Commissioning - Health Committee Contents

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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