Public Expenditure - Health Committee Contents

Conclusions and recommendations

1.  The Local Government Spending Review settlement is a tough one (though in line with many others across government) that cannot fail to pose a challenge for the successful delivery of social care. Although councils do have the additional revenue stream of council tax, this will only dampen the cuts to a certain degree, with the Spending Review itself placing the actual decrease in funding at around 14%, still an enormously challenging figure. It would also be unwise to regard this level of social care income as 'safe', at a time when councils will be trying to divide scarce resources between competing priorities, and when councils' ability to seek additional revenue from council tax payers will be limited and could lead to variation. (Paragraph 12)

2.  Although we welcome the Government's identification of additional resources for social care, through the mechanism of the Personal Social Services Grant, the fact is that this funding is now part of the general local authority revenue grant which will reduce from £28 billion this year to £21.9 billion in 2014-15. Given the pressures on local authority spending overall, the majority of our witnesses expressed serious concern that changes in the PSS grant will not be reflected in changes in actual spending in social care. The decision to end ring-fencing of PSS grants means that the total level of social care spending is now at the discretion of local authorities. Even though this may be welcome in principle it has the practical effect of introducing an additional element of uncertainty into the plan for meeting demand for health and social care. (Paragraph 16)

3.  We urge the Government closely to monitor the relationship between the level of PSS grant and actual social care spending. In the meantime the Government must shore up the 'positive attitude' to spending of social care funds by clearly communicating its expectations to local government. (Paragraph 17)

4.  We strongly support working towards an improved interface between health and social care, and we recognise the efficiencies and improvements in the quality of care that could result from this process . The distribution of this sum for social care from the NHS revenue budget is a key opportunity to drive positive change in this interface. The Secretary of State's description of a formal transfer of funds based on a jointly-agreed spending plan suggests an approach based on the provision of particular services in isolation. It will be an opportunity missed if this sum is not distributed with the primary aim of developing a better overall interaction between health and social care which could have a much wider impact on efficiency, prevention and reablement than the more limited funding of certain services. We expect that the distribution guidelines set out in the Operating Framework will grasp this opportunity. (Paragraph 20)

5.  The evidence submitted to us, including the evidence submitted by the Government itself, does not allow us to conclude that the Spending Review settlement, coupled with the pay freeze, is enough to allow councils to 'sustain' care levels without restricting eligibility criteria. Our analysis shows that, depending on spending decisions by individual councils, the social care sector will need to deliver efficiency gains of up to 3.5% per annum throughout the Spending Review period to avoid reducing their levels of care. We intend to monitor the delivery of these key objectives on a regular basis throughout the Parliament. (Paragraph 32)

6.  Improving the interaction between health and social care will be very important if the necessary cost savings on both sides are to be realised. The potential to make savings in this area has long been acknowledged, but has not yet been properly realised. We believe that it is mission-critical to successful delivery of the Nicholson Challenge to achieve a quantum leap in the efficiency of this interface. (Paragraph 35)

7.  We strongly support the objectives of improved partnership between health and social care but doubt whether the current institutional or policy structures are fit for the purpose of achieving them. The examples which are quoted often involve demonstrating how better developed social care services will relieve the burden on the healthcare system as well as improving outcomes and experience for patients. There is ample evidence to support these objectives, but delivery involves more than cooperation and improved discharge procedures. It requires a serious commitment to plan and deliver coherent delivery systems ('pathways of care') which are complicated by institutional differences. (Paragraph 43)

8.  The allocation of £1 billion to social care through the NHS budget is a step in the right direction in that it formally recognises the interaction between health and social care, but we are concerned that it may be too tightly focused to bring about a genuine wider improvement in the interface between the two services. In general, there is a risk of the 'better interface' becoming a by-word for the health service seeking to achieve its own efficiencies by asking social care to take on more. The Government must do more to bring about improved relations and interaction more generally between the two sectors, as this could ultimately contribute to broader cooperation, more imaginative efficiencies, and more significant savings on both sides. It is not enough for the Government to exhort change in this area: there must be a formal policy infrastructure that recognises the importance of achieving this. (Paragraph 44)

9.  The Department of Health takes up a significant portion of the Government's total funding across departments: by 2014-15 the Department of Health will account for 33% of the total Resource budget and 11% of the total capital budget. The ability of the NHS to operate within its settlement is therefore vital to the achievement of the Government's spending plans. (Paragraph 47)

10.  The Government's commitment to a real terms increase in health funding throughout the Spending Review period will not be met. This emphasises the fact that the settlement, although generous when compared to other departments, represents a substantial challenge to the NHS. (Paragraph 51)

11.  The efficiency challenge for the NHS is not about cuts. It is about doing more with the same amount of money. The Government needs to ensure this fact is more clearly communicated both by the NHS itself and to the wider community. (Paragraph 60)

12.  There is an urgent need for a credible plan to deliver the efficiency gain which is the central requirement of the Spending Review settlement for the NHS. Many witnesses have drawn attention to the need for this plan and have expressed concern that it is not yet available. We share this concern. (Paragraph 62)

13.  The QIPP programme is the tool available to healthcare to make efficiencies, and represents a good starting point. However, the scale of the challenge is so immense that QIPP will need to demonstrate clear savings early in order to provide the savings programme with the momentum to proceed at a steady pace towards the £15-20 billion goal. Close monitoring and consistent reporting of performance against publicly available norms will be essential if these gains are to be seen as real improvements rather than accounting changes. (Paragraph 67)

14.  We are concerned that 40% of the necessary efficiency improvements are to be derived from tightening the tariff. There is no guarantee that reductions in the tariff will always result in genuine efficiency gains, and there is a risk that the quality of services could suffer if changes are driven by reductions in the cost of the tariff alone. There should not just be across the board cuts in the tariff. It needs to be revised to remove perverse incentives and encourage best practice. (Paragraph 71)

15.  We welcome Sir David's recognition of the need for close financial oversight during this transition period. We believe there must be more detail in the Operating Framework and over the coming months on the exact nature of these controls and, in particular, how they will address the transitional arrangements from PCTs to commissioning consortia. (Paragraph 82)

16.  Sir David Nicholson has acknowledged the risks of delivering the efficiencies programme over the transition period to the new NHS structures, and we are encouraged by his determination to maintain tight financial controls during this time. However, we are concerned that there has been a lack of co-ordination in the period since the White Paper was published, and the Government has not communicated a clear narrative to support PCTs and other NHS organisations in implementing the reforms. (Paragraph 88)

17.  The cost of the White Paper reorganisation emphasises the need to achieve the higher end of the £15-20 billion of efficiency savings identified in the Nicholson Challenge. These costs must be clearly identified and planned for, if the spending challenge is to be achieved. It is unfortunate that the Government has not yet provided even a broad estimate of the likely reorganisation costs; and it is unhelpful for the Government to continue to cite the £1.7 billion figure, as it does not relate to their specific proposals. The next round of White Paper documents must present a clear assessment of the likely costs, both direct and indirect, and demonstrate how they are to be accommodated into wider spending plans. (Paragraph 92)

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Prepared 14 December 2010