Examination of Witnesses (Questions 40
TUESDAY 4 DECEMBER 2001
40. Mr O'Donnell, you do not have a view on
(Mr O'Donnell) It is a matter of public spending.
(Mr Sharples)within the framework of the ambition
the Prime Minister has set out. We are clearly on track towards
the European average. The plans that we have made so far, up to
2003-04, will take us up to about 7.7 per cent of GDP for health
spending (that is taking public and private together), so, as
you can see, we are well on track towards the EU average by 2005.
But obviously the precise details of health spending plans for
the years up to 2005-06 will have to be reviewed next year in
the spending review, taking account of Derek Wanless's report,
when the final report is received, and we will be setting firm
spending plans for health at that stage.
41. I do not want to be too boring about this
but this is quite a simple question. I am surprised Mr O'Donnell
does not have an answer to it as well. The Prime Minister, who
is after all responsible for the Government, gave an answer at
Prime Minister's Questions last week in which he said that the
commitment of the Government was to bring NHS spending as a share
of GDP up the EU average by 2005. Is that, Mr O'Donnell, the policy
of the Government or not?
(Mr O'Donnell) I can only repeat what Adam has said,
that in terms of health spending we will look at these issues
in the light of the Spending Review 2002.
42. You cannot confirm that the Prime Minister
may be wrong about that?
(Mr O'Donnell) It is an issue that will be sorted
out in the spending review.
43. All right, let me try something else. You
follow presumably, do you not, the debates in Parliament, particularly
those in which the Chancellor is involved? Are you aware that
he was asked this question yesterday by the Member for Truro and
St Austell: Does the Chancellor back ". . . the Prime Minister's
commitment . . . to raise spending on the health service to the
EU average by 2005? Was the Prime Minister right?" Chancellor:
"Of course that is our policy." Are you disagreeing
with the Chancellor now?
(Mr O'Donnell) No. I have said that the issue will
be considered in the light of the Spending Review next year.
44. We have had the Chancellor of the Exchequer
and the Prime Minister within the last week say that it is the
policy of the Government to bring NHS spending as a share of GDP
up to the EU average by 2005. Is that the policy of the Government
(Mr O'Donnell) What I have said is that for health
spending they will look at that in the light of the Spending Review.
45. But they have said that that is their policy.
Is it the policy?
(Mr O'Donnell) I do not disagree with what is being
Chairman: I think, Mr Laws, we do have
an opportunity, a golden opportunity, to speak to the Chancellor
before us, rather than the officials themselves.
46. Perhaps I can pursue this slightly further.
You are supposed to be the department that is responsible for
looking at the targets that other departments are pursuing. You
seem to have no view yourself and no grip on this particular target.
If it is the case, as the Prime Minister has said, and the Chancellor,
your own boss, has said, that you are trying to bring NHS spending
up to the EU average, which average is this that you are looking
at? Is it the weighted EU average or is it the unweighted EU average?
(Mr Sharples) The figure that has been used fairly
widely on this is the unweighted average for spending on health
in other EU countries.
47. That is the lower one, is it not?
(Mr Sharples) Which is currently round about 7.9 per
cent of GDP. As I said earlier, the current plans will take us
to about 7.7 per cent by 2003-04, so we are well on track for
delivering what you say is the ambition set out by the Prime Minister
and the Chancellor for getting to the EU average by 2005.
48. So it is the unweighted that we are looking
at, not the weighted.
(Mr Sharples) There are all sorts of different ways
that one can measure these figures and obviously that figure of
7.9 per cent is a figure that goes back a few years. It takes
a few years for the OECD, who produce this data, to collect data
on a consistent basis. I believe that figure is for 1998.
49. Mr Sharples, your boss
(Mr Sharples) Can I finish the answer. The point is
that that figure may change and there are different ways of measuring
averages. The shape of the EU might well be different by 2005who
knows? So there are many variables here. That is why we need to
take account of all these considerations when we review spending
plans in the spending review next year.
50. So what you are saying is that your boss
the Chancellor of the Exchequer and the Prime Minister have set
themselves a target but you do not actually know what it is.
(Mr Sharples) Not at all. Their policy is absolutely
clear. There is the ambition of getting to the EU average by 2005
and the details of how we get there will be considered in the
course of the spending review next year.
51. Let me ask you one other question about
this really important target of the Government. The EU average
that you are trying to get to in 2005, according to the Chancellor
and the Prime Ministeralthough Treasury officials do not
seem willing to commit to supporting the policies of the Prime
Minister and the Chancellorthe target you are committed
to getting to in 2005, is that the EU average now or the EU average
(Mr Sharples) As I say, these are exactly the questions
that will need to be considered in the course of the spending
review next year.
52. Mr O'Donnell, does this not give you cause
for concern? Here it is, you are the department that is supposed
to be ensuring that other Government departments have clear targets
that they are trying to achieve, that they are focused on delivering,
and here we have the most senior officials from the Treasury come
to us to tell us that they do not know what the target of the
Government is in respect of this, they do not know how it is measured,
and they do not know whether they are trying to deliver it as
of now or 2005. Do you not think the Treasury has quite a lot
to learn from the measures that it is trying to impose upon other
(Mr O'Donnell) Like I say, the details of that specific
target will be sorted out in the Spending Review 2002.
53. To clarify the Committee's considerations
of this issue, I wonder if it would be possible for you to do
us a little table showing, as best you canand I accept
all the statistical limitationswhere we stand relative
to the EU average, of course distinguishing between gross and
net spending on healthbecause of course in a country like
France there is a substantial element of private spending on health
and our spending is less substantialcomparing like with
like (ie, gross and public sector spending) then we would know
slightly more where we were.
(Mr O'Donnell) We would be happy to provide such a
(Mr Sharples) Could I say on that that there is indeed
a table in the Wanless report on page 64 which sets out some very
helpful comparisons of health spending in this country and overseas.
Chairman: Are you looking for more than
a photocopy of that table, Jim?
54. Really yes. I do not want to depress Mr
Sharples, but we do not, as it were, carry these things around
with us, either on our backs or in our heads.
(Mr Sharples) That does not depress me at all, I can
55. David's question was suggesting that we
have a Government policy to deliver something but we do not seem
to know what the something is. The target seems to be rather vague.
Perhaps I could ask the question in a slightly different way.
Has the announcement of this target in any way influenced Government
policy on the health service?
(Mr Sharples) Absolutely. It is precisely because
of the ambition to raise health spending in this country to the
EU average that we set in the spending review last year very ambitious
plans for raising spending on the health service, plans which
deliver the most sustained growth in health service that we have
seen in the history of the NHS. So the ambition set out by the
Prime Minister at the beginning of last year provided the basis
for the decisions that were taken in the spending review last
year which provide for extremely rapid growth, growth of something
like one-third in real terms over the five years up to 2003-04.
56. It may not be of concern now, but at which
point do you think you need a clear target. After all, you do
not want to find yourself having more than met the target. For
you, being Treasury men, that would be an appalling outcome. Presumably
you want to be clear about what the target is at some point, even
though you have made clear to us now that you are not clear about
what the target is at the moment.
(Mr Sharples) What we have been very clear about is
that in the course of the spending review next year, we will be
reviewing the spending plans up to 2005-06, taking account of
the Government's ambition, taking account of Derek Wanless's report
on long-term trends in health spending and health demands, and
taking account of the overall fiscal position and the demands
from other services. As you will appreciate, spending reviews
are quite long and complicated processes in which we have to balance
out all sorts of considerations. That is the process we will be
going through next year and that process will lead to setting
plans for the health service up to 2005-06.
57. That is a response to the question: When
can you meet the target? My question is: when are you going to
give clarity to the definition of the target? You have made it
very clear that you cannot give clarity now: you may enlarge,
you could use weighted or unweighted averages, the OECD figures
are produced in arrears and this makes comparisons difficult.
I am asking at which point as you approach this target you will
feel the need for clarity about what this target is.
(Mr Sharples) As I have said, the spending plans to
be announced next year will set out where we will get to by 2005-06.
The point I would like to emphasise here is that what is being
delivered is actually quite remarkable. The fact that our present
spending plans provide for an increase of one-third in the real
level of spending on the health service over a five year period
is unprecedented. It is a step-change in the level of funding
for the health service in this country towards European levels.
58. I am asking the same question in different
forms each time but we are getting closer. When that spending
review is conducted, you will, as part of that review, produce
the target and then will it at least be a target that we can all
(Mr Sharples) We will produce a plan for public spending
on the health service up to 2005-06.
59. That was not my question at all. That was
about what level spending will be. I am sure you will produce
a plan: Treasury always produces those. My question is: over here
you have plans going like this and over here somewhere
you have a target. You have said at the moment this target is
a moveable feast, you can twiddle all sorts of dials if you feel
you have to. I am asking at which point will you need that clarity
of that target?
(Mr Sharples) Can I apologise if I am not answering
that precise question.