Examination of witnesses (Questions 1 - 19)
WEDNESDAY 17 JUNE 1998
MR
GEOFF SCAIFE,
DR PETER
COLLINGS and MR GERRY
MARR
Chairman
1. Good afternoon, may I welcome you once
again to the Committee, Mr Scaife. Today we are looking at the
Comptroller and Auditor General's Report and the Summarised Accounts
for the National Health Service in Scotland for 1996-97. Perhaps
you would like to introduce your colleagues, for the benefit of
the Committee, and then we can get started?
(Mr Scaife) Certainly, Chairman. On my left is
Dr Peter Collings, who until 1 June this year was Director of
Finance in the Management Executive of the Scottish Office. Since
that date he has moved to become the Principal Finance Officer
for the Scottish Office as a whole. On my right is Mr Gerry Marr,
who is my Director of Human Resources.
2. Thank you very much. You know the form
now. Let us get straight in. I will start with paragraph 4.6,
which tells us that Lothian was the only Health Board to report
a surplus (as it turned out) of £6.4 million, and in paragraph
4.10 we see that the same Health Board also made cash advances
to Trusts of £7.7 million in order to spend enough to meet
its cash target. On what basis are you satisfied that the Board's
financial plans were taut, that payments that were made earlier
than usual represented good value to the Health Service and did
not impact on patient care in this year or future years?
(Mr Scaife) Chairman, the payments made by Lothian
towards the end of the financial year were broadly to do with
two things. One was because they believed that GP fund-holders
would be late in paying under their contracts to the NHS Trusts
in Lothian, so that there would be a period when there might be
a cash flow problem. That was one significant sum of money, just
over £5 million. The second sum of money, some £2½
million[1],
was a payment in respect of pharmaceuticals. The Health Board
entered into a payment for a larger quantity of drugs than it
might have been expected to and in so doing negotiated a significant
volume discount. So in a sense there was some advantage to the
Health Board in terms of buying in bulk and achieving a discount.
I cannot see any specific advantage to the Health Board in respect
of paying money out in effect to cover the gap for GP fund-holders'
payments. When we discovered that this had gone on, we made our
concerns known to the Health Board and, of course, we have issued
guidance to the service.
3. Thank you. Others may want to pursue
that one because the principle is obviously quite important. Let
me move on. The incidence of clinical and medical negligence:
the costs seem to be increasing and divert resources from patient
care. Can you tell us what you are doing to reduce the number
of cases and keep costs down, but in doing so, can I ask you also
to address another issue, which is almost, I am afraid, the reverse
question. If I assess it right, the various contingent liabilities
and so forth that, in your case, add up to about £30 million,
for England add up to about a billion, which is about three times
as large on a pro-rata basis, I think, and I am quite curious—you
may not know the answer to this because obviously you are not
responsible for England—but I am interested in why there
is a difference? Is it because Scottish doctors are better than
English doctors, I hesitate to ask? Is it because Scots are less
litigious? Is it because there is a different accounting treatment?
I am just curious, if you know the answer; if you do not, I quite
appreciate the issue. So could you deal with both those?
(Mr Scaife) I am not sure I can comment on the
situation in England. The situation in Scotland, though, is quite
interesting, in that the number of claims, looking back over time,
over a three-year period, is really very constant. In 1995-96
there were 168 claims, in 1996-97 there were 189, an increase,
and in 1997-98 there were 164 claims. Obviously the number of
payments is slightly different because you can have more than
one payment in respect of each claim. Also, it is remarkable that
the level of settlements was relatively constant, too. In 1995-96
settlements were valued at £4.1 million throughout Scotland.
In the following year, 1996-97, the level of settlements was £4.5
million, and last year, 1997-98, the figure was again down, to
£4.1 million. In each year our audits tell us that there
are about 500 new claims arising and because claims can take some
time to settle, at any one time there are about 1,400 claims in
the system as a whole, I suppose about three years' work for the
lawyers and lawyers representing the claimants. So that for the
500 claims or so arising in a year, about a third of those, 170,
would be settled. So we have really a very settled picture looking
back at it. We made provision in the year in question of £13
million, being our estimate, our judgment, of the likely outcome
of the cost of current actions, and we also estimated that we
would need something like 16 million as the potential cost of
future claims. So we are making considerable provision, which
is lying well above the level of actual settlements coming through.
I am afraid I am not briefed on the English situation and cannot
answer for them.
4. I quite understand that. It might be
helpful, however, if you could have a look at the comparators
and make sure the comparative treatment is the same, the accounting
treatment, or have your finance officer do that, and let us have
a note on that because it is an interesting discrepancy, a major
difference. As I say, in England it is £1 billion, a lot
of money.
(Mr Scaife) We will be happy to do that.
5. The Millennium Threat: you will be aware
that the C&AG recently published a report on the Millennium
Threat and we took evidence last week from Mr Langlands on the
preparations made by the NHS in England. When and on what basis
will you be sure that all critical systems in the NHS in Scotland
will be able to cope with the year 2000, and whilst we are on
that, if you could you tell us what you expect to spend on dealing
with it, that would be helpful?
(Mr Scaife) Chairman, we have been working very
hard in Scotland to try to deal with the year 2000 problem, the
Millennium Bug. Across the service as a whole we have categorised
the work that needs to be done into critical and non-critical
areas; in other words, those areas where, if we do not get it
right, then patient care will suffer directly, and obviously the
main focus has been on trying to ensure that we get that right.
Of all the NHS bodies in Scotland, 66 per cent. of them are currently
forecasting compliance of all their critical systems and equipment
by the target date we set, which was 31 December this year, obviously
allowing a full year for following up problems and further testing.
A further 16 per cent. are very clear that they will be compliant
three months thereafter, so by the end of March 1999, and, with
rounding, we have about 17 per cent. where, frankly, we are not
yet satisfied. We are chasing that up vigorously with the bodies
concerned, applying very considerable pressure, so that the NHS
in Scotland is very clear. Indeed, Sam Galbraith, the Minister
for Health and the Arts, made this his centrepiece along with
waiting lists and waiting times, I have to say, at our major NHS
event in the year at the end of May when he told every chairman,
every chief executive of every health body in Scotland in no uncertain
terms that he regarded squashing the Millennium Bug and reducing
waiting lists as the two critical things that they had to give
their personal attention to and get right. So we are well seized
of it.
6. Thank you.
(Mr Scaife) We are well seized of it.
7. Paragraph 6.4 describes the progress
made in identifying and dealing with cases of irregular severance
payments and it says that no recovery action will be taken because
of the delays in identifying the cases. Why did you not complete
this work soon enough to be able to take action to recover the
amounts overpaid?
(Mr Scaife) Chairman, the process of tracking
what payments had been made and the possibility of recovery involved
searching back over ten years to 1986, a considerable amount of
work, work that was going on at a time when frankly the rules
were not clear. It was not clear to the service exactly what powers
they had and did not have. We tracked down 18 such payments. Obviously
we had to investigate every one individually. We had to share
the details of that individual investigation with colleagues in
the Treasury, they considered every one and we chased them all
hard. We obviously looked at the case for recovery bearing in
mind that many of these settlements occurred several years ago.
We followed to the letter the guidance from the Treasury in terms
of how to recover payments and how much to go for but at the end
of the day the Treasury have agreed to write off every single
one of those 18 payments. We did not recover because many of them
were time barred. The payments were made in good faith, they were
accepted in good faith, and our judgment, and the judgment of
the Treasury, was that we could not recover them.
8. I suspect that others will take you up
on those points. I will move on to one final point before I open
matters up to the rest of the Committee. I would like to turn
to the auditors' report on the irregular and potentially illegal
payments to senior staff at Tayside Health Board described in
paragraph 2.8 of the C&AG's Report. I appreciate that while
the Procurator Fiscal is considering the Board's report it would
be inappropriate to ask questions about individual cases but there
are some general issues that I think can be safely dealt with.
In particular, can you tell me what action you have taken to ensure
that the Board recovers the overpayments where this was recommended
by the inquiry report.
(Mr Scaife) Thank you, Chairman. I am grateful
for the acknowledgement that this matter is still before the Procurator
Fiscal. I appreciate that. When the Tayside affair first blew
it was a matter that was picked up during the routine audit by
external auditors. They were concerned about payments to certain
general and senior managers that might be unlawful. In fact, the
issue concerned non-adherence to directions about general and
senior managers' pay and related to the years 1995-96 and 1996-97.
As a consequence of those concerns the external auditors submitted
a Section 104 Report to the Accounts Commission for Scotland who
oversee the external audit of health bodies. In turn the Accounts
Commission submitted a report on 18 August 1997 to the Secretary
of State. In response to advice from the Department the Health
Board itself set up an external inquiry and established a team
headed by the chairman from a Health Board in another part of
Scotland. The investigation was to assess and quantify whether
there had been any overpayments, ascertain the extent of those
overpayments, and to identify responsibilities for any failure
in practices and procedures and to establish whether there were
adequate grounds to invoke the Health Board's disciplinary procedures
and to make recommendations for improvement. The report of the
inquiry team was submitted to the Health Board in February. That
matter then had to be considered by the Health Board in a formal
meeting. The Health Board adopted the report, accepted all of
its recommendations, and sent a copy of the report to Tayside
Police and the Procurator Fiscal. You ask about specific action.
I thought it would be helpful for Members to lay out just what
happened here and the concerns that were raised. The point of
the inquiry team was to establish what amounts might be involved
and what should happen. As soon as we got wind of this there were
a series of meetings primarily with the chairman. Ministers had
appointed a new chairman to the Health Board on 1 July. We worked
firstly with her and obviously requested a full report. By the
end of August, very quickly, the general manager of the Health
Board was on extended leave of absence and so was her right-hand
man, the director of commissioning. It is a bit of a complicated
case but the Board general manager earlier in February 1997 had
been given consent by the Health Board to take early retirement.
The first thing that the Health Board did was to withdraw that
consent. A consequence of that was that although the general manager
was still entitled to take early retirement, because she had been
paying into the superannuation fund and was over 50, the amount
of her pension was reduced because it was now without the consent
of the Health Board. While the inquiry was going on we had ensured
that the Health Board appointed an interim general manager because
obviously by this time the management team was depleted. The interim
general manager, on behalf of the Health Board, took immediate
action to try to ensure that any questionable payments were no
longer being paid, notified those concerned of the Health Board's
intent to pursue recovery, and subsequently over the following
weeks gained agreement from the vast majority to agree to recovery.
The Health Board were, however, advised by the Procurator Fiscal
not to pursue recovery until he had finished his investigations
and until he was clear as to whether there might be criminal proceedings.
The fact is this has been chased, it has been chased vigorously
by the new management team. They are clear about the amounts,
clear about capping any overpayment, but on the advice to them
of the Procurator Fiscal have not actually taken the next obvious
step which is to require repayment.
9. Thank you, Mr Scaife.
(Mr Scaife) I hope that is helpful.
10. I have been tolerant of you taking some
time over that because it is quite complex and because of the
sub judice considerations there. Can I ask you to be brisker
when dealing with other questions.
(Mr Scaife) Yes, of course.
Mr Page
11. If I might ask a question first of the
NAO. In the report we see that some of the Trusts and Boards failed
to meet the various deadlines through the submission of their
accounts and completion of the audits. Is any of this serious?
(Mr Le Marechal) No, Mr Page. It was a minority
of bodies and I understand that in no cases was it more than about
a month behind the targeted deadline.
12. And none of these accounts has been
qualified in any way? They have all been given a tick in the box?
(Mr Le Marechal) Correct, yes.
13. If I could, I would like to take up
the line of questioning by the Chairman regarding compliance with
the Millennium Bug, the 2000 problem, call it what you will. I
must say that out of this report I am getting a confused message.
If I look at this report and if I take you to page x, paragraph
3.5, we see that you sent out in August 1996 a request asking
them to formulate strategies. A year later you sent out another
one saying "an urgent programme of work to ensure that serious
problems do not arise when computerised systems encounter a new
century for the first time". It gives the impression that
nothing happened for a year and suddenly you woke up to the fact
that there were going to be all sorts of problems if there were
not some emergency action. Were some Boards and Trusts just ignoring
your advice and doing nothing or very little?
(Mr Scaife) No, they were not. They were taking
this very seriously. What they were attempting to do in those
initial months, frankly, was to scale the problem. The NHS, as
you appreciate, is such a vast organisation the Trusts and Boards
were finding out that in Scotland alone there were some 116,000
systems or items of equipment potentially affected by the Millennium
Bug. As I have said, they were then categorising what is critical,
what is less critical. In Scotland we organised the Health Boards
and Trusts, primarily Trusts because it is in the Trusts that
you find the problem, into teams so that the teams would work
on behalf of their colleagues across the country as a whole on
particular aspects of service. So that, for example, you have
a team looking at lifts throughout Scotland, identifying who the
suppliers are, making contact with them, arranging for them to
come in and fix the problem. Another team would have been looking
at telecommunications and so on, so a vast amount of work. It
is fair to say we have been ratcheting up the pressure. We have
also been offering practical support and help by putting all the
information about who is doing what on our Intranet, Scotland's
Health on the Web, and providing some modest financial support
to help people to come to grips with it.
14. I am glad to see that you are spreading
the knowledge across the system. When was Dundee Teaching Hospital
designated as the—I will not call it the guinea pig but
the one which was going to be the model from which all lessons
could be learned. When was that started?
(Mr Scaife) I do not think, Chairman, I have the
date for that. It was quite early in the process, I think.
15. Was it August 1996 or August 1997? That
is the question?
(Mr Scaife) I am afraid I do not have the answer
to that.
16. You appreciate that the later you leave
setting up the ideal practice, then the more difficult it is for
the message to be spread, the less time?
(Mr Scaife) Yes, of course.
17. You gave the Chairman some answers about
the critical systems that will be checked and in place or satisfactory
by the end of this year, but you have a national co-ordinating
group that has been set up to ensure the consistent approach to
the New Year 2000 problem. Has the group given you any guarantee
that all the critical systems will be in place by the Year 2000?
(Mr Scaife) They have not given a categoric guarantee.
What they have done is made it absolutely certain that every health
body has this at the top of their agenda. They have encouraged
and since turned into practice the idea that progress in squashing
the Millennium Bug will be reported at no less than quarterly
intervals to every health body, so that in their public meetings
they will have to report on progress and account for their performance
to their general public.
18. But that, if you do not mind my saying
so, is slightly worrying, because what you are saying is that
there is certainly at this stage no guarantee that we are going
to have every critical system checked and it is not going to fail
at the turn of the Millennium?
(Mr Scaife) Chairman, what I have said is that
the health bodies concerned are forecasting as of now that 66
per cent. of the critical systems will be compliant by the turn
of this calendar year, that a further 16 per cent. will be compliant
by 31 March. We now know who appears to have a problem where and
that is being pursued vigorously and everybody is seized of the
need to get this right and to do so quickly, and, of course, we
still have some time to go.
19. I appreciate that. I am not that brilliant
on maths but it looks to me that at the end of March next year
30 per cent. of the critical systems will not be in place and
you have nine months to go. It seems to me on what you are telling
me that it would not be advisable to be ill in Scotland at the
turn of the Millennium?
(Mr Scaife) Chairman, the arithmetic suggests
that some 17 per cent., as we sit here today, of the bodies concerned
are not confident that they will get there at the end of March
1999—everybody clear about what needs to be done, teams
of people working on this, pursuing it vigorously, applying the
resources that need to be applied to get a result, the Minister
personally giving this his personal authority and commitment,
bearing down very hard, and people pulling out the stops to achieve
this.
1 Note by Witness: The second sum of money,
was some £2½ million, not £½ million. Back
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