Examination of Witnesses (Questions 60
- 79)
THURSDAY 1 DECEMBER 2005
SIR NIGEL
CRISP, MR
JOHN BACON,
MR RICHARD
DOUGLAS AND
MR ANDREW
FOSTER
Q60 Mike Penning: We talk about "businesses"
but these are people's lives we are talking about here.
Sir Nigel Crisp: I entirely agree
with you. That is why it is very important that we do the sort
of things which Mr Bacon talked about, which is to look very sensitively
when we are working with people at what the local circumstances
are, what is happening, and what impact this has on people. Because
we well understand this is about something that is extraordinarily
important to people in their lives.
Q61 Mike Penning: Exactly. Turning
round and saying this is only a tiny proportion of the budget
and this is only a small area of the NHS—when it is affecting
people in real life instances—to be dismissive about the
size of the deficit, I think was wrong.
Sir Nigel Crisp: Again, I apologise
if that is the impression I have given. I know the Chief Executive
and Chair of your local large hospital group. I have met with
them and I understand what they are doing. I have not seen the
latest figures for that area—
Q62 Mike Penning: There are cuts—
Sir Nigel Crisp: I do not mean
the financial ones, but: Are they treating more patients than
they were last year? Are the waiting lists continuing to fall?
Are their heart services and their cancer services continuing
to grow?
Q63 Mike Penning: Well, you are closing
the cardiac unit, so that would be difficult.
Sir Nigel Crisp: Well, where are
the patients?
Q64 Mike Penning: They will be shipped
off to someone else.
Sir Nigel Crisp: Are the patients
getting treatment?
Q65 Mike Penning: The point I would
like to come back to—I do not want to get too localised
or my Chairman will pull me up—is this: Are you 100% confident
that this blame game needs to go down to them and does not sit
anywhere within your own Department? We have heard nothing this
morning about your own Department having any deficiencies at all.
Sir Nigel Crisp: I am not in the
business of allocating blame.
Q66 Mike Penning: That is what you
have done successfully this morning.
Sir Nigel Crisp: I was trying
very deliberately not to, but to say there are some areas which
might have difficulties for a whole variety of reasons and that
they may well include things like, as I have said, the point about
trying to run two hospitals. Again, this is an issue in a number
of areas and it is harder to do that. In terms of ourselves within
the Department, I have no doubt there are things we could do to
provide more help in those circumstances, and that is precisely
why we are putting in external teams to support people and to
help them with that. We have started doing that and we will be
doing that more—
Q67 Mike Penning: External teams
being external consultants which cost an awful lot of money. PriceWaterhouse
is—
Sir Nigel Crisp: Some may be,
but, where we have had issues like this before, we have brought
in teams which also include clinicians, because a lot of the issues
will be clinical, about how services are delivered and so on.
But this is actually about supporting people to manage this. I
think there is perhaps more we can do to do that.
Q68 Mike Penning: I think you need
to look at your formulas as well. Have you done an analysis to
establish the factors underlining the deficits within the PCTs
and the trusts?
Mr Douglas: I do not think you
will find a single common factor.
Q69 Mike Penning: But you have done
no analysis.
Mr Douglas: We have done analysis.
We look at the individual organisations; we compare them with
what their position is against average unit cost; we look at where
they are on their allocation formula; we look at where they are
in terms of performance targets. But I do not think you will find
one single common factor that comes through for every organisation
deficit.
Q70 Mike Penning: I did not say there
was one single one, I said common factors. Could you share that
analysis with the Committee? Could you provide that to us?
Mr Douglas: We could provide you
with an analysis. It may be that the simplest one is to show the
deficits against their position compared to their target allocations.
Q71 Mike Penning: That is not what
we want. We do not want a simple analysis because there are people
here who can analyse it for us. If you could share the analysis
that shows why the PCTs are in deficit.
Mr Douglas: We will share the
analysis.
Q72 Dr Naysmith: Sir Nigel, we know
that is part of the job of SHAs to advise trusts which are in
deficit on recovery. It would be useful if you could explain to
us what that should be in practice and how it will work. Added
to that, you have been saying quite a lot "We do this"
and "We do that" implying that things happen from the
centre as well. It might be interesting to have an explanation
of how this is meant to work in practice.
Mr Bacon: I think I described
earlier the planning process we go through. That process requires
each of our statutory organisations, trusts and PCTs to do a business
plan for each year which demonstrates what they will achieve in
terms of service delivery and their financial position. One of
the tasks for our SHA colleagues is to ensure that each of those
organisations for which they are responsible has a viable plan
for the year. They then track against that. We then track at SHA
level. If they detect that organisations are not on plan, part
of their job is to analyse and to understand why that is and to
work with those organisations in terms of helping to resolve that.
That could either be through straight management or it could be
by identifying areas of weakness that need strengthening or it
could be by identifying help that is needed to reorganise or to
make more productive a particular function. That is going on constantly
between our SHA colleagues and the PCTs. We monitor at SHA level
and if we detect that a health economy, an SHA area, is not being
successful or if there were individual organisations within it
that were really seriously seen to be off-plan, then we can and
do work with the SHAs to understand that and then agree a plan.
In the last few weeks, I have seen a number of the SHAs directly
and gone through the situation in their localities, understood
what their plans are to correct them, and in one or two cases
have said, "I am not satisfied with that. I want you to look
at other things" or "I want to offer you this help".
That is a constant iterative process that goes on during the year,
obviously targeted at those places which we feel are having the
most difficulty in delivery.
Q73 Dr Naysmith: So there are some
places where there were deficits last year and these deficits
have increased this year rather than improving. Could that possibly
mean that Strategic Health Authorities could be held to account
in having failed in their duty?
Mr Bacon: When we have a trust
that is seriously in deficit—and we would confess, as we
said earlier, that there were 33 organisations that contributed
over half the deficit, so mathematically that demonstrates they
have serious problems—one of the things we would do with
our health authority colleagues is to see whether we felt that
to correct that in one year was a sensible thing to do, given
the imperative of patient care. We might agree a plan which was
not exactly in balance if we felt that people needed time to recover.
I do not know whether my colleague Mr Douglas would want to add
to that.
Mr Douglas: No. I think that is
correct.
Q74 Dr Naysmith: I want to get into
an area that Mr Douglas and I have had exchanges about before
at this Committee. There are reports that some Strategic Health
Authorities are advising bodies for whom they are responsible
who are in surplus and moving surpluses from bodies that are in
surplus to organisations that are in deficit—which reminds
me of something that used to happen and is supposed not to happen
in the National Health Service any more. This is a form of brokerage,
is it not? Is it happening?
Mr Douglas: There are different
elements to this. At the start of a year, organisations can agree
what we call planned support, so that, if there is a programme
for recovering an organisation and another organisation within
the SHA agrees to provide some help, then they can give that planned
support at the start of the year. We do not allow the transfer
of resources and money during the year, so, if the support is
not planned, there should not be any movements: deficits should
stay basically where they fall. That is the view we take, as the
only way you can get organisations to address problems is to leave
the deficits there. That is the overall approach on brokerage.
You will have in some cases within the Strategic Health Authority,
one organisation making a deficit, and the Strategic Health Authority
then agreeing with another organisation that they will make a
surplus to allow the whole Strategic Health Authority to balance.
The resources will not move between the organisations but the
Strategic Health Authority as a whole will then balance.
Q75 Dr Naysmith: So it is not in
contravention to the Department's stated policy, which is "to
ensure that local bodies report their actual financial position,
with deficits remaining where they have been incurred and not
being masked with brokerage and other financial support."
It is in complete compliance with that, is it?
Mr Douglas: The only element where
there is allowance for movement of funds is around this area of
planned support and that is explicitly shown in the accounts.
On the face of the accounts, if an organisation has only achieved
a balanced position because it has been given planned support,
that is separately identified in the accounts so that everybody
can see it.
Q76 Dr Naysmith: I have a couple
of slightly different but related questions. Is this double-deficit
regime, whereby trusts inherit their previous year's deficit,
a fair one? Or is it too punitive? Because presumably there will
be a reason for it and not all of them will be due to management
failures that we were talking about.
Sir Nigel Crisp: No. Let me, again,
be clear, I do not think these are necessarily to do with management
failures. However, with the regime that you have just outlined
where the deficit stays there, you need to pay it back next year—just
as the NHS as a whole has to pay back the £250 million deficit
that was incurred last year. But that is, I have to say, good
financial discipline. The only way in which we moderate that at
all is by the sort of discussion that both my colleagues here
have talked about saying, "Well, maybe you cannot pay it
all back in one go". But, if people are going to be in control
locally and make decisions locally, then accountability needs
to rest there as well.
Q77 Dr Naysmith: I am very much in
favour of this, and it is better, I think, than the system before
where people could transfer money around the system without making
it open and accountable, which it is now—which is perhaps
the reason why we are getting these figures.
Mr Douglas: It is more transparent.
The impact of that is that you are tending to have more organisations
showing a deficit. The net figure will not necessarily change
in terms of the size of the deficit but more organisations will
show them because there is not the opportunity for those deficits
to be masked.
Sir Nigel Crisp: May I make one
other point on this, Chairman? Our target as an organisation is
to be zero—neither overspent or underspent—at year
end. On £70 billion, this is quite difficult. With 600 separate
units of account, in any year you will always have some over and
some under. We will try to make sure we are always the right side
of the line, and, indeed, it is very important that we do, but
you will always get some kind of spread, and you will be aware
that in the past we have been criticised for underspending as
well as for overspend. The advantage now is that the underspend
you can carry forward but the disadvantage is you carry forward
the overspend too.
Q78 Dr Naysmith: For interest's sake,
what happens if NHS bodies do not recover their financial position?
What are your ultimate sanctions in that situation? I know you
have talked a little bit about going in and managing it and sending
in teams, but what is the ultimate sanction?
Sir Nigel Crisp: I suppose the
starting point is that we have to understand why. Do we have a
problem here that is absolutely structural in some reason and
some way that the whole NHS has to take some responsibility for?
We have had the odd example in the past, typically with things
like terrorism or wherever, where we have actually released the
regime because people have incurred costs, because their first
task is to look after patients and therefore the NHS should take
some responsibility. So let us understand what the position is
and then let us have a plan that is appropriate for dealing with
that. If you mean the point about: "Let us suppose at the
end of the year the organisation still ends up in deficit",
then that has to be covered by a surplus from somewhere else and
if the NHS ends up in deficit that has to be covered by an underspend
somewhere else in the work of the Department.
Q79 Dr Naysmith: Is it possible for
an individual part of the National Health Service to be insolvent?
Mr Douglas: We would not get to
a position where we would allow an individual institution to be
insolvent without first having been through the full range of
recovery activities that we have. If patients and the public still
wish to use an institution, if that institution is still getting
activity through and people are still using it, I could not envisage
a situation where the organisation would become insolvent because
we would have put in the support and other help to allow it to
deliver what was required within the resources available.
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