Uncorrected Evidence 1114

UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 1114-ii

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

HEALTH COMMITTEE

PUBLIC EXPENDITURE 2004

Wednesday 3 November 2004

RT HON DR JOHN REID MP, MR JOHN BACON and MR RICHARD DOUGLAS

Evidence heard in Public Questions 194 - 230

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Health Committee

on Wednesday 3 November 2004

Members present

Mr David Hinchliffe, in the Chair

John Austin

Mr Keith Bradley

Mr Simon Burns

Mrs Patsy Calton

Jim Dowd

Mr Jon Owen Jones

Siobhain McDonagh

Dr Doug Naysmith

Dr Richard Taylor

________________

Witnesses: Rt Hon Dr John Reid, a Member of the House, Secretary of State for Health, Mr John Bacon, Group Director, Health and Social Care Deliver, and Mr Richard Douglas, Director, Finance and Investment, Department of Health, examined

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, and on my left my money man, Director of Finance, Richard Douglas, John Bacon, 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 Ł450 million from 96/97. So in 2003/4 67 NHS trusts were in deficit and 41 PCTs were in deficit. In 2002/3 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.

Q200 Dr Naysmith: Secretary of State, one of the areas where the centre has been very generous and very helpful is in my area, the Bristol area and the Avon area. One of the points that arises from what you have just said, and I do not want to in any way criticise, I am very grateful for the generosity that has been shown and the understanding that has been shown, but from what you have said sometimes it might be that you have got old hospitals who are pretty inefficient and up against a modern all‑singing‑all‑dancing hospital. The costs are bound to be different in that situation. Is that not the case? You have got to take that into account when you decide where the deficits are arising.

Dr Reid: I understand that, and I do not want to court unpopularity from the Committee, but let's call a spade a spade. I can go from Bristol to Yorkshire, I can go from there to Manchester, I can go from there to Milton Keynes, I can go from there to the south‑west, to Dorset. Every single area I visit has a specific reason why they should get more money or they should get deficits right now. If you go to Yorkshire they will tell you, with absolute justification,, that they are the furthest away from target and the highest in need to places like Easington. If you go to the south‑west, they will tell you that the market factor militates against them, and, although they have between Ł3‑400 million extra, actually there is Ł60 million more which has been taken to give to London. If I go to Manchester, they will tell you the census was wrong.

Q201 Mr Bradley: He is coming!

Dr Reid: And I could go on ad infinitum, because we visit ‑ this team of ministers has done I think it is something like between 50 and 100 visits in the last year, and it may even be more than that; so I know this. In other words, despite the fact that we have got the biggest ever increase in health expenditure, and despite the fact it has gone from Ł40 million odd to Ł90 million odd over five years in England ‑ sorry billion ‑ Ł110 billion throughout the UK ‑ everybody has a good reason for saying they want more, and in the case of Bristol, you know, it will be one particular reason, but there is only so much money that goes round. It so happens the pot is bigger than ever before, but if we take from one area, or we waste a pound anywhere, or we say to people they have to face up to their responsibilities, somebody else is losing that, and actually, after many years of under‑investment, everyone has a very legitimate claim: because the truth is that there are a lot of potholes in this road which we hoped that the new money would immediately put traffic on the road, but actually the back‑filling of the potholes means that some of it has been used for that, I accept; but I now think we are beyond that, and in all those areas I mentioned there is substantial progress.

Q202 Chairman: Before I bring our expert on the census in, Mr Bradley, can I ask you a little bit about the capital schemes? I asked Mr Bacon this question last week. One of the concerns is that because we have moved to PFI funding primarily on the capital schemes, the situation in respect of deficits may be somewhat different from what it would have been had it been direct Treasury funding. Mr Bacon gave me a fairly confident reply in terms of the capital schemes, which I hope he is not regretting giving me a week later. Are you still confident that the capital schemes, the PFI schemes, hospital schemes that are now planned, despite some pretty significant deficits in some of the trusts concerned, will go ahead as anticipated?

Dr Reid: Yes, I am still confident. Does that mean that I am omniscient or arrogant enough to assume that we will never have any problems with the PFI scheme? No, I am not, because whether it is in the public or the private sector, whether it is PFI or straight public funding, there are always in the real world, and construction involved, and costs involved, there are always going to be problems, but I have no doubt that there will be on occasions designs that would have been better thought through, costs that have over‑run, contingencies that have not been thought about when you go down the road of PFI, but all of us know here, again calling a spade a spade, that those problems were not entirely absent from procurement through the public sector. One merely looks at the Ł40 million Scottish Parliament that has come in at just over Ł400 million or the history of defence contracts, all of which used to be done through the normal public acquisition, and they ended up invariably over cost, overrun and somewhat separate from the original plan. So the truth is, there is no way of acquiring these assets known to human kind which is absolutely free of either risk or problems, but the transfer of the risk, the maintenance of the cost over a longer period and the fact that they are both thought through at the beginning, I think, gives me a degree of confidence with these schemes which is higher than I would have if we were just saying, "Let us bear all the risks ourselves and think merely of the capital costs initially without the through life maintenance, Chairman.

Q203 Chairman: In a sense I was pressing you more on whether schemes are likely to go ahead where you have got some of these serious deficits without getting into the whole PFI debate. You basically confirm Mr Bacon's confidence that the schemes we are talking about should go ahead despite some of the trusts being in difficulties financially?

Dr Reid: Yes, I fully accept that when people are trying to make up for inherited problems of under‑investment and deficit, and so on, that there is a general mitigating factor about the capacity you can get out of any level of investment, but I think by and large now we have overcome that, and, despite individual instances, I am confident that the generality of these will go ahead, and I cannot think of any one that strikes me as being in serious difficulty because of that. John, do you want to comment on that?

Mr Bacon: Yes. Chairman, picking up the discussion we had last week, I did explain, I think, at the time that the trust you were referring to will have to demonstrate that this scheme is both value for money and affordable.

Q204 Chairman: I am trying not to tie you down to my local constituency. This is a general concern.

Mr Bacon: This would apply to any scheme anywhere at any time.

Dr Reid: I have not even said that, because you see that is not because it is PFI or there is a deficit; those rules would have to apply to any planning. For instance, there are huge plans in the country. Manchester: there was a lot of discussion between local representatives and PCTs about the balance of benefit between major establishments in the city centre and the potential loss that would be accounted for by money being taken away from primary care trust ventures or on the periphery, if I can call that the periphery. In other areas you get the same sort of... In London at the moment - one huge scheme there - Paddington, and so on. There is a constant scrutiny that goes on, but that is not because of deficits and it is not because of PFI; it is right and proper that that goes on irrespective of them. The question you asked me is do I remain confident, without being complacent or arrogant about it, that deficits will not hamper schemes that would be otherwise proven to be beneficial? I have a fairly high degree of confidence in that, Chairman.

Q205 Mr Bradley: Secretary of State, I am grateful you raised the census with the Committee, and that is related to the central Manchester development: because part of the financial deficit problem with Manchester, whether it be hospital trusts or PCTs, is the abject failure of the Office of National Statistics to actually count the number of people in Manchester. Thousands were missed off, and, as you know, all those people, quite rightly, need, and from time to time demand, appropriate healthcare. Those people are not reflected in the budgets allocated to Manchester, and so far, and we raised this with Mr Bacon last week, there has been an intransigence on the Department's part to compensate Manchester; and if they not compensated that problem compounds itself over years by not properly reflecting the population of the city. As you know, the Deputy Prime Minister has accepted that argument in terms of local government services. Why will you not accept it for health services?

Dr Reid: Because, you see, if I did, and it is unlikely I would come here and do it today anyway - this is not forum to do it - then I would have to look at Milton Keynes, who for 30 years have been under-estimated every year in terms of the projected demographic changes upwards, and there are several other areas like that. I would have difficulty in explaining to Easington why it is that they are the area of greatest need, not the furthest away from target, and I can find the money to rectify what is a mistake or anomaly in Manchester but cannot there in Easington - and I can go on in other ones. In other words, the point that is always forgotten in these forums, and I am sure it is not forgotten by yourself, Keith, but sometimes these are the arguments, is that, notwithstanding any deficiencies of the type that I have mentioned, the increases have been, quite frankly, huge over a three‑year period to Manchester and Easington and other areas. So the complaint, which I understand, and I do not say any of them are illegitimate, but the complaint is that on top of the huge increases we have had we would have had more had X not occurred. If I say that I am going to rectify one anomaly or mistake in the case of Manchester, then it becomes very, very difficult not to open in retrospect every other single area, because there are a lot of legitimate areas of complaint. I have to say to people like yourself, although I understand and I do not for a moment say to you that anything you are saying is incorrect, but the extent of the increases that we have given overall to everyone are some compensation for the fact that the increases might have been bigger in several areas if we had not had inherited mistakes, some of them unintentional, as in the case of Manchester, and some of them, when it comes to distribution of resources, mismatched to needs throughout the country, I find it difficult to believe were unintentional when I look at the pattern of distribution over a period of 20 years, and it is so mismatched to the areas it meets; areas partly, in that case, because of the law of inverse care where money, personnel resources, was not going where it was needed but was being the pushed away provided by the challenge, but also the pattern of distribution away from need to the most affluent areas looks as though it might be other than unintentional over these years. I do not expect that to be a satisfactory answer to you or to people in Manchester, but I hope it is a more satisfactory answer given the context in which there is a huge additional amount of money going into the Manchester area for expenditure on health.

Q206 Mr Bradley: I fully accept the increased expenditure, but we are talking about the best part of 30,000 people that are not counted, through no fault of the local health economy, and they are having to bear the costs of those people who need NHS treatment; and I would just urge you - I will not labour it any further, Chairman - to look again at the matter?

Dr Reid: I will, of course, at your request. In any case, we are on the verge of calculating the distribution of monies to private care trusts for the next few years. I had intended that that would take place about now actually, but delays in producing statistics from an organisation that we will not go into means that it probably be the New Year before we get round to it.

Q207 Mr Jones: On another subject, Secretary of State, practice based commissioning: a new phrase for GP fund owners, is it not?

Dr Reid: No, it is not actually. What I have done is unashamedly tried to take the good points from practise based commissioning and incorporate them in an indicative approach and to avoid the worst points of practice based commissioning. There are a number of areas where I think, quite frankly, we could learn from other systems, and I have always taken the view that we should try and learn. I am trying to do that by taking the best of the public sector and the best of the independent sector as well for the benefit of patients, but I would emphatically deny that this is the same as practice based commissioning. Fund‑holding, which is what you are talking about, led, in the first instance, to an equitable distribution of resources because fund‑holders got more money. That is not happening under the indicative commissioning that we are doing. Secondly, the savings from fund-holding did not have to be spent directly on patient care. That is the case with what we are doing. Thirdly, under fund‑holding GPs could simply elect the cheapest cost for a procedure. They cannot under the system we have got. There are other differences, but there are three substantial differences between the approach that was used on the fundable way and what we are doing under indicative commissioning based on indications from GPs. On the other hand, the benefits we are getting having avoided some of the inequities and inefficiencies of the fund‑holding system, the benefits we are getting from decentralising it down to GPs, are that the GPs are very often best place to indicate to us what level of commissioning in a given area ought to be most appropriate for that local primary care trust. So what I was not prepared to do was to say we cannot learn from the decentralisation elements of this but to say what can we learn from this that is equitable, that is fair and treats patients better, and how can we avoid what was wrong with that?

Q208 Mr Jones: As the practice based commissioning rolls out, what do primary care trusts get left to do?

Dr Reid: What do they get less to do?

Q209 Mr Jones: Left to do?

Dr Reid: Left to do. Commissioning.

Q210 Mr Jones: But will not the practice based people be able to commission?

Dr Reid: They will be able to indicate... Do you want to go through the exact process of what I am doing? This is indicative. John, just go through the system.

Mr Bacon: Primary care trusts have a variety of roles, and there are two fundamental ones one of which is developing an approach to public health and health prevention, health promotion in their local communities. That will remain with them allied to their general practitioners. The second is to think about the development of community and primary based services and to oversee the general practice network. Thirdly, to oversee the practice based commissioning process. So we are not saying that they are completely divorced from it. They will continue to hold the real money. These are indicative budgets.

Q211 Mr Jones: They just want to police it, do they?

Mr Bacon: They will oversee it to ensure that services are developed strategically, that they meet the needs‑‑

Q212 Mr Jones: I am sorry, if I can intervene.

Dr Reid: Can I just stress the words that John used here: "These are indicative budgets."

Q213 Mr Jones: Yes, but so I can clarify for my own understanding and maybe other members of the Committee, if you end up with a practice based commissioner which is inappropriately commissioning, over‑prescribing, or whatever, is the role of the PCT to come in and police it and say, "Wait a minute, you are way out of line here"?

Mr Bacon: We are still essentially engaged in a managed system here. We are not saying this is completely laissez faire, but what we do want to do is to encourage general practitioners and practices to think of innovative ways of providing services to patients that best meet the needs of those patients. Of course, if practices were acting inappropriately, we would expect the primary care trust to intervene?

Dr Reid: Basically it is an extension of devolution to the primary care trust. Just as we are passing down a lot of the operational responsibility and operational rights and money to primary care trusts, so we are hoping that that process of devolution and decentralisation is not stopping the level of primary care trust; while minimising and removing the inequities of the old GP fund‑holder, they are involving the front line in the commissioning of care. That does not mean to say that they lose the role of doing that.

Q214 Mr Jones: No, but since the practice based commissioners are doing things which they were not previously doing which the PCTs are now doing, it is bound to lead to a lessening in the role of the PCTs. Do you foresee that meaning in the future that possibly there should be less PCTs or less small PCTs?

Dr Reid: I do not think it necessarily means that there will be fewer PCTs. What it should mean necessarily is that the PCTs themselves, which were an attempt to localise and decentralise decision making, decentralise it and make better decisions because they are more in touch with the grass roots front line services. That is what it should mean. Is it possible, as a result of this, that there would be some shift in the number of PCTs? It is possible, but not for the reasons that I think you are implying of redundancy. Up to this point we have stopped PCTs merging, not stopped them working together, but we have said, "Look if the PCT were set up to give a local dimension to this to make sure that we are in touch with local people and their needs and, therefore, we do not want everybody rushing into merging them into larger bodies." But say, for instance, and I merely give this as an example, say there are a series of PCTs in a given area where, through their own willingness to decentralise, are putting in place mechanisms within their own PCT structure, within the local area structure, to enshrine localism and then saying, "We want to merge with the local PCTs down the road in order to reduce the overheads and the bureaucracy here, not because it is redundant but because we think we have now got systems in place that, even if we were to merge, would route local power and local decision‑making through GPs in other ways." If that was to happen, one can envisage a set of circumstances where it might as PCTs evolve, but I do not think it will happen because (a) they are redundant or (b) it is being determined and dictated from the centre?

Q215 Dr Naysmith: I am just reading this paper about the practice based commissioning. It is a little bit ambiguous, it has to be said. It can be read in the way that you are telling us today, so that is the right way, but there are things that say, "The right to hold a budget and our willingness to see it as a first step"‑‑

Dr Reid: I cannot hear you.

Q216 Dr Naysmith: I am sorry, this is from the paper Practice Based Commissioning. It says, "The right to hold a budget and our willingness to see it as a first step towards the adoption of a sophisticated range of ways in which practices are involved in commissioning are entirely consistent with the principle of greater devolution." There are lots of things like that that can be read, and this is the first step in actually giving a budget to practices. I know you have just said that it is not that, but I suspect some people think it is that?

Dr Reid: I have not said it is not that. I have said it is not necessarily that. I have not closed my mind to the evolution of anything, whether it is PCTs, it is the centre, you know. We are in a situation that is dynamic. I do not think we are saying, "This is it. We have got it right." Indeed, the paper to which you have referred there, Doug, I think is the one issued on 5th October, which has gone out and it is preliminary guidance, but we are specifically asking the NHS - that is everyone involved, including PCTs - to give us their feedback on that. So if the PCTs came back and there was massive resistance or widespread deficiencies pointed out, people said, "You ought to put to a cap on this", or whatever, we would take full account of that. That is why we have issued it in order to get the feedback from them.

Q217 Dr Naysmith: The reason why it is an important question and one I am very interested in is because, as you have just been talking about, there are people who are saying that current primary care trusts are too small for certain commissioning decisions.

Dr Reid: Yes.

Q218 Dr Naysmith: You mentioned public health and care for chronic diseases and that sort of thing ‑ I have just mentioned care for chronic diseases; you mentioned something else ‑ and that PCTs are really too small for that kind of role. That is a view that has been put to us more than once, and I know it is around. If you speak to PCT people ‑ let me finish ‑ if we get to that stage, then what happens is GP practices are going to be left with commissioning the acute services, which is what always happen in the National Health Service. Funds go towards the acute services, public health and chronic diseases and community care gets left behind. How are you going to make sure that that does not happen?

Dr Reid: Again, when you say that some say that PCTs are too small to undertake commissioning, it seems to me a peculiar argument for these people then to say, "So we go down to small local GP practices to do the Commissioning."

Q219 Dr Naysmith: No, that is not what we are saying. We are saying we ought to commit a bigger‑‑

Dr Reid: I am trying to reassure you that I do not start with an a priori view that PCTs are too small and all ought to merge.

Q220 Dr Naysmith: I do not either?

Dr Reid: But up to now we have taken the opposite view that because we wanted smallness and, if you like, locality and localism and nearer the front line of the service, we have prohibited them from merging, or talking, or reducing their own overheads, not as a matter of principle, but as a matter of practice and saying, "You have just been established; give it some time." The question I was asked, I thought, was, "Can I envisage evolution of this?" Yes, I can envisage it. I do not think it is necessary, I do not think it will happen in every case, but I can envisage a situation where we lift a prohibition on this at the request of PCTs, and I put a condition on this, if we are convinced that by doing so they will not detract from the locality and the localised input in service commissioning. What I am saying is that the fact that we have got indicative budgets from local GPs would be one way, perhaps, of a PCT saying, "We have now enshrined a way of having a finger on the local pulse." It is not leaving all the commissioning to GPs, but it is saying, "We have a way of retaining locality in small units. Can we now at PCT level merge with another PCT?" And I can envisage that happening. I do not think it will necessarily be the part and I do not believe it will be, it will not be driven by me dictating to them, but a degree of evolution in that might come about.

Q221 Mrs Calton: Secretary of State, could you say whether you have been able to make an assessment of the effectiveness of collaborative commissioning of specialised medical services by PCTs looking at it from the other angle. Where there are specialist needs if they are looked at merely from the local GP practice point of view, then they may get lost completely. Are you in a position, perhaps from information from strategic heath authorities, to say whether collaboration between PCTs is producing the sort of commissioning that is necessary?

Dr Reid: I can make a general comment, Patsy. I do not have the figures here. I do not know if either of my colleagues have them for the empirical evidence on this. There are a number of things happening at the PCT level that may mean that that is less of a risk now than perhaps it was 10/15 years ago. The first thing is that through the GPs contract and general approach, general practices, GPs practices, are being encouraged to develop so that they include specialised services that previously they have never provided at the primary care level. That, again, is a vehicle of local service for people, local convenience. Secondly, we have been encouraging GPs, though they remain general practitioners by definition, themselves to develop specialisms, and that means, I think, from memory, we have 1400 GPs ‑ it is only a start but it is growing ‑ who are now developing a degree of specialism because the contract gives them some more time to do that, and that is the benefit of the local area. Thirdly, of course, and finally, part of this general development at the level of primary care has been the role that nurses now play in specialist subjects as well. So in terms of even one GP, before you go into collaboratives, in terms of the general practices themselves at a local level, I think the degree of specialisation and the diversity of services that they are now beginning to offer in a burgeoning fashion, and have been encouraged to do and rewarded to do, means that the risk of your fears are less than they would have been a few years back. In terms of the actual empirical data, John, would you like to make some comment?

Mr Bacon: If I could maybe add a bit to what you have said, Secretary of State. Of course, there is no absolute size of population for purchasing specialist services, and what we have developed is what we feel are appropriate size populations to address depending what the specialties are, and there are a few which are still purchased nationally. So we have an arrangement where one of our health authorities leads on behalf of the rest of the country to ensure that where we only have the service in one or two places that is appropriately commissioned; and there is a pyramid of size of organisation necessary to do that and we have encouraged health authorities and their constituencies to join together where it is appropriate, either at health authority level or at PCT level, to agree that and, indeed, increasingly in things like cancer, what we call cancer networks. So whilst I do not have with me any empirical data to say whether that is better or worse, I think the evidence is based on the outcomes of those services. I am confident that the arrangements that have been put in place structure the commissioning level appropriately for the service that is being purchased, the bulk of which should be done at local level but clearly for wide area populations you need aggregates of PCTs or SHAs to do that.

Q222 Dr Taylor: Secretary of State, can we move on to agency nurses? Although the expenditure on agency nurses is increasing, we were told last week by, I think, Mr Foster that he was optimistic that NHS professionals would be able to control the problem or at least help. This week we have had the comments from the Royal College of Nursing, very worried about the cost of agency nursing, worried about their estimates of the number of nurses who are currently leaving the NHS every year and the reasons for doing it. I was not terribly impressed with the Minister of State's response to this, because he tended to rather rubbish the Royal College of Nursing, and they are the people on the ground who can actually see what is happening. What are your comments?

Dr Reid: Richard, it is not in any way to diminish my respect for the Royal College of Nursing or for the organisations that represent accident and emergency consultants, or midwives, or anyone else, to say that that it does not come as an entire surprise to me to hear those organisations saying, "We need more of us", and more power to their elbow, because we do. But sometimes the way in which they highlight it, while containing a germ of truth, can be presented in a way with which we would not entirely concur. Let me give you an example of that. I awoke to see Ceefax saying there was a crisis in nursing in the NHS because everyone was leaving to go to the United States. Actually the figure was 2,000 last year, which is the highest ever admittedly, but it is out of 393,000 nurses. I saw figures suggesting that there were 30,000 nurses leaving the NHS. I did not recognise the figures, first of all, but I can tell you that the net increase in the last year for which we have figures alone, that is net after those leave are taken into account, was 18,000 additional nurses. We are training something like, I think, 24,000 a year. We have got 77.5 thousand extra nurses over 1997. That is a head count, but it is still equivalent to a full‑time equivalent of about 50,000 extra nurses. So none of that should make us complacent, because Beverly Malone is right, there is a global market for nurses, particularly for well‑trained nurses. We try to deal with that in a civilised fashion ourselves by reaching protocols with those countries from which we take nurses. We are trying to minimise the number of agency nurses that we take it, and perhaps I could finish by addressing that, because that was the third point of what they said. I asked for some figures on that. The figures show, as they will in several areas of what have to say today, that the capacity is up and the costs are down. That is true in several areas which I will come on to, but as far as nursing is concerned, the latest provision accounts data show that the average spend on agency nursing did not increase between 2002/3 to 2003/4 but fell. It fell from around Ł590 million spent in 02/03 to Ł525 on 03/04. That means that it fell by something of the order of Ł65 million during that period. I give you those figures which have not been released before, I do not think.

Mr Douglas: They are in the unaudited accounts.

Dr Reid: They are in the unaudited accounts, but we expect them to be right. I did not want to use them the other day in terms of a press release because I thought you were entitled to have them. So a reduction in spend of Ł65 million or over 10 per cent in one year alone on agency nursing, and that is partly because of the NHS professionals that we are now bringing in, but it is also partly as a direct result of a policy to expand the NHS nursing work force and increased flexible working patterns. That is the key to it. A lot of nurses actually go to the agencies because they find it more flexible. So we are trying to do that and we have increased the number of qualified NHS nurses by 21 per cent since 1997, that is 77,500, and we have almost 400,000 nurses now. That is as full as I can be.

Q223 Dr Taylor: Thank you very much; that was very helpful. I am delighted that the total sum is going down and that you are addressing the problem of flexibility, because the huge attraction of being an agency nurse is you can work when you want to, as long as you want to and as short as you want to and you do not have the responsibility for running the ward. So there are tremendous challenges to improve the working life of the real NHS nurse?

Dr Reid: Indeed; that is a 10 per cent reduction. I can tell you through the measures taken in London, where there is a particular problem, of course, agency spend is high, it is the combination of the London agency project and the NHS professionals is showing pretty promising results at the moment and I expect not a 10 per cent reduction in costs there four agency nurses but 17 per cent between 02/03.

Q224 John Austin: On the question of future planning for nursing levels, I was surprised to see in the answers you gave to the questionnaire that you have no break down of the age structure of the current nursing profession. In terms of future requirement for agency nursing, or whatever, surely you need some idea of the likely retirement patterns on nursing for the future. Certainly in London I know that my trade union which represents the community nurses and health visitors has shown a quite alarming figure in terms of the nurses who will be retiring in the next few years?

Dr Reid: I do not dispute that, John. I would hope that we did not say we had no idea at all, but what we do not have is sufficiently verifiable figures to put into the public domain or to someone like you; but, you are right, we should be doing that and working on that. I agree with you. I do not dispute the fact that nurses retire, and so on. The key point about it is to try and make sure that we not only recruit nurses, which we are doing very well, but we retain nurses. Let me give you two ways of doing that. One is to give more flexible working, which we are trying to do, although the trade unions and the Royal College do not thing we are going far enough and, fine, we will have a look at other ways of doing it. But the second way is to give better wages and own conditions, and nurses who used to start on around Ł12,000 under an agenda for change start on Ł18,000 and the ceiling now that we give nurse practitioners, specialists and consultants is not where it was, Ł30,000, Ł35,000; it is going to be Ł49,500. So I hope that is helpful.

Q225 John Austin: We all welcome that, it is very important, but if the high proportion of the most experienced staff are about to retire in the next few years, no matter how many improvements you put in, there is a real problem, is there not?

Dr Reid: Yes.

Q226 Dr Taylor: Moving on to treatment centres, can I have your comments on two inconsistencies of the Department of Health that appear to me to be inconsistencies. The first one: absolutely correctly, the Department in previous years has put huge efforts towards building NHS treatment centres, and there are now 27 of them open, and certainly the one in my constituency is built to a very high standard and will provide a very good standard of service; but these were built with capacity to bring work in from the outside to trusts. So they were built with much more capacity than an individual trust actually needed. I tried to get at this last week with a question about the unfunded spare capacity. The answer I got was not about that at all; it was about the amount of planned activity that was being carried out: because from talking to NHS Elect, which is the organisation that runs four of the treatment centres, they are convinced that there is a large amount of unfunded spare capacity in treatment centres, and it seems to me completely illogical that, rather than using that amount of spare capacity, which is, even before you go on to week‑end working, that we are contracting out to the independent sector, what could be done if the money was given straight to PCTs in the NHS treatment centres?

Dr Reid: Yes, if more money was given.

Q227 Dr Taylor: No; if the money that the Department is putting into the independent sector was given straight to the primary care trusts, they could then commission services within the spare capacity that exists in the NHS treatment centres?

Dr Reid: Yes.

Q228 Dr Taylor: Because you are paying more as the Department of Health because you are paying set up costs. It is costing the country more to use it in the private sector than to get it in the NHS treatment centre?

Dr Reid: Let me come back to the cost in a second, Richard. The fact is that you would be taking money away from independent treatment centres that would, say, be reducing the waiting time for cataract operations from 18 months down, in some cases, to four or five weeks. There is a cost. There is a cost with all of these things. The fact of the matter is that there may be, and I will ask John to come in here and give you, or Richard to give you a technocratic answer to it, but the reality is that we are going through the most massive transformation of any organisation anywhere in the world in the public or the private sector, short of the State. The last person to try anything like this was Gorbachev, and that was the only thing that is bigger.

Q229 Chairman: Order. Can I just say, we understand from the recent dialogue that has been going around the Committee that there are likely to be four divisions. My suggestion, and I think the only person who was not consulted was Richard because he was talking, is that we end the session now and reconvene at a date as soon as we can to continue the session, because we have got to go into a range of issues. Would you be happy with that?

Dr Reid: On another day?

Q230 Chairman: On another day, yes. I know you have commitments after 5 o'clock; other members have as well. It seems unreasonable, as we are not certain how many divisions there will be to suggest we come back, because we do not know when this division will end. Are you happy with that arrangement?

Dr Reid: I am happy with that if you would grant me the indulgence of giving several pieces of news to you since I kept them today to give them to you.

Chairman: There are rules. I have to allow members to go and vote. I will be happy for you to do that at the next meeting. We will adjourn to a future date to be arranged. Thank you, Secretary of State, and our thanks to your colleagues.