3 The costs and benefits of the Programme
18. The estimated cost of the Programme is currently
£12.7 billion (at 2004-05 prices) (Figure 2). Value
for money has yet to be established. There remains considerable
uncertainty around the estimate of £3.6 billion for local
costs, principally because the figure is based on business cases
compiled by Trusts in 2003-04. The Department carries out an annual
survey to establish how much the NHS has spent on IT, but is not
able to separate the amount that Trusts have spent on the Programme
from spending on IT for other purposes. The Department considers
that the figure of £3.6 billion is probably an overestimate
and, as part of producing the next benefits statement for the
Programme, is to carry out research at a sample of sites to generate
more accurate data on local expenditure.[20] Figure
2: Estimated cost of the Programme at 31 March 2008 (at 2004-05
prices)
| Category
| £ million
| £ million
|
| Core contracts | 6,805.5
| |
| Products added to the scope of the Programme
| 665.8 |
|
| Other central costs |
1,599.0 | |
| Total central costs |
| 9,070.3 |
| Local costs |
| 3,585.9 |
| Total |
| 12,656.2 |
Source: Department of Health
19. The Programme's contracts were based on the
assumption that all Trusts would take the systems at some point.
If the Local Service Providers do not receive the expected revenue
for reasons solely due to the Department (for example, where a
Trust decides not to deploy the system), the Department is obliged
to make payments to the suppliers concerned. At 31 March 2008,
£36.1 million had been paid under these arrangements, of
which £29.1 million will be deducted from the charges if
the deployments go ahead and £7.0 million is irrecoverable.
Most of the irrecoverable amount relates to two Trusts which declined
to take the Picture Archiving and Communications Systems being
provided under the Programme.[21]
20. We are not yet convinced that the Department
secured good value for money by letting contracts which covered
the NHS as a whole. It can direct NHS Trusts and Primary Care
Trusts to take the systems, though the position on Foundation
Trusts is less clear cut. While Foundation Trusts are not subject
to direction, they are bound by Treasury rules which require them
to take account of the impact of their decisions on the wider
public sector finances. The Department considers that it would
therefore be difficult for a Foundation Trust to put together
a business case which involved rejection of the Programme's preferred
systems. In any event, it expects all Trusts will want to take
the systems when they see the prospective benefits. However, in
the event that the problems with Millennium cannot be resolved
or the Lorenzo system is not satisfactorily developed, it may
be necessary to renegotiate or terminate the existing contracts
with the Local Service Providers.[22]
21. The Programme is intended to generate substantial
benefits for patients and the NHS—both financial savings
and wider benefits such as improvements in clinical safety and
the quality of patient treatment—though there is no baseline
against which to assess the benefits actually achieved. The Picture
Archiving and Communications Systems for digital X-ray has helped
to reduce diagnostic waiting times, although picture archiving
systems were already being introduced in the NHS prior to the
Programme.[23]
22. Financial savings arise where Trusts no longer
have to buy something or can buy it at a much reduced cost, such
as the N3 broadband network and NHSmail. The first benefits statement
for the Programme, for 2006-07, forecast estimated total savings
of £1.1 billion over the 10 years to 2013-14, though the
Department expects the total will prove to be considerably higher
as more of the systems are fully deployed across the NHS.[24]
20 Q 27; C&AG's Report, paras 2.12, 2.24-2.26 Back
21
Ev 24; C&AG's Report, paras 2.32-2.33 Back
22
Qq 19-23, 67-68; C&AG's Report, para 1.14 Back
23
Q 74; C&AG's Report, paras 2.35, 2.39, 3.89 Back
24
Q 28; C&AG's Report, paras 2.37-2.38 Back
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