Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 140-159)


16 OCTOBER 2006

  Q140  Mr Touhig: You are about £300 million overspent on that one particular contract. Were Ministers involved in the negotiations on the contract?

  Mr Nicholson: I have to say that I do not know.

  Mr Touhig: Can you find out?

  Mr Nicholson: I can. Yes, they would have been.

  Mr Douglas: An agreement or contract of that nature must involve Ministers.

  Q141  Mr Touhig: Yes, right. So what was said when Ministers realised that you were going to be £300 million short? The Ministers had you in, I suppose, and interrogated you and asked, "Why are we in this position?"

  Mr Douglas: The issue around the GMS contract has been primarily but not entirely about over-achievement against the targets that were built into the contract. Advice was taken on what level of achievement we could have expected from GPs. We worked with the NHS Confederation, with NHS Employers, and took the best evidence we could about how people would respond to the incentives. They responded better to the incentives than we had anticipated.

  Q142  Mr Touhig: Anecdotally, I pick up that consultants are laughing all the way to the bank as a result of your settlement with them.

  Mr Nicholson: In terms of the consultants, the two issues that caused the problem in relation to the amount of money it was going to cost were, first, the on-call arrangements for consultants, when the assumption was that the vast majority of consultants could be on call by telephone and have lower payments. In fact, in the vast majority of the arrangements they come into the hospital, which seems to me a reasonable thing to do. Secondly, there is the number of PAs that they have and the number of sessions that they work. There is some evidence that this year, through negotiation, there has been a reduction in the number of PAs overall for consultants, as we have appointed more.

  Q143  Mr Touhig: You are going to provide us with figures on the amount you have spent on extra salaries and so forth, but would you accept—I think the Report indicates this—that one reason why you have the difficulties is that the way you handled the contract negotiations has cost you much more?

  Mr Nicholson: Most of the money that we spend in the NHS is on pay, so inevitably when we have deficits pay is an element of it.

  Q144  Mr Touhig: Page 4.9 of the Report tells us that "a small number of NHS bodies considered deferring payment of tax and social security costs to HM Revenue & Customs, with a handful even struggling to pay staff wages." Did you not get them into a hell of a mess if they could not pay their own staff?

  Mr Nicholson: But they did, and the NHS as a whole worked with those organisations and enabled them to do that.

  Q145  Mr Touhig: How did they overcome that problem?

  Mr Douglas: By moving money round the system in the way we have just described.

  Mr Touhig: Something went; something had to give. Something was not funded in order to—

  Mr Douglas: Surpluses and cash had to be moved in order to do it, that is true. But that only reinforces our need to ensure that we get ourselves into balance so that we do not get into that position again.

  Q146  Mr Touhig: I think that is important; it is right. On sharing good practice, you indicated earlier that you have all sorts of initiatives for sending out information. Do you have a must-do approach to sharing good practice? Do you have a lessons-learned approach, and do you ensure that it goes right through the whole health service? Do the two thirds of PCTs that you said are doing okay in respect of their financial balances share good practice with those that are having difficulties?

  Mr Nicholson: Yes, and the Audit Commission helpfully put together some useful stuff that we have used in the NHS. Overall, that is true.

  Q147  Mr Touhig: Yes, but is it a must-do, or is it, "Oh, I think that I will tell old Bob about this"? Is that how it goes?

  Mr Nicholson: No.

  Q148  Mr Touhig: Do trust chairmen bump into each other and say, "We did rather well," and, "How did you do that?" over a cup of tea or a gin and tonic?

  Mr Nicholson: No. Richard works with each strategic health authority finance director, and they work with all the finance directors in their patch to ensure that lessons are absolutely learned.

  Q149  Mr Touhig: To what extent are Ministers advised of the trusts that are having difficulties?

  Mr Nicholson: Ministers see the financial information that I see in the submissions that are made. They are well aware of the organisations that have financial difficulties.

  Q150  Mr Touhig: Yes, and what happens then?

  Mr Nicholson: We tell them what we are doing about it, and that is it.

  Mr Touhig: That is it?

  Mr Nicholson: They ask for further information and test us as to whether we are taking appropriate action or whatever, but that is what happens.

  Q151  Mr Touhig: Health in Wales is devolved, as you know, Chairman. When I was a Wales Minister and spoke to a Health Minister in Wales about a trust chairman whom I had some concerns about, the shoulders were shrugged, but trust chairmen are appointed by Ministers.

  Mr Nicholson: They are appointed by the Appointments Commission.

  Mr Touhig: By the Appointments Commission?

  Mr Nicholson: Yes, it is an independent organisation.

  Q152  Mr Touhig: What do Ministers do if a trust fails and concerns are expressed about the management, control, direction and leadership given by a chairman? Do Ministers get involved at all?

  Mr Nicholson: Not in my experience. The chairman of the strategic health authority would deal with the situation in conjunction with the Appointments Commission.

  Q153  Mr Touhig: So nobody gets blamed or sorts out the problem?

  Mr Nicholson: Yes, of course they do. In my experience, chairmen have been dealt with in that way. A statement by the strategic health authority chairman setting out its assessment of the performance of the chairman goes to the Appointments Commission, and it makes a judgment as to whether to remove the chairman or ask for their resignation. That happens.

  Q154  Mr Touhig: Do you think that that is the best way of doing it?

  Mr Nicholson: It is the most effective way of doing it.

  Q155  Mr Touhig: You think that it is effective. You do not think that Ministers have a role to play.

  Mr Nicholson: I do not think that Ministers have a role to play.

  Q156  Mr Touhig: Not in putting on pressure?

  Mr Nicholson: No, it is up to the Appointments Commission, which is an independent organisation.

  Q157  Mr Touhig: My right hon Friend Mr Williams and I have certain views about devolution, but I remember that in pre-devolution days the Health Minister in Wales would ring up a trust chairman on the weekend if there was something wrong.

  I shall leave my questioning there, Chairman.

  Mr Douglas: I should add that at the end of the last financial year, the Secretary of State personally wrote to all chairmen of organisations with large deficits. At the same time that the chief executive wrote and expressed concerns, the Secretary of State did so as well.

  Q158  Mr Touhig: And how many chairmen were removed as a result? Were any removed for failing? We have all sorts of failing things—failing schools, failing this, failing that—but we let the chairmen of failing trusts carry on, do we? They pick up £15,000 a year or more—nice work if you can get it.

  Mr Nicholson: I know of examples where chairmen were removed as part of the process.

  Q159  Mr Mitchell: Mr Douglas, why is the deficit problem worse in the south than in the north? You said that you had considered all the possible correlations but the only one that you could find was that if there was a deficit one year, there would be a deficit the next year. That says that once you are in a hole, you do not get out of it.

  Mr Douglas: It says that once you are in a hole, it is very difficult to get out of it.

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