Select Committee on Health Minutes of Evidence


Examination of Witnesses (Questions 140 - 159)

THURSDAY 2 NOVEMBER 2000

MR COLIN REEVES CBE, MR BILL MCCARTHY, MR DAVID WALDEN, MR HUGH TAYLOR CB AND MR PETER COATES

  140. No; no, they did not say "as other drugs", because there are no other drugs?
  (Mr Reeves) Yes, okay; they suggested it was not, from their view, cost-effective, and, as you know, Schering, the main manufacturer, appealed against that decision, and, at the moment, I cannot comment because that appeal is still being held.

Mr Amess

  141. Is the Department still claiming that the National Institute for Clinical Excellence is truly independent of it, the Government?
  (Mr Reeves) Yes. I was saying, I do believe it is set up as an independent body, and it is—

  142. No, I did not ask you, Sir, what you believed when it was set up. Are you still claiming, in practical terms, that it is completely independent of the Government?
  (Mr Reeves) I did indicate that, as far as I am concerned, it is an independent body, but there are certain situations, and I named one, which is round about the issue of affordability and priorities, where I do believe that the Government and NICE would work very much in concert together.

  143. So it is the case then, when out there in the public there is a sexy drug which is available, where there is obviously constituency pressure building up for it, there is a big campaign working, that the rumour is on the National Institute for Clinical Excellence might throw it out because they do not think it is proven, etc, etc, that the Minister gets on the `phone and says, "For God's sake, you mustn't reject that drug, we're on a sticky wicket here; please do the right thing, help us out and approve the drug"?
  (Mr Reeves) I said, there are one or two areas where I would say there are certain caveats; one was affordability and priorities, the other one is in terms of the dissemination of NICE guidance. And it is, and it is made very clear, that it is subject to approval by the Secretary of State, so I am afraid it—

  144. So it is not independent, and there are conversations between Ministers and the people who make the decisions about the approval of the drugs?
  (Mr Reeves) I come back again. It is intended to be as independent as possible, but there are certain circumstances where Ministers will wish to be involved in terms of any decisions being made by NICE, which they would talk to NICE about before anything was agreed.

  145. So, hang on, there are circumstances under which Ministers would want to be involved; so these circumstances are when there are political difficulties?
  (Mr Reeves) They are your words, Sir, not mine.

  146. Okay; then what are the circumstances whereby Ministers would wish to be involved?
  (Mr Reeves) I have just mentioned them. The first one is in terms of, on a certain number of occasions, where there might be issues around affordability, or the relative priority of the particular drug.

  147. Sorry, that would be the case with all the drugs?
  (Mr Reeves) No, I said on certain occasions. The second point is in terms of they might wish to supplement NICE's guidance in various areas to assist, again, patients. And thirdly, again, the final point is, the dissemination of the guidance is subject to the approval of the Secretary of State, which is what we would expect anyway. But, having said all of that, the important point is, in terms of general working practice, NICE, to all intents and purposes, is an independent body.

  Mr Amess: For all intents and purposes, but in practical terms it is not independent, because Ministers, when they are on a sticky wicket, have conversations with the people making the decisions; that is the case, is it not?

  Chairman: I think this is a question, David, that you could usefully put to the Minister himself next week.

  Mr Amess: Yes, I was just going to say, I will have to put it to your boss next Wednesday, at 3.45.

Mr Burns

  148. Can I take you back to an area that, through our own fault, we admitted to at the time, which is the question of deficits. Have you got the latest estimate for the in-year deficit for health authorities and trusts, and have you got the figures for the last financial year, please?
  (Mr Reeves) Yes, Chair; in fact, I was a bit surprised that this came on the agenda, in the sense that I take a monthly report to the Executive Board, and I think for the first time in seven years it did not have the word deficit in the report. As we are all talking at the moment, the latest available figures are the quarter one figures up to 30 June this year, and at the moment we are projecting in expenditure terms both for health authorities and trusts that the service will break even; which, I must say, we have not been in the position to say for some considerable time. I recall going back and talking to this Committee in 1996-97, when the deficit then was £459 million, so we have made a lot of headway, I think, in terms of moving towards financial stability, and I am very hopeful this year we will break even at the year end.

  149. And accumulated deficit for 1998-99?
  (Mr Reeves) The accumulated deficit for 1998-99 was £483 million, which in itself has fallen. I remember talking to the Public Accounts Committee on the 1996-97 summarised accounts, and the figure there was £724 million; so, again, the figure there has diminished. And a point worth making now, I think, Chairman, is, the intention is that cumulative deficits, which are a reflection of historic in-year deficits, will not increase in the future, because, firstly, we are thinking about, and not thinking about in terms of our longer-term liabilities, to help what is mainly provisions and mainly for clinical negligence, they will be now excluded from the definition of an INE deficit, which I think has caused a lot of concern to a lot of health bodies over time. So that is another reason why in-year deficits, and indeed cumulative deficits, will not increase in the future. And, secondly, something I have been very keen to do, over the last seven years I have been here, was to ensure that creditors, how we pay our debts, do not increase either, and I am pleased to say that level, which is round about £700 million in total, has also levelled off as well. And because of the new system of Government accounting, called Resource Accounting and Budgeting, which is coming in across Government, the chances of actually paying off our debts in the future by extending our creditors, as opposed to making cash payments, is also going to be impossible, under new Government regulations. So I am very, very confident that, firstly, we are going to break even this year, in in-year terms, and, secondly, that the reduction which has occurred in terms of the cumulative deficit will continue in the future as well.

  150. And has the reduction, because a reduction, presumably, if you took it to its logical conclusion, would mean elimination at some point, is that because of the extra money that has been made to the NHS and will be made over the next few years, or is it partly that and partly greater efficiency and greater cut-down on waste, and things like that, or a combination of everything?
  (Mr Reeves) I think it is a very good point. There are two things, certainly, that all those comments apply to, and that is to try to ensure that in future we do not have in-year deficits, and that ultimately we have what we call underlying break-even, underlying balance, whereby in recurrent terms there is neither a deficit nor indeed a surplus. So I think that is an important desire for the future. A lot of the cumulative deficits actually go back many, many years, and to give you an example, our result of, for instance, a health body putting money aside in case a clinical negligence case, which arose many years ago, comes to fruition and they have to pay some money in terms of the settlement. Now I think to try to go back and eliminate those might be a bridge too far, but what I am intent on doing is to ensure that cumulative deficits in the future, because they will exclude provision for clinical negligence, will not increase. I think, looking back many years historically and trying to respond to that, at least in terms of provisions, is not being realistic. However, I am quite keen to look back in terms of reducing those health bodies whose creditors have risen historically, and I think it is an important discipline which we need to continue and ensure occurs throughout the NHS.

John Austin

  151. Can I just ask a question on that. Are you satisfied that the financial monitoring systems are adequate? As you know, I represent part of the area of Greenwich, which has probably got one of the largest deficits in the country, at something like £6.2 million. Now how could a deficit of that kind suddenly arise, not be noticed by the trust, not be noticed by the internal audit, not be noticed by the regional executive, who is responsible for monitoring as well, and not be seen by the Department?
  (Mr Reeves) It is a very fair comment, Chairman. We are talking about 500 health bodies, over a number of years, and I would say our monitoring processes, our financial information, is discernibly better than it has been at any time. That is not to say that occasionally we do not have a Greenwich, and there are specific circumstances around Greenwich, and particular personalities, that I do not think I would want to go into in detail today. But we have to do two things, I think. One is to ensure we continue to get better financial information, that is not just the quality of the data, it is also the time when it is available, and there has been a comment today about why do we not have the provisional outturn figures for last year, and the answer is because we still have not got the final data in. So I would like to speed up the whole process. The second thing I would like to do, which I think we have done extremely well in the NHS, is to implement what I call controls assurance, whereby every health body has to give an assurance to its board, through a controls assurance statement, accompanying both the annual accounts and the annual report, that there are risks systems in place, to ensure that there cannot be any faults regarding internal or organisational control. And, I believe, if Greenwich had possibly taken more focus on that initiative then maybe some of the problems that have occurred in that area possibly would not have; but I do not particularly want to use Greenwich as an example. But I would say, directionally, we are getting better; that is not to say we cannot improve even further.

  152. Given the lack of accountability, could you say why the independent examination of the situation in Greenwich, why that report is not available to the public?
  (Mr Reeves) I cannot honestly comment on that, at this stage, Chairman.

Mrs Gordon

  153. As you know, there are a lot of trust mergers going on, at the moment, I will not name names, but where you have got two trusts merging, one has balanced their books and are, a very famous word, prudent, and the other one comes with a deficit; what are your views on how that is going to be managed and whether it seems equitable that the other trust, presumably, is now going to be liable for that debt as well?
  (Mr Reeves) Yes, I know that is a very important point, and the merger process, I think, will be ongoing, and not just with trusts but also with health authorities. I come back to the major point, in my view, why you have a merger, it is to encourage a strategic alliance, in other words, you are doing what is best in terms of planning for the local community. I think, obviously, the point you made is quite right, in terms of it could be that as two equal partners come together one brings with it a deficit while the other shows it has good financial discipline. I think what the important thing is to do is to make sure that the management arrangements of the ultimate, combined trust, the merged trust, has sufficient people in place and the right disciplines in place, and that includes the board itself, a newly-founded board, to ensure that financial discipline is a very important part of a merger process, and to ensure that the deficit of that, the trust that inherited or brought with it its deficit, the reasons for that should be determined and that a sensible recovery plan should be implemented. And it could well be that maybe the trust that has that deficit can learn an awful lot from the other trust it is being merged with.

  154. But does it not mean that the trust that is going in with a clean balance sheet is actually going to be penalised, because it must impact on services?
  (Mr Reeves) That is absolutely right, but I think, at the end of the day, the decision to have a merger is a mutual decision, taking account of all circumstances, one of which is that one trust has a deficit and that needs to be taken into account. But the whole point about it, as far as I am concerned, about a successful merger, is that there is this agreement, you have this consensus, this combined mutuality that ensures that, in the future running of the merged trust, not only are you thinking about strategic developments and service developments but you are also thinking about financial discipline. So I am afraid that the answer is, let us think about the future but let us take account of those trusts that have inherited deficits and ensure they are eradicated as soon as possible.

  Chairman: Mr Coates, I am conscious that we have not involved you in this morning's discussion. I think your turn may be about to come.

  Mr Austin: I want to ask you questions about private finance, but, before that, could I just go back quickly to the waiting times issue, because there is something I wanted some clarification on. On the waiting times of those people waiting 12 to 18 months, those figures are published on a quarterly basis; the last figure for the previous Conservative Government, the last figure published, was 31,000, and the first figure for the incoming Labour Government was 46,000, an increase of 50 per cent on people waiting 12 to 18 months. Can I seek your view as to whether there could possibly have been anything which the Labour Government could have done, either way, which possibly could have caused that increase, or is it a fact that when coming into office in May, a few weeks before the June figures were published, those figures were on an upward and increasingly rising trend, which peaked in March 1998, and they have come down considerably since?

  Chairman: People are not normally passed over in this Committee, as you will appreciate, but I think you are feeling a bit sort of hurt, this morning, John, are you not?

Mr Burns

  155. We are very interested in your answer.
  (Mr McCarthy) I expect you will have to look at numbers, and individual members of the Committee will draw their own conclusions, I would have thought.

  Chairman: That is a very diplomatic answer. Thank you very much, Mr McCarthy.

  Mr Burns: We shall ask the Minister next week and tell you what the answer is.

John Austin

  156. Can I go on to PFI. There are a number of us who have expressed some concerns about a number of aspects of PFI. I have been particularly concerned about the basis of the reduction in beds, particularly under the last Government, which was done on an anticipation of community services being in place, which clearly have not been. What I would like to know is, we have now had the National Beds Inquiry and I want to know how the restoration of provision in hospital and intermediate care settings will be provided, and from which budgets the extra funds will be made available?
  (Mr Coates) We are taking two approaches to this problem. The National Beds Inquiry introduced new planning assumptions for the NHS, and we have to take those on board in terms of major hospital redevelopments. But we cannot be sure of what the requirements are in individual economies until the long-term planning guidance has been published; we anticipate this being out some time in the next couple of months. But until it is produced we are taking every scheme as it comes, and applying various checks and analyses to make sure it is compliant with the principles expressed in the NBI, in terms of bed modelling; once the guidance is out we will then reapply those parameters to all schemes that are in the pipeline. In terms of schemes that are in construction at that time, we will amend, if possible, the contract to allow beds to be increased, if necessary; this was done at Norfolk and Norwich, for example, where 144 beds were included. If it is during the design stage, we will amend the design process so that we can include the beds if necessary, as we did at UCL before our contract was signed. If the hospital is already operational then there are three potential outcomes, it seems to me. Some will require investment, in terms of new-build and new construction, which will be a resource problem for us; some will be a free good, as far as capital is concerned, because it is simply opening a new ward or re-using space that already exists; and some will not be affected, because the NBI guidance and the longer-term planning guidance will look at the economy approach, and it may be that trusts will not be affected by the change in planning guidance.

  157. But there is a possibility that as the configuration of services changes we may, with those PFI schemes which have already been approved, be left with hospitals which are outdated and do not fit in with current practice. Is there a possibility that we would be left with paying vast sums of money to the private sector for hospitals which are outdated and do not fit in with current requirements?
  (Mr Coates) Any decision to invest money in new infrastructure carries risks, in terms of long-term risks, and it seems to me it is no different whether we invest through private finance in a new hospital and get our sums wrong or get our assumptions wrong, or build it from public funds; whichever way you do it the Treasury has to borrow money, or we borrow money, and then we are in for a long-term liability, in terms of debt.

  158. If you are in the process of renegotiating private contracts, is there not some possibility that might be a somewhat expensive process?
  (Mr Coates) If you change any planning assumptions in mid course, it seems to me, there is a cost to that process, and if we were designing a hospital from public funds and were about to build it from public funds we would have to redesign the hospital and remodel our assumptions in terms of bed numbers.

  159. Could you tell us what changes are being envisaged in the PFI process to take account of the National Beds Inquiry and recent (events?)?
  (Mr Coates) At present, we have done an initial survey of the hospitals being built under PFI, and, indeed, all those being funded publicly, to determine whether the planning assumptions used in those hospital designs were compliant with the NBI. And I think it is true to say that none of the hospitals has applied the exact criteria in the NBI, but all did use whole economy approaches to determine bed numbers for their particular locality and economy. We have done some very recent work in the Department, which we have not shared with Ministers, nor, in fact, with Colin Reeves, particularly, yet, but I am prepared to go through what we have found, if you so wish.


 
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