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NHS Bureaucracy

The Secretary of State for Health (Dr. John Reid): On 22 July, Official Report, column 61WS, I announced the completion of the review of my Departments arm's length bodies (ALBs). I made it clear then that there is considerable scope to improve efficiency and reduce bureaucracy in the ALB sector and I reiterated the following parameters for the review:

Detailed discussions have been held with all interested parties about how to implement these changes. We are now publishing the next steps to be taken in implementing the review of the Department's arm's length bodies, the conclusions of which were published in July in the report "Reconfiguring the Department of Health's Arm's Length Bodies". As well as next steps, reconfiguring the Department of Health's arm's length bodies implementation framework, sets out the principles, processes and timescales by which we will implement the ALB change programme. Copies have been placed in the Library.

The ALB programme is part of a wider programme of change to improve efficiency and cut bureaucracy in the management of the national health service. The objective of all these activities is to reduce the burden on the frontline and free up more resources for the delivery of frontline services to patients and users. This wider programme is to ensure that the increased investment in the NHS—42 per cent. in real terms from 2003–04 to 2007–08—is accompanied by modernisation that cuts out waste.
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The ALB change programme itself will deliver a redistribution to the frontline of at least £0.5 billion a year by the end of 2007–08. The number of ALBs will be reduced to 20 from the base year of 2003–04, despite the sector assuming new functions under statutes approved by Parliament. Even with these new functions, which bring new costs, we will be setting the 2005–06 budget for the ALB sector so that it will cost about £100 million a year less to run than in 2003–04. A further £200 million a year will become available for redistribution to the frontline by the end of 2006–07 and again in 2007–08. This will inevitably mean significant changes in the organisation, staffing, financing and governance of the ALB sector. These changes must now be delivered.

One of the changes in the ALB sector is the establishment of a health and social care information centre to coordinate and streamline the collection and dissemination of data to those who use it. This will build on the work done by the Department in reducing demands for information from the NHS frontline. Since March 2003 the Department has reduced the burden of central returns by about 160 person years and this will have risen to 400 person years when we reach April 2005. That means 400 people in the NHS will be freed up for frontline operations through the Department reducing and simplifying its statistical collection. Now it is the turn of the inspectorates, strategic health authorities, primary care trusts, royal colleges and others to follow the Department of Health's example by streamlining their statistical collection through the new health and social care information centre.

Cutting overheads is now a key part of any modern business. That is why we expect substantial reductions in the overheads of the ALB sector. By 2007–08 we expect annual savings in overheads of £35–40 million and significant progress towards that made in ALB plans from 2005–06. This will be achieved by merging bodies, sharing back office services and moving to cheaper locations.

There is a tendency for all organisations to undergo "mission creep" and add functions. The ALB Review is about slimming down the sector to the essentials and to do those essentials more effectively. That is why we are expecting major savings for redistribution to the frontline from those central services in the ALB sector. They will be regrouped into eight key central businesses:

In 2005–06 we aim to have in place the boards and executive teams to streamline the business processes of this group of businesses and to reduce their overheads. At the same time, we will see a further dividend from the supply chain excellence programme which is already delivering better value for the local NHS by using the purchasing power of the NHS as a whole more effectively.
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In 2005–06 the NHS will benefit from a minimum of £100 million in savings from more efficient procurement led by NHS PASA. By the time we get to 2007–08 we expect that procurement activities led by NHS PASA, together with other supply chain initiatives such as the recently negotiated pharmaceutical price regulation scheme, to be delivering over £800 million savings annually for use by the NHS frontline.

The Government's better regulation task force have shown the way forward in reducing the burden of regulation. Linked to this is the need to systematise more effectively the work of inspectors and reduce the burden they impose on the NHS frontline. The Government have already merged some inspectorates. The ALB review will continue this process and build on the work of the new health inspection concordat. This concordat will reduce the number of inspection days in the NHS, cut the information demands, especially through the new health and social care information centre, using more self-assessment and providing "inspection holidays" for high performing organisations. The budgets of the inspection sector will not be allowed to grow in an uncontrolled way, so that the inspection burden can be better contained than in the past. Full cost recovery will be pursued for independent sector inspection to reduce in stages the burden of their costs falling on the NHS.

Alongside cutting the inspection burden, the Government have abolished the controls assurance standards as a separate set of standards, and reporting to the centre has been stopped. Key elements of the controls assurance standards have been incorporated into the standards for better health which will enable NHS trusts to link assurance on controls directly to NHS objectives. These and other changes announced in the recent Cabinet Office report will cut the NHS burden of collating and reporting information by about 85,000 person days a year, thereby freeing up over 350 staff at the frontline for other work.

There has been much unfair criticism of the Government's use of targets. Targets have helped to save lives. Cancer mortality rates in the under 75s have fallen by 12 per cent. and coronary heart disease mortality rates in the under 75s by over 20 per cent. in less than six years. A specialist sees 99 per cent. of people with suspected cancer within 14 days—compared with only 63 per cent. seven years ago. Targets have reduced waiting times. There are now 300,000 fewer people waiting for inpatient treatment than seven years ago. And their average waiting time then was over 18 months and now it is half this. But the time has now come to reduce the number of national targets from 62 in the last planning round to around 20 for the next three years. And more targets will now be locally determined to reflect local priorities.

"Local" is where the NHS action is and will continue to be. Eight regional offices and 100 health authorities have been replaced by 28 strategic health authorities. The Department of Health's change programme has reduced the size of the centre by 38 per cent. The ALB Review will reduce the staffing of that sector by 25 per cent. But the NHS still needs good managers to run its operations and administrative and clerical staff to support doctors, nurses and other health professionals to do what they are good at—looking after patients. All these changes have not led to a growth in NHS management costs. In 2003–04 management costs were
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3.7 per cent. of net NHS expenditure compared with 4.0 per cent. in 1996–97. We will keep those costs under control. The ALB Review will help us to do that by ensuring that the local NHS gets efficient, better value for money from central services, a contained regulatory and inspection system and fewer demands made on it from the centre.

Ministers are determined to secure the changes set out in this framework document within the timescales it proposes. They will be fully supported in that purpose by Sir Nigel Crisp as the accounting officer and his departmental management board, which includes the senior official responsible for seeing through this change management programme successfully.

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