated by the consultants. In the face of rising prescription bills the SHA has placed an emphasis on prescribing more generic drugs and fewer branded drugs, but that has been done for many years in the NHS. There is now quite a high rate of usage of generic drugs, so I do not think that there are huge cost savings to be gained from that. Let us also consider the costs of the national framework for IT in the health service. The main contracts let are worth £6.2 billion, but recently it was revealed that the additional costs if all the implementation is taken into account will be between three and five times more - in other words, between £18 billion and £30 billion over the next 10 years.

All those costs added together mean that primary care trusts have to run very hard just to stand still and to have any serious opportunity of coping, even with the extra funding that they have had. In Norfolk, we have the added problem of the private finance initiative: it is an open question to what extent that has increased overall costs. I am not dogmatic about the PFI. I have examined a lot of PFI projects in many different areas and there is no doubt that if one wants a hospital, prison or school delivered on budget and on time, the PFI is a good way of getting that. We have seen many examples of that across the country in different sectors. It is also true that criticisms of the PFI sometimes do not take adequate account of the potential costs and the risks that would have attended on a different approach. Conventional procurements are full of horror stories - take the examples of the British Library, the Jubilee line extension and Portcullis House, where the windows alone cost £23 million more than they were supposed to and the wrong kind of bronze was used on the roof, so it does not go bronze coloured. If I dare say so in the presence of the hon. Member for Norwich, North (Dr. Gibson), there is also the example of the Scottish Parliament, which is a locus classicus of how not to carry out a conventional procurement.

Let us be clear that the old way of carrying out a procurement has had its problems. That is not to say that we should not be questioning and critical about the PFI. It does appear—and the hon. Member for North Norfolk (Norman Lamb) has asked many questions about this, as have I—that the way in which the original contract for the hospital was let may have resulted in very large windfall refinancing gains. So far as the contractors are concerned, they will be shared on a 30 per cent.:70 per cent. basis and will be crystallised immediately and yet as far as the hospital is concerned they will have to be taken over the life of the contract.

Most people do not think that their local school or hospital ought to be put into an investment fund and traded by City institutions; if there is enough income around to make that possible, many people will question whether it would not be better for the money to go to the school or to the hospital, many of which have charitable activities going on alongside them because they have not got enough money for some of the things that they would like. A leading City investment banker who works in the securitisation area of the PFI recently told me:

"I like PFI. It's a good source of income. It's good for the business."

But he added that, as a taxpayer, it really cheeses him off, except he did not used the word "cheeses". I feel that in your august company, Mr. Deputy Speaker, I should edit his words.

There are legitimate questions to be asked about the PFI. I think that the answer lies in having the greatest possible degree of transparency, so that we can form a fair assessment of what the fair costs and the fair returns are. After all, no one worries about schools or hospitals buying equipment from the private sector, and in the PFI we are essentially talking about buying services from private sector instead. We should not have an ideological objection to the PFI, but we must examine it carefully.

The SHA has announced a number of measures that it proposes to take to improve the financial situation. I will not list all of those now, but details are available from the SHA. There are certain questions that I think are legitimate to ask of local health managers, particularly in relation to the learning difficulties pooled fund. Notwithstanding the point made by the hon. Member for Great Yarmouth, I emphasise that if we are to have joint working arrangements, we need joint management arrangements adequate to that task. Given the already considerable progress in prescribing generic drugs in recent years, is it realistic to suppose that that will provide serious savings in future? What can be done to reassure people that the so-called "better care for Norfolk" proposals, which aim to deliver cost-effective care closer to people's homes instead of in much more expensive hospital settings, are about getting closer to patients rather than saving costs? Are the out-of-hours arrangements now in place working well and communicated well so that people understand them when they are working well?

I honestly do not think that there is widespread bad management locally. Huge extra activity is being imposed from the centre without the resources to pay for it. As I said, 75 primary care trusts and 73 NHS trusts across the country forecast deficits, which suggests to me that there is a systemic problem. Norfolk's deficit accounts for about 6 per cent. of the deficit of NHS organisations nationally - that is, in England - yet it has only about 1.6 per cent. of England's population. It may be that the Government are not only imposing costs on the NHS that are way in excess of the resources that they make available, but, in particular, that they have their sums wrong on Norfolk. There seems to be problem of asymmetry: the country had managed a position of financial balance until the rapid stream of reforms. Are we seeing the systemic underfunding of Norfolk?

Finally, I am interested in hearing the Minister's comments on the extra costs that the Department estimates will be imposed on Norfolk as a result of the national programme for IT in the health service. GPs and others have expressed many concerns that they may be forced to withdraw working systems that they have developed incrementally over a long time—systems in which they have faith and through which they have close relationships with IT suppliers—and to replace them with systems whose software in some cases has not yet even been written. Understandably, that is a cause of huge concern among GPs, who, after all, are the people closest to patients. If we are to see that kind of transformation with that kind of uncertainty and at huge cost, it is not surprising that people are concerned. I would be interested in the Minister's comment on that IT issue.

In conclusion, the Norfolk health economy faces serious problems that are not the result of overall bad management by local managers - notwithstanding the management issues that have to be dealt with - but primarily the result of a high level of extra activity and burdens imposed from the centre without the resources to pay for them.