Examination of Witnesses (Questions 194-199)
RT HON
DR JOHN
REID MP, MR
JOHN BACON
AND MR
RICHARD DOUGLAS
3 NOVEMBER 2004
Q194 Chairman: Colleagues, can I welcome
you to this meeting of the Committee. We particularly welcome,
Secretary of State, you and your colleagues. Could I also place
on record our greetings to our new clerk who is at his first formal
meeting, David Harrison. We are very pleased to welcome you to
your first formal meeting of the Committee. Can I ask you to each
introduce yourself to the Committee?
Dr Reid: Yes, John
Reid, Secretary of State for Health, now for a surprisingly long
period given my previous brevity of occupations, and on my right,
your left, is the Director of Health and Social Delivery, for
brevity, my delivery man, John Bacon, and on my left my money
man, Director of Finance, Richard Douglas, Chairman.
Q195 Chairman: Can I place on record
again our appreciation for the efforts made by the Department
to co-operate with this inquiry. We find the information very
useful and we appreciate your efforts. Can I begin by just looking
briefly at an area that we touched on last week, and I am sure
you will be familiar with the ground we covered last week, and
one area which I think caused many members some concern was the
overall financial position currently of a number of the acute
trusts and the implications of that. The one area that I pressed
Mr Bacon on, and Mr Douglas may wish to comment as he is here
today, is the financial monitoring of the individual trusts at
a local level; because I think we looked at one or two examples,
including one that you will be familiar with in my own area, where
it did seem that questions had to be asked about the way in which
independent monitoring outside trusts of the financial position
left a great deal to be desired. So my first point to you would
be are you satisfied that we now have in place a regime of independent
financial regulation to ensure perhaps that some of the problems
we have seen occurring in various parts of the service, especially
in terms of some of the acute trusts, may not recur in future?
Dr Reid: I am satisfied. Are you
referring, David, specifically to foundation trusts?
Q196 Chairman: No, I am referring at
this point to the acute trusts, the ordinary acute trusts, the
ordinary NHS acute trusts, because obviously the acute trusts
that we looked at, some of them had quite severe financial problems,
especially in the current year. I gave an example of the one in
my area, which I think you wholly do not agree with, but really
the point I am making is at what stage would the Department be
made aware of a problem at local level? Are you satisfied that
you have got sufficiently vigorous systems in place to get some
mechanism to ensure that we are not getting the kind of deficits
that have been raised in the current year?
Dr Reid: Yes, I am satisfied,
because I think that paradoxically the fact that these are coming
to our notice more apparently now is precisely what the system
was designed to do. There is a lot more transparency now about
the conduct of individual trusts and there is a lot more accountability
and traceability of where the money goes to, and I asked for some
figure in this. If you look, for instance, at 03-04, there was
a quantum improvement in deficits, for instance, of over £450
million from 96-97. So in 2003-04 67 NHS trusts were in deficit
and 41 PCTs were in deficit. In 2002-03 it was 50 trusts and 21
PCTs. The difference between the two is not actually because at
any given point in time people are now in trusts which are more
in deficit, but it is now more obvious to us because of the transparency.
You will know, for instance, that last year, despite the fact
that we always have claims of deficits in the middle of financial
years, that in fact the NHS as a whole was in surplus last year.
So I am satisfied that the mechanisms we have put in place are
doing exactly what they were supposed to do, and that is allowing
deficits or indications of expenditure and loss to lie where they
actually are apparent and making it more transparent to all of
us.
Q197 Chairman: One of the issues that
we will be exploring in other questions is the relationship between
those who are running the service at local level and the departments,
and obviously increasingly in recent years we have devolved the
direction of healthcare, rightly in my view, to people at a local
level. Where would the Department be involved in managing an individual
trust deficit where that trust was possibly going to take decisions
that could impact upon the overall levels of patient care, could
impact possibly on targets in other areas to address financial
targets, requirements of the Department? Would you get involved,
or is that entirely a matter, in your view, now for the SHA at
a local level?
Dr Reid: The first thing is to
recognise that what we now do is we let the deficit lie where
it occurs. Previously it was never quite clear where these deficits
were occurring at the end of the year and there was a great deal
of bailing out, and, secondly, because of things like payment
by results, we are going onto a system where, quite frankly, although
it sounds quite revolutionary in the NHS, it is quite common to
say, "You will be paid for the work you do" I think
this is something that has been wrong for half a century. It has
never been quite clear what was being paid and who was being paid
for doing what at the end of the year. If there were deficits,
those costs would tend to be either written off or subsumed within
some general level. So that is the point that I would make, that
the transparency we are bringing about and the responsibility
which we are asking now to accompany from individual trusts, the
money that we are giving, it puts a discipline on the trust which,
thirdly, will be instrumentalised, if you like, through payment
by results. As far as, if a trust gets into difficulty, are we
willing to assist? Yes, there are several levels at which we can
do it. If it is one of the NHS foundation trusts, obviously there
is an independent body monitoring and we may want to deal with
that separately. If it is an NHS trust in general, then we would
seek by advice, in the first instance through assistance from
the Centre for Modernisation Agency, through the strategic health
authority to assist. There is a range of facilities available
through the NHS bank, and so on, where we think that financial
assistance can be given where it is merited, though that is by
no means routine, as a matter of policy, and, thirdly, then we
can bring about circumstances where there is a change of management,
either internally in the NHS with more experienced managers or,
indeed, bringing people in from outside. So there is a range of
measures.
Q198 Chairman: What I was getting at
was if a trust is faced with such a problem, as some are, inevitably
the only way that they can get back into balance is by making
some quite significant and fundamental changes in their service—for
example, closing wards or closing hospitals. How would you handle
that situation nationally, or would you not want to? Would you
leave it to the trusts?
Dr Reid: No, I think the first
thing that we recognise in that is that if we were to handle that
situation the way it has been handled in the past, in some cases,
and that is merely to take the money from elsewhere and to write
it off in order to avoid one trust facing difficult circumstances,
let us be quite frank about it, somebody else is going to have
to close, somebody else is going to have to wait longer in pain,
or somebody else perhaps is going to have to die earlier, because
every time a pound is given in the National Health Service it
has to be taken from somewhere else. So the general approach we
take to this is that whatever we do to try and assess, Chairman,
must not undermine or detract from the new responsibilities which
we are insisting that local management and local staff must take
upon themselves along with the new transparency. Does that answer
the point?
Q199 Chairman: I wonder if there are
any examples where you might have intervened to prevent a local
programme of closures of some kind because of concerns about the
impact on services arising directly from a deficit being addressed
by the trust?
Dr Reid: There have been circumstances
where I am aware that the Department, essentially, and the strategic
health authority has given assistance ranging from advice through
to, in some cases, probably unwelcome assistance from one or two
people, by assisting them to move on and other people to take
their place, right through to financial arrangements where, for
instance, I am aware, I do not know whether you want to mention
specific cases, but I am aware where deficits have been deferred;
but I can assure you that that does not imply that we are in a
position where we are willing to write things off willy nilly
in one area in order to help local people avoid, local management
avoid difficult circumstances. Part of the transformation we are
trying to bring out in the NHS is precisely to do the opposite,
is to say that local people running local services have a responsibility
to local people but they also have a responsibility to the taxpayer
and to other patients in a wider sense and that the days where
we handed out—I do not want to use the word "bung",
but sometimes the way in which we gave money to trusts in the
NHS lacked some of the rigor that you would expect from the best
value use of public money, Chairman.
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