Commissioning - Health Committee Contents

4  Events since the White Paper

SHAs and PCTs in flux

49. For the reasons set out in the previous chapter the Committee believes that the White Paper was introduced without sufficient clarity of process. The result of this lack of clarity was that the weeks immediately following the publication of the White Paper were marked by a period of considerable uncertainty within the NHS.[29]

50. This uncertainty was reinforced by the planned implementation of substantial cuts in spending on management and administration in SHAs and PCTs which meant that a significant number of management staff opted to receive a severance payment to leave the NHS under the Mutually Agreed Resignation Scheme (MARS), which ran from mid-September 2010 to the end of October 2010.[30] As Sir David Nicholson reported to us:

    part of the issue, to be frank, is that there are some people who want to go—they want to leave and they don't want to be part of the new system—and we should help them to do it. Why have them sitting around? More than 2,000 people took the opportunity. It has cost us £40 million to pay them off, and it will save us £70 million next year and £70 million every year after that.[31]

The Secretary of State confirmed that some 2,200 staff had left under this scheme, adding that:

    there are staff who will leave, and we accept that they will leave. That will enable us to reduce the overall administration cost, the management cost and the number of managers. The number of managers in the NHS has been declining since earlier this year, and it is declining at a rate of some 600 or 700 over the course of the past six months, which will continue.[32]

51. This uncertainty within the PCT structure had the consequence of allowing the Government to deliver management cost savings, but it also meant that events began to move quickly within the NHS, requiring management to anticipate new structures even before a Bill to give effect to the planned changes had been brought before Parliament.

52. The British Medical Association (BMA) told us that they were "extremely alarmed" at the "potential vacuum" that could open up in the transition from PCTs to consortia — with "a real risk of PCT implosion".[33]

53. It has been widely claimed that many PCTs are indeed "imploding" as a result of so many staff leaving (whether taking severance under MARS or simply resigning) and those who remain feeling demoralised and uncertain about their future.[34] There is perceived to be a significant danger that these developments will enhance the risk associated with transition to the new system; in particular it enhances the risk of a breakdown of financial and management controls, with potentially serious consequences for meeting the Nicholson Challenge.

54. The King's Fund saw reform coming "at the expense of considerable disruption to the operation of the NHS over the next 3 years" and questioned whether "organisational upheaval [would] distract from the productivity challenge that the NHS needs to be focusing on over the next 5 years".[35]

55. The management consultancy Tribal told us:

    The White Paper has caused a degree of organisational turbulence in PCTs and Strategic Health Authorities (SHAs) and this could threaten the pace of reform and in particular, the creation of the new GP-led commissioning consortia.[36]

56. Karen Jennings, Head of Health for UNISON, told us:

    The whole human resources agenda is lagging way behind what is happening and therefore staff are not able to TUPE across [i.e. transfer to new employers under the Transfer of Undertakings (Protection of Employment) Regulations] so we are starting to lose them, and the talent that remains is being removed out of the PCTs and taken into the centre [i.e. the DH] […] We are starting to see this wide variation. It's a mess. It's a complete and utter and total mess. That is because it has not been thought through.[37]

57. The Secretary of State strongly denied to us that there was any such state of disarray in PCTs:

    Can I just comment, because there is a tendency to repeat a phrase that I don't think is justified? PCTs across the country are not "in meltdown". They are delivering a continuing responsibility. Where financial control is concerned […] we are, if anything, expecting to retain stronger financial controls through the course of next year than we have done in the past, because we are in a very constrained financial situation.[38]

However, Sir David (speaking at the same evidence session, on 23 November 2010) appeared to think somewhat differently. He was asked how, given that in many areas of the country PCT managers are leaving and PCTs are effectively in meltdown, it would be possible to deliver the efficiency challenge at all, let alone deliver it in a logical way. He told us:

    I think you're absolutely right. That is a big challenge for me as chief executive and for the other executives. If you were to ask me whether I think we can sustain 152 independent PCTs between now and 1 April 2013 [their planned date of abolition], I would say that we cannot. Increasingly, in parts of the country, we see that we cannot do that now.[39]

58. Sir David went on to describe the policy of developing PCT clusters:

    we need to make arrangements so that we can pool the capacity that we've got. Hence, in London, they're looking at clustering organisations together and having one management team to run a series of PCTs. I have absolutely no doubt that that will be the model across the country as a whole. So, you will see PCTs being clustered together with single management teams in order to sustain the management capacity, both to enable them to devolve the responsibilities to the local government and consortia and, on the other hand, to enable them to hold on to the accountability chain, which is going to be so critical for us over this period.[40]

59. The Department has now decided that there should be a requirement to develop PCT clusters set out in the Operating Framework for 2011-12. Sir David Nicholson's letter to NHS Chief Executives, dated 15 December 2010, explains that:

    The broad role of clusters will be twofold. Firstly, clusters will oversee delivery during the transition and the close down of the old system. In so doing, they will ensure PCT statutory functions are delivered up to April 2013. Secondly, clusters will support emerging consortia, the development of commissioning support providers and the emergence of the new system. In so doing, they will provide the new NHS Commissioning Board with an initial local structure to enable it to work with consortia. In creating clusters, our aim is to maintain the strength of the commissioning system in light of the significant financial challenges ahead.

    Clusters will have a single Executive Team and will be in place by June 2011 at the latest in a form that is sustainable up to April 2013, and potentially beyond that date if the NHS Commissioning Board chooses.[41]

60. We gained further insight into the role of clusters during our visit to City and Hackney PCT in December. Alwen Williams, the Sector Chief Executive of one of the existing clusters, East London and the City Alliance (covering City and Hackney, Tower Hamlets and Newham PCTs), explained to us that there would be three elements to the cluster:

  • Commissioning Support Services - which could become a consortia support body from 1 April 2013;
  • Primary care commissioning - which could become an outpost of the Commissioning Board from 1 April 2012; and
  • Public health - which could become part of Public Health England (as the Public Health Service is to be branded) from 1 April 2012 - or local government from 1 April 2013.

61. Ms Williams told us that there would be a focus on working to deliver the required efficiency savings through QIPP. There would be redundancies early in 2011, to achieve the required 46% cut in management costs - but these would not be uniform across PCT functions. Front-line commissioning would be protected, while savings were made by cutting out duplication in back-office functions.

62. Ms Williams told us that uncertainties remained. While the intention was to achieve local business continuity, and a phased and developmental transfer of business skills, it was not yet known how the commissioning support market would develop. She said that there was a rumour that consortia would be allowed to "take the money and run to the private sector" for commissioning support within the next six months. TUPE rules would then presumably apply to existing PCT / cluster staff - but it was not yet known what the human resources and TUPE arrangements would be.

63. It seems that, even where clusters are taking shape, there is still apprehension - and, in some cases, considerable anxiety and demoralisation. An extremely pessimistic view about prospects for the near future was recently expressed in widely reported remarks by Robert Creighton, the Chief Executive of Ealing PCT and leader of a cluster also encompassing Hillingdon and Hounslow PCTs:

    This could be a bloody awful train crash. It could collapse. All of us are looking inwards […]

    I've got to completely clean out the team and make a whole series of new appointments. I spent 13 hours yesterday interviewing yesterday, I'm spending another six hours today, eight hours tomorrow. In all that time, I am not spending a moment thinking about patient care or money. It will be very difficult to keep everybody focused in the task in hand.

    This must be working together, but we are at risk of blowing it. Sometimes I feel I'm only doing what I'm doing because of a sense of public duty. In two years' time, I will probably be out of a job.

    The Government is saying that everything I have done for the past eight years has been bad or should be destroyed. Where's the sense of that?[42]

64. The Committee acknowledges the development of PCT clusters as a pragmatic response to the situation that developed following the publication of the White Paper.

The Way Forward

65. The Secretary of State announced on 15 December 2010 that Sir David Nicholson has been appointed the first Chief Executive of the NHS Commissioning Board. The Committee welcomes the fact that the Government has acted promptly to fill the post. It believes that this decision represents an important step in developing a commissioning function which will allow the NHS to achieve the efficiency gains which are required during the lifetime of this Parliament.

66. The establishment of PCT clusters will perform several functions. It will provide a focus for change management; it will allow the Government to maintain control of NHS finances during the crucial transition period and it will provide a focus for regrouping management talent. The formation of clusters must not, however, serve as merely a short-term expedient. The way that the clusters are constituted needs to be consistent with long-term objectives for the NHS.

67. The Government plans that PCTs should cease to exist on 1 April 2013, and that GP-led commissioning consortia will take on their commissioning functions from that date. The Government also plans that SHAs should be abolished on 1 April 2012 and that the NHS Commissioning Board should be constituted as a "shadow" Special Health Authority (under the provisions of existing legislation) on 1 April 2011 in order to assume its executive role from 1 April 2012.

68. Although the Committee welcomes the establishment of PCT clusters it remains concerned that the relatively protracted timescale is undermining the effectiveness of the NHS response to the Nicholson Challenge. The Committee believes it cannot be too often repeated that the commitment to generate 4% efficiency gains four years running is extremely challenging and it believes there must be a clear and effective management every step of the way if the NHS is to have a realistic chance of meeting the objectives it has been set.

69. The Committee recommends that PCT clusters should be in place by 1 April 2011, in order to ensure that they are able to manage the delivery of the Nicholson Challenge effectively. The Committee believes it is important that clusters "own" the change process; as the focus for financial control, they should be responsible for the development of commissioning in their area.

70. More immediately Sir David told us during our inquiry into Public Expenditure:

    there is no doubt in my mind that in some ways we are going to have to centralise more power in the very short term to deliver the benefits in the medium and long-term […] we will have to take a very tight rein in relation to the management of finance.[43]

He even spoke of imposing "a whole series of what might be described as Stalinist controls on the system".[44]

71. However, Sir David has also been keen to emphasise that the Department is also seeking "to grow the new system out of the old"[45] at the same time as it is imposing more rigid central control in the shorter term.

72. A key policy in this regard is the fostering of "Pathfinder" GP commissioning consortia across the country. The first 52 Pathfinder consortia were announced by the Secretary of State on 8 December 2010. A Pathfinder Learning Network has been formed and the Department expects that new Pathfinder consortia will be formed throughout the transition to the new system, as the idea gains momentum among GPs. According to Sir David, "Our aim is to have full coverage of the population by prospective consortia by the end of 2011/12".[46]

73. The development of Pathfinder commissioning consortia represents a further important step in clarifying future commissioning responsibility. The Committee remains very concerned however that a timescale which involves a further 15 month delay in establishing full coverage represents a serious risk to the quality of commissioning decisions during that period. It means that a total of two years will have elapsed since the formation of the Government during which responsibility for managing an unprecedented efficiency challenge will have been unnecessarily weakened and diffused.

74. Changes have taken place in the management structures of the NHS in advance of Parliament having the opportunity to debate and approve them. We think this is unsatisfactory. However, given that these changes have been made, it is important that they are put in place as quickly as possible in order to ensure that the system is managed effectively.

Service Developments

75. In our report on Public Expenditure we noted that increasing numbers of PCTs are struggling to maintain financial balance and consequently implementing what amount to service cuts and rationing.[47] When we visited City and Hackney PCT on 14 December 2010 we heard from the GP who chairs the local PBC consortium that clinicians were being forced to make "awful decisions". There was even the possibility that patients with cataracts in both eyes might only be able to have one of them treated.

76. Concerns have been expressed to us that after a sustained period of falling waiting times the NHS is once more faced by the prospect of long waits for treatment - although when we asked the Secretary of State about this he was dismissive of these concerns, arguing that the figures quoted were for the summer and needed to be seasonally adjusted.[48]

77. The Committee acknowledges that delivery of the efficiency gains required by the Nicholson Challenge will require some difficult decisions about service levels. We believe, however, that this unavoidable prospect underlines the importance of effective commissioning structures that are able to make decisions which reflect defensible clinical and managerial priorities. We are concerned that there appears to be a growing perception that the emerging pattern of service developments reflects management instability and weakness in the organisations on which this responsibility rests.

78. This concern was expressed in evidence that we heard from Katherine Murphy, the Chief Executive of the Patients Association:

    The scale of the restructure is happening so quickly. It is already having an impact on patients because many GPs up and down the country are already getting ready for consortia. There are patients who are already being told that their operations have been postponed. Indeed, last week we had a call from a senior nurse from the north of England who said that over the past three weeks she had seen five patients who should have been referred for pain services but whom she was unable to refer because she had been told that she cannot refer to the appropriate service. So there is already an impact on patients. We've also heard from a number of patients around the Warwickshire area who were due to have hip replacements within the next couple of weeks. They have been postponed and they haven't been given a new date for their operation.[49]

Transition costs

79. As we discussed in our report on Public Expenditure, PCTs are being required in the current financial year to hold back 2% of their recurrent revenue budgets (amounting to £1.7bn) for non-recurring "service transformation" costs (in accordance with a requirement laid down by the previous government).[50] In the current financial year these monies are to be deployed "non-recurrently in-year to support service transformation" on the basis of "financial flexibility in PCTs".[51] Sir David Nicholson told us that he expected PCTs to be subject to the same requirement in 2011-12.[52]

80. Sir David described this money as being "to give PCTs the headroom to move into the new world" through creating a financial buffer to allow, for instance, "the ability to double run — to set something up before you close something down".[53] However, Minister of State for Health Simon Burns MP has stated that this money can be used for "reorganisational purposes"[54] and the Secretary of State told the Committee that MARS was funded from this source.[55]

81. The Secretary of State also told us he had "a very clear idea" of the cost of the reorganisation and that it would be published in the Impact Assessment for the forthcoming Health Bill. However, he refused to give us the figure at this stage, despite repeated questioning.[56]

82. The Committee notes that there has been a change in the intended use of at least some of the reserved sum of £1.7 billion. Some of the money which was originally reserved for "service transformation" is now being used to fund "management transformation". At a time when delivery of the Nicholson Challenge is going require a substantial commitment to service transformation, the Committee is concerned that some of the money originally set aside to support this service change is now being used to fund management change.

83. In our previous report we said that the Department should publish "a clear assessment of the likely costs, both direct and indirect, and demonstrate how they are to be accommodated into wider spending plans".[57]

84. The uncertainties described in this chapter will almost certainly have added both to the direct costs of transition, as well as the indirect costs incurred as a result of poor decision making by Commissioners. We welcome the Secretary of State's commitment to publish a full Impact Assessment at the time of publication of the forthcoming Health Bill and expect that it will include a full assessment of the transition costs likely to be incurred as a result of the White Paper proposals.

29   See, for example, COM 104, para 27. Back

30   MARS has been reopened until the end of January 2011 for those NHS organisations that were unable to participate in it previously - Department of Health, "Additional Annex to Sir David Nicholson's letter on 'Equity and Excellence: Liberating the NHS' - Managing the transition and the 2011/12 Operating Framework: Appendix B: Frequently Asked Questions", December 2010. Back

31   Oral evidence taken before the Health Committee on 23 November 2010, HC (2010-11) 512, Q 381 Back

32   Q 526 Back

33   COM 109 Back

34   "'PCTs seem to be imploding': LMC reaction to the Government's GP commissioning plans", Pulse website, 24 September 2010; "NHS managers warn commissioning handover in chaos as PCT staff clear their desks", Pulse website, 19 October 2010 Back

35   COM 118 Back

36   Ev 141 Back

37   Q 460 Back

38   Oral evidence taken before the Health Committee on 23 November 2010, HC (2010-11) 512, Q 377 Back

39   Ibid., Q 372 Back

40   Loc. cit. Back

41   Loc. cit. Back

42   "Government's NHS reforms could be a 'bloody awful train crash', angry PCT chief warns", Pulse website, 8 December 2010 Back

43   Oral evidence taken before the Health Committee on 23 November 2010, HC (2010-11) 512, Q 371 Back

44   Loc. cit. Back

45   Loc. cit. Back

46   Department of Health, "Managing the Transition and the 2011/12 Operating Framework" - letter from the NHS Chief Executive to NHS Chief Executives, December 2010 Back

47   HC (2010-11) 512, para 84 Back

48   Qq 579-580 Back

49   Q 395 Back

50   HC (2010-11) 512, para 90 Back

51   Department of Health, The Operating Framework for the NHS in England 2010-11, December 2009, para 3.7 Back

52   Oral evidence taken before the Health Committee on 23 November 2010, HC (2010-11) 512, Q 371 Back

53   Loc. cit. Back

54   HC Deb, 11 November 2010, col 179WH Back

55   Oral evidence taken before the Health Committee on 23 November 2010, HC (2010-11) 512, Q 415 Back

56   Qq 501-504 Back

57   HC (2010-11) 512, para 92 Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2011
Prepared 18 January 2011