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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 736-ii House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE Health Committee
Public Expenditure on Health and Personal Social Services 2005
Tuesday 6 December 2005 RT HON PATRICIA HEWITT MP, SIR NIGEL CRISP, MR RICHARD DOUGLAS Evidence heard in Public Questions 262 - 370
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Health Committee on Tuesday 6 December 2005 Members present Rt Hon Kevin Barron, in the Chair Mr David Amess Charlotte Atkins Mr Paul Burstow Mr Ronnie Campbell Jim Dowd Anne Milton Dr Doug Naysmith Mike Penning Dr Howard Stoate Dr Richard Taylor ________________ Witnesses: Rt Hon Patricia Hewitt, a Member of the House, Secretary of State for Health, Sir Nigel Crisp, Chief Executive of the NHS and Permanent Secretary and Mr Richard Douglas, Director of Finance, Department of Health, gave evidence. Q262 Chairman: Good afternoon, Secretary of State; could I just ask you, for the record, to introduce yourself and your two colleagues? Ms Hewitt: Yes, thank you, I am Patricia Hewitt, Health Secretary; Sir Nigel Crisp our Permanent Secretary and Chief Executive; Richard Douglas, our Director of Finance. Q263 Chairman: Thank you very much for coming along to help us with this inquiry into expenditure. Secretary of State, last week Sir Nigel said that 50% of the additional NHS spending had gone on new activity, new staff and new drugs; 20% had been spent on training and capital and 30% on more pay for existing staff. I just wondered, how do we know that there was a need for increasing pay, other than the obvious? Was it to do with the business, the activity of the National Health Service? Ms Hewitt: We knew, when we were first elected, that there was a real issue about pay in the public sector generally and specifically within the NHS, and we could see the difficulties that we were having in recruiting to training, recruiting to fill our vacancies and we could see the levels of pay that our staff were getting compared, for instance, with those in the private sector, so when we embarked on pay reform and particularly Agenda for Change, it was in the very clear recognition that we needed to be rewarding NHS staff properly for the extraordinarily important job they do and the dedication with which they do it. We have not only achieved that, particularly through the most recent three-year pay increase that we have had, but through Agenda for Change we have also established a modern pay system that we believe meets, for instance, the needs of equal pay for work of equal value and, perhaps most importantly of all, allows our staff to be recognised for the skills and the competencies that they have, and then to progress and acquire new skills, take on board responsibilities and, of course, in many cases be even better rewarded for doing so. Q264 Chairman: Was that the same for GPs? Was this movement into the primary sector the reason that we have now ended up with the highest-paid general practitioners in Europe? Ms Hewitt: With GPs what we did, unlike Agenda for Change, was to tie a very significant part of the pay negotiations to outcomes, measured within the quality and outcomes framework, and it certainly appears to be the case that the profits that GPs are making as a result of the new contract are higher than we and I think they anticipated, but that is a result of their having achieved more on the quality and outcomes framework than we were anticipating, so although certainly there is higher pay there - or higher profits - it is earned through that outcomes-related pay. Obviously, we are taking that into account as we negotiate next year's round. Q265 Chairman: Obviously, an increase in productivity you expect, but is that going to be measured? Have you got a way of measuring the benefit that patients will have due to these increases? Ms Hewitt: In terms of the GP framework, obviously the quality and outcome framework is directly tied to issues like dealing with diabetic patients, for instance, or advising patients to give up smoking, dealing with a whole range of issues that we identified as a priority. In the case more broadly of the NHS and the results we are getting for the increased investment, there has been, I think, a long and vexed debate, not least amongst the statisticians, about how you measure productivity within the NHS or more broadly public services, and we have commissioned some additional work on that and indeed we will be publishing some of that tomorrow alongside Sir Nigel's annual report. Q266 Chairman: Will we have a measurement for patients' benefit or will that be as a consequence of productivity measurement and increase? Ms Hewitt: The quarrel, in a sense, the criticism that we had of traditional measures of productivity within the NHS was that they really took no account at all of improvements in the quality of patient care and patient experience, and they also absurdly undervalued, for instance, the increased number of people's lives saved as a result of statins. What they were doing was looking at the cost of the statins, and of course they are a rather cheap drug, rather than the fact that we are saving more people's lives, which is the real outcome that of course you want to achieve and you want to measure. Our own departmental statistical team, with the help of some academics and, indeed, the Office of National Statistics, have been looking at how you really try and account for improvements in the quality of care that patients get, the outcome that patients get and the quality of patients' experience, and then reflect that in the measures of output and productivity. Q267 Dr Stoate: I am particularly interested in health inequalities in this country. As you know, life expectancy can vary by as much as nine years across social class and across regions in this country, there are huge inequalities in cancer, in heart disease, in strokes, in diabetes, in obesity and enormous differences. One of the targets the Government set was to reduce health inequalities by 10%, but we heard last week that that was going to be missed and in fact inequalities are more likely to widen before they get any better. What are you going to do to try and bring these inequalities under control? Ms Hewitt: The more I look at this issue of health inequalities, which are deep and very disturbing, the more convinced I am that we have to act on a whole range of issues, some of which are within the control of the NHS and the Department of Health, some of which of course go far, far broader than that. The single biggest cause of health inequalities is simply poverty, so the commitment we have made as a government is to reduce and then to eradicate child poverty and to cut poverty among people of working age and of course amongst the retired population. That will have a very direct bearing on the health outcomes, on all the dimensions that you mention, of the population in future, but I know from some of the communities that I represent myself just how deep-seated these health problems can be when you have, for instance, a baby born with a low birth-weight, to a young single mother who may have smoked throughout the pregnancy and perhaps not had very good nutrition either, whose own parents have perhaps been unemployed or not working, may even have had a disability, so that you have a real inter-generational problem of very poor health outcomes that are directly linked to social and economic deprivation, not just in one generation but going back three, sometimes four or even five generations. We have got to tackle all of those as well as making sure that through the NHS, for instance through the stop smoking programme, or through the kind of targeted work that was done in Sheffield on heart disease, we most directly give support to those who need it most. Q268 Dr Stoate: I appreciate that many things to do with inequalities you have no control over as a single department, and it has to be across government, but nevertheless there are significant discrepancies in access to healthcare, differences in quality and availability of GPs, out-of-hours services, hospitals vary quite markedly across the country, so there are very specific health inequalities due to differences in access to healthcare facilities which are under the control of your department. What do you intend to do, for example, to improve access to primary care in inner cities, in difficult estates? What do you intend to do to improve equality there, because those directly impact on your department? Ms Hewitt: Your point is absolutely right and, given that one of the founding values of the NHS was equal access based on need, not on ability to pay, it is quite shocking after nearly 60 years that we have still got, as a general rule, the worst services, the poorest services, in the poorest areas; it is not acceptable. What are we doing about it? First of all, I am delighted to say that John Reid made really landmark decisions about the pace with which we would move the allocations to primary care trusts towards their target level. You will be aware that back in about 2000 when we recalculated the targets, based on need, we had some primary care trusts that were over 20% below their target formula. Over the next two years we will get to the point, by the end of 2008, when no primary care trust on the current boundaries is more than 3.5% away from their target. That is an enormous improvement and it means that there will be some very, very large increases in funding, largely to the poorest and most under-provided for areas over the next two years. Everybody will continue to get significant increases but obviously those who have been above their target allocation level will get lower increases than those where we need to put the most money in to bring them up to or as close as we can get them to their allocation. That will make, I think, a very big difference. The other point I wanted to make is that in the White Paper that we are going to be publishing shortly on primary and community care we are looking specifically at what we need to do in areas where you have not got enough doctors, where you have got more closed lists, where patients are saying loud and clear through the surveys that they are not satisfied with the services, and we are looking both at what the trigger for action should be and then what action the primary care trust should be required to take. Q269 Dr Stoate: I hope that is going to work because we have had a resource allocation working party - which was the predecessor of the current redistribution system - since 1978 and, although a lot of work went in, very little came out in terms of real redistribution of health resources, because when this Government took over inequalities were absolutely rampant through the system. Are you confident that this new system will be any more effective than the previous one which spent a long time really achieving very little? Ms Hewitt: I am confident, but the point you make is absolutely right. The problem is that you had the RAWP working away, trying to get to as good a measure of need as you could, and therefore coming up with the targets, but even if you moved the allocation towards the target there was no guarantee that the spending was going to follow the allocation. I am sure we will come on to talk about deficits, but one of the very striking features of the deficits is that by and large the worst deficits are arising in the parts of the country that are both healthier and wealthier and, up until very recently within the NHS financial system, deficits in one part of the country were simply covered by surpluses elsewhere, and if you look at the average figures - and these are only averages, obviously there are exceptions - what was happening was a redistribution from the North and the Midlands, the areas generally with greater poverty and worse health needs, to the South and the South East with better-off populations and healthier populations. That was allowed to happen, that was the way the finances worked. What we have now done - indeed we were discussing it at an earlier session at this Committee - is to say, no, if a trust or a whole health community is getting into deficit, then they are responsible for that deficit and if they want to borrow money from a different part of the NHS to cover the deficit, then they will be charged interest on it, and the part of the NHS that is in surplus and is lending the money will gain interest on it, so we have an incentive in the system, coupled of course with the rest of the reform programme, to ensure that money is spent where it should be spent, that there is a constant incentive in there to improve the services and improve value for money, and you do not have the perverse incentive to overspend, pile up the deficits and rely on somebody else to bale you out. Q270 Dr Stoate: Just a final and very brief question, in 2006/07 what will be the percentage increase in allocation to the most below target PCT compared to the average allocation increase? Ms Hewitt: The average is going to be 9.2% next year, 9.4% the following year. The primary care trusts which are furthest away from target will receive an increase of over 30%; those who are most above their target allocation obviously will not have money taken away from them, the least they will get is 8%. Is that right, Richard? Mr Douglas: Yes, 8.1% is the lowest. Ms Hewitt: There you are, 8.1% is the lowest so everyone gets at least that, the average is 9.2%, rising to 9.4% but much higher - that is 30% over two years, forgive me - for the ones who are furthest away. What that will mean is that by 2007/08, if you look at the 5% of PCTs in the most deprived areas in health as well as economic terms, they will receive about £1700 per person capitation, compared to just under £1200 per person in the 5% of PCTs that are healthiest and wealthiest, so it is a significant redistribution. Dr Stoate: Thank you. Q271 Charlotte Atkins: Secretary of State, you have recently made a number of announcements about Herceptin and in doing so you appear to have short-circuited the role of the drug regulation authorities simply because, obviously, Herceptin is not licensed for the early onset of breast cancer and nor has it been through NICE. Is it an appropriate role for a politician to be making these decisions on Herceptin? Ms Hewitt: It is a hugely important question; I very much hope I have not in any way undermined or sidestepped either the licensing or the evaluation body. I have thought very, very carefully about Herceptin and discussed it very carefully with colleagues and with officials because we are in a difficult position. As you rightly say, it is not licensed for early use treatment and, by definition therefore, has not been evaluated. It has always been the position as I understand it that clinicians can, if they want to, prescribe an unlicensed drug, but the particular position we had with Herceptin was that here was a drug, not yet licensed for early stage use which nonetheless, on the early reporting of the clinical trials, appeared to show results in terms of lives saved that were as good as the breast cancer screening programme - as good clinically in terms of about 1000 lives saved a year, as good in terms of value for money. That is not my judgment - obviously, it would be wholly inappropriate for me to try and make that judgment - that is the judgment not least of our national cancer director. In that situation, it seemed to me right, following discussions in particular with NICE, both to urge the company to get their application in for licensing as quickly as possible - that application as far as I know has not yet gone in - secondly, to speed up the NICE evaluation process, not only for Herceptin but for other drugs as well because I think there was a general feeling it was taking too long; thirdly, to put in place, as we did in September, the testing that was required so that every woman newly diagnosed with breast cancer would also get a test for HER2 to see whether or not at the end of her other treatment she would be suitable for treatment potentially with Herceptin and then, fourthly, to make it plain that PCTs should not be refusing a request where the clinician believed that this was the right treatment for an individual patient solely on grounds of funding. Q272 Charlotte Atkins: You say that PCTs should not refuse solely on the ground of funding; certainly with the North Stoke PCT there was clearly a lot of pressure from yourself and the department for the North Stoke PCT to fund the lady who needed Herceptin. This of course brings into very strong relief the position of PCTs, because you will be aware that nearly all the North Staffordshire PCTs are in deficit and they are certainly not in the wealthier and healthier parts of the country, as I am sure you would recognise, so on what grounds could a PCT refuse Herceptin for a particular patient if it is not on cost? Ms Hewitt: These judgments on these exceptional requests for particular therapies are made largely by clinicians, and they would have to look at the case because, of course, what has to be balanced in the case of Herceptin is on the one hand the apparent very real benefits for a minority of women with breast cancer, but on the other hand some very real concerns about side effects, particularly in relation to heart disease, which were not really an issue for late stage breast cancer but of course become much more of an issue for early stage treatment. These are clinical judgments, they are certainly not for me to make as the Health Secretary, but they are the kind of judgments that primary care trusts and their clinicians are used to making. If we all reflect on the last ten years or so, we are all aware of very difficult cases sometimes involving a child whom the clinician thought would benefit from a very particular, possibly untested and expensive therapy, and that would go before the primary care trust and the clinical committee would evaluate it and so on. So although Herceptin is unusual because of the nature of the clinical trials and the reports that have come from those clinical trials, it is not a unique situation for primary care trusts to find themselves in. Of course it is difficult, not only in Stoke - but I am certainly aware of the financial difficulties there - when a primary care trust is already under financial pressure, but that is one of the reasons why they exist: to hold the NHS budget, to get the best possible care and the best possible value for money for their local population and to make decisions that will sometimes be difficult on priorities. Q273 Charlotte Atkins: What worries me in particular is that Herceptin is not going to be the first or the last drug of this nature that supposedly is a wonder drug, even if it is based on clinical trials sponsored by the manufacturer and clinical trials which in fact lasted no longer than 12 months, so for early onset it is obviously an issue. The other issue is that if a PCT has to pay £44,000 for two years treatment and, at the same time, you will be aware that the North Staffordshire PCTs are having to ask the hospital to delay treatment on 500 patients, is this a fair position to put PCTs in, given that no extra money is going to be made available from government to pay for this exceptionally expensive drug? Ms Hewitt: I believe it is. Stoke, along with every other primary care trust, is getting more funding that it has ever had before and although there are very real cost pressures in the system, of which Herceptin is one, there are also savings in the system and you refer quite rightly to the fact that Herceptin is not going to be the only expensive new drug coming through, and we can see from the pharmaceutical companies and indeed the scientific research that there are going to be more and more new drug treatments, new therapies, often very expensive and often, I think we can anticipate, quite remarkable in their effects as we develop drugs based on the human genome project, for instance. Those cost pressures, which are faced by every health service across the world, underline the importance of the reforms that we are making and the immediate steps we are taking to ensure that trusts that have deficits get back and get help to get back into balance. Fundamentally we have got to make sure that we get much better value for money, much greater productivity gains, we do far more prevention, we do far more in the community than we are currently doing - compared with, for instance, the out-patient work that is done in acute hospitals - we do more day case surgery, we reduce the length of stay, we spread best practice far faster across the NHS than has traditionally been the case, because unless we do all those things, even at the end of 2008 when we will be around the European average for investment in health services, we will be spending around 10% of total national income on the health service, we will not have enough money to pay for the next generation of Herceptins and beyond. We have to have that really rigorous focus on value for money and organising services in the way that delivers the best possible health and best possible healthcare along with the best possible value for money. The final point I wanted to make is that the Department also plays its part in this, not merely by giving PCTs more money than ever before but, for instance, in a very tough and successful negotiation on the PPRS, getting a 7% reduction in the price of medicines that we estimate will save the NHS around £2 billion over the next five years. That will help deal with some of the cost pressures for the new drugs. Q274 Charlotte Atkins: Finally, who will take responsibility if the use of Herceptin for women diagnosed with early onset cancer goes dreadfully wrong and we find a lot of these women dying from heart failure? Ms Hewitt: That is a responsibility that the clinician takes, but in full discussion with the woman and, in many cases, directly or indirectly with her family. I have to say the women I have spoken to, and you have probably had the same experience, are saying "I will sign any disclaimer, just let me have this chance." Q275 Dr Taylor: Secretary of State, I have battles with my own PCT about getting them to fund licensed drugs that have got NICE guidelines - not NICE appraisals, NICE guidelines - so it completely puzzled me why you leapt on Herceptin. It struck me really as a knee-jerk reaction to the tremendous emotional pull for people with breast cancer and the press campaign. I have a tremendous battle with ventricular pacemakers in my patch at the moment, which are lifesaving for people in severe heart failure, but every person with that in my area is having to go through a special, complicated case panel. It was hard to know why you selected Herceptin to jump on like this. Ms Hewitt: It certainly was not a knee-jerk reaction and it was based on a very careful consideration of all the different factors, not least the need to reinforce the licensing and the evaluation process. The licensing process obviously is there for health and safety reasons and we must not in any way undermine it, but we also need to recognise that it has always been possible for clinicians to prescribe unlicensed drugs when they think that is appropriate for the individual patient. In the case of NICE I thought the criticisms of the length of time that the evaluation took were justified; I discussed them with Mike Rawlings at NICE, my colleague Jane Kennedy worked on this over quite a long period - we had been looking at it before Herceptin became a major media issue - and we were able to work with NICE to come up with a much faster process; for instance, in a case like this starting the evaluation as soon as the licensing application went in, rather than waiting until the licence had been granted and thus having several months delay in the process. All of that is important and welcome and it strengthens the evaluation process, but of course where NICE is recommending the use of particular therapies for particular clinical indications, then we have made it very clear to primary care trusts that within three months they should be implementing that. Q276 Dr Taylor: I absolutely welcome the fact that NICE is now going to assess these crucial drugs much more quickly, but I am still rather confused between guidelines which are recommendations and technology appraisals which are must-dos. Last week I asked for further detail and clarification of Table 3.5.2, and I think all we got is a change of the word at the bottom from "recommended" to "routine". It still does not separate which are technology appraisals and which are guidelines, and there is so much confusion about this that it would be hugely welcome to have that absolutely clarified. On this table there are now a number of things that are called routine; does that mean those are the appraisals that have to be funded and, if so, would it not be much easier to say that? The amount of extra money that you have to find has gone down between the two tables from £836 million to £758 million. Ms Hewitt: Yes, someone has found a saving. Q277 Dr Taylor: But we do not know which of those appraisals are must-dos and which are guidelines and which are just recommendations. Ms Hewitt: You raise an enormously important point, Dr Taylor. I do not know the answer to it so why do I not take that one away, have a closer look at it myself and then perhaps I could write, Chairman, to you with a fuller response on that, because it sounds like a very valid point to me. Chairman: Thank you. Q278 Dr Taylor: Finally, you mentioned licensing. On the pharmaceutical industry inquiry that we did we were very worried that when a new drug is licensed there is an absolute explosion of prescription of that drug. Obviously, the firms have to try and make their money; that will not apply quite the same to Herceptin because it is such a closed market, but have you any comments on that as a general point, the explosion of prescriptions immediately after licensing? Ms Hewitt: I must admit it is a point I have not looked at before so I have not seen the evidence for it, but assuming there is that explosion of prescribing I guess, particularly if clinicians have been waiting in a sense for a better treatment for a particular condition, it is not surprising that at the point where the drug becomes available under licence and they no longer have to make quite that same case by case judgment on their own responsibility, there might well be an incentive to prescribe it at that point. Q279 Dr Taylor: The huge problem is that the claims that this or that drug are better are not fully substantiated by that time, and with the explosion one then gets into the horrific side effects, but we will be bringing that up in the debate on Thursday and I hope you will be able to answer. Ms Hewitt: I certainly will. I will have a look at what you are saying on that because, of course, in a sense that reinforces the point that one wants the NICE evaluation to follow as rapidly as possible after licensing, because obviously if there is a long period post-licensing and pre-evaluation then that is not very satisfactory. In some cases, though, it may take some time for side effects to emerge and enough data to build up, so I am not sure that there is a perfect answer to this problem. Q280 Dr Naysmith: Can I follow up on that, please, Secretary of State; it is interesting that drug companies and NICE would like to get to the stage where both evaluations take place together and licensing and recommendations from NICE are issued at the same time, everyone would like to work towards that. I am a great fan of NICE, I think it has done enormously good work for the National Health Service and in other ways as well since it was introduced, and I am glad to hear you have been discussing these things with NICE. Do you think it has had any effect on the morale of NICE that you are now interfering at this level on things that should be their province really? Ms Hewitt: I do not believe I am interfering, I am certainly not aware of any impact on morale. As I say, I have made a point of discussing this with the chairman of NICE and making sure he was comfortable with what I was doing on the Herceptin issue because at every point, I think, in virtually every statement I made, I was trying to reinforce the importance, both of NICE and obviously of the licensing process. Like you, I am a huge fan of NICE and I am very struck by the way in which people all around the world are coming to Britain to look at how it is working and to see how they can copy it, and indeed what I would now like to do is invite NICE to start looking at some very long-established treatments and therapies that may no longer - indeed they may never have been - thoroughly justified. Q281 Dr Naysmith: At one of the previous Health Select Committee inquiries into NICE that was one of the things that we recommended, that there were treatments being undertaken that could well be looked at again, but their argument is that they are under constant pressure from drug firms and other people and so on to put things that are newly discovered through the process. Ms Hewitt: Of course they are under pressure and in a sense that pressure will go on building up as all these new drugs and therapies come through. We will certainly be talking to them about trying to find some space to review some of those very long-established treatments because I think the Health Select Committee was absolutely right to say in some cases it may well be that money is simply being wasted on treatments that really have very little value. Q282 Chairman: We are now going to move on to your favourite subject, deficits, Minister. Paul. Ms Hewitt: Thank you for that introduction, Chairman. Q283 Mr Burstow: We are, Chairman, but there was just one thing on NICE that I wanted to very quickly pick up on, which is this welcome process of reviewing NICE's processes and shortening the length of time there, but there is also the question of the topic selection issue within the Department. I understand that currently topic selection takes, on average, nine to twelve months. That would suggest there is quite a variation and range within that in terms of how long certain drugs will take before they emerge from that process. Could you give us a bit more information on what the breakdown might well be - and I do not necessarily mean today but maybe in a note - of how long it does in fact take the Department to do its selections for the various procedures and drugs it has had to look at so far? Ms Hewitt: We will happily send you a note on this. I have not got the details in front of me; my recollection is, when Jane Kennedy looked at that, it was clearly taking too long and we seemed to have a rather cumbersome process for that kind of pre-selection, and I am pretty sure we have shortened that. Nigel, do you want to add to that? Sir Nigel Crisp: Can we come back to you with the details? Q284 Mr Burstow: That was a very quick question, so if I can go on to deficits now because, as you anticipated, we want to ask about these. Can I start with just a question about the deficits as you reported them in the response to our questionnaire and the £30 million deficits; how are the trusts that are £30 million in deficit - and there are a number of these - realistically going to recover their financial positions and what are you going to do with the trusts that fail to recover? Ms Hewitt: We are not planning for failure here. What we found of course, particularly with the audited accounts for 2004/05, was that we had a minority of trusts with deficits, some of them quite significant levels of deficit. We have been putting in place a recovery programme for each of those either individual organisations or broader health communities, and the strategic health authority in each case has been agreeing a recovery path and a control total for the current year. We have been monitoring that month by month, since those control totals were agreed, and of course last week - I think for the first time ever - we published the mid-year forecasts for the end of year figures. What those suggest is that exactly like last year a minority of organisations are predicting a quite unacceptably high level of end year deficit - the forecast deficit at the moment is around the same as it was at this time last year. We believe that by managing this very closely we will get the net overall deficit back to around £250 million at the end of this year and we will, at the very least, get back to balance by the end of next year. What I would want to stress here is that the majority of NHS organisations are simultaneously improving services to patients and meeting all the waiting time and other targets that we have set them, and living within their means. That is what we expect everybody to be able to do. If I look at the position both last year and this year, the bulk of the deficit is in a very, very small proportion of trusts - over half of the currently projected deficit is in only 5% of the organisation - so we have got to focus on those organisations that have allowed the problems to build up, for a variety of reasons behind them, and that is why last week I announced that we were sending in turn-around teams to the organisations which have got the worst problems so that they can get it under control now, get to where they need to be this year, and for the worst organisations obviously they are unlikely to get to balance this year but we will want them to get to balance next year. Q285 Mr Burstow: One of my colleagues wants to explore a bit further the whole issue of recovery planning and some of the other statistical information that has not been supplied so far around financial support, but can I come back really to this point? You say the Department is not planning for failure; surely the problem with not planning for failure is that when failure then comes along the problem is far greater. Therefore I assume the Department actually has planed for failure and does have some contingencies in place for NHS organisations that do not, within the three or four year periods for recovery planning, pull it back and, certainly in the timescales you have just described, Secretary of State, do not pull it back to balance. Just what is the contingency arrangement to deal with those organisations that fail to deliver on your requirements and bring the organisations back into balance? Ms Hewitt: We are not sitting here with a plan B that might well send a message to the leadership of those organisations that they can carry on in deficit and then something else will come along to sort it out. When I say we are not planning for failure, the approach we are taking on the deficits is exactly the approach that we have taken, for instance, on the four hour A&E target. You will remember when we first set the four hour A&E target we had a lot of people saying this was completely impossible; I have had so many A&E consultants say to me in the last six months "I was one of the ones who said it was impossible; the truth is we have done it, that target was a very good target, even though we did not say so at the time, because it has forced us to rethink the way we deliver the services." What we did with the hospitals who were really struggling with their A&E departments and were not getting anywhere near their four hour target, we sent in our excellent recovery support teams. What we are now doing, alongside the recovery support teams that focus on the services - the waiting lists, the four hour target and so on - we have now put in recovery teams that focus on the finances. The reason why we are managing this, if you like, as a single programme with a single team is we do not want trusts saying "We can hit the financial targets but then of course we will have to give up on the waiting time target", or vice versa. Q286 Mr Burstow: On that point, if I may, because that is clearly one of the concerns that is emerging and has emerged from some of the reporting of your statement last week in terms of how NHS organisations are in fact trying to balance the books, achieve the financial objectives that are being set for them and at the same time manage the pressures around targets. We had the example of Harrow, for instance, where they had issued some very blunt advice to frontline NHS organisations to do the minimum necessary to achieve your targets. You have also said that there is a new incentive system to be introduced that means that NHS organisations in deficit will have to pay an interest charge to others to finance the funding that they will get to keep their books in balance temporarily. Surely some of the consequences of these changes will be direct impact on frontline services; patients will in fact notice that they are having to wait longer to get access to treatment, or are the Harrow PCT and others who are issuing similar advice completely missing the point that you are trying to get across, Secretary of State? Ms Hewitt: I understand very well the real anxiety that patients are going to feel if they live in an area where their hospital or primary care trust is in deficit and where they may well have the media, in particular, telling them that their care is going to suffer as a result. So the first point that I would want to stress is that the great majority of NHS organisations are doing both: they are improving services, they are hitting the waiting times and waiting list targets - in fact just last Friday we published the latest waiting list figures which showed the waiting list at the lowest level since records began, so we can see the improvements coming through, right across the country. The vast majority of organisations who are delivering those improvements are also living within their means. In some parts of the country where deficits have arisen we have an almost paradoxical position where the hospital would be able to go even faster than we have asked them to do. We have said we do not want any patients waiting more than six months for their operation by the end of the year, and we will achieve that target. There are hospitals who could hit a much lower maximum than that, if the money was there to finance them to do it, but in a deficit trust the money is not there and, of course, the truth is, if you look at where we are this year, getting down to a six month maximum wait and where we want to be at the end of 2008, with the maximum of 18 weeks from GP referral to hospital treatment, we phased that so that we build up the hospital capacity and we build up the funding over the next couple of years. Some hospitals, possibly because they have increased their staff, increased the capacity or whatever, would dearly love to get rid of all those waiting times this year or in the next six months or so, but the funding is not yet there to do it. That is why, in some situations - and I do not know Harrow in detail, I am not commenting specifically on that - it will make sense for the primary care trust to say to the hospital as well as the maximum which you absolutely have to hit, it makes sense in this very short term to have a minimum as well. Q287 Mr Burstow: So slowing down is something that would be an acceptable part of the way of managing the financial position. Ms Hewitt: In specific circumstances, as a short-term way of managing the recovery, it would make sense to slow down, but recognising that that still means a maximum of six months wait for the in-patient treatment, a maximum of three for the first out-patient appointment, it does not mean going back to the nine, 12, 15, 18 months waits that used to be commonplace. Q288 Mr Burstow: I understand that. Can I move on slightly, if I may, to another issue about the use of the resources and the effects that deficits have? You will know that newly qualified physiotherapists, junior doctors and graduate nurses have all been reported at the moment as being unemployed in higher numbers than for a number of years, the numbers of trainees not getting job offers is quite significant. Do you regard this potentially permanent loss of resources to the NHS in terms of trainees, that the NHS organisations themselves have actually paid for, really as being something that is a necessary sacrifice in terms of the quest that you set for zero tolerance of NHS trusts financial deficits? It does seem to us that we are training staff and then there are no jobs for them to go to: 805 physiotherapists, for example, that do not have jobs to go to this year. It seems a huge investment of public money in training people who then cannot go and do the jobs that we would like to see them doing in the NHS. Ms Hewitt: The first point that I want to make is just to put this in context, which is nearly 10,000 more consultants than we had eight years ago, over 4000 more GPs, over 1000 more GP registrars, nearly 79,000 more nurses, nearly 14,000 more health professionals. Q289 Mr Burstow: The Committee understands that. It is useful to have it, but we could do with an answer to that question. Ms Hewitt: Absolutely, and I am coming to that point. More professionals in every category are employed than ever before. What we are seeing is a small number of physiotherapist graduates and a small number of junior doctors and so on having difficulties getting their first job. I have not got precise figures on the physiotherapists, though I certainly had not heard that figure before, and in terms of doctors I believe the BMA figures, which were very widely reported, were a wild over-estimate of the true position, but there is now much greater competition for the vacancies precisely because we have built the workforce up and we are seeing so many graduates coming through the training programme because we have funded so many more people to do medical and clinical training. That is a good thing, of course we would like every single one of them to get a job and I am pretty confident that the vast majority will get a job, but they may not get their first job in exactly the place or the specialism that they would like and, as we know, the popular jobs are becoming increasingly hotly contested. Q290 Mr Burstow: Of course there is a whole new group of graduates coming through next year and adding to that competition. Ms Hewitt: Modernising medical careers, particularly on the doctor's front, will help enormously there because they will not have to go through an annual round. Q291 Mr Burstow: I am conscious that I need to move on to one final question if I may which is about the whole range of additional commitments that the NHS is dealing with, not least GPs' contracts which we heard about last week in Agenda for Change, and indeed the commitments around moving to an 18 week target. We are coming to an end in 2007/08 of the current comprehensive spending review and, as you yourself have intimated, we are likely to be in a period after it where the level of increased growth in the NHS will be lower. Are you confident at the moment that with all of the commitments that have been entered into, many of which will run well beyond the current round of comprehensive spending review, all of these things can be afforded within the likely levels of resources that will be given by government in 2008/09 and beyond? Ms Hewitt: I am confident that they can be afforded, providing we make very significant efficiency and productivity gains right across the NHS. I am also confident that the reforms we are putting in place - a much stronger voice and more choice for patients, more diverse providers with more freedom to innovate, connected by payment by results, money following the patient and a better IT system - are the right framework to get the continuing improvements, both in the quality of the care and in the value for money that we need, but at the moment and historically we have not had incentives within the system to get the best value for money or to adopt best practice everywhere. Indeed, in many cases we have had perverse incentives. If I can give you one very small example of that, under the star rating system for trusts you were allowed to get a two-star rating, even with the deficit up to a million - with 600 organisations that could represent a hell of a lot of deficit - and you could get a one-star rating with a deficit with no ceiling. Clearly, that is not acceptable and I am very pleased that the Healthcare Commission is in future going to take an even tougher approach on financial management so that that is taken fully into account in assessing the performance of the hospital as a whole. That is just one example, we were talking earlier about the problem of better-off areas shifting their overspending into worse-off areas, that is another example of having the wrong incentives in the system. Q292 Mr Burstow: You say you are confident, does that mean you have a costing for the 18 week target already, that that has been costed and you know how much it will cost you? Ms Hewitt: Richard, do you want to just elaborate on that? Mr Douglas: We did a preliminary costing as part of the last spending review and we will continue to refine that, but there is costing for delivering the 18 week target. Q293 Mr Burstow: Can we have it in that case? Mr Douglas: I see no reason why not. Ms Hewitt: Chairman, just on this point, because I think this issue of productivity and getting better care and better value for money simultaneously is absolutely central, I would like to give the Committee an example. I recently heard the chief executive of one of the London strategic health authorities talk about the seven hospitals in his area, and he had been comparing length of stay for different procedures. He took the example of hip fracture, very common. In two of his hospitals the length of stay was below the NHS average which is 25 days, they were doing it in 20/22 days; the other five were above the NHS average and the worst one had an average length of stay of 38 days, and the hospitals with the longest stay had the worst clinical outcomes. He estimated that if every one of the hospitals managed to get the same length of stay as the top quarter of NHS hospitals - which is not world class - they would find themselves in this one part of London with over 600 more acute beds than they need. That is just one illustration for one SHA area of what I call the productivity pot of gold that the NHS is sitting on. That is what we have to release to deal with all of these cost pressures in the system, all of these rising expectations and improved treatments that are coming through, and that is what the reform programme will help us to deliver. Q294 Mike Penning: I am very interested, Secretary of State, that you are, quite rightly, cherry-picking the good points, but very often you are not talking about the real problems that are occurring. You have referred to a trust there in London, and you are probably aware that Beds and Herts Strategic Health Authority have closed beds and they are cutting in one hospital trust over £10 million out of frontline services. That is what is making people frightened, it is not the figures that you are jumping around with now. What you have done to help that situation is send in your hit squads. You announced last week that hit squads will be sent into hospitals with the worst deficits to help with their financial situation; so it is about finances and not that clinical need then. Ms Hewitt: They go together, and the point I have been making all the way through to the Committee and I will continue to make, and so will my colleagues to the service, is that these things go together. If you are not managing your finances wisely, the chances are that you are not delivering the best service. Q295 Mike Penning: Can you tell me what clinical qualifications a large group of accountants have got when they go into a hospital and tell staff this is the way you are going to run your hospital? Ms Hewitt: That is not how the turn-around teams - which is what they are, not hit squads - are going to work. I was saying earlier, and it is an important point, the turn-around teams, the financial experts, are going to be working alongside and with the clinical recovery and support teams, who are experienced NHS managers, and what they will do is deal with the fact that, unfortunately, some NHS organisations have not got their financial management under control. You and I obviously have a close interest in Bedfordshire and Hertfordshire --- Q296 Mike Penning: Not as close as I would like. Ms Hewitt: I have been looking at the most recent board papers and at the beginning of the financial year the strategic health authority agreed, as part of the recovery plan to get the deficit under control, a set of measures to ensure that the staff numbers were brought into line with what the organisations in that area could afford. They set a path, if you like, to reduce the staff numbers by a modest amount - they would still have significantly more staff than were in post a couple of years ago - but instead of that happening over the last six months the staff numbers across Bedfordshire and Hertfordshire have gone up and up and up. I would hope that you and everyone else on the Committee would agree that if a trust or if a whole health community has got a financial problem - and the deficits are quite severe in some of the Bedfordshire and Hertfordshire hospitals - then continuing to add staff numbers when you cannot afford those staff, is grossly unfair to the staff you are taking on, and to everybody else. Q297 Mike Penning: The accountants that your department has put in - because you are in charge of the health service in this country - have your authority to make staff redundant and close wards? Ms Hewitt: No. Q298 Mike Penning: It is a simple question. Yes or no? Ms Hewitt: No. Q299 Mike Penning: That is what they have done, because in West Herts Hospital Trust your hit squads went in there months ago. You announced it last week. They have been in there since before, I think, you came into post. So they are there closing wards. Your authority has been put in there to designate what they do. On the basis of financial outcomes you are closing wards, and the chief executive said to me, "I will not be able to pay my staff in the fourth quarter unless I close these units and cut back." That is on your authority, is it, Secretary of State? Ms Hewitt: I am afraid that the trusts in Bedfordshire and Hertfordshire, like the trusts everywhere else, have to live within their means, and their means are significantly bigger than they were last year and massively bigger than they were eight years ago. The clinicians, the clinical directors, the finance directors, the managers and the recovery teams work together to decide what, in their judgment, is the best way of ensuring that they get themselves back under financial control without compromising patient care. I think it would be helpful if Nigel elaborated on this point. Q300 Mike Penning: I want to take you up on that point, Secretary of State, because that particular point you are making is fundamentally wrong in the constituencies you and I represent, not the officials, you and I as elected people. You cannot say that you are getting a better outcome in a hospital if you are closing wards and cutting £10 million from front line services. I am sorry, that just does not add up. At the end of the day, you are either in charge of this department or not; it is either their fault or your fault. Is it your fault that they cannot manage themselves so we can treat our patients and our constituents today with the treatment they need or not? You cannot pass the buck around the Civil Service. Is it your responsibility or not? Ms Hewitt: There is a responsibility upon all of us to ensure not only that we give the NHS adequate funding, and I would say we are more than discharging that responsibility, but also upon each part of the service to use that money as efficiently and effectively as possible. What I would say to you---- Q301 Mike Penning: The Committee if you do not mind. Ms Hewitt: Absolutely. What I would say to you, collectively, is that any trust and any health community that is over spending, even on the enormously increased allocations we are giving them, is relying on another part of the country, quite possibly with greater health needs, to bail them out. I do not regard that as either fair or acceptable, because my responsibility is for patients in every part of England, including but not confined to those in Bedfordshire and Hertfordshire. There are fundamental problems, which you and I have discussed on an earlier occasion, within Bedfordshire and Hertfordshire which have to do with the configuration of services across multiple hospital sites. There is an agreed way forward on that which will include a very large PFI rebuilding programme long-term, or medium to long-term because obviously it involves a reorganisation of the services in the mean time. That is a very important part of the answer, but that is not an excuse. Q302 Mike Penning: Can I bring you back to the question, because you are not answering the question. Ms Hewitt: That is not an excuse for employing more staff than the service in Bedfordshire and Hertfordshire can afford. Q303 Mike Penning: That is right; it is an excuse not to treat patients. That is what you are saying. One last question. The cost of these accountants, is that going to be borne by the trust or your department? Mr Douglas: The central recovery team costs will be borne by the department. Q304 Mike Penning: The department itself? Mr Douglas: The recovery teams that went out setting up, they will be borne by the department. Q305 Mike Penning: The ones that are already in place? Mr Douglas: The teams that are already in place that have been employed by the trusts are paid for by the trusts. Q306 Mike Penning: So that is yet more money that is coming out of the front line to meet your targets? Ms Hewitt: I think it comes back to a judgment, and you and I may disagree on this, about whether good financial discipline and management is an important part of a good health service. I think it is. You may disagree, obviously, but I think it is and therefore I think, if you have a trust with weak financial --- Q307 Mike Penning: I do, but what I think, Secretary of State, does not matter. It is what the Committee decides, and, at the end of the day, it is about treating patients. That is what the NHS is there for. I will hand back to the Chairman. Ms Hewitt: That is why I am proud of the fact that we are putting more money in than before, but I am absolutely determined that we get value for money. Q308 Chairman: Sir Nigel, did you want to add anything to that? Sir Nigel Crisp: I think it has probably been covered. I could say more about performance management, but I do not think so. Q309 Jim Dowd: Briefly on defences, do you think that the resources, accounting and budgeting regime, otherwise known as RAB, I believe, assists or obstructs trusts in deficit from achieving balance? Ms Hewitt: It is many years since I was a treasury minister and had the pleasure of a training session on RAB. I am not sure. I am going to turn to Richard on this, because I think we are getting into technical areas which I do not really feel qualified to judge. I think the issue you are referring to is that effectively if someone overspends in one year we take that money off the allocation the following year. Q310 Jim Dowd: And they still have to recover the deficit. Ms Hewitt: They will still have to recover the deficit over the five-year period, but once someone gets to the point of recovering the deficit we could look at making some changes around the RAB adjustment. The difficult thing is we introduced the RAB adjustment, what people call the RAB problem, because every time someone overspends it takes money out from somewhere else in the system and we have to pay that money back, not in five years time but the following year, and that is what we did. I think the issue about recovery over the five year period is an important one. One of the things we are looking at in the new financial regime and that we are trying to develop is not having that thing that the NHS effectively call a "double whammy" on this, and we would like to remove that, but we need to get organisation back into recurrent balance first before we can do it. Q311 Dr Taylor: Secretary of State, we welcome the statement, we do not welcome it but we welcome the openness, that 620 million is the forecast deficit for the end of this year. I am slightly worried that this may underestimate what is going on, because if you look through the list of the deficits admitted to for this year, if I just pick up a couple that I know about, in Worcestershire the deficit is forecast to be 3.8 million, and yet the plan for the year after that is the necessity for a 20 million saving, in Shropshire 10 million is admitted to and the plan for the year after that is a saving of, I think, more than 30 million. Somehow that 620 million is not nearly the size of the saving that has got to be made the next year, because it is not taking into account brokerage and shifts, as you have said. Is there any way that we could get a grip on the total feared deficit in 2006/2007 which these people are working so hard to save, amounts of 20, 30 million? Ms Hewitt: I suspect, I hope, the answer is, "Yes." Richard, elaborate, if you would. Mr Douglas: I think I did promise the Committee at last weeks meeting to give you a summary of what is called the "planned support" in the system. The only thing I would say about the numbers, and I do not know the numbers you particularly refer to for next year, but when people talk about a savings programme for next year that may well include - and I do not know without those figures - their assumptions about what efficiency targets they will have to meet. Every organisation will have an efficiency target to meet each year, so to present a savings figure as equivalent to a likely deficit, they are different things. I think we can disentangle those two. Q312 Dr Taylor: If you are an accountant, yes! Have you, Secretary of State, made any analysis of the major trusts and PCTs with the really big deficits? You have mentioned that they are worst in healthier and wealthier regions. If you look at the 12 worst PCTs and the ten worst acute trusts, certainly the PCTs do appear to be in wealthy areas, but some of the acute trusts are not; and one of our advisors has analysed them by SHAs and County Durham and Tees Valley come very high in the area, north-west London comes high, so it is not as simple as that? Ms Hewitt: No. Q313 Dr Taylor: It would be worth analysis. Is it because of under funding or bad management or what? Ms Hewitt: This is a very important point. I stressed earlier that I was giving you an average picture, and obviously there were exceptions to it. If I look at the largest forecast deficits from the trusts - you are looking at Surrey and Sussex, St George's, Hammersmith Hospital, Hillingdon, West Hertfordshire, North West London, Kensington and Chelsea, Bedfordshire, Hertlands, Southampton - South Tees Hospital stands out geographically in that list. If I look, as I did some months ago, at the overall position for net surpluses and deficits and how they have been moved around the system in previous years, it is very noticeable. You see a shift, if you like, between north-east London, which is poorer, to north-west London, which is wealthier, from London and the South East, or, rather, from the North and the Midlands down to London and the South East, but the overall figures conceal, obviously, the particular problems. The particular problems are themselves caused by a number of different factors. You may have in some cases hospitals with very high costs; in other cases, sometimes associated with excessive length of stay, you may have low levels of day surgery, excessive referrals into the acute sector, not enough done in the primary sector, you may just have poor management. Q314 Dr Taylor: So your hit squads will pick up these things? Ms Hewitt: Our recovery and turn-around teams will undoubtedly pick up these problems, and Surrey and Sussex - I mean not simply the hospital but Surrey and Sussex SHA - which is one of our very problematical health communities, we have just put in an interim chief executive, in fact both to Surrey and Sussex hospital and to Surrey and Sussex SHA. They have both got new chief executives in there to help sort things out. Q315 Dr Taylor: Our advisers have given us a very useful table comparing the increase in revenue spending of 6.6 billion, and, taking off the impact of cost increases, it leaves 3.73 billion available for new programmes, and they have balanced that with commitments that add up to 3.6 million. If we sent you a copy of this table would you be able to analyse it and see if you agree with it: because if it is right it means that there is only 100 million left over, apart from efficiency savings which you are banking on for doing everything else the NHS has got to do? Ms Hewitt: I would certainly like to have a look at the table, so I would welcome the chance to have our people analyse it, and my first question would be whether they have taken account of the savings that are also in the system as well as the cost pressures; and I do not simply mean the efficiency savings, although, while I am on the point about efficiency savings, perhaps I could say we are ahead of where we committed to be in terms of our Gershon savings and we have achieved savings of 1.7 billion since March 2004, which puts us £200 million ahead of our target. The overall target, of course, is 6.5 billion by March 2008, but we are achieving those savings and that is more money available for front line services. Q316 Dr Taylor: Thank you. It would be most helpful if we could send them? Ms Hewitt: We will do that Q317 Anne Milton: Secretary of State, I wonder if I could clarify a few points. You said that you were planning for a deficit of 250 million at the end of this year when, in fact, the Department of Health press release on 1 December says 200 million. I wanted to clarify which one it was. Mr Douglas: Our control totals we have agreed would take us to 200. Q318 Anne Milton: Sorry. Mr Douglas: The number that we have fixed on that we will aim towards this year is 200 million. Ms Hewitt: I am sorry, I was wrong then with 250. Q319 Anne Milton: Picking up on some points that you made earlier, you said that you did not feel that PCTs should deny treatment on the grounds of costs. Do you mean any treatment? Ms Hewitt: No, and indeed this is the point of NICE, because you have to make an assessment of both clinical effectiveness and cost effectiveness. Q320 Anne Milton: Could we have yes or no answers? Ms Hewitt: No, I cannot give you a yes or no answer because what I said about denying treatment on grounds of cost related specifically to herceptin where the initial estimate, based on the clinical trials so far, is around a thousand lives saved a year. That is the same number of lives at round the same cost as the breast-cancer screening programme, which, of course, is generally regarded as a rather successful and in a sense low-cost programme. That is the balance, if you little, that I was drawing the PCT's attention to, but I certainly would not make that as a blanket statement in relation to all or any therapies that people might come along with. Q321 Anne Milton: So you do not think that PCTs should deny treatment on the grounds of cost in the case of herceptin? Ms Hewitt: That is right. Q322 Anne Milton: But you would not take it any further than that? Ms Hewitt: Where there has been a NICE evaluation and NICE say that for these clinical indications this treatment should be given, the PCT should be organised to make that available within three months of the NICE recommendation. I am afraid it is horses for courses here. Q323 Anne Milton: What about delaying treatment? There are stories about some operations being delayed until the next financial year. What do you feel about delay of treatment due to cost? Ms Hewitt: What I said earlier was by the end of the year we expect a maximum wait of six months for an in-patient treatment and we are certainly not prepared to see trusts go beyond that even if they have financial problems, but if their hospital is saying, "We would really like to get rid of all these waiting lists and we can do it all in the next six months. We want to spend all the money that is going to be in the system next year and the year after, we would like to spend it right now and get to a zero waiting time now", then it is perfectly reasonable for the PCT to say, "Not quite so fast." Six months now, and then you start moving that down to 21 weeks, 18 weeks, and so on, and we have set out the phasing that will happen for that final part of the system as you wait for the operation as we move towards the goal of 18 weeks from GP referral to operation, and we will get there by the end of 2008, not the end of 2005/6. Q324 Anne Milton: It is the fact that operations are being delayed to save money, but we hear talk in the broad papers about over-performance, which I think is a rather sweet term, is it not? Ms Hewitt: I understand the frustration. Clearly, if you have got a hospital that believes it has enough spare capacity to do operations even faster and they would like to do that, if the primary care trust can afford that and wants that to happen when it looks at all its other priorities, that is fine, that is a judgment for the primary care trust, but if the primary care trust cannot afford to get, not to six months (everyone has to do six months) but cannot afford this year to get to five months or four months, that is okay, because next year and the year after they will get, by the end of 2008, down to 18 weeks. Of course it is frustrating for people who are being told, "You are going to have to wait six months", when maybe the hospital is saying they could do it in four months, but, compared with where we were not so many years ago, it is still an enormous improvement and it will not breach the six month maximum. Q325 Mr Amess: Chairman, I cannot help thinking that our proceedings this afternoon are somewhat overshadowed by the election of the new Pope, or, should I say, new leader of the Conservative Party, but we will just have to cope with the event! Sir Nigel, you and I had a robust exchange last week and, unlike the chief medical officer, you were absolutely not for resigning, indeed it had never crossed your mind. You will recall how upset the Committee were that, for whatever reason, a number of our questions were not answered in full, and I shared with you that question 3811, where we asked for a set of figures on patient admissions broken down by in-patient and day care plus a commentary, was not done. You did not provide a table of figures and the commentary amounts to one very short paragraph and does not refer to the data at all and a second paragraph refers briefly to one series only. You, Sir Nigel, told the Committee that you accepted fully our disappointment and that you would provide us with that information this week. I am advised by our clerks that, in spite of chasing up this information, we still have not got it? Sir Nigel Crisp: Mr Amess, I did on Thursday say that I intended to get you the information. I can take you through it verbally if you wanted me to, but the reason that I have not got it for you in detail is there is one figure which may --- May I just remind you, there was a particular point here, I think. You were saying that the number of decisions to admit seemed to be going down, so what was happening? That was one of the questions you wanted to know. I said that I thought it was to do with the increase in the number of primary care procedures that used to be done in hospitals and the increase in the number of procedures that are done in out-patients. I have got all the rest of the information. I have not got an adequate fix on that piece of information, which is why I have not given it to you, because I would rather give you accurate information. I do apologise for the fact that you do not have a note to the effect of what I have just said. Q326 Mr Amess: Sir Nigel, you earn your money, you have been positively charming. The Chairman would not want me to delay proceedings by going on about that issue. I am sure it is perfectly acceptable if, when you do have the final piece of the jigsaw, you would kindly send it to us. Secretary of State, your predecessor, John Reid, said that earnest statistics on productivity being 4 to 5% lower in 1997 compared to 2003 were absurd. Do you agree with that statement made by your predecessor? Ms Hewitt: Of course. I always agree with my predecessor, almost. "Almost", I did say at the end of that sentence. However, on this particular issue, yes, I do agree. This issue of productivity in healthcare has been argued over by statisticians for many, many years and not only in our country. We have been looking at it and working on it, our own staff, some academics and ONS itself, because I thought John Reid made a very pertinent criticism that the productivity figures did not take account of the improvements in the quality of care and patient experience (the point that we were referring to right at the beginning), and we will be publishing, as I think I said, more detail on this tomorrow, but I think it is absolutely essential to take a proper account of the real changes in activity and outcomes that are taking place in the NHS. Q327 Mr Amess: So that the Committee gets it clear, what are the figures to which you wish the Committee to refer to prove that overall National Health Service productivity activity is increasing? Ms Hewitt: What I would like to do, if I may, Chairman, is send the Committee tomorrow the rather lengthy report, in fact two, I think, lengthy reports and articles that we are publishing as a sort of accompaniment to the chief executive's report, and then we would be very happy, and it might make more sense for our statisticians to come along, but I would be very happy to come back with them and go through that in much more detail, because essentially what we are looking at is a whole series of adjustments to productivity figures. I gave the examples of statins taking account of the lives saved rather than the cost of the treatment. There is a whole series of adjustments like that. Q328 Mr Amess: If you could send us that information it would be very useful. Could I recommend some bedtime reading called Heathcare UK 1991 and a splendid article written by the notable academic Sean Boyle called, "Minor surgery in general practice. The effect of the 1990 General Practitioner Contract." I think, Sir Nigel, this goes back to our exchange last week: because we have in the course of the week had an opportunity to reflect on this matter and I think I did describe this whole presentation as a fiddle. Relying on this data, the Committee is a little bit confused about your relying on the increased activity of general practitioners because it seems in 1991 there were about a million of these procedures that general practitioners were doing in any case. Again, I think the Committee comes back to the original point: why are the waiting lists falling? We really do feel very, very strongly that the waiting lists are falling because in a very real sense there are less and less people put on these waiting lists, and I think the Committee feels it is unfair that you are relying on the increased activity of general practitioners? Sir Nigel Crisp: Not just that. The other very big thing that is happening in hospitals is that there are many more procedures being done in out-patients rather than in-patients. So people will bring people back to have some minor surgery or, indeed, in some cases, some quite significant surgery, coming back as out-patients, and so they are part of a different system. They are not admitted to the hospital, they come in for the day and they have the procedure. In addition to that, there are a significant number of increases in primary care. We started to try and collect these systematically. I do not know that particular study. There are lots of studies, as you are probably aware. We began to attempt to collect this information systematically three years ago when we systematically went round the country and asked people to identify the specific changes that were planned changes: for example, people taking vasectomies out of their hospital service and putting them in primary care and so on. We have now got a better set of figures which are measuring the changes. There is a base-line level of activity, but specifically aimed at identifying measuring the changes not what the overall activity is. That is why this is both anecdotally and evidentially happening. Our figures are not yet as good as they might be, which is why I have not been able to give you the figure earlier. Q329 Mr Amess: I shall not labour the point, and, without wishing to be seasonal, I think the Committee still feels that you are skating a little bit on thin ice with these figures? Sir Nigel Crisp: May I bring back examples, if you would wish? Q330 Mr Amess: We are finishing at five o'clock, and I do not think we are quite halfway through yet. My final point, Secretary of State, and this again has been a divide between the Government and the opposition about waiting lists, the argument is that we feel very strongly that the waiting lists and the Government's reliance on the figures tends to distort clinical priorities. Why do you feel so strongly, Secretary of State, that these waiting lists should be a priority for National Health Service managers? Ms Hewitt: Because they were the top priority for the public, and the public made it very, very plain to us before 1997 that the thing they were most distressed about was the length of the waiting lists and the waiting times. They and we believed it was simply unacceptable to have, for instance, an elderly person waiting in agony for a hip replacement for months and months on end, those months often stretching out beyond a year, sometimes close to two years or even worse. We did not think that was acceptable, and we therefore made the promise that we would get the waiting lists and the waiting times down. I think clearly there is a disagreement between us about the figures. We believe, not just on the basis of the statistics, though we think those are robust, but also on the basis of what our own constituents tell us, that the waiting times have come down very sharply indeed. The recovery and support team within the department who go round supporting hospitals that are struggling are very, very clear, because they can practically tell you the names and addresses of people who, for instance, at the time when we were trying to get the maximum wait down to nine months, were in danger of breaching that point. They went through every one of those patients with the hospitals concerned to make sure those patients got their treatment. If the patient no longer needed the treatment, obviously that was a different situation, but the patient who needed the treatment got the treatment. That is what is now happening on the six-month wait, it is what is happening on the much more complex challenge we have set ourselves of the 32-61 day target, which is an end to end target, for cancer patients which we have set as the target for the end of this year and which will give us very good experience to bring to bear on the general 18-week target before the end of 2008. We believe it was the right thing to prioritise, because it is what the public wanted, we believe we are making enormous improvements and will continue to make the improvements that are still needed, because although six months is a lot better than it used to be, it is still not good enough; so a lot done; a lot still to do on this; and, of course, in order to achieve the 18 weeks we have got to get into that black box of the diagnostics and the additional out-patient appointments beyond the first out-patient appointment where we know people have long waits at the moment and those waits, of course, have not even been countered. That is what we are now tackling in relation to cancer and we will tackle everything as we move towards the 18-week target. Mr Amess: I understand everything you say about the pressures from the general public, and I will finish my questioning there, Chairman, but I would simply say that, while I understand about the pressures from the general public, the Committee does increasingly hear from clinicians that they feel there is a distortion in priorities because of the pressures on the managers, but in the interests of time, Chairman, I leave the questioning there. Q331 Dr Stoate: You talked a lot this afternoon about targets, and certainly targets can concentrate the mind wonderfully when it comes to assessing performance, but, equally, targets can at times have adverse and perverse effects. For example, the 48-hour target for GP appointments has led many practices to prevent patients booking routine appointments in advance and, in fact, have forced some people to have to phone on the day through busy phone lines simply to get an appointment at all and hide behind the Government's policy by telling patients, "Oh, no, the Government insists we do this", and we all know of an example where this has happened. What can you do to avoid these perverse effects happening to distort the way targets are being interpreted? Ms Hewitt: The first point I would make is that I think you and I would agree that targets are very useful, although they can also have some unfortunate perverse effects, and I want to stress the very useful point, having been a critic of the Government for having had too many targets in the past, and I think we have largely dealt with that, but I have been genuinely surprised by the number of clinicians who have said to me in the last six months, "Such and such a target was really brilliant because it forced us to redesign and rethink the way we did things", and so I think that important. The 48/24 hour example you give is a very good one, a very good one on perverse results, because we do now have a very significant number of patients who are very unhappy about the way their GP's appointment system is working. Again, I would observe, the majority of GP practices meet their 48/24 hour target and they do it with a perfectly sensible appointment system: people can get through on the phone and if they want to book an appointment in advance they can do so because that was never ruled out, certainly never intended to be ruled out by our 24/48 hour target. But I think there is a bigger point here. We can always try and design targets to be smarter and avoid these odd effects, if you like, that some of them have had. I think the much bigger gain to be made is by moving towards this thing we call a patient-led NHS: because if the patient and the user of the service has got more choice and a greater say in how that service is designed, then you will not need to rely on top-down targets nearly so much, and that is the fundamental point of the reform programme, that we put in place a whole set of incentives that will enable the NHS to become genuinely self-improving, because there will be this constant motivation of incentive to respond to what patients want, to improve the quality of care and the quality of the patients' experience and to keep getting better value for money, because without that you cannot do all the other things as well. Q332 Dr Stoate: I accept all that, but there is still going to be a problem with the target culture, and that is that some areas of NHS activity will inevitably be target driven. Will that not mean there will be clinical distortions, because areas that are not target driven could easily find themselves missing out. I will give you one example. I passionately believe that GPs should take much more care of obesity. I would like to see much more notice taken of patient size and appropriate advice being given. That is not part of the quality and outcome framework and therefore there is no incentive for GPs to concentrate on that because they have other priorities. What do you do to avoid this culture where targets drive you in one direction to the exclusion of others? Ms Hewitt: There are a couple of things you can do. As you say, a target is not a target if everything has a target, and so you do have the problem that people will focus on the identified priorities, possibly at the expense of other things that are very important. We can obviously make adjustments to the quality and outcomes framework each year so we embed best practice and then move on to the next priority, and that will help in some situations, but I think practice-based commissioning and an indicative budget for every primary care practice showing them what they are currently spending in the acute sector is going to concentrate attention on all those long-term conditions, obesity being one, alcoholism, alcohol abuse being another, that have appalling effects on people's lives and appalling results in terms of emergency admissions to hospitals, and so it comes back to embedding the incentives in the system. There will be an incentive in there for the GPs, nurse practitioners and others working with the primary care trust to say, "Hang on, what is driving our acute bed occupancy?" We have got a real problem of obesity, alcohol abuse, diabetes, a whole series of other things, so let us focus on those, look at what we need to do in terms of prevention and public health, but also look at what we need to do to enable people to manage their condition better - diet, exercise, and so on - where we know that something like half of people with long-term conditions do not have a proper care management plan agreed with their primary care practice. Q333 Dr Stoate: The logical conclusion of what you are saying then is simply to have even more targets and let best practice drive clinical practice? Ms Hewitt: Best practice by itself does not do it. Almost anywhere you go in the NHS you will find one or two examples of best practice, and for anything you care to name you will find best practice somewhere in the NHS, but you very rarely find an organisation that is systematically applying best practice across everything and across the entire health community. That is where we need the system reforms, Payment by Results to make the costs transparent, practice-based commissioning to give GPs a real incentive to pull care out of the acute sector and focus on prevention and better management of long-term conditions. You can do that, and that will give you the results that you and I both want - it will not be no reliance - but with less reliance on targets because you will not have to single out obesity, or diabetes, or alcoholism because they will be so visible as you look at the patterns of care and expenditure across the entire practice. Q334 Dr Stoate: If that still remains, if you are going to have diabetes rolled up with heart disease and everything else, you do not need targets for it because you are simply going to have the best local outcomes driving activity, and it is illogical, therefore, to have a diabetes target but not to have an obesity target because one will inevitably undermine work in the other? Ms Hewitt: But it might make more sense for the primary care practices and the primary care trusts to identify one of the biggest problems of long-term conditions in their area, which may well be obesity and diabetes, to look at the patients who are, if you like, at the top of the pyramid, who have the worst conditions and are probably being admitted, possibly more than once a year, to emergency care. What do we do better to manage those people and keep them out of an acute admission at all, and then, in the middle of the pyramid, what do we do for people in the danger zone who need real help in managing that condition better? You do not necessarily have to have a target for this, that and the other. What you can do is put the incentive in the system, make the best practice information available, encourage people and in some cases possibly require people to benchmark themselves, and then make sure they are driving the improvements. Q335 Jim Dowd: Can I look at another target before our way to A&E. Imagine, if you will, one of the busiest A&E units in London which is currently regularly hitting 98, 95 occasionally 96, but the investment required to hit 98 is completely disproportionate to the effect it will have on other hospital services, requiring something between 8 and 10% additional expenditure on the current A&E budget. Is that 2, 21/2% improvement worth that effort and that expenditure? Ms Hewitt: I obviously do not know the details of the particular example you are giving, and I would really want to talk to our recovery and support people about what is going on in that individual hospital because I have heard that general point made before. When I have gone back and checked with our delivery people, who are superb, fundamentally what they say is if you redesign the service in the right way, you can achieve the 98% target even in a really busy, stretched inner city hospital, which I guess is the kind of hospital you are talking about, but if you are just box-ticking or drawing lines on the floor and calling one side A&E and the other side a medical admission unit, you probably will not hit the targets or, if you do, you will not hit them through a real improvement in the experience and the care of the patients going in. I am perfectly happy to look at the detailed example if you want me to, but that is the general view of our recovery and delivery support people. It may be you are referring to one of the small number of hospitals that is continuing to struggle with the A&E target, but we would need to look at it in detail to be sure of that. Chairman: One question on NHS reorganisation. Q336 Anne Milton: Foundation trusts. 50% are in deficit, which I think is a surprise to many of us, and it is the case that the foundation trusts are more likely to be in deficit than normal NHS trusts. I would like your comments on that? Ms Hewitt: I am surprised by that figure actually. I was just asking Richard to check it for me. There is a significant difference in the foundation trust regime, which is that obviously Monitor checks very thoroughly the financial health of the organisation before clearing it for foundation trust status, but it then, going forward, allows the foundation trust to balance its books over three years, so you could well have a situation where a foundation trust is quite deliberately, if you like, building up a deficit in the first year while it invests in new services and reorganises itself, and Monitor would be concerned about that if they did not think they were going to get back into balance over the three year period. Mr Douglas: I am sorry, I have not got the number of trusts to check, we have only have the value of the deficits there. Q337 Anne Milton: The figure I have is 50%, whereas the deficit overall is 28%. In terms of deficit, they are doing far worse than the normal NHS trusts? Ms Hewitt: First of all, I think there is an issue about the size of those deficits and, secondly, it is a different performance management regime, and perhaps we could get a note from Monitor for you on that. Q338 Anne Milton: You have got something about the size? Mr Douglas: The value of the deficits is roughly similar to the proportion for NHS organisations. It was around £34 million last year. My understanding is that the foundation trust system as a whole is planning for a break-even position for this year. Q339 Anne Milton: So the interim figures suggest that, do they? Mr Douglas: I have not got the interim figures for foundation trusts because they are monitored and regulated by our foundation trust regulator. Q340 Anne Milton: Maybe you could let us have some information. Ms Hewitt: It is a matter for Monitor. I am not sure what they collect, but we will ask them and come back to you on that point. Q341 Chairman: Can we move on to the issue of private sector involvement in the National Health Service. Evidence to date suggests that the contribution of ISTCs to NHS output is marginal. Is the idea behind ISTCs to either increase choice, capacity or innovation, or all three? Ms Hewitt: All three, and I would not dismiss changes at the margin. I think when you are dealing with waiting lists or trying to change the performance of organisations, changes at the margins can be hugely important. The cataract example, which I have used often and sometimes been challenged on, suggests that although the private and not for profit sector is, as you would expect, doing only (and I have not got the exact figures) a relatively small proportion of the total number of cataract operations, it was responsible for between a third and a half of the reduction in the waiting list; so a relatively small input can have quite a significant effect. Q342 Chairman: I think we accept that. About 4% of overall cataract operations are being done in that way, and presumably geographical targeting has meant it has been a success in those areas, but that is not necessarily improving the innovation of the National Health Service cataract overall. Could you tell us precisely what is the reason for the second wave? Is there any evidence base from need, as it were, in terms of waiting lists, or is it more to do with setting up choice? Ms Hewitt: As we have said, Chairman, for several years now, we believe the private and not for profit sector can help us by increasing capacity, thus getting the waiting lists and times down, by supporting patient choice, which in turn helps to drive further quality improvements in the service, and by bringing more innovation and more challenge to the NHS itself. Again, cataracts are quite an interesting example because, of course, it was the independent sector that brought in the mobile cataract surgery units that are now being used for some other procedures as well and which have been enormously helpful because they are faster, you can mobilise them quickly, you can get them to parts of the country where you have got the worst problems, they are particularly useful in rural areas, and so on. It is for all of these reasons that we want to have a small, but nonetheless thriving and competitive, independent sector share of the total NHS delivery for patients. Q343 Dr Naysmith: Secretary of State, you will be familiar with the situation in the North Bristol Trust, which has been discussed endlessly, and Mr Douglas also is familiar with it in the past. It is undergoing major reorganisation in the South Gloucestershire, North Bristol area, and not uncontroversial reorganisation, and somehow it has popped up that there is an ISTC plan for this health community. I wonder, can you tell me what this is supposed to contribute to what is already a rather difficult and tricky situation? Ms Hewitt: There is, indeed, a proposal for an elective treatment centre, an independent sector treatment centre as part of wave two for exactly the same reasons as I was outlining to the Chairman. We want to give patients more choice, both because we believe patients value that in itself but also because it gives you more chance of having the good local hospital on your doorstep that of course people want, we want to bring in more capacity so that as we get to the 18 weeks, which is the maximum, of course, the average will be lower, and then we want to be able to sustain that at a level of funding with lower rates of growth subsequently than we have enjoined in current years; we want to keep getting more innovation in the system, we want to keep that degree of competition and challenge that we think will continue to drive further service improvement; and the evidence for this, I think, is very striking, but it was after we made the decision to bring the independent sector that we saw the really big falls in waiting times and the very significant changes on the part of some consultants for whom, of course, long waiting lists had often been a source lucre in the private sector. Q344 Dr Naysmith: I do not disagree with that, because it is true in many cases, but I am talking really about the North Bristol Trust situation where we are reducing capacity slightly in the acute sector and moving a lot of activity to primary care centres and other really top quality stuff. Can you understand why it seems just a trifle perverse to some of the clinicians and to some of the people who live in the area that we are promoting an ISTC? Ms Hewitt: Yes, I understand the point that people in the existing the hospitals are making, but I think the important thing here is always to look at it from the point of view of the patients and making sure that we get what we are really driving towards, which is a system that has got enough diversity and challenge on the provider side and enough choice --- Q345 Dr Naysmith: There is a lot of challenge going on in North Bristol at the moment? Ms Hewitt: Indeed there is, but challenge from other providers as well, and enough choice on the patient side to give us that incentive for continuous improvement both in clinical care and in value for money. The wave two proposal, which has not yet gone out to tender - I am sure that is right - was the result of discussions between the department and the Strategic Health Authority, as it was in other parts of the country, but has not yet gone out to tender, so at this point we do not know who might be interested in providing it or whether it will represent value for money. Q346 Dr Naysmith: Is this part of the ideological bit moving towards 10 or 15% of independent sector treatment? Is that why it is happening? Ms Hewitt: I do not think that an absolute commitment to continuously improving care and continuously improving value for money is really ideological, but maybe we can use different words for it. That is what the commitment is. As part of that we want to have a modest involvement but, nonetheless, significant from the private and not for profit sector, for all the reasons I have said, because we do need more capacity in the system. We do not want to continue running all of our hospitals at the 90%, or thereabouts, occupancy rates that we had to have in order to get the waiting lists down, so we want capacity, we want choice, we want more innovation, we want more contestability, and for all of those reasons we have got the commitment that I have announced to wave two both on the diagnostic side and on the electives, which I think is where your particular scheme comes in. I am sorry, the 10% and the 15% figure - let me just pick up on that. Q347 Dr Naysmith: What is the ideological bit? Ms Hewitt: I do not think this is ideological. John Reid made the point that, looking at what he thought was needed, he did not believe, I think the phrase was, in his political lifetime that it would be more than 15%. I have obviously looked at those figures, and if I take wave one and wave two, that would represent in total about 10% of all elective treatments and about 1% of the total budget of the NHS, and that is what I mean by modest but significant. In the great scheme of things 1% is really not very large. In terms of the impact that it will have on the quality, the speed, the levels of innovation for elective care and diagnostics, it will be significant, and that is why we want it. Q348 Chairman: Could we say that the choice then is that you need to have an independent sector there within a geographical area? The choice is in part the independent sector? Ms Hewitt: The choice is in part the independent sector. If I look at my own city of Leicester and the broader county of Leicestershire, Leicester East PCT has been trialling information to patients on choice, and the choice that is offered there is the three hospitals from the University Hospitals of Leicester Trust, a Nuffield and a Bupa hospital within Leicester, but also Northampton and Kettering trusts just down the road; so there is choice, which includes NHS hospitals, but also in this case two private sector providers. Q349 Chairman: In South Yorkshire we have got four what you would call "disciplined hospitals". The one at Sheffield is a big teaching hospital, but quite a lot of my constituents go to Bassetlaw Hospital, because I border on to Nottinghamshire, and in a sense in a short period of time they have five NHS hospitals which, being in urban areas, are quite easy to get to if you have got your own transport, but it needs to have more than the independent sector that we have in Sheffield now for the department to be happy presumably? Ms Hewitt: What we have said in relation to choice by the end of this year is that there should be a choice of at least four providers, and, if there is an independent sector treatment centre or some other private provider, then that should be included on the choice menu. Once we get to the end of 2008 patients will have a completely free choice. Most people will not want to travel, but they will have a completely free choice of any hospital within England that is offering that particular treatment at the NHS quality and the NHS price, and if they want to travel, which some people will want to do for family reasons, of course they can do so. They can choose any hospital that meets those particular criteria. But the reason for having this modest expansion through wave two of the ISTCs is not only to support choice and just give patients more choice and control over their treatment, which I think is a good thing in itself, it is also to help drive innovation and quality improvements and value for money improvements across the whole system, and I think, looking at the reference costs of certainly some of the hospitals in South Yorkshire, they are higher than one would want, and having some contestability as well as Payment by Results is a way of really getting our NHS hospital trusts to focus on what they need to do to improve the quality, improve speed and improve value for money as well. Q350 Mr Campbell: Value for money. We have got in front of us some figures that were given to us on ISTCs in comparison with the health costs, but after repeated requests from PEQ no information has been provided on the cost of in-patients and day-care treatment purchased by the private sector. If we are looking at the whole gamut of the private sector we must have all the figures in hand. I would like to request those figures for the Committee, if you can get them, for the private sector involvement in the health service. As I say, we have got ISTCs, but we have not got the private sector providers. Ms Hewitt: I will get Richard, perhaps, to supplement this in a moment. Q351 Mr Campbell: It is very important because we obviously want to make some comparisons and look at the value for money. Ms Hewitt: Absolutely, and this is why I want to give you a thoughtful answer. Before we started on this procurement of the independent sector we have had for a very long time NHS hospitals buying operations (spot purchasing of operations) from the private sector when their waiting lists were simply intolerable, their waiting times were intolerable. Those prices were very, very high indeed, reflecting the fact that until recently the private health sector in Britain was one of the most expensive in the world, and so, when the NHS was using it, it was using it at an enormous premium. The first wave of ISTC procurement brought that premium down very significantly. There is still a premium in the system which we needed to pay in order to get providers into the NHS, in order to get the investments that they had to make, because they were not previously working for the NHS, but that is not true for everything. I was visiting the Nuffield Hospital in Leicester last Friday, as it happens. They are part of a different contract where they are doing orthopaedic operations, helping to get those waiting times down, at the NHS tariff price. Obviously, with wave two we do not yet not know what prices we are going to be paying because we are in the early stage of those procurements. In the case of the diagnostics so far, we have been buying quite significant numbers of scans and other diagnostic tests at significantly less than the average NHS price; so it is a mixed picture. That is why I wanted to give you a thoughtful answer. I think there are some figures that we simply are not able to make available to you, because of the commercial confidentiality, and I know that is something we discussed previously and I sent you a note. Q352 Mr Campbell: I say that in all respect, of course. I just want to have a comparison, if we can get that, if that is a possibility. I think that is very important, because I have always got this funny feeling that we are getting ripped off by the private sector and sometimes I get a feeling that the private sector is doing something that the health service itself can do cheaper without being pushed in through the back door. I have got that feeling. I hope you are going to relay that feeling? Ms Hewitt: It is the diagnostics. As I say, we have been buying rather more cheaply than from within the NHS. Mr Douglas: We have a limited cost collection about the comparisons of other forms of private sector, other than through the ISTC programme, which we collect as part of the annual reference cost collection. I can provide the Committee with that. It is quite limited. What I am looking at doing in addition to that is some separate survey work amongst a number of hospitals that I know have used the spot market to get spot places directly from them; so I want to supplement the information that comes on a standard collection with something that is targeted around those places where we know they have used spot purchasing, and when I have got that we can then put that together. Ms Hewitt: We will certainly let the Committee have that. The other point I would make is one that John Reid made, I thought very effectively, as it emerged about a year ago. The private health care sector in Britain, as I was saying, has always been incredibly expensive by world standards and the fees paid to consultants in the private sector, including NHS consultants working overtime, have been amongst the highest in the world. Those prices and costs are now dropping very rapidly, both because we are getting the waiting times down in the NHS itself (so that is having an impact on demand), but also because the companies want to work for the NHS, and in order to do that they have got to get their costs down because we are not going to pay the kinds of charges that they were charging us when we were simply buying from spot purchasing. Q353 Mr Campbell: Just a couple of questions on PFI. You said that the greater levels of local initiatives and autonomy should be brought into the health service. How does that square with the large increase in PFI programmes when you have got the hospitals being built by these private companies who are nearly running everything, of course? Ms Hewitt: The PFI programme, of course, was our response to the fact that there had not been a new hospital built in England for longer than any of us, I think, can remember - there simply had not been any - and large parts of the NHS were working in pre NHS hospitals, rather too many of them nineteenth century never mind twentieth century, and PFI has enabled us to make an enormous difference in terms both of refurbishing and modernising or commissioning entirely new hospitals, and we are seeing those new hospitals opening around the country - University College Hospital in London being the nearest one - but that, I think, is really helping to improve the quality of care that the NHS can give patients. Of course, those PFI projects are not imposed by the department on local health communities. They are generally led by local hospitals who are desperate to rebuild their premises and improve their services, sometimes re-organise services maybe across several sites. They are the ones champing at the bit, if you like, for PFI. We have to make sure, as we do in every case, that there is real value for money and that the health community as a whole locally can afford what the hospital itself wants to build. Q354 Mr Campbell: I appreciate that is the only thing on hand, because the hospitals are never going to get government grants because we have not got the expenditure to do it, and the Tories are always telling us we are spending too much money anyway, but in saying that what do you say to the accusation from the National Audit Office when it describes PFI projects as scientific mumbo jumbo? Ms Hewitt: I do not agree with that at all. Q355 Mr Campbell: It is the National Audit Office? Ms Hewitt: I know, but I am entitled to disagree with the National Audit Office, I think, and I do disagree with that particular conclusion. I must confess, I do not recognise the quote, but anyway. I do not agree with that comment. Both the Treasury and ourselves do rigorous, painstakingly rigorous, value for money assessments of any PFI programme or, indeed, any LIFT programme, which of course is a primary care report. Q356 Mr Campbell: They also say they are all over priced? Ms Hewitt: I think it is fair to say that lessons have been learnt from the early PFI projects - no doubt all - and I think we are now much smarter at procuring these. I think we have learnt, not least from Bradford, about making sure that you have got flexibility so that you can refinance if that is desirable, and where the private sector refinances we get some of the benefit of that refinancing if it makes it cheaper. Richard, do you want to say something about this? You have been doing this longer than I have. Mr Douglas: Unfortunately, I recognise the phrase "pseudo-scientific mumbo jumbo" because another committee of this House raised it with me on a PFI scheme. The actual comment from one of the NAO Assistant Auditor Generals was that the public sector comparator was pseudo-scientific mumbo jumbo rather that the whole PFI process, unless he has said something else since then, and that was really an issue about how the value for money test worked. Q357 Anne Milton: This is probably for you to deny rather than anything else because I cannot remember the source, I had in my head that the Government had a target of 30% of all elected surgery in the private sector? Ms Hewitt: No. Q358 Anne Milton: Is that wrong? Ms Hewitt: We do not have a target. Q359 Anne Milton: Is that not passed down by the Department? Ms Hewitt: No. Q360 Anne Milton: Sir Nigel? Sir Nigel Crisp: There was one point about 18 months ago when we asked PCTs to plan on the basis of a certain percentage of expenditure but we changed our minds, we did not see that through. I cannot remember the percentage, I do not think it was 30%, I think it was 8%. I will check. Q361 Anne Milton: The other issue is about using the private sector to train staff. One of the arguments, which has been around for a long time, is that the private sector does not carry the costs of training staff, particularly doctors and nurses. I would appreciate your comments on that? Ms Hewitt: I think that is an absolutely fair point. It was a criticism that was made quite frequently with the wave one ISTCs. What we have done since then is discuss it with the BMA. We have come to an agreement that there can and should be training in the ISTCs. Junior doctors would get experience of hip replacements if those are being done in large numbers in an ISTC, and we will mandate that in the wave two contracts. Q362 Anne Milton: And nurses? Ms Hewitt: We have spoken to the BMA which is about doctors. Have we had parallel discussions on nurse training? Q363 Anne Milton: Have you not talked to the RCN? Ms Hewitt: No, we talk to the RCN a great deal. Let me double check this. Sir Nigel Crisp: I am not sure. Ms Hewitt: The criticism was being made particularly in relation to the junior doctors' training. We have dealt with that one and we will mandate that in wave two contracts. I want to check the specific position on nursing. Q364 Anne Milton: Can I correct you on the number of hospitals that have been built. There have been some built under the previous government. Chelsea & Westminster, Princess Royal, there are about 50; it was not none. Ms Hewitt: Right. Thank you. Q365 Mr Burstow: To pick up on something which you were talking about earlier on. In a press statement from the Department announcing an extension of Agenda for Change to the private sector, it states that the annual cost to the full regime from 1 October 2006 is estimated to be £75 million and that has been provided for within PCT allocations. How can that be, given that the announcement of the policy came well after the announcement of the allocations? Ms Hewitt: Let me see if I can remember this correctly. When we allowed for the cost of implementing Agenda for Change in the PCT allocations, we allowed for a bit more than we believed Agenda for Change would cost us. That was why at the point when we made that announcement on the two tier workforce we were confident that there would be sufficient within the allocations. Q366 Mr Burstow: A bit more, at least £75 million. Ms Hewitt: Precisely. I have to say, since then the cost of implementing Agenda for Change looks to be rather more than we originally estimated. Q367 Mr Burstow: My other quick question was the King's Fund are saying that the NHS is currently ill-placed to prevent hospital failure. They are advocating quite strongly for a financial distress regime to address the causes of deficits. They are particularly identifying two types of deficit which are in need of attention. One is the legacy costs that come out of decisions which were made in the past, investment decisions; the other is the consequences of capital costs which cannot be fully recovered which is particularly the case when you come to payment by results where the tariff may not fully reflect that. Are you looking at constructing systems given we are moving into an era of payment by results that does allow for more flexibility in that way? Ms Hewitt: Certainly we are looking at not only the immediate management of deficits which we have talked about but what the long-term regime should be for trusts that are struggling financially or even at risk of failure. Yes, we are looking at that, we will have more to say on it. Q368 Mr Burstow: That will include looking at the tariff issue and the interface with PFI? Mr Douglas: Where we are at the moment with tariff is for five years after the opening of any new capital scheme, PFI or otherwise, we have tapering supports to the tariffs. The revenue cost of the capital scheme is added to the tariff for five years on a tapering basis. The intention of that is it allows people to transition over that period. Rather than them taking additional costs out they have a chance to change the cost structure to manage with the additional costs of the capital scheme. The other side of that is that the tariff increases naturally each year. For every piece of new capital investment in the system there is a capital element added for tariff. We think at the moment that transition phase should be sufficient but we have said we will continue to evaluate that and see whether it really does work as well. Ms Hewitt: It does come back to a value for money judgment on new capital projects so that we do not allow NHS organisations to commit to capital expenditure where really they cannot afford the revenue consequences long-term. Q369 Chairman: Secretary of State, thank you and your colleagues very much indeed for giving evidence. There are one or two questions that we skipped through because we realise you need to be away. We may write to you to clarify one or two points. We would appreciate the answers to our original questionnaire which have been promised again today. Ms Hewitt: Absolutely. Q370 Chairman: A comprehensive one would be very good for us. Thank you. Ms Hewitt: Thank you very much indeed, Chairman. We will get those replies to you as fully and rapidly as we can. |