3. NHS PLAN & REFORM (continued)
3.2.2 What are the expected costs of
Agenda for Change in each year from 2005-06 to 2008-09? Have these
estimates changed, and if so, can the changes be explained? (Q28)
ANSWER
1. The funding envelope for Agenda for Change
from 2005-06 to 2007-08, and a projection to 2008-09 is set out
in Table 28.
2. Monitoring of the costs of Agenda for
Change in 28 sample sites in 2005 suggested that in the first
12 months from October 2004 to September 2005 direct earnings
costs exceeded those originally estimated by 0.5% of the Agenda
for Change paybill, or around £120 million a year in cash
terms. In the same period, this data suggested that the indirect
costs of replacing additional hours and leave arising from Agenda
for Change exceeded those originally estimated by at least £100
million a year. However, these indirect costs are based on trust
estimates rather than actual payroll records, and are susceptible
to management action. Subsequent management accounts data (FIMs
data) suggests that actual spend may in fact be less than these
estimates, although we will need to await final accounts in September
2006 to confirm the position.
3. In addition, from October 2005, a significant
minority of staff who were previously on their scale maxima, or
on spot salaries, will have gained access to some further pay
progression. This was allowed for in the cost estimates in the
table above. But, whether actual experience of progression is
more than expected, or less than expected is not known, and we
are currently considering what further information and analysis
is necessary to measure this. But, it is important to note that
it will become increasingly difficult to separate out costs due
to the new system from other changes as time goes on.
4. In terms of the reasons for the cost
overruns suggested by the 28 sample sites data, for direct costs
(basic pay, unsocial hours, overtime, geographic allowances etc)
most elements came close to their original forecast except overtime
where an expected small saving of around 0.1% of pay bill became
a small cost of 0.1%. The original estimate was based on the assumption
that the savings from abolition of higher premium rates for Sunday
working for significant numbers of staff would exceed by small
amount the additional cost from paying overtime at premium rates
to some smaller groups who had not previously been entitled to
that, and the effect on overtime of increases in basic pay. This
variation accounted for nearly half the overall variance in direct
costs. The remainder was the net effect of small variations (both
up and down).
5. In terms of indirect costs there is a
significant difference between the sample site Trusts stated policies
on replacement of hours and leave compared to assumptions in the
original forecasts. There was also an assumption in the original
estimates—based on the evidence we had at that time—that
the old NHS extra-statutory days (additional bank holiday days)
were still being staffed at premium rates or had been bought out
by additional leave on the basis of three days normal leave for
the two extra-statutory bank holidays. Whereas evidence from the
sites monitored during assimilation suggested that in most cases
these had already been bought out with additional leave on a two
for two basis in some cases with unrelated concessions (for example
on car-parking). This contributed around £80 million to the
estimated variance in indirect costs within the sample sites.
6. There are a number of benefits from the
pay reform which will arise over time and are not taken into account
in the analysis above. One example is that the net effect of harmonisation
of working hours on nursing hours (37.5 hours per week) will be
to gradually increase the total hours available to the NHS, including
hours available from key groups such as radiographers.
Table 28
ESTIMATED COST OF IMPLEMENTING AGENDA FOR
CHANGE
|
| Year | Cumulative total
|
|
| £ million (1)
|
| 2005-06 | 950
|
| 2006-07 | 1,390
|
| 2007-08 | 1,780
|
| 2008-09 | 2,200
|
|
Footnotes:
1. Totals rounded to nearest £10 million.
2. The funding envelope for Agenda for Change agreed with
HMT in 2002 extended to 2007-08. The figure for 2008-09 has been
previously provided to the HSC as a projection of the trend in
the envelope.
3.2.3 What is the current Agenda for Change assimilation
rate? Can the Department comment on this figure? (Q29)
ANSWER
1. According to our central monitoring of assimilation
to Agenda for Change 99% of staff are now assimilated onto the
pay system. Our focus is now on supporting the small number of
trusts who have not yet achieved 100% assimilation. NHS Employers
are actively helping trusts to overcome obstacles such as band
evaluation disparities and technical payroll issues, in order
that 100% assimilation can be achieved as quickly as possible.
Unions are supportive of this action and are content with progress
so far.
3.2.4 What are the expected costs of the new consultant
contract in each year from 2005-06 to 2008-09? Have these estimates
changed, and if so, can the changes be explained? What have consultant
earnings been in each year since 2001-02? (Q30)
ANSWER
The information requested is given in Table 30a and
Table 30b.
Representations from trusts in late 2005 suggested that the
costs of the consultant contract had exceeded plans by as much
as £150 million, mainly due to higher levels of programmed
activities. We uplifted the tariff for 2005-06 by this amount.
Evidence obtained subsequently, however, from the first consultant
contract survey (on data as at October 2004), suggested that while
the levels of programmed activities were higher than expected,
the difference suggested an excess cost of the order of £90
million rather than £150 million. Data from the recent consultant
contract survey has shown a further reduction in average programmed
activities. It has also shown a reduction in the proportion of
consultants receiving on-call supplements, which had also been
cited as a cause of cost pressures.
Table 30a
CONSULTANT PAY REFORM ENVELOPES
|
| | |
£ millions
|
| 2004-05
| 2005-06 | 2006-07
| 2007-08 |
|
| Consultant contract | 252
| 325 | 396
| 444 |
| Cons. increase on previous year | 252
| 73 | 71
| 48 |
|
Table 30b
HCHS CONSULTANT EARNINGS BILL(1), (4)
|
| Year | £ million
|
|
| 2001-02 | 1,994
|
| 2002-03 | 2,224
|
| 2003-04 | 2,720
|
| 2004-05(2) | 3,088
|
| 2005-06(3) | 3,448
|
|
Source: Paybill.
Footnotes:
1. Figures for HCHS NHS Staff only and exclude agency.
2. Includes estimated for Foundation Trusts.
3. Figures are projections and are subject to change. Actual
outturn figures for 2005-06 are not yet available.
4. Consultants earnings bill is estimated by removing the
estimating employers contributions from the total paybill.
3.2.5 What are the expected costs of the new GMS contract
in each year from 2003-04 to 2006-07? (Q31)
ANSWER
The estimated cost of implementing the new GMS contract is
given in Table 31. The introduction of the contract was
underpinned by a three-year deal ending in 2005-06. From 2006
onwards, the contract will be reviewed annually and is the subject
of negotiations with the General Practitioners Committee (GPC).
Negotiations have agreed there will be not uplift to any existing
element of the contract for inflation or cost pressures in 2006-07.
Table 31
EXPECTED COST OF IMPLEMENTING NEW GMS CONTRACT
|
| Year | £ billions
|
|
| 2003-04 | 5.8
|
| 2004-05 | 6.9
|
| 2005-06 (1) | 7.7
|
| 2006-07 (1) | 7.7
|
|
Footnotes:
1. Estimated cost subject to validation/agreement with GPC.
2. The increase in spending over the period 2003-04 to 2006-07
is largely due to increased investment in the Quality Outcomes
Framework (c £1.1 billion) and Enhanced Services (c £0.5
billion).
3.2.6 What is the funding for the new pharmacy contract
in 2005-06 and 2006-07 and what will be the basis for such funding
in subsequent years? Could the Department comment on the provision,
and funding, of enhanced and advanced services? (Q32)
ANSWER
1. The provision for the new pharmacy contractual framework
in 2005-06 was £1,766 billion as agreed with the Pharmaceutical
Services Negotiating Committee (PSNC). This covers essential and
advanced services. Provision for 2006-07 is still under discussion
with the PSNC.
2. Funding for future years will be determined by the
factors agreed in the framework, which are:
— increases in dispensing volumes at marginal cost;
— increase in staff salaries in excess of GDP deflator
levels;
— the cost of significant regulatory burdens; and
— an efficiency assumption which reflects efficiency
targets in the NHS as a whole.
3. Considering these factors, the funding agreed for
2006-07 is £1.911 billion.
4. In addition, medicines purchase profits available
to the independent pharmacy sector are monitored to ensure the
agreed amount to fund the new pharmacy contractual framework is
delivered. As a result, there will be a further reduction to generic
medicine prices from 1 October 2006, yielding a net saving to
PCTs in 2006-07 of £150 million.
5. Enhanced services within the pharmacy contract are
commissioned and funded locally by PCTs to meet local health needs.
Emerging findings published by the Information Centre in July
2006 indicate a total of 16,835 local enhanced services provided
by community pharmacy contractors in 2005-06. This is equivalent
to 1.7 local enhanced services per community pharmacy contractor.
3.2.7 What are the expected costs of the new dental
contract in each year from 2005-06 to 2008-09? (Q33)
ANSWER
1. The new dental contracts took effect from 1 April
2006. They do not in themselves increase costs. Rather, they alter
the commissioning relationship between the NHS and dentists and
improve the method of remuneration so that dentists are no longer
paid on a fee-per-item basis.
2. Previously dentists in the General Dental Services
could set up practice where they wished and decide what levels
of NHS dentistry to provide from one month to the next, claiming
payment from a national budget. The fee-per-item method of remuneration
encouraged an inappropriate emphasis on intensive interventions
to the detriment of preventative care. Under the new arrangements,
PCTs have devolved budgets for dentistry and hold local contracts
with dentists. Instead of a fee-per-item system, the contracts
are based on a fixed annual contract value and an agreed annual
level of service provision based on overall courses of treatment.
3. For 2006-07, dentists' contract values are generally
the same as their gross NHS earnings during the reference period
October 2004 to September 2005, adjusted to reflect subsequent
pay uplifts (in line with the recommendations of the Doctors'
and Dentists' Review Body).
4. For 2005-06, before the new contracts were introduced,
provisional accounts data suggest that the combined gross expenditure
(including income from patient charges) on General Dental Services
and Personal Dental Services pilots was [£2,190] million.
For 2006-07, the Department has allocated net resource budgets
of £1,765 million for primary care dentistry. This, together
with the predicted level of charge income, should support total
gross expenditure of nearly £2,400 million. This is the minimum
resource that PCTs are expected to commit to primary care dentistry.
They can commit additional funding from their general NHS allocation
if they judge this a local priority.
5. The Department has not yet decided the level of primary
dental care allocations for 2007-08 and 2008-09, but they will
be at least the level of current allocations with an allowance
for pay uplift.
6. The increase of around £200 million in projected
expenditure between 2005-06 and 2006-07 does not arise from the
new contracts. It largely reflects growth in the volume of dental
services during 2005-06 (which was reflected in PCT budgets for
2006-07), together with the effect of the 2006-07 pay uplift recommended
by the Pay Review Body. Similarly, any growth in future years
(over and above the annual pay uplift) will reflect decisions
to expand the volume of dental services commissioned by PCTs.
3.2.8 What are the expected costs of the Options for
Excellence social care workforce scheme, by year? Could the Department
comment on the progress of the scheme? (Q34)
ANSWER
1. Options for Excellence is a national review of the
social care workforce. It is jointly sponsored by DH and DfES
ministers. The Review's work is expected to be complete by autumn
2006 and it is not possible to provide the financial information
requested at this stage.
2. The remit of the Review is to consider social care
workforce development options, including recruitment and retention,
education and development, leadership and expanding professional
regulation. A review Board was established, comprising key social
care organisations, and detailed work looked at:
(a) Quality of practice and quality within the workforce.
(b) Recruitment and retention.
(c) The role of social workers, including what tasks only
social workers should do, qualifications and skills needed.
(d) Developing a vision of the workforce in the longer
term.
3. At present, the Review Board is considering a number
of proposals which are currently only tentative, with the aim
of submitting firm options to Ministers by autumn 2006. The proposals
are being developed in more detail, being prioritised and having
costings worked up. Some proposals have been identified as achievable
in the short term within existing resources, but others will require
new resources, which may be available in the longer term.
3.3 Treatment Outside the NHS
3.3.1 What has NHS expenditure on the purchase of
healthcare from non-NHS bodies been in each year since 1997-98?
How much activity did this purchase? Could the Department provide
a detailed breakdown of these data where available? (Q35)
ANSWER
1. The information requested is given in Table 35a
and Table 35b.
2. The figures include expenditure on services provided
by all non-NHS bodies, including local authorities and other statutory
bodies, as well as independent healthcare providers (including
ISTCs). They include nursing care spend (for non-NHS staff).
3. The non-NHS spend is based on aggregating financial
returns from individual NHS bodies (PCTs, NHS Trusts, SHAs). Since
these are typically responsible for a mixture of acute, non-acute
and mental health work, and their returns do not give any details
of their non-NHS commissions beyond the total amount, we are unable
to provide any futher disaggregation. There is no data on activity
procured by this expenditure.
4. The expenditure is derived from financial returns
that are not audited.
Table 35a
EXPENDITURE BY NHS BODIES ON THE PURCHASE OF HEALTHCARE
FROM NON-NHS BODIES
| £ thousands
| | | |
|
| Year | Health Authorities/Strategic Health Authorities
| Primary
Care Trusts
| NHS Trusts | Total
Expenditure
|
|
| 1997-98 | 985,746
| n/a | 122,436
| 1,108,182 |
| 1998-99 | 1,108,471
| n/a | 121,954
| 1,230,425 |
| 1999-2000 | 1,166,412
| n/a | 134,784
| 1,301,196 |
| 2000-01 | 1,328,208
| 33,774 | 187,190
| 1,549,172 |
| 2001-02 | 1,136,793
| 409,936 | 246,238
| 1,792,967 |
| 2002-03 | 27,234
| 1,873,925 | 335,172
| 2,239,331 |
| 2003-04 | 3,329
| 2,903,763 | 408,801
| 3,315,893 |
| 2004-05 | 0
| 3,353,036 | 312,988
| 3,666,024 |
|
Source:
Annual Financial Returns of Health Authorities, 1997-98 to 2001-02.
Annual Financial Returns of Strategic Health Authorities, 2002-03
to 2004-05.
Annual Financial Returns of NHS Trusts, 1997-98 to 2004-05.
Annual Financial Returns Primary Care Trusts, 2000-01 to 2004-05.
Note:
2004-05 NHS trusts data does not include NHS Foundation Trusts.
|
