Examination of Witnesses (Questions 340
WEDNESDAY 24 APRIL 2002
340. It is no then.
(Mr Brown) The system is a three year spending allocation,
in this case for health five years, with end-year flexibility
so that money does not have to be used for an emergency where
it would be right for them to carry a reserve, they can carry
that money forward to use for other purposes. This is a far more
sensible system of financing than has existed in the past. If
I may say so, the three year spending system, and now for health
five years, has worked far better than the annual round which
caused so much consternation in the last few weeks of the year
when people tried to spend money probably inefficiently otherwise
they would lose that money. So your question again, like your
previous set of questions, is based on a wrong presumption.
Mr Ruffley: It is still an under-spend.
Chairman: After 12 minutes on that section,
we will pass to Mr Fallon.
341. I want to pick up one question on tax receipts,
Chancellor. You cut taxes before the last election, you admitted
last Wednesday that tax receipts are now £10 billion lower
in this year than you originally forecast, and now you are raising
taxes again. Most people, even if they support you on the NHS,
still now think you have broken your promise. How are you going
to recover your reputation?
(Mr Brown) I have broken no promise. There is no promise
we made at the election or we made in our manifesto which has
been broken. If you remember, Mr Fallon, it was a feature for
probably a week of the campaign that I refused to rule out changes
in national insurance, your party accused me of all sorts of things,
I still refused to rule out changes in national insurance, we
held to our election manifesto that the direct income tax rate
would not be raised, that the top rate would not be raised, that
we would not extend VAT to essential goods, these were the promises
we made and if you look back over the election campaign there
was an attempt made for me to rule out changes in national insurance
but I refused to do so.
342. Why do most people now think you have
broken your promise?
(Mr Brown) You will have to go back and look at what
I said. What I said is what I stand by. Any journalist who was
covering that election knows that we were under pressure for a
week by your party asking us to rule out changes in national insurance,
and I refused to do so.
343. So you were planning it all along, were
(Mr Brown) What I said all the time was that politicians,
particularly people who are running treasuries, can make a number
of promises which it is right to do but you cannot make promises
on every one of 250 reliefs and allowances, and those politicians
who have made promises, such as the Conservative Party before
the 1992 election when they ruled out everything, live to regret
that, because you have got to be able to manage the economy in
the way that is best for the economy subject to the promises you
have made. I kept all the promises that I made and our party has
kept all the promises we made on taxation at the time of the election.
Mr Fallon: We will come back to this
when we turn to national insurance.
344. On to health spending, Chancellor. Since
your announcement of the large increase in funding, there has
been quite a bit of discussion as to how this money will be spent.
Some say it will be swallowed up with wage demands, some say trust
deficits will have to be paid off, others say that liability claims
reaching £4 billion may have to be dealt with by the National
Health Service. So there is a view it could be going down a black
hole. Are you satisfied that the extra money you are giving the
NHS can be spent on improving services rather than fuelling excessive
wage settlements and paying off accumulated deficits?
(Mr Brown) We had to satisfy ourselves that put into
place before money was made available were new standards for audit
and accountability, and therefore there is a new system of audit
which is independent, a new inspectorate which is independent,
a new independent scrutiny of patient complaints which is built
into the system, and a duty for both an annual national and local
report itemising the link between the money spent and the standards
achieved. In addition, we have agreed with the Health Secretary,
who has made a speech on this matter today which I would refer
the Committee to, about the use of the resources, but there had
to be new financial incentives he wanted to introduce for hospital
performance, so there were rewards for hospitals that do best;
greater freedoms for the foundation hospital proposal, for high
performing trusts as well as hospitals; more power and resources
are going to the front line into primary care trusts; we are reforming
social services care for the elderly; we are increasing patient
choice, and all the time we are trying to meet the waiting time
targets that I think the Committee is well aware of. So the money
is conditional on the modernisation we have agreed, and that will
lead to the results that we intend.
345. Chancellor, are you satisfied with the
reforms which have been made in the National Health Service since
the Pre Budget Report?
(Mr Brown) The announcements which were made came
after a great deal of discussion but of course also after the
Wanless Report was prepared and published. I think it is very
interesting that the Wanless Report has looked at demography,
technology and patient expectations, and the driving forces for
additional expenditure are the extra costs of new technology,
new buildings, new equipment, new drugs and the rising expectations
patients have. It is right, for example, that instead of the eight
or 12 patient wards, of the new beds now being built in the 60
or so hospitals which have been constructed or planned a third
are single rooms in our hospitals, so the standard of care that
patients can expect is higher as well. Many of these targets have
been agreed between ourselves and the Department of Health. Mr
Milburn in his speech today outlined some of the ways he planned
to invest in the Health Service, including better IT, including
new equipment, including better work on the cancer and heart plans
he has developed for improving the service to cancer and heart
patients, these are the priorities including social services care
which he has outlined.
346. The Wanless Report in paragraph 5.19 said,
". . . the Review believes that its projections for UK real
terms spending growth of 7.1 to 7.3 per cent a year over the next
five years are at the upper end of what could sensibly be spent.
Indeed, to be wisely spent, they would represent a very considerable
management challenge." How would you reply to that?
(Mr Brown) What Mr Wanless is saying is that there
is a point at which extra resources may have caused either inflation
in Health Service costs or resources not to be used as efficiently
as possible. Our final decision is very similar to that of Mr
Wanless but we have taken into account one or two things, including
national insurance itself, and therefore we accept that the Health
Service can spend the money we have given it efficiently, that
it is not itself the extra money which is a driver of inflation
on the Health Service costs. Obviously, while we are negotiating
new doctors' and consultants' contracts and also the Agenda for
Change for nurses and for other staff in the Health Service, I
have made it clear today that responsible pay-setting is absolutely
crucial to the development of the next years of the Health Service.
We plan to hire considerably more nurses, doctors, radiographers
and other staff, and responsibility in pay is going to be important
to the way all public services develop. I think I emphasised that
for all public services when I gave my opening remarks on the
manner in which we will approach the public spending review.
347. Could it be that some of the under-spending
in the Health Service in the last two years has been due in part
to the National Health Service management being unable to cope
with these very swift increases in the funds available to them?
(Mr Brown) I would hope that the way that resources
are being used, because there is a longer-term frame for planning,
is actually better and more effective than if there had still
been the annual cycle. I do not share Mr Ruffley's view about
the under-spend being the problem he says it is, because it is
right you have a reserve to deal with emergencies, and it is good
if you do not have to use it and can use it for other things.
In the way that previously the Treasury held the reserve in its
entirety, the departments themselves have a reserve as part of
the three year plan set aside for contingencies or for developments.
Equally, at the same time, if a department is planning to spend
over the course of three years then the fact it spends it in April
rather than March should not be regarded as a source of great
348. How much has the system of public service
agreements enabled you to decide the allocation appropriate to
the National Health Service?
(Mr Brown) I think you will find that when Mr Wanless
drew up his proposals for the 7 per cent or so rise in the National
Health Service expenditure he was very much influenced by the
cancer plan and the heart plan and looking at the other specialties
where progress was to be made. These are, of course, targets we
have set, extra employment, equipment and servicing which needs
to be done, and he worked it through six separate specialties
to get an idea of the sort of costs which would be involved in
meeting the PSA targets, so the public service agreement targets
are absolutely essential. Let us emphasise that this is not money
thrown at a problem, this is money conditional on modernisation
leading to the achievement of targets and results with a built
in independent system of audit, inspection and scrutiny, including
independent reporting to Parliament with an annual report and
reports which are done by every health authority which are called
the local prospectuses which are published for each area, so people
can see the link between the money which is spent and the service
improvements they are getting.
349. Will the public service agreement system
be an adequate way of assuring you and the Treasury that the money
allocated is being spent as intended and to best effect?
(Mr Brown) I should say to you that we do not set
a target and then just leave things for years. What we do is have
a continuous process of stock taking, involving the Prime Minister
and others, so that it is important to have an idea, right over
the course of the period on a consistent basis, about how well
these targets are being achieved. The truth is that waiting times,
which are a maximum of 18 months, are now down to 15 months, going
down to 12, will go down to nine, then the plan is to get them
down to six by 2005, and then to three, so the aim is to stage
by stage improve the service to the patients so that waiting times
are reduced. The maximum times are these and the average waiting
time will come down even lower than that over the course of
350. How frequently during the 12 month period
before the annual statement of aims and expenditure will the Treasury
be monitoring these spending programmes during the year?
(Mr Brown) This usually happens every three months.
It is a continuous process of dialogue between the departments
and the Treasury and indeed the Cabinet Office. There is a process
of stock taking that is established now that is working so that
you have early warning if there is a problem, but equally, at
the same time, you have a committee sitting of Cabinet Ministers,
PSX, which looks at the spending plans of the different departments,
questions the ministers, that is ministers questioning other ministers
on that, and it is of course a process of continuous review which
is very important now to the operation of the system. The public
has a right to know not only that we have targets so that money
is spent well but that we continuously review that, and they also
have the right to the independent audit and scrutiny and inspection
system that has now been introduced for the first time since the
Health Service was created in a systematic way.
Chairman: We asked your officials yesterday,
Chancellor, if you could share that information with us on a regular
basis, and we would be pleased to have that.
351. Chancellor, up to now you have had mostly
questions asking how confident you are that the additional spending
on health will actually deliver better results and how you are
going control that and check it, and you have been responding
on that. Can I put the opposite question? In education we have
traditionally had the complaint that there are too many reports
and too many supervisory bodies that the schools have to respond
to and that they are so busy filling out forms that they cannot
get on with the job. Are you worried that the health authorities
will feel that they have now got three masters, the Health Department,
the Independent Audit, and the Treasury?
(Mr Brown) I would not look at it that way. We are
a helping hand! As far as health authorities are concerned, the
new PCTs, 75 per cent of the money in time will be spent by the
PCTs themselves. There is a process, as I said when I made my
introductory remarks, which is as true of health as of education
and other services: where there are national standards, there
is also substantial local devolutionary plan. It is frontline
first; getting the money to the front line, giving the people
the freedom to make the decisions, having a greater degree of
flexibility in a whole series of different areas, and we should
think of the Health Service as these legal PCTs are operating
with a great deal of independence, negotiating their contracts
with the hospitals that are generally in their area and securing
higher standards of care. I would not like you to think that this
is a centralised system: this is local devolution that is now
happening, and I cannot think of a situation since the Health
Service was founded where 75 per cent of the money is going direct
down to the local areas, and that is what the plan is under this
352. Although I am fairly new in Parliament
I have been following politics for thirty years, and I must say
I never remember a Chancellor previously taking an interest or
making specific commitments on the lengths of waiting lists, for
(Mr Brown) I do not make these commitments. I am just
reporting the commitments that have been made by the Department
of Health in the 10 Year Plan.
353. Are you concerned that you will come under
pressure in other areas to make statements on the number of troops
to be committed in countries overseas?
(Mr Brown) I think I should describe the relationship
as we are responsibleindeed, the guardian for everyonefor
the nation's money. We have to ensure as we report to you that
that money has been as well spent as possible, and therefore it
is for us to ensure that there are proper rules about the value
for money that is achieved, but it is for the departments to propose
how they wish to go ahead and the plan for devolution, the 10
year health plan, was drawn up by the Prime Minister and by the
Health Secretary together, and it was published two years ago
and is now being implemented by the Health Department.
354. Would it be fair to say just in conclusion
on this that because of the sheer volume of extra commitment this
Government is giving to the Health Service, additional scrutiny
is particularly important compared with perhaps some departments
where spending is not changing so much?
(Mr Brown) It is absolutely true that the independent
scrutiny built into the announcement made by the health secretary
last Thursday is absolutely crucial. I think people can look to
a different system where there has to be an annual independent
report prepared by the new auditor for Parliament, so that people
can see for themselves the link between the money that is being
spent and the results that are being achieved. In addition to
that, we have a far greater scrutiny of patient complaints which
is now being done independently of the Health Department, and
an equally independent inspection which is important to this process.
355. Coming back to something you said, Chancellor,
about taking account of National Insurance in the NHS allocation,
Mr Wanless presumably did not know what you were planning on National
Insurance. I think you have now said you have taken account of
it. What is the figure for the NI increase for the NHS itself?
(Mr Brown) I think we issued a figure some days ago.
Was it in the order of £200 million? I cannot remember exactly
but we will give you a copy of the figure. It was £200-300
million and that is why, when you look at the figures for employers'
National Insurance, the figure is for the public and the private
356. So that is £200-300 million that the
NHS has got to find from next April because of your decision?
(Mr Brown) : I think people would have found it strange
if I exempted National Health Service employees or any public
sector employees from a contribution that I am asking the whole
country in employment to pay towards the improvement of a National
Health Service, and I find it strange that people should argue
that somehow the public sector should have been excluded from
the National Insurance contribution. I think myself that, if private
sector employees are being asked to pay some contribution to the
Health Service, so too, in the tradition of National Insurance
which has lasted, after all, for fifty years amongst all parties
that have been in power, all employees and not just private sector
employees should pay the contribution.
357. I was not actually arguing that; I was
only asking you for the figure.
(Mr Brown) I know, but you will know that it has been
advocated in recent days by people within your own party.
358. I want to turn to one other spending line.
You announced last Wednesday that, for a typical secondary school,
additional payments to be made will rise from £98,000 last
year to £114,000 this year, but in the Budget last year you
said the payment would be not £92,000 but £115,000 and
these payments will be made not just for one year but for every
year through to 2004. How is the £114,000 which is £1,000
less, which you have announced this year, additional?
(Mr Brown) I think I might have to send you a note
on this because what is the typical school is the issue here.
Actually some schools receive far more than that figure in both
cases of these figures, and some schools that are smaller receive
less. Equally, in the case of primary schools, because of the
distribution of numbers in different schools there is quite a
range of schools for expenditure, so I will come back to the Committee
on this. You will see that for schools with 2000, 1500, 1200,
1000whatever the numbers of pupils arethere is a
big difference in the rate of payments. So it is the typical figure
that I was giving but it may not reflect the same definitions
as you are using, but I will send that to the Committee.
359. I understand that. I am familiar with the
thresholds and, indeed, with this area, but I want to be clear
whether what you announced last Wednesday is additional. You described
it as additional?
(Mr Brown) Additional money, of the order of £100
million extra, was put into this system.
2 See Appendix 8. Back