3 The White Paper Proposals
Financial context
24. We are mindful that the need to develop more
effective NHS commissioning cannot be considered in isolation
from the financial context in which the NHS now finds itself;
the two issues are inevitably bound up inextricably with one another.
25. We have already commented on the financial situation
facing the NHS in our recent report on Public Expenditure.[12]
As we noted there, the key priority facing the NHS in the immediate
period ahead is the challenge first articulated by the NHS Chief
Executive, Sir David Nicholson, in 2009 to achieve an efficiency
gain of 4% per annum ("the Nicholson Challenge") from
2011-12 (also expressed as the need to make £15 to £20
billion in efficiency savings). This was originally expected to
last for three years (until 2013-14), but will now run for the
four years of the next Comprehensive Spending Review (CSR) period,
up to 2014-15. The scale of this is without precedent in NHS history;
and there is no known example of such a feat being achieved by
any other healthcare system in the world.
26. As we also pointed out in our Public Expenditure
report, over the four years of the CSR period, beginning on 1
April 2011, funding for the NHS is broadly flat in real terms
(i.e. taking account of the prevailing rate of inflation across
the economy).[13]
27. However, demand for NHS services is expected
to continue to rise in line with observed trends (driven by demographic
changes, the increase in illness related to lifestyle risk factors
and growing public expectations). In addition, there are likely
to be knock-on effects upon NHS demand from likely changes in
levels of local authority social care provision. As we have pointed
out, around £1 billion of NHS funding in each year of the
CSR settlement has effectively been earmarked for spending on
social care, substituting NHS money for local authority spending.[14]
28. As we pointed out in our previous report: "The
efficiency challenge for the NHS is not about cuts. It is about
doing more with the same amount of money."[15]
Sir David Nicholson told us that the savings would be achieved
as follows:[16]
- 40% from freezing staff pay
(in 2011-12 and 2012-13), cutting management and administrative
costs (by 46%, mainly in 2010-11 and 2011-12)[17]
and reducing central budgets (covering areas such as training
and arm's-length bodies);
- 20% from service change (e.g. shifting services
from secondary care to primary care); and
- 40% from reducing the acute-sector tariff, thereby
driving up efficiency.
29. As Sir David and other officials indicated to
us, the Department is confident that substantial savings can be
delivered by successfully implementing the Quality, Innovation,
Productivity and Prevention (QIPP) programme throughout the NHS.
This consists of 12 national workstreams, identifying best practice,
which sit under three key areas: commissioning and pathways; provider
efficiency; and system enablers.
30. If the unprecedented efficiency gains which are
required to deliver the Nicholson Challenge are to be delivered
it is essential that NHS commissioning is better at:
understanding the health needs of a local population
or a group of patients and of individual patients; working with
patients and the full range of health and care professionals involved
to decide what services will best meet those needs and to design
these services; creating a clinical service specification that
forms the basis for contracts with providers; establishing and
holding a range of contracts that offer choice for patients wherever
practicable; and monitoring to ensure that services are delivered
to the right standards of quality.[18]
31. The Committee therefore accepts that it follows
from the unprecedented scale of the Nicholson Challenge, and the
widespread recognition of the weakness of existing commissioning
structures in the NHS, that action to enhance the effectiveness
of NHS commissioning is essential if the NHS is to deliver the
pace of change implicit in the Nicholson Challenge — and
therefore in the Comprehensive Spending Review. It is against
this immediate challenge that the Committee believes the White
Paper process should be judged.
The White Paper Proposals
32. The Coalition's Programme for Government,
published on 20 May 2010, stated that an independent NHS Board
would in future "allocate resources and provide commissioning
guidelines".[19]
GPs would be allowed to commission NHS services on patients' behalf;
but, at the same time, PCTs would also continue to have a commissioning
role. In addition, each PCT would be a champion for patients and
have responsibility for improving public health; and PCT Boards
would in future have some of their members directly elected by
the public. The Programme also stated that "We will
cut the cost of NHS administration by a third and transfer resources
to support doctors and nurses on the front line", a commitment
that the previous government had also made.[20]
33. In addition, the Programme gave an unequivocal
promise that "We will stop the top-down reorganisations of
the NHS that have got in the way of patient care."[21]
34. Only a few weeks later, on 12 July 2010, the
DH published the White Paper Equity and excellence: Liberating
the NHS. The key proposals it contained were as follows:
- PCTs and SHAs will be abolished
in due course.
- By far the greater part of
NHS commissioning will be undertaken from 2013 by GP-led commissioning
consortia. Membership of a consortium will be mandatory, but it
will be down to GPs themselves to make their own consortium arrangements.
Their spending on management and administration will be capped
by a "maximum management allowance".
- GP practice boundaries will be abolished, so
practices can accept patients regardless of where they live, effectively
allowing patients to choose their commissioner. However, consortia
will have to have "sufficient geographic focus" to allow
them to commission locality-based services (such as emergency
care), services for unregistered patients and services commissioned
jointly with local authorities.
- Funds for commissioning will be calculated as
"practice-level budgets", to be allocated directly to
consortia.
- A "Quality Premium" will be topsliced
from existing GP practice income streams and withheld if a consortium
fails to achieve good enough outcomes and financial control in
its commissioning.
- An independent NHS Commissioning Board will take
over responsibility for running the NHS, in accordance with a
mandate set by the Secretary of State. The Board will hold consortia
to account for the health outcomes they achieve and for their
stewardship of NHS funds. In addition, it will itself undertake
commissioning of primary care services (including GP services)
and some specialised services.
- The scope of Patient Choice will be extended
so that it encompasses choice of provider in all clinical settings
(including mental health and General Practice), consultant-led
team and treatment.
- There will be a presumption of "any willing
provider" across all clinical settings, meaning that patients
will be free to choose any provider (including those in the independent
sector) which meets NHS quality standards and is prepared to work
at NHS prices.
- Within three years, all NHS provider organisations
will be constituted as FTs, operating as free-standing businesses
that will compete on equal terms with other providers (for-profit
and third-sector) in the NHS "market".
- There will be no "preferred providers"
and FTs will not be bailed out if they fail financially. FTs will
be given greater commercial freedom, with the removal of the current
cap on their income from providing privately-funded care. FTs
will also have greater scope to determine their own governance
arrangements, with the option to become "social enterprises".
- The Care Quality Commission will continue to
act as an inspector and licenser of providers in both health and
social care, across public and private sectors alike. It will,
though, lose its role as regulator in respect of NHS commissioners,
since this function will form part of the remit for the new Commissioning
Board.
- Monitor (which is currently the FT regulator)
will develop into an economic regulator for the health and social
care sectors (operating a joint licensing system with the CQC),
with a remit to promote competition, regulate prices and support
the continuity of essential services in the face of provider failure.
- Local authorities will be responsible for local
health improvement and illness prevention. There will also be
a new Public Health Service, accountable to the Secretary of State
for Health, which will appoint local Directors of Public Health
jointly with local authorities and allocate ring-fenced health
improvement budgets to local authorities.
- There will be a new patient and servicer-user
involvement body called HealthWatch, which (despite its proposed
name) will cover both the NHS and social care. At the local level,
HealthWatch will be funded by, and accountable to, local authorities,
and will be formed from existing Local Involvement Networks. It
will help patients to exercise choice in using local health services;
and data from HealthWatch will be fed into the commissioning process.
The role of HealthWatch will include providing advocacy support
for complainants, a function that will be commissioned by local
authorities. At the national level, HealthWatch England will be
constituted as an "independent arm" of the CQC, of which
it will form a statutory part.
- Councils will play a "convening role"
regarding the local NHS, social care, public health and other
services. This will be done through statutory local "Health
and Wellbeing Boards". These will be made up of elected local
authority members, representatives of NHS commissioners, social
care and HealthWatch.
35. The proposed new "system architecture",
as illustrated in the White Paper, is reproduced as Figure 1.
Figure 1: The proposed new NHS "system architecture"[22]
36. There was a significant policy shift between
the Coalition Programme, published on 20 May 2010, and the White
Paper, published on 12 July 2010. The Coalition Programme anticipated
an evolution of existing institutions; the White Paper announced
significant institutional upheaval. The Committee does not believe
that this change of policy has yet been sufficiently explained
given the costs and uncertainties generated by the process.
Evolutionary or revolutionary?
37. The unexplained change in approach between the
Coalition Programme and the White Paper has led to considerable
uncertainty about whether the Government intends to build on existing
experience within the NHS or create a major discontinuity. This
uncertainty has been compounded by apparently inconsistent messages.
The Secretary of State has tended to emphasise continuity with
the policies of the previous government, playing down the extent
to which he plans to change the structures of the NHS. When he
gave evidence to the Committee in July 2010, he said:
Chairman, you will know that over this last more
than six years I have talked to thousands of people in the National
Health Service, clinicians who say, "We do not want another
big upheaval." […] For the great overwhelming majority
of clinicians in the National Health Service this is not an upheaval,
it is an empowerment. There are organisational changes that flow
from it—I do not deny that—but they would have had
to have happened anyway.[23]
In November 2010 he told us:
This is not a nuclear device going off from the
point of view of most of the staff working in the NHS […]
much of this is evolution. Seen from the perspective of GP practices,
this is more to do with empowering them than changing the terrain
around them […] we are in a position where, frankly, what
we need to do is to keep the best of many of the processes that
were set in train [by the previous government], whether it is
patient choice, practice-based commissioning, the introduction
of the tariff or greater autonomy for providers through foundation
trust status. I didn't invent any of those things. What I am doing—I
make no apology for it, because I regard it as absolutely essential—is
ensuring these things are done in a consistent and coherent fashion,
not done piecemeal.[24]
Sir David Nicholson, however, has appeared to interpret
the government's proposals differently. He told us:
The scale of the change is enormous—beyond
anything that anybody from the public or private sector has witnessed,
really.
In December 2010 he adopted the same approach when
he told NHS finance officers that he had consulted change management
experts from around the world:
and no one could come up with a scale of change
like the one we are embarking on at the moment. Someone said to
me 'it is the only change management system you can actually see
from space' — it is that large.[25]
38. Professor Julian Le Grand, who was a health policy
adviser to the Prime Minister during Rt Hon Tony Blair's premiership
told us that, in his view, the White Paper represented not a "revolution"
but the natural "evolution" of the policies he had helped
design. He told us that:
most of these reforms are very much where [Mr
Blair], and indeed I, would like to have gone if we had not encountered
some of the road blocks that one did.[26]
39. It remains unclear which interpretation is correct.
The Committee has been struck by elements of both continuity and
discontinuity. There is clear continuity with broad policy objectives,
shared by successive governments, in relation to ensuring that
the NHS is: responsive to patients' needs and wishes; provides
care that is of high quality; and is as productive and cost-effective
as possible. The Government's proposals seek, like those of previous
administrations, to achieve these objectives through: a commissioner
/ provider split; greater clinical engagement in commissioning;
and greater accountability of NHS services to patients and the
wider community.
40. There are also, as the Secretary of State has
pointed out to us, several very specific lines of continuity between
his proposals and policies that were pursued by the previous government,
including: Patient Choice; Any Willing Provider; Practice-Based
Commissioning; the transformation of all provider Trusts into
Foundation Trusts; reintroducing the commissioner / provider split
into community services; the abolition of GP practice boundaries;
and substantial reductions in NHS management and administration
costs. As he explained to us, his proposals can be seen as taking
those strands of the previous government's policy and pushing
them further and faster than the last government did.
41. The Department's own response to the White Paper
consultations appears however to emphasise the discontinuity:
The headquarters of the NHS will be in the consulting
room, not the NHS Commissioning Board. Innovation will come primarily
from the leadership of liberated local commissioners and providers,
supported by the NHS Commissioning Board, not the other way round.
The Board will need to construct a very different relationship
with GP consortia to that which currently exists between the Department
and SHAs, and SHAs and PCTs. It will be less of a hierarchical
performance manager than a quasi-regulator of commissioners, operating
on the basis of clear and transparent rules, within well-defined
statutory powers. In line with this vision, the Bill will not
grant the NHS Commissioning Board a general power of direction
which implies general control. Nor will it be able, as SHAs are,
to use hierarchical power as a way of resolving disputes between
commissioners and providers. Instead, the Government is exploring
how it can enshrine the principle of the autonomy of individual
commissioners and providers as a duty both for the Secretary of
State and for the NHS Commissioning Board.
The NHS Commissioning Board will hold consortia
to account for the quality outcomes they achieve and for financial
performance, but it will only have the power to intervene where
there is evidence that consortia are failing or are likely to
fail to fulfil their functions.[27]
42. At a time when the primacy of the Nicholson
Challenge should have focused the minds of NHS senior management
on the need to secure unprecedented efficiency gains, we have
been presented with evidence of widespread uncertainty about the
Government's intentions. In addition to its inevitable effect
on management morale, the Committee believes this will have had
the effect of blunting the ability of the NHS to respond to the
Nicholson Challenge.
43. In the Committee's view the policy described
in the White Paper introduces significant institutional upheaval
into the NHS, without significantly changing its policy objectives.
The Committee broadly shares the policy objectives so it therefore
welcomes the fact that these are substantially unchanged. It does
not believe however that the approach adopted by the Government
represents the most efficient way of delivering those objectives.
44. Like most observers, the Committee was surprised
by the change of approach between the Coalition Programme and
the White Paper. The White Paper proposes a disruptive reorganisation
of the institutional structure of the NHS which was subject to
little prior discussion and not foreshadowed in the Coalition
Programme.
45. During the Committee's inquiry it took evidence
from leading academic experts and important stakeholders in the
field of health policy. It was striking how limited the consultation
was by the Government in the preparation of the policies set out
in the White Paper.[28]
46. While such a "surprise" approach
is not necessarily wrong, it does increase the level of risk involved
in policy implementation. It allows less time to understand complexity
and detail, and less time to develop and explain policy; and it
leads to less understanding of objectives by staff, patients and
local communities.
47. A successful "surprise" strategy
requires clarity and planning, but the Committee does not think
that the White Paper reflected these qualities. There appears
to have been insufficient detail about methods and structures
during the transitional phase. The failure to plan for the transition
is a particular concern in the current financial context. The
Nicholson Challenge was already a high-risk strategy and the White
Paper increased the level of risk considerably without setting
out a credible plan for mitigating that risk.
48. Much has occurred since the publication of the
White Paper (and during the course of our inquiry). In the next
chapter we look at how matters have moved on and what this means
for the Government's reform programme.
12 Health Committee, Second Report of Session 2010-11,
Public Expenditure, HC 512 Back
13
Ibid., paras. 45-51. The Government plans a marginal real-terms
increase in NHS funding across the CSR period. As our report stated,
the latest inflation forecasts from the Office for Budget Responsibility
indicate that the planned level of NHS spending will actually
represent a marginal cut in real terms. Back
14
Ibid., para 18 Back
15
Ibid., para 60 Back
16
Ibid., para 68 Back
17
As noted at para 19 above, the previous Government had planned
to cut these costs by one third. The Coalition stated in its Revision
to the Operating Framework for the NHS in England 2010/11,
published in June 2010, that it would be pressing ahead with this
policy. It also announced that a substantial increase in this
area of spending during 2009-10 meant that cuts of one third on
a 2008-09 baseline would actually mean cuts of 46% on the 2009-10
baseline, and that the cuts would have to be achieved mainly in
2010-11 and 2011-12. Back
18
Department of Health, Liberating the NHS: Commissioning for
patients, July 2010, para 1.7 Back
19
HM Government, The Coalition: our programme for government,
May 2010, p 25 Back
20
Ibid., p 24 Back
21
Loc. cit. Back
22
Department of Health, Equity and excellence: Liberating the
NHS, Cm 7881, July 2010, Figure 2, p 39 Back
23
Oral evidence taken before the Health Committee on 20 July 2010,
HC (2010-11) 380, Q 1 Back
24
Oral evidence taken before the Health Committee on 23 November
2010, HC (2010-11) 512, Q 389 Back
25
"Warning on NHS budget pressures", Financial Times
website, 9 December 2010 Back
26
Q 205 Back
27
Department of Health, Liberating the NHS: Legislative framework
and next steps, Cm 7993, December 2010, para 4.51 Back
28
Qq 251, 331 Back
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