Examination of Witnesses (Questions 100-119)
MR DAVID NICHOLSON CBE AND MR DAVID FLORY
21 JANUARY 2008
Q100 Mr Touhig: Would you know for certain whether they had bonuses or not?
Mr Nicholson: Not for NHS Trusts or Foundations.
Q101 Mr Touhig: Where they are in deficit?
Mr Nicholson: We would not know.
Q102 Mr Touhig: You would not know. Could you find out for us? It would seem a bit rich if they did, would it not? A bit rich if they did have bonuses having got their Trusts into deficit.
Mr Nicholson: Well, it could be that, for example, they have moved from a huge deficit to a relatively small—they could have made significant progress, and there are other measures, of course, that would relate to the quality of service that they may be doing remarkably well on. So whilst I agree with you, I would not expect it, I can probably see circumstances where you might want to reward people at the top of organisations, or even in them, to do that.
Q103 Mr Touhig: But remove those who fail?
Mr Flory: Yes.
Q104 Mr Touhig: Should that not happen?
Mr Flory: Yes.
Q105 Mr Touhig: What I cannot understand about this, Mr Nicholson, is the whole deficit issue, in the sense that we are talking about Trusts having significant deficits at a time where there has been substantial growth in funding. How do you explain that?
Mr Nicholson: I know. Part of the issue is that NHS organisations have gone through a massive period of growth, you know, we have added a third to the number of people who work for the NHS over the period, and what is clearly the case is that organisations were continuing their level of growth at a time when those growth financial circumstances of the NHS were coming to an end, and then you can take action, and that is what we did last year.
Q106 Mr Touhig: So the Trusts that have deficits, what happens, how do they make up their deficits? Do you provide them with extra money, or do they have to save in their following years' budgets?
Mr Nicholson: Predominantly, they have to reduce costs.
Q107 Mr Touhig: So therefore they have got to reduce services.
Mr Nicholson: No.
Q108 Mr Touhig: Well, they have to do something.
Mr Nicholson: They can improve efficiency. A 20% reduction in average length of stay means you can reduce the number of beds.
Q109 Mr Touhig: I think you and I have already disagreed about what a reduction in service is, but it just seems to me that these Trusts which are in deficit are clearly poorly managed, you do not seem to be taking any firm action as a result, either removing chairmen or chief executives or getting people who can actually run the Health Service.
Mr Nicholson: I think in all of those things—and we are down to a position where only 7% of our organisations this year are in deficit, from over 30% at the height of the deficit, so I think we are taking that action and it is working.
Q110 Mr Touhig: But responsible Trusts who manage their finances effectively are being penalised by the fact that other Trusts that go into deficit are being poorly managed and nothing happens about them.
Mr Nicholson: In the past, that is absolutely the case, when we have moved money around the system, but that is not what we are doing at the moment. We are absolutely tackling these long-term financial problems that some parts of the country have had, and one of the by-products of that is to give those that have performed well the opportunity to use their surpluses, and it seems to me a perfectly reasonable thing, and I think we have done it very well.
Q111 Mr Touhig: My time is running out, but could you help the Committee perhaps by writing to us and telling us what action has been taken at all in any of the Trusts that have had deficits, either the removal of senior staff or warnings or instructions or some key reorganisations. You say it is down to 7% now, which is good, so can we see what action has been taken with people who are failing to deliver the Health Service that we demand and require, when we provide them with so much money?
Mr Nicholson: But this group of people at the top of these organisations have done a pretty impressive job over the last two or three years to get the NHS back into financial balance, to improve services to our patients.
Q112 Mr Touhig: You seem to suggest, Mr Nicholson, that somebody else outside the NHS got it into the financial mess in the first place. These are good guys, they are putting it all back into balance, but who got it in the mess in the first place?
Mr Nicholson: What I am saying is that we got ourselves into a good financial place by the hard work and dedication of people throughout the organisation, including those at the top of organisations. Some of those organisations in deficit have had new leadership who have been driving the changes forward and driving the improvements forward.
Mr Touhig: Well, perhaps you will drop us a note on that. Thank you.
Chairman: You also want a note on bonuses, do you?
Mr Touhig: Yes.
Q113 Chairman: I cannot understand why, if this is a public body, the Committee of Public Accounts cannot know about bonuses paid out of Trusts. You seemed to intimate that Mr Touhig can have this information; this is all public money.
Mr Nicholson: The salary system for people at the head of PCTs is nationally organised. It is called the very senior managers' pay system, and is organised nationally, we understand it and we are part of it. NHS Trusts have flexibility to set their pay rates for senior staff.
Q114 Chairman: I want to ask Sir John, surely we are entitled and you are entitled to have this information, are we not?
Sir John Bourn: We are certainly entitled to have it because we have access rights to it.
Q115 Chairman: So can we have it?
Sir John Bourn: I will discuss with Mr Nicholson how it can be taken forward.
Q116 Chairman: So can we have a full note of what Mr Touhig wants?
Mr Nicholson: Except NHS Foundation Trusts, yes.
Q117 Chairman: You do accept that we should have it, the Committee of Public Accounts?
Sir John Bourn: Certainly, if the PAC wants it, it should have it. It is public information.
Chairman: Exactly. Mr Williams?
Q118 Mr Williams: You are in an impossible situation really, are you not, Mr Nicholson? How would you determine success? If you are in deficit, you are incompetent, and if you are in surplus, you are denying us services we could have. Do you not think you would be better off having another job?
Mr Nicholson: I think we are in a much better place financially for the NHS than we have been for a long time in my experience of the NHS. One of the things that people have said, you know, in my experience working in it, and I have done nearly 30 years in it, is if only we had a bit of headroom, if only we had a bit of flexibility, if only there was a bit of extra money in the system that would enable us to do all those things that we have always said we wanted to do. The great thing about the place we are in at the moment is we do have that headroom, and it is under the control of individual NHS organisations, so although it can be uncomfortable around the detail, it seems to me we are in a much better place as far as managing the NHS is concerned. Add to that, I think, the way in which the NHS has tackled some deep-seated financial problems that have been going on for some years, I think it puts us in a good position, and although we have got a lot more to do in terms of organising the way in which we do our forecasting, the way in which we get efficiencies in the system, to make sure that everybody in the country gets the benefit of new drugs, new treatments and all the rest of it, this I think does seem to me a good step towards that successful outcome.
Q119 Mr Williams: I accept immediately that things are looking better than they were and I am glad about that. Let's take, for example, the situation where, in your quarter 2 report on NHS Finances you plan for a surplus of £916 million, which is quite a sizeable sum. You are now forecasting a surplus of £1.8 billion; that is an extra £900 million. Is that a success or a failure? If £900 million would have given you this level of service that you wanted, why do you justify £1.8 billion?
Mr Nicholson: Two things happened there: one of them is that there were circumstances that happened that were not taken into account in the £900 million, for example, the £200 million on generic drugs and there were a number of other issues that went in our favour. My experience of these things is that often they go against you but for once they went in our favour in terms of the service and people had been very prudent. One of the effects of all the newspaper coverage and public disquiet about finance and the way in which finance was being delivered in the NHS is that not only did that have a massive effect on the public, it had a massive effect on the NHS because, apart from anything else, everything that we tried to do in that year was seen as being financially driven when very often it was to do with quality of clinical care. I think all of those things affected the psychology of the NHS significantly and people were very cautious and very prudent about saying what they had. What happened with the CSR statement where the NHS got more growth than it perhaps expected, given what was happening in the economy as a whole, encouraged people to be much more open and clear about what they had in those circumstances.
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