Examination of Witnesses (Questions 60-79)
RT HON
PATRICIA HEWITT
MP AND SIR
NIGEL CRISP
27 OCTOBER 2005
Q60 Mike Penning: So the meeting
that took place on 4 May, the day before the General Election,
when you met the chief executives of the strategic health authorities
and told them you would not allow them to meet their expenditure
plans for the following year did not take place?
Sir Nigel Crisp: I meet with the
chief executives of the health authorities once a month and we
discuss how we are collectively managing the NHS. Probably 4 May
would be about when we were signing off or not signing off plans.
My reply is that every year we sign off people's plans or we do
not sign off people's plans. If you are telling me it was 4 May
that we signed off or refused to sign them off then it was 4 May.
Q61 Mike Penning: What was the size
of the deficits across the board then?
Sir Nigel Crisp: Let us just remember
what we are talking about here. These are budget forecasts. These
are people coming forward with what they believe their budget
forecasts will be. I do not know if you know the process.
Q62 Mike Penning: I know the process
very well.
Sir Nigel Crisp: You get local
delivery plans that come in, the health authority scrutinises
the local delivery plans and the local delivery plans are then
brought forward to the Department of Health and amalgamated across
the SHAs. I cannot remember what number we were looking at at
about that point, I just do not know.
Q63 Mike Penning: I find it astonishing
that we are having this discussion because obviously deficits
were going to come up but you cannot tell us what the figure will
be.
Sir Nigel Crisp: You asked me
what figure the health authorities told me on 4 May.
Q64 Mike Penning: My strategic health
authority for Herts & Beds this year is just under 100 million.
That was last year's figures carried forward with these figures
this year.
Sir Nigel Crisp: Are you talking
about their month five forecast?
Q65 Mike Penning: I am talking about
figures carried forward from last year, which according to them
are some 47 million carried forward into the projected forecast
for this year of 48.
Sir Nigel Crisp: What date is
the forecast?
Q66 Mike Penning: The forecast was
done as on 4 May.
Sir Nigel Crisp: It is not the
latest forecast. The forecast changes every month.
Q67 Mike Penning: I appreciate that,
but what the Committee is trying to get to is the size of the
deficit problem within the UK. It is all well and good you saying
there are no deficits but there are real crises taking place in
some areas, particularly in the South East, where there are massive
cuts to expenditure being made within trusts and within PCTs.
That is because of the budget problems which are taking place,
which are called deficits. You can call them whatever you like
but at the end of the day they call them deficits. What I am trying
to get through to you is traditionally these deficits or overruns,
whatever you want to call them, have used the NHS bank to purchase
in help from elsewhere.
Sir Nigel Crisp: This year as
well.
Ms Hewitt: If we can just clarify
this. At the end of the financial year, in other words for 2004-05,
the audited accounts show an overall deficit of around 250 million,
less than half of 1% of the total NHS budget. For this year, nearly
half way through the year, as Nigel has said we are looking month
by month at the forecasts within those trusts and health economies
that have either got carried over deficits or are projecting deficits
for this year and we making sure that in each area where there
is a sizeable inherited deficit or a sizeable forecast overspend
for this year they get them under control because it is not acceptable
with more money than ever before going into the NHS to have overspending
on the scale that we have seen building up in a very small minority
of trusts when the majority of trusts are both improving services
and living within their means. We expect everybody to do that.
Q68 Mike Penning: I know my colleagues
want to ask further questions. To get them to live within their
means means in most hospital trusts, in particular the West Herts
Hospital Trust that I can speak of, they have got massive cuts
in frontline services. Where you have been talking about patient
choice, that choice is being cut back because departments are
closing, nurses are being made redundant and wards are closing.
Is the only way you can hold trusts within their budgets by cutting
frontline services?
Sir Nigel Crisp: Let me just draw
out two things. One thing is this year, as in previous years,
some parts of the service will provide surpluses and we do have
some informal arrangements around the NHS to support people because
where you have got a major financial problem, as you have got
perhaps in that particular hospital, the longer the time you can
sort it out over the better. That hospital has had a problem for
two years, I think.
Q69 Mike Penning: It is a trust of
three hospitals actually.
Sir Nigel Crisp: I meant trust.
I know that it has received support in the past. The point I would
make is if you do not have financial balance you cannot plan.
We have to make sure that we get ourselves into good financial
balance so that we can plan effectively for the future.
Q70 Mike Penning: The point I am
making is that the patients are suffering. At the end of the day
it is the patients who are suffering and our constituents in the
South East in particular who cannot get the treatment that they
deserve. This argument about choice is fictitious if they cannot
get the services they deserve.
Ms Hewitt: In every part of the
country, because of the investment that has been going in and
because of the reforms, the quality of service and the speed of
service has been improving very, very significantly compared with
eight years ago, and that will continue to be the case. I think
it is a great mistake, with respect, to assume that the existing
organisation of services is always and inevitably the best that
it can be. Very often it is far from the best and it is very clear,
not only across the NHS but across health services in developed
countries generally, the most financially efficient hospitals
and health communities are also those that deliver the best quality
patient care. In many cases, part of the answer to these overspending
problems and these financial management problems is to reorganise
services in a way that is not only more cost-effective but, much
more important, is going to be better for patients as well.
Q71 Chairman: Could I move on. Could
I just ask, Sir Nigel, in terms of inherited deficits from the
year before and this year's budget, is that type of enforcement
you are following this year different from what it was last year
or the year before?
Sir Nigel Crisp: Why it has got
a higher profile at the moment is that in the two or three previous
years we were in surplus by 100 or 200 or 300 million.
Q72 Chairman: Not all trusts from
what you have just said in answer to my colleague, Mike Penning,
in some trusts there were deficits.
Sir Nigel Crisp: In previous years
that is right.
Q73 Chairman: This year's enforcement
getting them into balance, is that different from last year? Do
you understand where I am coming from?
Sir Nigel Crisp: Yes, I do. Are
we being tougher this year, is that what you are really asking?
Q74 Chairman: Yes. Everybody would
say you need to keep your books in balance, but if you say, "Your
books will be in balance by the end of this financial year",
it has a different meaning from saying, "You need to keep
your books in balance".
Sir Nigel Crisp: Let me be clear.
The situation has changed a bit because in the previous four years
the NHS overall was in surplus and, indeed, we were criticised
for being in surplus as you might recall.
Q75 Chairman: Yes.
Sir Nigel Crisp: This year we
were slightly overspent, as the Secretary of State has said, and
that changes the circumstances, does it not? It makes it that
much more important that we get a tighter financial grip. That
is the one thing that has changed.
Q76 Dr Naysmith: I think there is
a very important point here which this Committee in its previous
incarnation had something to do with. About three years ago we
had the Financial Director of the NHS here and we had a big exchange
about how deficits were handled in the National Health Service
up until about three years ago because trusts could lend money
to each other. Those that were in surplus could lend money to
the ones who had a deficit, which meant you could cover up these
deficits at the end of the financial year. We got a commitment
given to this Committee that that was going to stop and it would
not happen any more. I suspect that may be part of the reason
why we have exposed trusts which may have had problems for a long
time. Is that what we are talking about?
Sir Nigel Crisp: There are two
things. That is certainly true, we have said deficits should lie
where they are created. That does not mean that we have not also
created an NHS bank so that in certain cases where we think there
is a strategic reason then we will allow surpluses to go and support
another area, and Herts & Beds had some of that money in a
previous year. The second point is that the whole regime has also
got tighter because the Treasury has changed the rules within
which we work so that you cannot under spend on capital to bail
out your revenue, for example, which is a perfectly sensible change
but it does make it harder. The environment is tougher.
Chairman: I really want to move on. Could
I ask you if you could drop us a note in relation to this and
what is happening this year and potentially how it is a bit different
from last year. I think the Committee would quite like to look
at that. Can I move on to Howard. We have not quite finished on
PCTs and commissioning, Secretary of State.
Q77 Dr Stoate: Can I just direct
the Committee to the Members' interests where I declare that I
am a part-time general practitioner and, therefore, have a particular
interest in what I want to ask which is around practice based
commissioning. Could you tell me what is the purpose of practice
based commissioning? Why is it being introduced?
Ms Hewitt: We are introducing
it because we want GPs to have the responsibility and be accountable
for the decisions that they are making which are about expending
public money, but also to have greater freedom to design the services
that they think will be best for their patients. At its simplest,
practice based commissioning means that each GP will have an indicative
budget which will include, in other words, the budget for hospital
referrals and they will get from their PCT each month a report
showing the hospital referral rates and, therefore, their expenditure
against their indicative budget but also benchmarked against their
peers. As I think happened in the past with prescriptions, there
is a real incentive there for GPs to look at their referral patterns,
look at how much money they are putting into the local acute hospital
and then, if they want to, start thinking about how they might
pull some of those services out of the hospital either into their
own surgery or perhaps into a community hospital or some other
community facility in order to get the services they want for
their patients closer to their patients, but also with better
value for money.
Q78 Dr Stoate: They are not actually
responsible for these budgets then, they are just indicative budgets,
it is not real money.
Ms Hewitt: We are talking about
indicative budgets here.
Q79 Dr Stoate: How is this different
from fund holding in principle, not in the practicalities? What
is the principal difference between this and fund holding?
Ms Hewitt: There are two big differences.
One is this will apply to everybody whereas, of course, fund holding
created a two tier system. Secondly, we will not have each GP
negotiating with each hospital and, worse still, negotiating on
the basis of price. There will be a single tariff set through
Payment by Results for hospital treatments and procedures and
there will be a single national contract which the primary care
trust will be able to make some local variations to if that is
what they and their GPs decide to do. There will be none of that
incredibly expensive and wasteful negotiation and administration
that fund holding involved. If I can say, there is one similarity
with fund holding. I think the virtue of fund holding was that
it gave some GPs the opportunity to make some really good changes
in their services. If I can give an example from a GP colleague
in Leicestershire, who was saying "We looked at what we were
doing with the hospital. We decided to appoint our own physician,
so we have cut the hospital referral rates and we saved some money.
We then decided to employ a physiotherapist, we cut the hospital
referral rates and we saved some more money". That kind of
freedom to innovate, which some GPs want and some may not, is
a real advantage that will come with practice based commissioning.
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