NHS: Trust Finances

Lord Prior of Brampton Excerpts

Monday 1st February 2016 Lords Chamber

[The Parliamentary Under-Secretary of State, Department of Health (Lord Prior of Brampton) (Con)]

My Lords, with the leave of the House, I shall now repeat as a Statement the response to an Urgent Question on NHS finances given in the other place by my honourable friend the Minister for Care Quality. The Statement is as follows:

“The House will know that in 2014, the NHS itself set out its plans for the next five years, which included a front-loaded funding requirement of £8 billion. Because of our strong economy, the Government have been able to honour that request and will be funding it in full, including a down payment of £2 billion in this financial year ahead of the spending review period. Next year, there will be an increase of £3.8 billion and, taken together, we shall therefore be providing £10 billion towards the NHS five-year forward view.

Within that context, a number of hospital trusts are running a financial deficit—in large part because of the need to staff wards safely after what was learned in the aftermath of the scandal of Mid Staffs. It is also the case that the best hospitals have begun to transform along the lines required by the NHS Five Year Forward View, but some have not, and this has made the management of their finances all the more difficult.

NHS Improvement expects that NHS hospital trusts will report an overall deficit for the current financial year, 2015-16. Savings achieved in the rest of the NHS have ensured that this overall deficit will be offset, so that the system as a whole will achieve financial balance. For the next financial year, NHS Improvement will continue to work with trusts to ensure that they improve their financial position. To help them in this endeavour, the department has introduced tough controls on the costs of staff agencies, a cap on consultancy contracts and central procurement rules, as proposed by the noble Lord, Lord Carter, in his review on improving hospital efficiency. The House should know that the savings identified by the noble Lord total £5 billion a year by 2020. The chief executive of NHS Improvement, Jim Mackey, is confident that, taken together, these measures will enable hospital trusts to recover a sustainable financial position next year”.

That concludes the Statement.

--- Later in debate ---

[Lord Prior of Brampton]

My Lords, the noble Lord asked a number of questions. Starting in reverse order, the Five Year Forward View was signed by not just the NHS Commissioning Board but also all the ALBs. Of course the £22 billion is a huge stretch. No one denies that and it requires a transformation in the way in which healthcare is delivered in this country. In terms of efficiency savings, the requirement for next year is 2%. We expect that to continue at around 2% to 3% over the five-year period.

I come to the noble Lord’s other questions. There is not a direct conflict between safe staffing levels, efficiency and financial balance. In good hospitals, the three go together. Of course I accept that there have been tensions and it is not surprising, looking back on it, that the reaction to what happened at Mid Staffs led to a number of hospitals increasing staffing levels very rapidly. I remember talking to the noble Lord when he was chairman of a trust—as I was at the time, or I might have been at the CQC—and of course I understand those pressures. All boards of all hospitals must live with those pressures and come to the right balance. I accept that the newly reinvigorated CQC has added to some of the pressures on hospitals to increase the level of staffing.

On the King’s Fund, I have not seen the report that the noble Lord mentioned and that reference to the “financial meltdown”. We expect to break even across the NHS this year. There is £3.8 billion extra spend going into the NHS next year and we hope that when all the plans have come in from the hospital trusts we will be in reasonable shape.

The noble Lord referred to the letter sent out, which I think was leaked in the Guardian, which led to this Urgent Question. I did not see the actual letter before it went out, but there is nothing in it that comes as a big surprise.

[Baroness Walmsley (LD)]

My Lords, a good example of NHS trusts doing what the Government have asked them to do and working together to deliver care more efficiently is the Uniting Care Partnership in Cambridgeshire and Peterborough, which collapsed after only eight months. We are told that the three NHS entities involved in the contract will continue to deliver care under the new model without disruption. If this is able to be done, why was so much money wasted in the bidding process? Could not they have worked together anyway? How much did the whole process cost and how much was paid to their advisers, the Strategic Projects Team, which did not seem to realise that the contract at the agreed price was simply undeliverable? Is not it clear that the CCG simply did not have enough money to deliver those services?

[Lord Prior of Brampton]

I think that the noble Baroness’s party was in government when that contract was negotiated, although it seems a bit churlish to remind her of that. The fact is that, as we move to these new ways in which to deliver care, risk is going to have to be taken. Some of the new ways in which we do it are not going to work. In this case, it clearly did not work. It was a very big project—£800 million in total value, I believe, over five years, for older people in Cambridgeshire. It was a highly complex contract and, tragically, it has not worked out. I shall have to come back to the noble Baroness if I can about how much it cost in fees.

[Lord Warner (Non-Afl)]

My Lords, the Minister mentioned the chief executive of NHS Improvement in very approving terms. Is he aware that that same chief executive told the House of Commons Public Accounts Committee that the sector’s deficit for the current financial year, 2015-16, looks,

“like it is heading towards £2.5 billion or perhaps even north of that”.

Capital to revenue transfers and “accounting adjustments” will kick in before April to bring the number down. Does that mean that the much-touted £3.8 billion that will come into the NHS next financial year, 2016-17, already has £2.5 billion to be offset against it before the financial year starts?

[Lord Prior of Brampton]

My Lords, it is true indeed that Jim Mackey mentioned those figures. He is hoping that he can get that deficit down to £1.8 billion by the end of the year as a result of some of the capital to revenue and other accounting adjustments to which the noble Lord referred. We are also hoping that the reduction in agency spend will start to have a big impact in the final quarter of the year. We will get the third quarter results in two weeks’ time, when we will have a better idea as to where we will end up at the end of the year.

[Lord Patel (CB)]

Correct me if I am wrong, but the noble Lord mentioned in his Statement imposing a tariff on agency staff, cutting down on consultancy fees and the potential savings that the report of the noble Lord, Lord Carter, might produce—although most people doubt that it will. Where does he think that the finances of the NHS will be on 1 April 2017? What is his prediction?

[Lord Prior of Brampton]

The cap on agency staffing rates and on agency staff has really started to apply only in the past six weeks. So far, it looks as if we are making significant progress there. As I said in answer to the Question, the NHS is receiving £3.8 billion of extra funding in the forthcoming year. We believe that that will enable it to restore its finances to a proper balance by April 2017.

[Baroness Finlay of Llandaff (CB)]

What are the Government going to do about the haemorrhage of finances into the PFI deals, given that £11.8 billion of buildings will have cost the country £79 billion by the time 31 years comes round? By then those buildings might very often not be fit for purpose because things have moved on so fast. Year on year there is a haemorrhage of money from the NHS to finance these deals. Last year, £2 billion went in that direction.

[Lord Prior of Brampton]

It is clear that a number of these PFI deals were massively expensive and have put huge pressure on a relatively small number of trusts. However, the fact is that we have entered into these long-term contracts and there is no way of getting out of them. I am afraid that it is a cost that the NHS will have to continue to bear.