House of Commons Health Committee NHS Deficits Sixth Report of Session 2005–06 Volume II Written evidence Ordered by The House of Commons to be printed 8 June 2006 HC 1204-II Published on 28 June 2006 by authority of the House of Commons London: The Stationery Office Limited £20.50 The Health Committee The Health Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department of Health and its associated bodies. Current membership Rt Hon Kevin Barron MP (Labour, Rother Valley) (Chairman) Mr David Amess MP (Conservative, Southend West) Charlotte Atkins MP (Labour, Staffordshire Moorlands) Mr Ronnie Campbell MP (Labour, Blyth Valley) Jim Dowd MP (Labour, Lewisham West) Sandra Gidley MP (Liberal Democrat, Romsey) Anne Milton MP (Conservative, Guildford) Dr Doug Naysmith MP (Labour, Bristol North West) Mike Penning MP (Conservative, Hemel Hempstead) Dr Howard Stoate MP (Labour, Dartford) Dr Richard Taylor MP (Independent, Wyre Forest) Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk. Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at www.parliament.uk/healthcom Committee staff The current staff of the Committee are Dr David Harrison (Clerk), Eliot Wilson (Second Clerk), Christine Kirkpatrick (Committee Specialist), Ralph Coulbeck (Committee Specialist), Duma Langton (Committee Assistant) and Julie Storey (Secretary). Contacts All correspondence should be addressed to the Clerk of the Health Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6182. The Committee’s email address is [email protected]. List of written evidence Page 1 Department of Health (Def 01) Ev 1 2 Adur, Arun and Worthing PCT (Def 51) Ev 9 3 Advanced Medical Solutions (Def 34) Ev 10 4 The American Pharmaceutical Group (Def 29) Ev 12 5 Amicus (Def 11) Ev 15 6 Audit Commission (Def 25) Ev 18 7 Avon, Gloucestershire and Wiltshire SHA (Def 52) Ev 26 8 British Medical Association (Def 33) Ev 27 9 Dr Peter Carter (Def 15) Ev 32 10 Chartered Society of Physiotherapy (Def 16) Ev 37 11 Commission for Patient and Public Involvement in Health (Def 28) Ev 41 12 County Councils Network (Def 37) Ev 46 13 Deltex Medical Group plc (Def 32) Ev 48 14 Diabetes UK (Def 30) Ev 51 15 Finance and Leasing Association (Def 09) Ev 53 16 Healthcare Commission (Def 45) Ev 55 17 Patient & Public Involvement Forum, Hull & East Yorks Hospital Trust (Def 17) Ev 59 18 Improving Surgical Outcomes Group (Def 41) Ev 62 19 Kensington and Chelsea PCT (Def 57) Ev 64 20 Overview and Scrutiny Committee for Health, The Royal Borough of Kensington and Chelsea (Def 14) Ev 67 21 King’s Fund (Def 49) Ev 68 22 KPMG (Def 56) Ev 73 23 Local Government Association and the Association of Directors of Social Services (Def 42) Ev 75 24 Macmillan Cancer Support (Def 43) Ev 77 25 Monitor (Def 46) Ev 79 26 NHS Confederation (Def 36) Ev 84 27 North East London Strategic Health Authority (Def 26) Ev 87 28 University Hospital of North Staffordshire NHS Trust (Def 58) Ev 91 29 Parkinson’s Disease Society (Def 44) Ev 98 30 PricewaterhouseCoopers (Def 59) Ev 101 31 Rethink (Def 24) Ev 103 32 Royal College of Midwives (Def 39) Ev 105 33 Royal College of Nursing (Def 27) Ev 107 34 Royal College of Psychiatrists (Def 08) Ev 120 35 Socialist Health Association (Def 21) Ev 121 36 South East Hertfordshire PCT and Royston, Buntingford and Bishop’s Stortford PCT (Def 35) Ev 123 37 Chairmen of local-authority NHS Overview and Scrutiny Committees in the South East (Def 31) Ev 128 38 Southend University Hospital NHS Foundation Trust (Def 54) Ev 135 39 UNISON (Def 18) Ev 136 40 West Hertfordshire Hospitals NHS Trust (Def 55) Ev 141 41 West Sussex County Council Health Scrutiny Select Committee (Def 38) Ev 145 42 Anonymous GP (Def 05) Ev 152 43 Professor Sheena Asthana and Dr Alex Gibson (Def 12) Ev 152 44 Ken Cunningham (Def 50) Ev 160 45 David Drew MP (Def 23) Ev 162 46 David Dufty, Health Management Consultant (Def 20) Ev 162 47 Mrs Jane Galbraith, Honorary Research Fellow, Dept of Statistical Science, University College London (Def 06) Ev 164 48 Andrew Lansley MP, Shadow Secretary of State for Health (Def 48) Ev 166 49 Robert Lapraik (Def 10) Ev 174 50 Peter Mellor (Def 19) Ev 175 51 Laura Moffat MP (Def 40) Ev 178 52 Professor Calum Paton, Centre for Health Planning and Management, Keele University (Def 03) Ev 179 53 Dr Jillian Pritchard (Def 04) Ev 181 54 Chris Reynolds (Def 22) Ev 181 55 Mervyn Stone, University College London (Def 07) Ev 183 56 Glynden Trollope (Def 13) Ev 192 3404742001 Page Type [SO] 28-06-06 03:43:09 Pag Table: COENEW PPSysB Unit: PAG9 Health Committee: Evidence Ev 1 Written evidence Evidence submitted by the Department of Health (Def 01) NHS DEFICITS ENQUIRY The memorandum of evidence for the enquiry into NHS deficits is enclosed. This addresses the specific questions your Committee directed to the Department of Health. As stated in Question One of the memorandum, I will be making an oral statement to the House on 7 June with the provisionaloutturn position for the NHS in 2005–06. I willa lso make available the figures for individualNHS organisations. This information willbe passed to the H ealth Committee at the same time. To coincide with my statement to the House, we are publishing a report on NHS performance by Sir Ian Carruthers, and a detailed finance report by the Department’s Finance Director. The Committee may also find it helpful to consider the detailed analysis in these reports as part of their deliberations, so we will also make these available to you as soon as they are published. Year End Figures 1. Based on the unaudited accounts, what was the outturn financial position for the PCTs, NHS Trusts and SHAs as at 31 March 2006? 1.1 The Secretary of State for Health will inform Parliament of the position on 7 June. This additional information will be provided to the Health Select Committee on the same day, along with a report from the Department’s Finance Director to the Secretary of State for Health providing supporting detailand analysis. 1.2 The figures have been subject to additionalchecking, but they have not y et been audited and are still subject to change. 2. Based on the latest data available from Monitor, what is the projected financial position for all Foundation Trusts as at 31 March 2006? 2.1 The Health Committee have requested this information directly from Monitor. Movements between Month 12 and Final Audited Accounts 3. What steps has DH taken to assure itself that the discrepancy between the 2004–05 FIMS data and the audited outturn figures will not recur in 2005–06? 3.1 The following paragraphs explain the changes in 2004–05 and the action taken on by the Department of Health to prevent a recurrence. 3.2 2004–05 was the first year in which there was a significant movement between the finalin-year monitoring information collected by the Department of Health (based on the draft accounts) and the final audited accounts (see answer to question 4 below). 3.3 The Department became aware of the movements in early August 2005 following submission of final accounts. Each of the Strategic Health Authorities was contacted by the Department to ascertain the reasons for the changes and the action that was being taken. The changes can be broadly categorised as: (i) diVerence of opinion between Boards and auditors on accounting treatment and estimates. The main areas here were: (a) the underestimation of prescribing creditors—as PCTs do not receive confirmation of their actualexpenditure from the Prescription Pricing Authority untilafter d raft accounts are prepared, they must make provision for expenditure for the final2–3 months of the year. (b) the understating of the provision for the costs of implementing agenda for Agenda for Change (AfC). The new AfC pay system was rolled out from 1 December 2004, backdated to 1 October 2004. During 2004–05 NHS bodies had the task of assimilating staV onto the new pay system, and making provision for the expenditure. Some organisations incorrectly disclosed a contingent liability in their draft accounts instead of a provision. (c) capitalisation and asset valuation—this relates to expenditure which had been classified as capital in draft accounts and subsequently reclassified as revenue, and also understating charges relating to the down revaluation of assets. (ii) diVerences between organisations concerning the amount of income due—including within this category adjustments made to service level agreements and levels of support. 3404742001 Page Type [E] 28-06-06 03:43:09 Pag Table: COENEW Ev 2 Table 2 3.4 Details by Strategic Health Authority are given in Table 2 below: Health Committee: Evidence CHANGES FROM DRAFT TO PUBLISHED ACCOUNTS BY STRATEGIC HEALTH AUTHORITY Reasons Explaining the diVerences between Month 12 FIMS data and the Final Accounts Changes 2004–05 to Income/ Final 2004–05 Agenda Expenditure Primary Accounts Month 12 for Changes involving Changes Care surplus/ surplus/ Change Prescribing Other in levels non NHS Changes to Asset SLA GMS Organisation Name (deficit) (deficit) Change Provisions Creditors Provisions of Support Capitalisation Bodies to Stock Values Adjustments Changes Other Total £000 £000 £000 £000 £000