Examination of Witnesses (Questions 1-19)
MR DAVID NICHOLSON CBE AND MR DAVID FLORY
21 JANUARY 2008
Q1 Chairman: Good afternoon, welcome to the Committee of Public Accounts, where today we are considering the Report on the NHS Summarised Accounts 2006-07, and we welcome back to the Committee Mr David Nicholson, who is Chief Executive of the NHS. Would you like to introduce your colleague?
Mr Nicholson: Yes, Mr David Flory, who is the Director General for Finance, Performance and Operations.
Q2 Chairman: Let us try and get a grip, if we may, with your help, Mr Nicholson, on what is really a very difficult and complicated field. Perhaps we could start by looking at paragraph 3.5. I think you will agree that what we have if we look at that paragraph is a forecast of £1.8 billion surplus for 2007-08, yet we had a Q1 report, did we not, in August, I think, on NHS finances, Mr Nicholson, where you said that you planned for a surplus of £916 million. So we have a difference between £916 million and £1.8 billion. This rather emphasises what we said in our last report, that you seem to be very poor in your forecasting.
Mr Nicholson: I mean, there is no doubt that we could be better at forecasting than we are, and we are doing quite a lot to put that into place, but nevertheless, we started off the year, as you will be aware, with an ambition to deliver a £250 million surplus, plus 0.5% of the turnover of the NHS as contingency, plus about £170 million that we needed to deliver to reverse RAB, and that is what came to the nearly £1 billion that we identified in Q1. Q2, I think a number of things happened in there, there were some issues that went in our favour, and there was a £200 million benefit from changes in generic prescribing costs, and it became clear that the CSR settlement was going to be better than many in the NHS thought it would be. What that did, of course, is that encouraged people who were, in a sense, being very prudent in their forecasts for 2007-08 to be much more straightforward about them, so we saw all of that happening during the period.
Q3 Chairman: So all this explains why you apparently are so way out in your forecasting, does it?
Mr Nicholson: Well, I do not think we are—if you look at Q2, I think we are very clear that the Q2 forecast is a good forecast and will deliver during this year.
Q4 Chairman: There is a lot of difference between £916 million and £1.8 billion.
Mr Nicholson: Absolutely, but the turnover of the NHS is over £100 billion.
Q5 Chairman: I thought you might make that point, but the difference is still—to the people on the ground, that is a lot of healthcare, is it not?
Mr Nicholson: It is one of the reasons why it is so important for us to have a surplus, because in the past, if there had been shifts in that way, we may have had serious difficulties.
Q6 Chairman: That leads straight into my next question. We now have a surplus then. Can we use this surplus to achieve the end of the postcode lottery, for instance?
Mr Nicholson: I think all sorts of opportunities are available to us as part of this better financial position for the NHS, but we need to do it in an organised and planned way. That is why we have said in the operating framework for next year we expect the surplus to remain broadly the same. As you know, we have only made allocations for one year. If you take into account what we are saying we are going to deliver in year 1, all the kind of commitments that we have made, and you add to that the underlying underspend in the NHS, we think there are more than enough resources to deliver everything that we need to deliver. That gives us the opportunity for the second two years of the CSR.
Q7 Chairman: To do what? That is a lot of words. You have not answered my question.
Mr Nicholson: What it does, it gives us the opportunity in years 2 and 3, when we make the allocations in the spring and summer, to be really clear about some of the things that we have wanted to do for a long time in the NHS; a big strategic change that we have wanted to do that, for example, would need double running costs, and, of course, delivering a much more equitable service to our patients, are things that we can certainly consider doing as part of our ambitions for those two years.
Q8 Chairman: If I understand you rightly, Mr Nicholson, this surplus is a result of improved management, it is not a result of service cuts; can you reassure me?
Mr Nicholson: Absolutely. If you look at what we—
Q9 Chairman: There have been no service cuts, no ward closures, nothing? It is all down to improved management, is it?
Mr Nicholson: I mean, if you take what we have actually delivered over the last period, it has been down to clinicians and managers working really very hard together. The number of organisations in deficit have gone from 22% to 7%; we have had a massive turnaround programme that I talked about at the meeting this time last year; and the performance of the NHS, on a whole range of matters that we regard as being significant, has gone up. Patient satisfaction has gone up significantly, we have hit all of our major national targets, smoking, waiting list targets, cancer waiting over 18 weeks, we have had improvements in MRSA; there are a whole range of things we have delivered during that period. Some people's kind of views about service cuts will be my efficiencies. So, for example, if you reduce the average length of stay of patients by 20%, if the way in which you deliver savings out of that is to reduce the number of beds and reduce the number of wards that you have, it seems to be a perfectly sensible way of taking efficiency forward.
Q10 Chairman: Do not believe me or the press; we read in paragraph 14, "The King's Fund has reported that 14 Primary Care Trusts imposed activity limits on NHS Trusts towards the year end."
Mr Nicholson: What we are trying to do is have a planned change from—waiting times right down to much shorter waiting times, and if organisations want to go faster, that is fine, as long as the NHS can afford it. But if the NHS cannot afford it, then it needs to do it in a planned way, and that is all that PCTs have been doing to make sure that they live within their means. It seems to me very prudent to do so.
Q11 Chairman: There is some anecdotal evidence, is there not—you have this target of 18 weeks between referral to a GP and hospital treatment, you are on 20 weeks at the moment, and you might have made more progress but for this; is that a fair criticism?
Mr Nicholson: Made for?
Q12 Chairman: You might have made more progress towards 18 weeks. At the moment I think it is 20 weeks, is it not, between referral to your GP and hospital treatment?
Mr Flory: I do not recognise the 20—
Q13 Chairman: If I am wrong, it is only anecdotal evidence.
Mr Flory: I do not recognise the 20 weeks. Clearly we continued to make good progress towards the 18-week target for December of this year. The latest data that we published for October of 2007 shows that 60% of patients who were admitted to hospital for treatment are now seen within the 18 weeks, and 77% of those people whose care does not involve going into hospital for an episode.
Q14 Chairman: Obviously we are all in favour, are we not, for greater autonomy of the NHS, but we have imposition by your Department of financial controls such as turnaround, withholding of central budgets, top-slicing; is there a dichotomy between these two aims?
Mr Nicholson: I think there is clearly a dichotomy with some of those aims. What was clear to me was that we needed to take significant action to get ourselves in a much better financial position, I think I described some of that this time last year. It was absolutely necessary to get a grip of the finances of the NHS, to make sure that we did not do what the danger was that we would do, and was described to us before, which was slide into another year of deficit. That was absolutely clear that we could not afford to do that, so we had to take action. It is almost a precondition, if you like, for allowing us to be much more decentralised in the way that we take the service forward. It was absolutely essential to make those decisions, I think the results have proved that.
Q15 Chairman: This is a broader question, I am not trying to be difficult here, I just want to honestly hear your view. It seems to me that there are three different ways of running the NHS. There was the way we used to do it before the 1980s, of trust in the professionals; then there were the internal markets of the 1980s; and now since 1992 we have had targets and more controls. I spend a lot of my time in NHS hospitals, in skin departments and things. When I speak to the consultants, they all say to me they are fed up to the back teeth of all these controls, they want to be allowed to run their own departments. You will have heard this again and again. I must confess that I and the members of the public who listen to these consultants and doctors, we meet all the time, and on whose judgments we rely, have a lot of confidence in what they say. So what do you say to them, that there is just not enough progress towards trusting clinicians to run the departments in the way that they want to do so?
Mr Nicholson: I think there is confidence in their ability to run them. Indeed, for great tracts of the NHS, clinicians are already playing a key role in the development of management of those services. But there are two preconditions for that, I think. The first one is that we make sure that we provide the basic services absolutely right, and patients and the public have been telling us for some time that access is a major issue for them, so we drove national access targets, 18 weeks, waiting list times, in order to drive those changes on the one hand; and secondly, we need to get ourselves in financial order with a surplus to give us the headroom. I think this gives us a fantastic platform to work with professionals to make sure they can have the autonomy they need to make the real changes in patient care. One of the things that I say to people in the NHS quite a lot is that it is really important in the future for NHS organisations, PCTs, Foundation Trusts, NHS Trusts, to look out to their communities and to their staff to organise their services and not up to Whitehall.
Q16 Chairman: So under your management, under your watch, there is going to be a real shift back towards trusting consultants to run their departments?
Mr Nicholson: That is my ambition.
Chairman: That is your ambition? Well, that is a very good point to stop, I think, for me. I will quit while I am ahead. Keith Hill?
Q17 Keith Hill: Thank you, Chairman. Mr Nicholson, paragraph 12 of the summary, at the beginning of the NAO Report, tells us that in 2006-07, the number of compulsory redundancies was 2,330. This is a long way short of the 18,000 estimated by the Royal College of Nurses, and the 20,000 estimated by the Conservative Party. Do you agree?
Mr Nicholson: It is a number that I recognise, that we have published. What was really clear to me and to the management team at the centre of the NHS when we got ourselves into financial difficulties was one of the real problems that we had was the control of staffing, staffing numbers in particular, and so we put in quite a lot of controls, and the NHS did, to make sure it controlled staffing, to really avoid the need for compulsory redundancies, and I think that broadly played out. If you look at the numbers that you have just described, 80% of those staff were actually non-clinical staff. Most of them came from the changes in PCTs and SHAs that we were working through at the same time, so they were significant and we always believed they were significantly lower than—
Q18 Keith Hill: Let me cut in at that point, because you are right, the figures produced in the NAO Report show that only just over 400 of the redundancies were clinical staff, in other words that is a very small proportion of the 126,000 doctors and 390,000 qualified nurses in the NHS.
Mr Nicholson: It is, and in any one year, you would expect 200 or 300 as a matter of course, where services are changing, and the model of services are changing generally.
Q19 Keith Hill: Do you want to confirm the NAO observation that there was no deterioration in key performance targets in the NHS as a result of its improved financial performance?
Mr Nicholson: Absolutely, we delivered on all of our major targets.
|
