Select Committee on Health Minutes of Evidence


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 million—or I think it is £950 million—is 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 therefore—it may be that you have that in your inflationary figure there—we 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 that—I 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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