Examination of Witnesses (Questions 20
- 39)
THURSDAY 1 DECEMBER 2005
SIR NIGEL
CRISP, MR
JOHN BACON,
MR RICHARD
DOUGLAS AND
MR ANDREW
FOSTER
Q20 Mr Burstow: So what do you think
it will be?
Sir Nigel Crisp: We do not yet
have a proper figure on it, but very, very much less than that.
Q21 Mr Burstow: My understanding
was that the figure of £900 million was a figure from the
Department. It obviously would be useful to get clarity on that.
Mr Douglas: No, we do not have
a final figure for Agenda for Change cost overruns. It will not
be anywhere near £900 million. We have done some initial
work around a number of trusts just to test out what has happened.
We need to further validate that and quality-assure it, but it
is nowhere near £900 million.
Mr Foster: We have taken a sample
of 28 trusts and we have looked at what we know to be the direct
cost overrun and made an estimate of the indirect costs. What
I mean by direct costs is the degree to which people's salaries
have increased, and what I mean by indirect costs are, for example,
where staff have been given additional annual leave, then there
is the cost of replacing those staff when they are off. But, as
both my colleagues have said, I do not know where you got the
figure of £900 million from. That is way, way above what
we are looking at.
Mr Douglas: I think I may be able
to identify it potentially. The £900 millionor I think
it is £950 millionis the allowance that we made within
the allocations for the additional cost of Agenda for Change,
so when we made the allocations, clearly, we knew that Agenda
for Change would cost money, and our estimate of the cost in 2005-06
was £950 million. Any overrun would be an amount on top of
that figure.
Q22 Mr Burstow: So the £950
million is covered within the existing budget, but there is an
exercise looking at 28 trusts to see how much there is of a real
overrun. When will you have the figures for the real overrun?
Mr Foster: At the end of the year,
because this is the first full year of implementation.
Q23 Mr Burstow: Back to the main
part of the question, are you telling the Committee today that
within that envelope of increased resources available to the NHS
in this year, that all of the very long list of initiatives that
I have mentioned plus the various initiatives that have been announced
in 21 separate press releases in the last few months, announcing
all sorts of goodies that are coming along, will in fact be contained
within that £3.7 billion that I was mentioning after you
take off inflation?
Mr Douglas: Our planning assumptions
are that they can all be contained within that. When we looked
at the allocations, we looked at the costs of everything we were
planning to do, including what we expected in terms of efficiency
savings, because one of the items that was not included in your
list was how much we need to generate in terms of efficiency savings
for the NHS to help fund all these things. The cashable element,
the element of efficiency that can be applied then to spend, is
about 1.7%. So in addition to that, we would always look for efficiency
savings to help fund the full list of items.
Q24 Mr Burstow: On efficiency savings,
£1.7 billion achieved so far, and that sounds like cause
for celebration, but can we be clear: in terms of the overall
target the Department has from Gershon, it would be surprising
if the savings that had been achieved were not the easier ones,
the more concrete ones. The list of things that have been set
out as Gershon savings for the Department, some of them are really
quite nebulous in terms of precisely how you are going to achieve
them. Are there detailed plans that we can see for each of the
Gershon saving proposals as to how much they would be realised
and on what sort of timescale?
Mr Douglas: Yes. We have a programme
that sets a trajectory across the next three years for how much
we will save each year against each of the Gershon headings that
we agreed. So we have an agreed amount for procurement, an agreed
amount for shared services, an agreed amount for productive time,
that is all then given a trajectory across the three-year period.
That is then reviewed by the Office of Government Commerce, the
Public Sector Productivity Panel, who questions us on our plans
for achieving it. So we have plans that sit behind all of those
savings.
Sir Nigel Crisp: But some of the
things that have already happened will have benefits further down
the line. I mentioned the shared services joint venture we have
with Xansa, which is about actually reducing the costs of a lot
of the administrative process in finance and so on, sitting behind
organisations. To date, only 60 NHS organisations are using those
services. As more do, we will generate more savings from that
sort of process. So we are pleased that we are ahead of the game
at this moment, but not remotely complacent about the fact that
actually, to get the next £4 billion will require a lot of
detailed work, but there are detailed plans to make that happen.
Q25 Mr Burstow: Can we have sight
of the detailed plans?
Mr Douglas: Yes, I am sure we
can provide those to the Committee. I should say on the things
that have been achieved so far, big numbers have come out of the
renegotiation of things like the pharmaceutical contracts, some
of the national contracts, so those are the areas you can grab
reasonably quickly in terms of efficiency savings. The big numbers
for us to deliver are around the productive time of staff, which
is around primarily process improvements and really deriving the
benefit from the pay contracts that we have just talked about.
They inevitably spread over a number of years, so you do not capture
that benefit straight away.
Sir Nigel Crisp: But the examples
there again are things like length of stay, which we talked about
earlier.
Q26 Dr Taylor: I want to go back
to the £300 million for sexual health because first it was
announced, as it was, for sexual health. Then we gathered it was
part of the money that had already been given to the PCTs. Was
this not a classic example of really what is a government tactic,
of announcing new money twice when it is really just the same
money?
Sir Nigel Crisp: I think the initial
question was about whether we had accounted for this in the Spending
Review and whether we had then had subsequent decisions. In the
Spending Review discussions, we assumed some fairly large numbers
for investment in public health areas, but at that point of the
Spending Review we did not know precisely how we were going to
spend it. So actually, at the point when we made the decision
that we were going to spend £300 million on sexual health,
that is the pot it came from, if you like. That is the process
you go through: you identify public health and then you identify
how you are going to spend it.
Q27 Dr Taylor: Would it not be a
lot more open if you said that this was £300 million that
had already been given to PCTs and that you wanted them to spend
on sexual health, rather than saying to the sexual health people,
"Here's £300 million" which they never actually
got?
Sir Nigel Crisp: No, I do not
think that . . . I do not have exactly what we said at the time
or have the timing quite right in my mind but in the process which
Mr Burstow just talked about, which is the annual budgeting process
where we do exactly what you did, which is look at the available
money for the future year and then look at the new commitments
that we make within it, we in that year made a commitment and
made an allocation that was for sexual health. What we do not
do then is to micro-manage the NHS on precisely how it spends
all of its budgets. We actually recognise that this needs to be
a local service as well as a national service.
Q28 Dr Taylor: But you should not
then tell the sexual health people that there is £300 million
specifically for them.
Sir Nigel Crisp: We told the PCTs.
Let us be clear what we actually said. We said to the PCTs that
"Part of the deal that you have for how you have to spend
your money in this forthcoming period is on sexual health, and
this is the amount we put in the budget". That is how we
do it. We talk to the PCTs and explain what it is they are expected
to do.
Q29 Mr Campbell: I have a brief question
in regards to the money you were talking about before. How does
that square with the new drugs coming on the market, particularly
the breast cancer drug, and many others of course, that are not
available because of cost?
Sir Nigel Crisp: Again, I am not
quite sure if Mr Burstow's list includes the fact that we do recognise
that there will be new drugs approved by NICE during the course
of the year and thereforeit may be that you have that in
your inflationary figure therewe make an assumption about
what new drugs are going to be coming and make an allowance for
that in terms of our overall budget.
Q30 Mr Campbell: So the money will
be there if a drug becomes available? We read in newspapers all
the time "Drug not available". It is there, but it is
not available to the patient. You are telling us that you have
a sort of surplus of money but you are being cautious about that,
and I appreciate that, but if the money is available, why are
these drugs not available when people need them?
Sir Nigel Crisp: The level of
assessment that we make at the beginning of the year is necessarily
our forward look as to what we think will be the future cost.
During the course of the year that may shift a bit, may it not,
because you do not necessarily know particularly what an independent
body like NICE will say? On the particular issue of Herceptin,
this is, as you may be aware, a drug that has neither gone through
the NICE process, nor is it licensed for the particular application,
and our normal ruling for drugs in those cases is that where the
clinician and the patient are in agreement that they understand
all the risks and they understand that this is not a drug that
applies to everyone, and they understand it is not licensed and
that it has not been fully evaluated, then that is a decision
which is rightly made by the clinician and the patient, subject
to the PCT agreeing that they will be able to fund it.
Q31 Mr Campbell: So it is available
if, as you have just said, the patients agree that it has not
been through clinical licensing? It is available in all areas?
Sir Nigel Crisp: Subject to local
decision-making about whether they agree that that should be available
there, but remember, this is an unlicensed drug, unlicensed for
that application, and one that has not gone through the full process.
Q32 Anne Milton: Just for clarity,
Sir Nigel, the decision as to whether somebody gets a drug is
being made by unelected PCTs? How PCTs spend their money, one
of the concerns at the moment is that the decisions as to who
gets what treatment is being not made by politicians but by PCTs.
Is this a concern for politicians? Is this a concern for employed
staff?
Sir Nigel Crisp: The principal
mechanism we have is NICE, which you are probably aware of, which
is the process by which we actually within the system evaluate
new technologies, new therapies, and they then make a recommendation,
or they take a view as to whether the NHS should be doing it,
and the view that NICE takes is the one which we then expect everyone
in the NHS to follow. So there is a clear national decision.
Q33 Anne Milton: We are talking at
slightly crossed purposes. If money is not ring-fenced for sexual
health or for Herceptin, then the decision as to what to fund,
ie what treatment is available at any particular area is made
by PCTs, not by politicians.
Sir Nigel Crisp: The specific
local decisions are made locally. Of course they are.
Q34 Anne Milton: So they are not
made by politicians.
Sir Nigel Crisp: But there are
national priorities, and we monitor PCTs on delivering the decisions
made by politicians, if you like.
Q35 Anne Milton: That is right. Take
Herceptin or take sexual health; decisions are being made by paid
staff, not by politicians as to what they will fund and therefore
what is available in any one area.
Sir Nigel Crisp: The decision
made by politicians is very clear, that in every area we shall
have the targets which Mr Bacon referred to. There is nothing
local about that. You have to make sure that by the target dates
you are providing the services that we are talking about. The
specific way you do that and the specific balance and maybe the
timing of that is, quite rightly, done locally as opposed to nationally.
We are not micro-managing every aspect of expenditure, but we
are determined that there are very clear national standards and
those are the decisions taken by politicians.
Q36 Chairman: Sir Nigel, could I
just ask you about the overall expenditure increases that we have
had? Does the Department have a fallback position if the increases
in these services and in these costs are not met by budgets. If
there is effectively a shortfall, would you have a fallback position
there?
Sir Nigel Crisp: I will, again,
ask Mr Douglas to say a little bit more, but basically, there
is the NHS budget and then there is a wider group of budgets,
and our responsibility is to make sure that the whole vote, which
you vote, which covers the whole range of budgets is in balance.
Mr Douglas: Looking forward, we
set a three-year budget for the NHS overall, so on the back of
the Spending Review, we will commit to a three-year budget for
the NHS. We will set aside on top of that within the central area
of the Department an element of unallocated money. So we will
set aside some unallocated provision that could deal with new
commitments, because we could not say what would happen in two
years' time, so we make an assessment about unallocated provision.
If it is then found that there are new commitments that need to
be met, we can apply that unallocated provision. The other thing
we can do is reprioritise within our overall budget set either
in the NHS or in the Department. So we could say, if something
significantly new arrived, we would have to cut another area of
spending. What we cannot do is to go back on the overall settlement
that we have from the Treasury. We have a fixed amount for three
years and it is our responsibility to live within that.
Q37 Chairman: Probably not in my
lifetime here in Parliament, but in my political lifetime, when
there was a major deficit nationally within NHS funding, probably
in 1976, we had a situation where budgets were cut across the
board and that was the fallback position of the Department at
that time. Do you see any type of scenario like thatI do
not mean in scale, but in terms of reaction by the Department
if there is a shortfall in the budget?
Sir Nigel Crisp: No, I do not.
One of the things that we did four years ago, I think, for the
first time, is actually set three-year budgets for the NHS so
they could plan, and also three-year targets. The commitment we
made to the NHS is "We want you to manage this locally because
that is the right thing to do. This is the money you have got
over the next three years, and these are the things we expect
you to do with it", whether it is sexual health services,
whatever it is. We have actually managed to keep to that. That
is why from time to time we will be asked these difficult questions
about "Have you made some change in the allocations?"
or whatever. There is a very clear paper setting out our intention,
but we recognise that, bar absolute catastrophe of some cataclysmic
sense, actually, our deal with the NHS is "You get three-year
budgets. That gives you the chance to plan ahead, and these are
the things we are looking for from you".
Q38 Chairman: You presumably have
some sort of plan for this within the Department?
Sir Nigel Crisp: Yes. It is published.
Q39 Chairman: Is that something we
could see?
Sir Nigel Crisp: Yes, a very clear
plan actually.
Mr Bacon: I can just briefly outline
the planning process that we have. Leading into the three years,
we publish in the summer before the three-year period starts very
explicit planning guidance, which says, "These are the things
that we want you to achieve over the three-year run" and
they would be as narrow a range as we could do, because we want
some clear national things that are of high importance, and then
as much local discretion to meet the needs of local people as
we can. So we do not seek to prescribe absolutely everything that
they should do. There is a clear balance between national objectives
and local objectives. During the course of the next few months,
as soon as we are able to, we give them the three-year spending
assumptions so that they can then bring those two things together,
and give to us at SHA level a clear three-year plan which aligns
the objectives we have set, their local aspirations and the financial
plan. We sign that off at the beginning of the three-year period
and we track that with our SHA colleagues and they track with
their primary care trusts, and we can monitor progress against
that both in financial terms and in target terms and of course,
if people were moving off plan either financially or in terms
of the objectives, we expect our SHA colleagues to intervene and
to get back on to plan, and if that is happening across the whole
health economy, we would intervene and get back on to plan. But
the deal, as Sir Nigel has said, is that we set out a clear set
of three-year objectives, a clear set of three-year spending assumptions
and we seek, except for exceptional circumstances, not to vary
that, and if we have to vary it, we would make it very explicit
as to how we would accept it.
Sir Nigel Crisp: The one target
we changed in the first three years was to introduce a new target
for MRSA. That was in response to very clear public concern about
that, so we actually introduced the target for MRSA last year
in the mid-point of the plan, but that is, I think, the only substantial
change we have had.
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