Examination of Witnesses (Questions 1
- 19)
THURSDAY 1 DECEMBER 2005
SIR NIGEL
CRISP, MR
JOHN BACON,
MR RICHARD
DOUGLAS AND
MR ANDREW
FOSTER
Q1 Chairman: Good morning. I apologise
that we are a few minutes late starting. Could, I, Sir Nigel,
just ask you to introduce yourself and your colleagues.
Sir Nigel Crisp: Certainly. I
am Nigel Crisp. I am the Chief Executive of the NHS at the Department
of Health. On my right is Mr Douglas, who is the Director of Finance.
On my left is Mr Bacon, who is Director of Delivery, and finally
Andrew Foster, who is Director of Human Resources.
Q2 Chairman: Thank you very much
indeed for coming along and helping us with this first evidence
session of our inquiry into the public expenditure question. I
wonder if I could just start the proceedings by asking you a question
about NHS spending, which has doubled since 1977. What has the
extra funding bought, and has it been spent wisely?
Sir Nigel Crisp: If I start with
the first bit, about what it has bought, if you look at the total
new spend, almost 50% of it—the figure you have at the moment
is 48%—is on new activity, new staff, new drugs. So, for
example, within that, if I take the staff first, we have increased
the number of staff in the NHS by 190,000 in this period, of direct
hands-on patient carers, so people directly working with staff.
In that I include those important groups who are often forgotten,
like nursing auxiliaries, care assistants and so on, who are in
direct support of doctors and nurses. So a very big increase in
staff, a very big increase in activity throughout the NHS. We
tend to think in terms of hospitals very often, half a million
more operations a year than there used to be, but actually, if
I look at primary care, I see much more activity in primary care,
the new mental health community teams and so on. We could talk
about all that activity. On drugs, for example, we now have 2.5
million people a year receiving one class of drugs called statins,
and the total amount of drugs being prescribed at the moment,
keeping people out of hospital, for example, went up 25 million
in the last year. So huge numbers there, and the result from that
is that you are seeing death rates falling on cancer, coronary
heart disease, and you are seeing waiting lists falling very,
very fast indeed. That is the biggest challenge and 50% went on
that. Then 20% went on training and capital, so investment for
the future. Then big increases in doctors; number of doctors in
training up 60%, number of nurses in training up 34% and so on,
so big investment for the future, and indeed, if you look at any
of our major hospitals you will see a building going up in the
car park at the moment in terms of significant capital. Then on
top of that, about 30% went on pay for existing staff, and that
is about recruitment and retention, making sure that we have the
staff we need for the future, and indeed, also, as part of that—and
that is partly how we have attracted other staff, of course—also
bringing improvements and changes in staff roles and different
ways of working and so on, and finally a balancing figure of about
5%.
Q3 Chairman: A massive amount, as
you rightly say, in terms of increase. How do we know we are getting
value for money for this increase?
Sir Nigel Crisp: There are three
ways, I think, of looking at value for money. The first one is
just the efficiency of the operation. What I think is interesting
there is to look at things like length of stay in hospital and
delayed discharges, getting people out of hospital. Length of
stay, for example, in the last year went down half a day; we are
getting people through the system more quickly. Delayed discharges
are now a third of what they were in 2000, so we are actually,
thanks to excellent work in social care, may I say, as well as
the Health Service, making sure that we have got those down, and
we do a lot of benchmarking against world best practice to make
sure that the way we are delivering services fits. So part of
value for money, the real test is how this compares with world
best practice. Secondly, on overheads, we have kept a very tight
control on overheads, so, for example, management costs have fallen
from 5% to 4% in this period, so 4p in every pound is spent on
management whereas five years ago it was 5p in every pound, but
we have also done things like introduce a new shared venture with
Xansa of sharing back office functions, so tackling overheads.
Thirdly, the other big area is reducing costs through procurement.
For example, at the moment, better purchasing of drugs and other
things is saving us about £700 million a year. All of those
things are about driving value for money as well as quality in
the system.
Q4 Chairman: Per capita spending
is quite different around the UK. Scotland is about £200
more per annum per capita than England, and Wales is somewhere
in the middle. Does that show in better health care in Scotland?
Sir Nigel Crisp: I am afraid I
would have to do a complete analysis, but you will actually look
at things in England and you will see a number of things where
I suspect we are further ahead than Scotland, in terms of things
like waiting lists and so on, but I think there are a number of
different reasons for that, including the traditions, and indeed
the starting points of the two nations.
Q5 Chairman: Are things measured
differently or are priorities different?
Sir Nigel Crisp: I can only speak
for England, as you understand, and there are differences in the
way in which the NHS is organised in the two territories and there
are differences in the way in which priorities have been given.
Q6 Chairman: Could I move on a little
bit. We have had several announcements recently about increased
funding for various projects. Some of them will come along a little
bit later in this evidence session, things like PET scanners and
mental health services, which you have mentioned already. I wonder
if I could ask you how far this additional spending has been allowed
for in the three-year Spending Review allocations?
Sir Nigel Crisp: Can I actually
ask Mr Douglas to pick that up, as the Finance Director?
Mr Douglas: With any potential
new commitments that the Department makes we discuss them with
Ministers, assess the costs and try to identify a source of funding.
Most of these were identified at the time of the Spending Review.
If we go back to Spending Review 2004, the most recent one, there
have only been probably two to three significant announcements
that were not part of our Spending Review discussions when we
did our original planning. The main ones were the three manifesto
commitments around strengthening clinical governance following
Shipman, behavioural therapies for people with mental health problems,
and increasing the investment in palliative care services. They
were all part of the Labour party manifesto. They were identified
as costing in the region of £250 million a year, which we
would fund from the reduction in the administrative and management
costs following on from the reconfiguration resulting from Commissioning
a Patient-Led NHS. So we identified a cost with Ministers and
identified a source of funds for that. The only other significant
one recently has been the announcement about Herceptin and not
refusing treatment on grounds of cost and fast-tracking the appraisal
process. That effectively brings forward a cost from future years
that would have been built into our projections for NICE appraisals.
What we are looking at with PCTs as part of the planning process
for next year is to what extent we can reprioritise other areas
to ensure that we can fund them, but generally our approach is,
as soon as we get a new commitment, to find a source of funds
for it.
Q7 Chairman: All the speculation
is that in three years' time we are going to be looking at NHS
expenditure a little bit closer to that of GNP. Under those circumstances,
does it not give you any concern, the current situation, being
able to sustain these types of add-ons, as it were?
Sir Nigel Crisp: Perhaps I can
pick up the first bit of that and pass it on to the Director of
Finance. The first point is that this first period of the NHS
plan has been about growing capacity. Sitting in the Select Committee's
meeting in 2000, a lot of the debate was about the fact that we
are very low in terms of nurses, doctors and so on compared to
other countries, and so the big drive initially was about capacity
growth. We will not see the same build-up of staff numbers, for
example, over this next period. The real issue is, now we have
the capacity, now we have the people in training, now we have
the new capital, how effectively we can use that to get value
for money as well as quality. That is the big challenge which
we face in managing the services now.
Q8 Chairman: Could I just ask you
on that, are you going to meet your efficiency targets that were
set by the Gershon Report?
Sir Nigel Crisp: I am very confident,
on the basis that on our first monitoring of it, we have achieved
£1.7 billion of the targets, which is £200 million ahead
of the plan at that stage. So we are ahead at this stage. There
is a lot to go for because we have only £1.7 billion towards
£6 billion, so there is a fair bit still to go, but so far
so good. But it will require consistent demanding management attention
and a lot of work on that.
Q9 Dr Naysmith: Mr Douglas, you just
outlined various additional spendings that might or might not
have been funded and allowed for. One of the commitments that
we had in the Choosing Health White Paper was £300 million
for sexual health services. How does that fit into what you are
talking about?
Mr Douglas: The figures that were
included in the Public Health White paper were all part of the
Spending Review discussion, so we factored in what we planned
to do in terms of increased investment in public health.
Q10 Dr Naysmith: But it specifically
said for sexual health services, the £300 million, did it
not?
Mr Douglas: That would have been
part of the overall figure that we had within the public health
document.
Q11 Dr Naysmith: It was in the document
at £300 million.
Mr Douglas: Yes.
Q12 Dr Naysmith: I understand from
a number of PCTs—that comes more from the spending side
than the commissioning side—that the money is not being
spent on that; it is being spent on other things.
Mr Douglas: There was an allowance
within the PCT allocation specifically for spend to support the
Public Health White Paper. We did not ring-fence the resources
specifically for that. We identified them and said, "This
is the money you should be spending".
Q13 Dr Naysmith: What happens if
they do not spend it?
Mr Douglas: It will depend, critically,
on whether they deliver what they should be delivering from that
money.
Q14 Dr Naysmith: If they are not
spending it on sexual health services, they will not be delivering.
Sir Nigel Crisp: We monitor not
so much on the increase of money but on the output and the achievement
of the services, because that is more important. If we are thinking
in terms of value for money, actually, if we can get the services
cheaper, that is a very good thing to do but, as Mr Douglas has
said, our approach is that, in terms of the amount of money that
PCTs have, we have made sure that there is £300 million—presumably,
if that is the right figure—in that for sexual health services.
They then have to make local decisions about spending, but we
will monitor them on the achievement of the sexual health target.
Q15 Dr Naysmith: That is what I was
just going to come to. How are you going to monitor the fact that
when we looked at sexual health services, we came across a really
terrible situation in many parts of the country, and my information
is that it has not got all that much better? That is what the
£300 million was specifically put in there for.
Mr Bacon: With any of the objectives
of developing services, the approach we have adopted in recent
times is to pick a marker measure to judge whether the services
are improving. The power we have found is to pick something which
is relatively easy to measure and that we can track over time
against base, and in the sexual health target we have made the
objective there around two things: teenage pregnancy rates and
access to sexual health clinics, timing access, and those are
the things that we will track over time to judge whether the investment
is being correctly made in terms of delivering outcome. What we
do not do these days is to track all sorts of individual lines
of spending.
Q16 Dr Naysmith: That is fine. So
what are the initial results?
Mr Bacon: The first year of this
tracking is this year.
Q17 Dr Naysmith: So we have no results?
Mr Bacon: We will have year-end
results but of course, mid-year we do not have a clear view as
to what the first year's results will be. I think our actual first
deliverable target is the end of 2006, so we will be tracking
progressively through on that. That is the way we have been tackling
all of the objectives that we have agreed with our Treasury colleagues
as our PSA targets.
Q18 Mr Burstow: Can I just come back
to the question the Chairman was asking about whether or not all
the items that have been announced in terms of increased expenditure
and new commitments actually are fully funded? Our advisers have
taken us through some of these figures and we saw the figure for
this year in terms of extra growth is £6.5 billion. We understand
NHS inflation to be at about 4%, which is £2.8 billion off
of that. That leaves £3.7 billion in the pot. We have Agenda
for Change, we have the Consultants' Contract, we have the General
Medical Services contract, we have various other things like pharmacy
NHS commitments. We know, for example, on Agenda for Change, I
think it is, there is a substantial cost overrun of £900
million. Are you really saying that all of these items—sorry.
Sir Nigel, you shook your head fairly violently at that point.
Sir Nigel Crisp: At the figure
of £900 million.
Q19 Mr Burstow: There is no overrun
on costs on Agenda for Change?
Sir Nigel Crisp: We think there
may be, but nothing like that order.
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