Examination of Witnesses (Questions 40-59)
MR DAVID NICHOLSON CBE AND MR DAVID FLORY
21 JANUARY 2008
Q40 Mr Bacon: But what I am saying would apply to whether it is the SHA or the PCT column or whether it is the NHS Trust column: in order to get to that figure, there must previously have been two other figures, must there not? An expenditure that was planned, an actual, and then this one being the difference between the two, either a positive or a negative.
Mr Flory: There is also, as with most of the Strategic Health Authority numbers in that column, an element of the money top-sliced from Primary Care Trusts in order to cover some deficits elsewhere in the system, so in large part, that number at East of England will have been money that was originally allocated to Primary Care Trusts.
Q41 Mr Bacon: Which is one of the reasons the PCT columns tend to be where the deficits are located.
Mr Flory: I think on the Primary Care Trust deficits in East of England, as we can see when we look across that line, the biggest problem is in the Primary Care Trust, and if we look at page 32 of the—
Q42 Mr Bacon: I already have my finger in page 32.
Mr Flory: If you look at page 32 in the Report, we can see in the top of the biggest overspending PCTs Cambridge, Norfolk, Suffolk, West Hertfordshire, so there was a problem—
Q43 Mr Bacon: Do not forget Hillingdon.
Mr Flory: Hillingdon is there too, but that would be in London rather than East of England. What we can see is that the problems in some of those PCTs in that year was well in excess of the extent to which the Strategic Health Authority would have applied their top-slice.
Q44 Mr Bacon: Sorry, where?
Mr Flory: Significantly greater than the top-slice that the Strategic Health Authority—
Q45 Mr Bacon: Yes. What I find difficult about this is I would like to see a lot more information. For example, to take the Primary Care Trust column there, once again, for East of England, you have a deficit of £216.3 million, yes, do you see that one? This is again on page 12. Presumably, once again, that is the result of taking a budgeted planned expenditure for the whole of the East of England, an actual, and then the £216.3 million is the difference between the two, is it not?
Mr Flory: Yes.
Q46 Mr Bacon: Do you know, off the top of your head, what the budgeted planned expenditure for the East of England would have been?
Mr Flory: No, I do not, off the top of my head, but what we need to remember with the Primary Care Trusts is that some of the very significant problems that we have seen in the table on page 32 do not all materialise in the space of one year.
Q47 Mr Bacon: No, I appreciate that.
Mr Flory: But will build up over a period of time, so at the very start of the year, the PCT will have been deducted its previous year's overspend, so the total of the deficit does not represent the total overspend in that one particular year, there is also an element of cumulative problems being brought forward from previous years as well.
Q48 Mr Bacon: Nonetheless, I would like quite a bit more information. The other thing is you cannot really get a handle on what these figures mean without having some sense of how much funding they had in the first place per person. Presumably, the funding formula is based on the population, is that right?
Mr Flory: Yes, weighted for the needs of that population.
Q49 Mr Bacon: Is it possible then you could send us—I am afraid there are quite a lot of numbers I am after, but basically I would like this significantly expanded. For each of these three columns, there are going to be a significant—basically, it does not matter if there are loads of tables, we can just stick them in the appendix of our own report, and the big columns will be for the Primary Care Trust and for the NHS Trust. What I would like to see, in the case of each of these, for each of the SHAs, each of the PCTs, and then each of the Trusts, is a number that was the planned number, a number that was the actual number, and then the third number that you already have here, in other words the surplus or the deficit that is the result of the other two, or as you rightly point out, it might be more than two because of the top-slicing, but however you get to it. Then in addition to that, a fourth number, the population; and then a fifth number, divide the first number by the population, so you get expenditure per head. Are you with me?
Mr Flory: Yes.
Q50 Mr Bacon: Is it possible you could send us that? You must have all that information.
Mr Nicholson: Yes, we have all that.[1]
Q51 Mr Bacon: So basically, the actual budgeted or proposed expenditure, the actual expenditure, the difference between the two, being the surplus or the deficit, population and the expenditure per head. If you could send us that for the SHAs, each PCT, and then for each of the NHS Trusts, then we could stick it all in the back of our report, that would be very kind, thank you very much.
Chairman: Thank you, Mr Bacon. John Pugh?
Q52 Dr Pugh: Thank you. The big picture is you have gone from a £547 million deficit to a £514 million surplus, is that not the case?
Mr Nicholson: That is right.
Q53 Dr Pugh: I was intrigued when I read about that to come across paragraph 11, which says there was a fall from the previous year in the number of manager posts by 2,500. What conclusions do you draw from that?
Mr Nicholson: Well, as you—
Q54 Dr Pugh: Fewer managers and better financial performance?
Mr Nicholson: As well as dealing with the financial performance of the NHS and delivering all of the targets, we were also re-organising the PCTs and the SHAs, and our plan as part of that was to make savings of £250 million in order to re-invest in health services. So it was done on purpose, as part of that particular—
Q55 Dr Pugh: Fine. Moving on, in terms of the billion pound gain you made over the year, I am just trying to figure out what that is made up of really. One big change which I am sure many Trusts would have welcomed is the change in accountancy practices, moving from the RAB treatment of deficits to the usual old-fashioned Health Service method really of accountancy. Is that worth something in terms of eroding the deficit?
Mr Flory: Certainly the changes in the accounting regime make the numbers much more transparent to the true position in each individual organisation, and move us a long way forward from the regime we were operating, in understanding where the real problems sit.
Q56 Dr Pugh: But it has stopped hospitals going into spirals of decline through a double whammy.
Mr Flory: Yes, and how to deal with that. So in terms of the way those changes were managed in this particular year, taking away the dual hit, the double whammy—
Q57 Dr Pugh: But for an individual Trust, that would therefore have led to a better picture with regards to deficit, would it not?
Mr Nicholson: It helped individual organisations, but the accountancy change did not affect the total position of the NHS.
Q58 Dr Pugh: I accept that. Compulsory redundancies, I think we talked about that before, 2,330; what is the gross value of those? Do you have a figure you can put on those, in terms of the savings to the system?
Mr Nicholson: Well, the figures that we have are for "Commissioning a patient-led NHS", which is the programme by which most of them went forward, and I think I should have the number here that tells me what the gross savings are for that. I have it, it is £239 million, I think, but I will just check.
Mr Flory: Yes, it is.
Mr Nicholson: £239 million was the saving.[2]
Q59 Dr Pugh: So £239 million from 2,330 redundancies?
Mr Nicholson: Yes.
1 Ev 16-31 Back
2 Correction by witness: The £239 million is a figure for the whole of the savings, mostly made up from redundancies. Back
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