Commissioning: further issues - Health Committee Contents

Examination of Witnesses (Questions 240-333)

Q240   Q240 Chair: Good morning. Thank you for coming and for sitting through the previous evidence session. I suspect you don't need introductions but, for form's sake, briefly introduce yourselves and explain the position you hold in the Department.

Tim Rideout: Good morning. I am Tim Rideout. Substantively, I am Chief Executive of NHS Leicester City, but my current position is supporting the development of the NHS Commissioning Board.

Dame Barbara Hakin: I am Barbara Hakin. I am the Managing Director of Commissioning Development in the Department of Health.

Sir David Nicholson: I am David Nicholson, NHS Chief Executive and Chief Executive­designate of the Commissioning Board.

Ben Dyson: Good morning. I am Ben Dyson. I am Director of Policy for Commissioning and Primary Care in the Department of Health.

Chair: Thank you very much. Before we get into questioning about the detailed proposals and evolution of policy, Dr Wollaston has a general question that she would like to put.

Q241   Q241 Dr Wollaston: Could I ask Sir David a general question, because I was looking at the written evidence that we all received—the CFI 01 document—from the Department of Health? It refers to the consistency of the message since the general election and reports that the Bill has been the outcome of a "process of consultation, engagement and discussion". I am interested to know, therefore, how you feel it is that we have seen support from the professions ebbing away over the course of the Bill?

Sir David Nicholson: I think I understand the question. Inevitably, in something of this scale, the devil is often in the detail. It is only when people understand the detail that they can start to contribute properly to that debate. Whilst the discussion, initially, was on broad principles, now we are getting into the detail of it. It is an incredibly complex and difficult set of changes and issues to take forward. My guess is that, while we are going through all of that, people, inevitably and quite rightly, will start to raise the whole series of concerns they have about the detailed implementation of these arrangements. I am pretty satisfied that, overall, we are making good progress on that. If you look across the NHS as a whole, the NHS is now moving much more to a place where they are thinking about, "How can we make these things work?" as opposed to "Let's have a debate about whether they work or not." It is a natural consequence of the kind of changes we are trying to make.

Q242   Q242 Dr Wollaston: For example, would you describe the fact that Monitor takes such a central stage in the Bill as a detail?

Sir David Nicholson: No. What I do say—and I may have said it at the original hearing—is that people were focusing all of their attention on the commissioning side when, in my view, it is the provider side which is much more radical and much more far reaching. This is a reflection of people getting to understand that the provider side of the changes, in my view, are very radical indeed.

Q243   Q243 Dr Wollaston: You think it is the provider side that has caused the loss of confidence from the professionals.

Sir David Nicholson: I couldn't explain the view that you describe about the profession. Certainly, in all of my dealings with the leaders of the profession and people in the system, people are raising issues but they are determined to make it work as well. The provider side is quite a big set of changes and, as people understand it, they will understand the nature of the impact of the Bill.

Q244   Q244 Valerie Vaz: I am sorry, but we had a discussion about this right at the beginning. The Select Committee told you, when the White Paper was coming up, that there are going to be problems. We asked if pilot studies had been done and you said no. I am confused, in terms of public money being spent on all this, as to why you feel it is okay to bring through a Bill where we highlighted issues and concerns.

Sir David Nicholson: I am sorry. What I said initially—and I think it is the case—is that if you look at the major planks of the change, so if you look at GP commissioning, we have a lot of experience now from fund-holding to practice­based commissioning. We have quite a lot of experience, as you have heard this morning, about where people have gone on that journey and we can build on that. We know, in relation to the provider side, the development of foundation trusts, that we have a lot of experience now of developing foundation trusts and having them work and operate and we can learn and build on all of that.

If you take the other issue, which is contentious, the Any Willing Provider element of the changes—

Q245   Q245 Valerie Vaz: The privatisation part?

Sir David Nicholson: No, the Any Willing Provider bit of it. We have quite a lot of experience of that as well because, certainly in the last two or three years, patients have had free choice of any NHS organisation and 127 private sector organisations to choose for elective care. We have built experience over the last few years in all of these areas. It seems to me that building on that is a safer way of taking it forward and that is what we are trying to do.

Q246   Q246 Valerie Vaz: Not quite. There are £80 billion going to GPs, which wasn't the case before. You can't say that you are building on that. In fact, we did tell you that there are some good areas, like Cumbria and Hull. They are good areas of practice. Why didn't you just build on that?

Sir David Nicholson: We are doing.

Q247   Q247 Valerie Vaz: No, you are not.

Sir David Nicholson: That is precisely what we are doing. If you look at the timetable, it isn't until 2013 that the individual consortia—not GPs, but the consortia—will get the resource. They certainly will not get £80 billion, because obviously—

Q248   Q248 Valerie Vaz: We will come on to what you do know about what is going on and what is going to happen in 2013.

Sir David Nicholson: I'm sorry, I don't understand the point.

Q249   Q249 Chair: I am not sure that that is gathering evidence, Valerie. Can I suggest we break off that line of questioning there?

I would like to bring you to this question of what happens, on 1 April 2013, to the £80 billion. Sir David was quoted in an interview a couple of weeks ago saying it is not accurate to say that the consortia will be left to their own devices to work out how to use this £80 billion with effect from 2013. You have made it clear, Sir David, that you expect, or you intend, as the Commissioning Board, to put in place an assurance regime around approval of these consortia to ensure both that the financial controls are in place and that the quality controls are in place around health care delivery and around the commissioning process itself. I would be interested to hear how you envisage that process being developed. Will it look similar to the process that Monitor has, up till now, enforced in the approval regime for foundation trusts? Is that the kind of process you have in mind, and an important process point, given that PCTs are going to be abolished, as the Bill is currently drafted, on the date of 1 April 2013? What happens in areas where this assurance regime concludes that the emerging consortia are not yet ready to exercise the powers anticipated for them?

Sir David Nicholson: I am sure Barbara will talk about the details of the authorisation process, which is what you have described, but can I say a couple of things in response to that? First, from now on we expect GPs and the developing consortia to be engaged and involved in all of the financial, organisational and service planning going on in the system. Indeed, the planning process we are going through now across the NHS, as a whole for 2011-12, in some parts of the country has significant involvement, to the extent that the pathfinder consortia and members of the consortia are signing off individual plans. We will build expertise and knowledge over the next couple of years to enable people. It is not a kind of "Suddenly there's no responsibility and then suddenly there is." It is not a cliff edge in that sense. That is the first thing I would say.

It is quite a different process from foundation trusts, for one obvious reason. What we don't have is several years of trading of an individual organisation before you can make the judgment. We don't have that. Quite a lot of it is going to have to be based on perspective. Obviously, it is going to be based on the experience people are having over the next year or so, but thinking more about the way they organise themselves and the way they plan when they have got themselves ready. So it will be slightly different.

The other thing we want to make different is that we want it to be much more clinically relevant to the responsibilities of the consortia as they go forward. For example, I would like to see, as a principle, a 360^o part of the process so that patients—patients' voices—local authorities, secondary care clinicians and other clinicians would be able to have their say in relation to the authorisation of that organisation. That is a very different and much more open process, it seems to me, than perhaps we have had in foundation trusts in the past. Barbara can give you the details.

Dame Barbara Hakin: Yes, I am happy to give you the details of that. If you wouldn't mind, I will add a comment after Sarah Wollaston's initial question about the profession because, with my background and the role I have at the moment, I spend a lot of time with the leaders of the profession trying to tease out some of these things. It does seem to me that the issues fall into one of three categories. There are some issues where there is a genuine disagreement of policy intent, but we think those are very few. Talking to the leaders of the profession, they agree on that. There are a lot of areas where it is simply that there is not agreement that the wording of the Bill makes things clear enough, which we are working together on, or simply that there is a misunderstanding, and I think Any Willing Provider is one of the areas where there is a genuine misunderstanding of what it is about. We shouldn't assume that about the profession. We have a lot of problems, but much of it is to do with misunderstanding. I felt I wanted to add that point.

On to authorisation—if I can echo what Sir David has said about the authorisation—first and foremost we want to look to these organisations to be absolutely sure that they can improve the quality of services for patients. The number one category is that they have a credible plan and the infrastructure to deliver continuous quality improvement through clinical change and, obviously, to deliver that within the financial envelope—by eliminating waste, not by denying patients evidence­based treatment. That is the first area we would look at.

Secondly, we would need to be sure that the organisation has the appropriate infrastructure and governance arrangements to discharge its statutory duties, because it has a considerable number of statutory duties. These will be big organisations with, as you rightly point out, huge responsibility for both the health services for their patients and the public's money, so we need to make sure that the infrastructure the organisation has is appropriate.

Thirdly, as Sir David has pointed out, it is absolutely critical the Board is satisfied that the organisations have the full range of engagements with all the relevant stakeholders: that they have the systems and processes to make sure they are listening to patients and the public, that they are engaging secondary care colleagues and that they are engaging clinicians other than doctors. That will be a key part. It will also be critically important to ensure we look to see that they have the arrangements to commission services across a wider geography than their own consortium. It is key that we look at whatever systems they have in place for working with other consortia or buying in—commissioning—services.

Q250   Q250 Rosie Cooper: Should we call it a PCT?

Dame Barbara Hakin: I am sorry?

Rosie Cooper: Should we call it a PCT?

Dame Barbara Hakin: Should we call what a PCT?

Rosie Cooper: This greater strategic vision.

Dame Barbara Hakin: No. It is a commissioning consortia because it has a different ethos and basis. It is based on the practices.

Rosie Cooper: Rubbish.

Dame Barbara Hakin: We have built it up from a different area, but it doesn't mean it is any less important for us to make absolutely sure that these organisations are delivering better quality services for patients and better value for the taxpayer.

Q251   Q251 Chair: Can I put Rosie's point to you perhaps slightly more delicately?

Rosie Cooper: It's still rubbish.

Chair: You used the phrase, and I quote, "They are huge organisations." That is, I thought, quite an interesting phrase to have used to describe the consortia.

Dame Barbara Hakin: I am sorry, the phrase should have been "They have huge responsibilities." They don't necessarily need to be huge organisations. Some of them may be quite small.

Q252   Q252 Chair: Your phrase "a huge organisation" wasn't out of place in describing an organisation with that scale of responsibility.

Dame Barbara Hakin: It is "huge responsibilities", a huge scale. I agree completely. One of the things we need to look at with these organisations is what a consortium absolutely has to do for itself and what it might reasonably buy in or secure from elsewhere. That is where we get the difference in the size of scale. The scale of responsibility they have is enormous. However, in a lot of cases we will see consortia not trying to do everything for themselves.

Again, in terms of the authorisation process, what we would be looking to define with pathfinder consortia are the things that only the consortia could do—that they wouldn't be a commissioning organisation if they asked somebody else to do that. Those are the things about the final decision making, the clinical input and the changing services. There is an enormous raft of things that are part of commissioning which, by and large, all PCTs have tried to do for themselves. They are things for which, if we are going to make this system really different, we are going to get the economies of scale out of the back­office commissioning functions. Hopefully, we will see consortia doing those things that they, and they alone, can do and do well, which are the clinical things, and using economies of scale so that they can discharge these huge responsibilities without necessarily being enormous organisations themselves.

Of course, the other thing we need to look at is that they have the appropriate leadership capacity and capability. Again, in terms of the authorisation, what we want is not to increase the workload and not to create a bureaucracy out of this. We know the organisations have to have constitutions and we know that they have to have commissioning plans. Much of the authorisation, therefore, will be based on that already­present documentation. We also feel—although this is evolving and we are still working with pathfinders to work through it—as Sir David said, that the 360^o view of stakeholders, local authorities, public, patients and other clinicians will be important with, potentially, a site visit in the end to thoroughly understand what makes the organisation tick.

Q253   Q253 Chair: Can I also ask you to address this question? You have described a complex authorisation process, and it doesn't come as a surprise that it is relatively complex. What happens on 2 April 2013 if the Commissioning Board isn't satisfied that the consortium in a particular locality qualifies under this authorisation process?

Dame Barbara Hakin: I hope what we have described is a comprehensive authorisation process. The process over the next year will be discharging this, finding a way of working with consortia to discharge this in a way that doesn't create extra complex work.

Q254   Q254 Chair: I understand, but there must be a provision that covers that circumstance.

Dame Barbara Hakin: Yes. The Board will have a number of options where it feels a consortium doesn't meet all the criteria set out in the eventual authorisation process. First, it could confer partial authorisation on the consortium. It could choose to say, "For these services, which are slightly more straightforward to commission, we are happy for the consortium to commission them." But the Board itself, or another more effective consortium, might, in the short to medium term, take over the commissioning of the more complex services.

Q255   Q255 Chair: Does that mean the Commissioning Board has power to allocate, for a particular locality, the commissioning function between different consortia? It must do, because if a consortium is going to do part of the commissioning, and you said another consortium might adopt another part of the commissioning for that locality, effectively, the Board is in a position where it can almost compel merger.

Dame Barbara Hakin: The Board has to be satisfied, in its overarching role, that the commissioning arrangements for the whole of England are appropriate. In discharging that role, it would seek to make arrangements to ensure that was in place. In the early stages, if that meant a partial authorisation or an authorisation with some conditions—perhaps some advice and support—that is what the Board will do. My understanding is that that is the Board's authority and it has the mandate to do that. David, I don't know if you want to add to that.

Sir David Nicholson: Yes. A good example would be if there were a series of consortia all working around an individual acute hospital and you believed that a particular consortium did not have the capacity to do the acute commissioning. You could reasonably expect to arrange for another consortium essentially to be the lead consortium for the commissioning of acute services for that particular area.

Q256   Q256 Rosie Cooper: Should we call that one a PCT, then?

Sir David Nicholson: I don't know how you want me to respond to this.

Chair: Can we allow our witnesses to respond to one question at a time? This is supposed to be evidence gathering, not tennis.

Sir David Nicholson: But, to take the point, there is an issue here. One of the things about PCTs is that there was never a right size for a PCT. From when they were first designed, everyone said they were the wrong size—they were too small or they were too big. So there isn't a right size for an organisation. In a sense, that is why we are giving consortia a good deal of flexibility about what their sizes are.

What there are, though, are population bases which support particular services. They are graded. The population base that you need to commission a service for wound care for an individual group of patients is small but for proton beam therapy it is huge. There is a gradation all the way along, and they don't fit, sadly, into easy geographies. What you need is a system which is capable of flexing, so consortia will be working as individuals, as groups and as even larger groups for different services. That is the inevitability.

Q257   Q257 Chair: I will have one more shot and then I am going to call Rosie. There are two competing concepts around here, aren't there? One is earned independence of the default option, which is the National Commissioning Board, and the other is presumed independence. I am not clear. What you are describing doesn't come as a surprise to me in a National Health Service, but it sounds much more like the Commissioning Board holding the responsibility until it finds somebody to whom it can delegate it than presumed local independence.

Sir David Nicholson: I don't know whether you can halve "the best of both worlds" really, because that is what we are trying to get to. As clever as this authorisation process is, you will not be able to cover absolutely everything in every circumstance. You are going to have to make a set of judgments. The judgment we try to make, and the way I would describe it, is that we want these individual consortia to be the best consortia they could possibly be. Our job is to help them become that. If there is a presumption, it is that we want them to be the best they can possibly be. In a sense, the things that we are describing here are just a part of the journey on to that.

Q258   Q258 Andrew George: Could I ask something very briefly on the issue of the strategic nature of the decisions which have been taken and how they are being taken? I can quite understand that the Commissioning Board have a role with regard to the high level stuff—the complex neurosurgery. Clearly, that can't be easily commissioned by a consortium like that in Newquay representing 28,000 people. That can't be done. Someone needs to make strategic decisions about the pattern of those services. At the same time, it seems the Commissioning Board is also commissioning individual dental practices at Land's End. I don't quite understand how you can square the Commissioning Board's role in relation to very localised services, which it seems to be responsible for, and taking a strategic view on issues too.

Ben Dyson: You are absolutely right. There are some services which the Commissioning Board will commission itself, but it is important to emphasise that that doesn't mean that all the commissioning will be done from a single central location. It is not as though there will be a team of people sitting in a building responsible for the relationships with, say, every dental practice in the land. One of the things the Board will need to do is to make sure that it has sufficient presence in different areas to be able to manage relationships—

Q259   Q259 Andrew George: Like strategic health authorities, really?

Ben Dyson: —with providers.

Rosie Cooper: Good grief.

Ben Dyson: There could be a number of models for doing that. Having said that, and I think this builds on what—

Rosie Cooper: Back to the future.

Chair: Can we please be fair to Mr Dyson.

Ben Dyson: This builds on what Sir David and Dame Barbara have already said about the different levels of commissioning. One of the things that has happened in the PCTs is there has been a tendency to assume that that size of organisation is the right level—the right size—to do everything. When you start to unpick commissioning, whether it is the commissioning of dental services or the commissioning of community services, one quickly finds all kinds of different levels at which it is likely that things could be more optimally done. For instance—and I don't want to go too far into dental services—it may very well be that some of the work involved in monitoring dental contracts, looking at the services provided, doesn't have to be done 150 or 200 times over, or however many times it is. That could be done on a more central scale. Where you need more of a local presence is to manage issues that arise from that monitoring and be able to have conversations with individual providers. It is the same issue about finding the right level to do the commissioning.

Q260   Q260 Andrew George: The really big strategic tertiary issues, the complex neurosurgery and the major burns and very complex cardiology and so on, can't be commissioned by GP consortia either, can they?

Ben Dyson: No. It is by the Commissioning Board.

Q261   Q261 Chair: That is clear. Specialist commissioning, it has always been clear, would be done by the Commissioning Board.

Ben Dyson: Yes.

Q262   Q262 Rosie Cooper: I am going to ask you some general questions about accountability. But, before I do, following on from some of the things we have heard today, I would like to ask Sir David about this. You are the accountable officer for the NHS and I am really interested in how the National Commissioning Board will operate. I have heard what you said, but will it just operate in one place in London? Will it have local knowledge? Will it just be London and Leeds then? When things go wrong, when my constituents have a problem, who do I phone? Who will be on your Board? How big will it be? It sounds like you will need a cast of thousands. Will they have local knowledge? How will you know what is going on in West Lancashire? How will I know who I am going to—

Chair: That's enough questions for now. It gives the flavour.

Sir David Nicholson: I think you have brilliantly described the complexity. We are trying to do a very complicated set of things here. If I was to sit here and say, "We have sorted them all out" I would be fibbing to you. At the moment, we are involved in a process of building and organising ourselves in order to make ourselves do it. I am the accounting officer for the NHS, for the vote for the NHS at the moment, and my understanding is that the Chief Executive of the Commissioning Board will be the accounting officer for the NHS Commissioning Board vote. That is relatively straightforward in the arrangements.

In terms of the way the Commissioning Board will function, you are absolutely right that it has to function at a national level and a relatively local level, which is a challenge for any organisation. It is inconceivable to me that you will have a very centralised organisation, all based in London and Leeds. They are the two bits of the system that we have identified, that the headquarters will be in Leeds but there will be a sub­office, in a sense, in London. There will be people out working in the service, inevitably, but we haven't been through all of the process to identify how that is. If, for example, you take the relationship with the consortia, which is a very important relationship for the Commissioning Board, that is multifactorial. On the one hand, you are commissioning services from primary care directly into the people working in the consortia. Then you have a responsibility for authorisation, for monitoring the performance, for identifying and taking forward the Commissioning Outcomes Framework and you have a responsibility in relation to the accounting officer. That is quite a complex set of relationships. What we are trying do at the moment is tease out each of those relationships and work out how best the Board could organise itself to do that. That is exactly what we are doing.

Q263   Q263 Rosie Cooper: How big do you think the Board will be? It is not the direction I shall be asking you about, but how big will the Board be? How many employees will you have? How many satellite organisations, if not sites? How do you see it being delivered? Who do I phone?

Sir David Nicholson: We have published the financial number, haven't we? £400 million is the amount of money that has been allocated for the Commissioning Board to operate on. If you add up all the things the Commissioning Board does that are currently done by other organisations, it comes to a much bigger figure than £400 million. It will be a significant reduction in the amount of people involved in this kind of process, but it is about £400 million. As to the question about how many people it employs and how many people it buys services from, we have not concluded where we are going to be on all of that. It very much depends on the kinds of things I just described.

The other thing is that the Commissioning Board has a right of representation on every Health and Well­being Board. There will be some local individual who would be identified, in a sense, as the Commissioning Board's representative, or whatever you would describe it as, on each of the Health and Well­being Boards. There will be a local presence in that sense. They may not be based in that particular one, and they may cover more than one Health and Well­being Board, but there will be somebody identifiable on the Health and Well­being Board who will be the person that you could talk to.

Q264   Q264 Rosie Cooper: So when an MP has a problem, they phone "Mr or Mrs A.N. Other" who may be on a Well­being Board. When my constituent has a four­and­a­half hour waiting list, or some problem, I am to phone Mr Anonymous?

Sir David Nicholson: It depends on the issue. For most of them it will be the consortia, will it not, because the consortia will be commissioning the services for your individual?

Q265   Q265 Rosie Cooper: In other words, if MPs have problems, they phone GPs. As to GPs, I can tell you what one said to me not weeks ago—not to me but to my office: "If somebody has a complaint, just get them to put the complaint in in the normal way." That is not responsive or dealing with it. I park that as a problem that is going to be really big there. Otherwise, the Secretary of State and the Prime Minister are going to be faced with more adjournment debates than enough because we will have almost every complaint debated on the Floor of the House.

Sir David Nicholson: The issue is the resolution of the complaint, and if the consortia are the best place to resolve the complaint, that is who you should talk to, isn't it? If you can't get any satisfaction there, there is the Commissioning Board itself.

Q266   Q266 Rosie Cooper: Absolutely. I suppose I got knocked off course earlier on because you were talking about the number of people being employed. What I can't understand is—and you have the National Commissioning Board—how the accountability falls out, because we keep on getting different ideas. The Department says local authorities get extensive scrutiny powers, and you know I am far from convinced, but the power to refer service reconfigurations only refers to designated services. Some people view that as limiting. Some people are suggesting that consortia boards will have quite a large component of lay or elected members. I am not talking about Well­being Boards, but consortia boards. I am really confused—and I think many people are—as to where are we up to on the roundabout that talks about accountability in consortia? I ask you a direct question: Will there be non­executives on consortia?

Sir David Nicholson: What we have said on consortia is that they will come up with their proposals. Each individual consortia will decide on the kind of constitution that fits their local circumstances and their Commissioning Board will sign it off.

Q267   Q267 Rosie Cooper: So there is not necessarily any outside accountability there. As to Health and Well­being Boards, where is the real accountability there?

Sir David Nicholson: For what, exactly? The commissioning consortia are accountable to the Commissioning Board. That is really straightforward and not complicated at all. But, of course, they account to a whole series of different people. The consortia account to the Health and Well­being Board and that accounting means that they have to agree their plans and they have to work—

Q268   Q268 Rosie Cooper: The Health and Well­being Board, in your view, can sign off the consortia's plans. Do they have to sign off the consortia's plans? Do they have to agree them?

Tim Rideout: You will be aware that we have to have a Health and Well-Being Board for every upper tier local authority. The Health and Well­being Board, the parties and the commissioners across health and social care, working with elected representatives, will be responsible for developing a strategic needs assessment for their population. They will then be responsible for developing a strategic plan that responds to that. The legislation places a requirement on commissioners, both in social care and health, to pay regard to that plan. Effectively, for the first time, we have a formal environment, set up by the local authority, which brings those parties together and requires them to act in that way. That really builds upon the good practice that we have previously seen across the country in different places when those parties come together to identify the real things that are important for local communities and then come up with a shared response to those problems.

Rosie Cooper: There is regard, but no power—

Q269   Q269 Chair: If I can be clear, a plan has to be signed off.

Tim Rideout: The legislation talks, I think, about due regard. But the reality is, if I talk from my operational experience, that there is a kind of assumption behind the question that people were trying to avoid doing these things. In effect, if you want to discharge these duties well you have to do this. For a consortium to do its job and for a Health and Well­being Board to function properly, it will have to do the needs assessment well and it will have to come up with a good strategic response to it. That will play out as part of the authorisation process and as part of the assurance process, so there are good safeguards in the system that speak to the—

Q270   Q270 Rosie Cooper: There were good safeguards in the system that allowed Mid Staffordshire to happen. I am genuinely tired of being fed what I consider—not particularly from this board, so don't be insulted—evidence after evidence where people are telling us that "X will be, Y will be." Monitor sat there and talked about, "Hopefully, the system will sort out problems." It didn't sort it out for Mid Staffordshire. Who is going to sign these things off? Who is, when the music stops, responsible for each of these bits?

The question I started with is: what if a Health and Well­being Board does not sign off and does not agree the plan of a consortia? No platitudes. What will happen?

Dame Barbara Hakin: A couple of things. First, at the moment the Health and Well­being Board, in the Bill as it is written, does not sign off a consortia's plans. They have a responsibility to work together on the joint strategic needs assessments and have due regard.

Rosie Cooper: So they can be ignored.

Dame Barbara Hakin: It may be reasonable to say that issues such as these are being and will be debated in the House and in Committee stage as we go through. I recognise the responsibility of this Committee to look into these things but suggest that we don't always have the answer because some of them are properly going through other processes. Ben, I don't know if you want to add on that.

Ben Dyson: Could I add, briefly, that the Bill, as it stands, sets out clear statutory duties for consortia, not just to act to continuously improve the quality of services, which is at the heart of this, within the resources available, but also clear statutory duties to involve patients and the public to ensure they get expert advice from other health professionals, to act in partnership and in co­operation with local authorities and through to being members of Health and Well­being Boards. Part of the answer is that if a Health and Well­being Board, or anybody else in a local community, had evidence or felt that a consortium was not doing those things and was somehow ignoring the views of the local community, they would make that plain to the NHS Commissioning Board. The NHS Commissioning Board—who, as Sir David says, are ultimately responsible for holding the consortia to account—would challenge them and say "We don't think, from what we hear, that you are fulfilling your statutory duties. We have concerns that you are not involving the public, you are not involving the local community."

Chair: Rosie, can I bring in your colleagues?

Q271   Q271 Valerie Vaz: Following on from that, does the Board step in when you have failing consortia? What happens then?

Sir David Nicholson: Yes.

Q272   Q272 Valerie Vaz: You mentioned £400 million to facilitate the Board. Where is that coming from?

Sir David Nicholson: That is coming out of the current running costs of part of the Department, the SHAs and the PCTs.

Q273   Q273 Valerie Vaz: What is the current position in terms of consortia and PCT clusters? I am completely confused and I don't know what is going on in different parts of the country, but I wondered if you could give us a map. Could you send the Committee a map of where we are on the consortia and clusters?

Sir David Nicholson: Yes. We are happy to do that.

Andrew George: And the pathfinders.

Q274   Q274 Valerie Vaz: And the pathfinders. The Minister had said, in response to questioning, that no one is monitoring the spend on pathfinders. Is someone accountable for all the money that is being spent now? Do you know?

Dame Barbara Hakin: Could you just repeat that?

Q275   Q275 Valerie Vaz: The Minister has said in a written answer to me that no one is monitoring the spend on pathfinders. Is someone monitoring the spend on all this reorganisation and do you know how much it is all costing?

Dame Barbara Hakin: Certainly, in terms of the whole reorganisation there has been an impact assessment and there are figures around that. In terms of the spend on pathfinders, we are supporting pathfinders through the current system. In other words, all the funding to support pathfinders and all the development support is coming out of current budgets which PCTs and SHAs hold. We have said that in this early year, when they are pathfinders—they are not necessarily shadow consortia, they are just groups of GP practices who want to work out how they can become shadow and, eventually, full­time consortia—they will have £2 per head of population to help them with their internal support, but that has to be identified out of the PCT budget, their running costs. We have also said that pathfinders have to have resource in terms of some individuals to help and support them. All nascent consortia have to have individuals from PCTs and SHAs who can help them understand what their needs will be in terms of financial functions, organisational development, governance, et cetera. All the resource is just coming out of the current envelope.

Q276   Q276 Valerie Vaz: How much is this whole reorganisation process costing now? Do you know?

Dame Barbara Hakin: Do we have a figure?

Sir David Nicholson: It is quite difficult to disentangle the support to the consortia from the general running of the PCT because, in a sense, the same people are doing the work. We have not reallocated resources in that way from the new system and from the old system. We have not worked it like that. We have said that we expect them to have £2 per head available for them to work to develop the consortia from 1 April 2011, and that is £2 a head of population.

Q277   Q277 Valerie Vaz: How is the Secretary of State accountable to Parliament for the money that is being spent?

Sir David Nicholson: Obviously, he is accountable for the money, as I am, but what we are doing is setting a running­cost envelope and that running cost includes the running of the current service and the development of the consortia.

Q278   Q278 Valerie Vaz: How much is that?

Sir David Nicholson: That is £5.1 billion for the system as a whole, and it goes down, at the end of the period, to £3.4 billion.

Q279   Q279 Yvonne Fovargue: Can I return to the assurance regime? How are you going to call consortia to account? Rosie has already referred to the Mid Staffordshire issue, which had all the signs of failure. Everybody was saying it was failing and yet it wasn't called to account by anyone. The commissioners and the regulators—everybody—left it. Is this new system going to make it easier to detect early signs of failure in providers?

Dame Barbara Hakin: There are two things that need to be really different. I am sure there are many, but there are two things that we are focusing on that need to be really different in terms of avoiding Mid Staffordshire for the future. The whole of the NHS, irrespective of this Bill and the reorganisation and the commissioning side, is now paying much more attention to information for quality and ensuring that we are collecting and identifying a much broader set of information, that we have a more systematic approach to some of the softer elements of quality information, such as patients' views, patients' reported outcomes and complaints, and that, as a system as a whole, not only do we have more information which might have led us to understand Mid Staffordshire earlier, but it brings together all the relevant players. Often it is all the pieces of information that individual groups or organisations have, once brought together, that make the difference. That is the kind of general change in attitude to the systematic collection of quality information which allows us to see problems and have an early warning.

The other side to that coin, of course, is that we are changing commissioners so that, instead of having a managerial focus, the commissioners, in the form of GP consortia, will be much more clinically led. You suggested that a lot of people knew what was happening in Mid Staffordshire. What this new system should have for us is, first, a group of clinicians who would use the hospital all the time. They would have their referrals, see the results and see patients coming in and out of the hospital. Also, we have people who are in constant contact with huge rafts of patients who are using secondary care services. The idea is that in the form of these clinically­led GP consortia we create the kernel of something which is the most able to identify and focus on clinical quality. But that, on its own, doesn't work. We also have to have a better systematic collection of quality information.

Q280   Q280 Yvonne Fovargue: My concern is that that was all there before—or a lot of it was there—and Mid Staffordshire still happened. How are you also going to identify the consortia that are failing and who is going to call them to account at an early stage?

Dame Barbara Hakin: There are huge rafts of things that have been put in place in the NHS to improve our understanding of quality, our focus on quality, the way we identify quality and the way we deal and act with the concerns that we have. But we are changing to a system whereby the commissioning organisations are much more clinically focused. Therefore, they should have much more of a focus on quality outcomes and have, at their heart, people who have very frequent constant day­to­day interaction with patients and can pick up their causes and concerns. The next stage, beyond that, is to create the systems and processes that make it clear, when those concerns are being raised and identified, that the whole system works to bring those together and identify where there is a problem. As Sir David has rightly pointed out, those are many of the things that will be key and central to this and are in addition to the consortia and the changing clinical focus of the consortia rather than being entirely dependent on that.

Q281   Q281 Yvonne Fovargue: What about the governance arrangements as well? What plans are there to check the governance of the consortia and their decision making?

Dame Barbara Hakin: In terms of support for consortia's development and the authorisation processes, both of which are part of the same framework, we have been clear that consortia must have a constitution which demonstrates their governance arrangements. The Bill, as Ben pointed out, made it very clear that they will have a duty to involve patients and the public and other relevant stakeholders. When the Board is assessing the consortia for authorisation, it will take into account whether their governance arrangements and their constitution meet all those duties of partnership and stakeholder engagement.

Q282   Q282 Chair: In effect, the standards of accountability and quality management are all seen as part of the authorisation process.

Dame Barbara Hakin: Yes.

Ben Dyson: And ongoing accounting.

Dame Barbara Hakin: And ongoing assurance.

Chair: That is clear. It may not be satisfactory from everybody's point of view, but it is very clear where the monkey sits.

Q283   Q283 Chris Skidmore: Sir David, I want to talk about the ongoing process of reconfiguration that is going on at the moment, in particular your letter to NHS Chief Executives on 17th February, in which you stated that the end­point for the PCT clusters that are currently being set up would be "a single organisation covering the whole country and supporting a vibrant system of local consortia: the NHS Commissioning Board." Forgive me if I am mistaken, but this seems to lead to the integration of the PCT clusters into the NHS Board by 2013. Would it be correct to say that?

Sir David Nicholson: The PCT clusters will be part of the NHS Commissioning Board from 1 April 2012, so the PCTs will be part of the Commissioning Board right up to the end of 2013 when the PCTs are abolished. We haven't yet made a judgment about whether that cluster of people—obviously not a statutory organisation, but a cluster of people—would continue to be part of the Commissioning Board operating in the way that they will over the next 18 months or so. We will have to make a judgment about that to see how successful it works in practice.

Q284   Q284 Chris Skidmore: Could you give any estimate of when that judgment may be made?

Sir David Nicholson: The Commissioning Board is set up from 1 April 2012. You would think that within five or six months the Commissioning Board would be able to make a judgment about whether they would continue past 2013. That would be reasonable and fair for the staff as well.

Q285   Q285 Chris Skidmore: We heard from Christopher Long in the first session that he felt there was an "increasing and tightening central grip on things"—that is the quote I have got from what he said at the beginning of the session—and yet you have talked about the 360^o open process. I was also interested in the comments you made in the GP online interview of 3 March, which I am sure you have probably seen.

Sir David Nicholson: No, I haven't seen it. I have been on holiday.

Q286   Q286 Chris Skidmore: "When asked whether the Board will have a regional presence in the same way that there are strategic health authorities now, Sir David says: 'This is not like the NHS used to be.'"

I was wondering what you meant by those comments and, in particular, whether you would agree with Nigel Edwards, the Acting Chief Executive of the NHS Confederation, when he said that the process we are going through now is moving from a centrally managed system to a regulated industry similar to the gas and telecoms sector. Would you agree with that in terms of the NHS is no longer what it used to be and that this is the process, this is where we are going to head to?

Sir David Nicholson: Clearly, the NHS is not what it used to be. In lots of ways it has improved and its performance has increased enormously over the last few years. But in organisational terms, it has been changing since the beginning of 2002 through 2003, in a structural sense, in the sense of the development of foundation trusts and independent autonomous organisations, which are different from what we have ever had in the past in terms of their accountability. That changes the nature of the way in which the system operates.

The commissioning system, though, is not quite the same as that. What I mean by it being different is that the NHS Commissioning Board is a corporate entity. It is one organisation for the whole country. It is not a set of statutory organisations all working together with an organisation. It is one. As such, it is a really important and powerful mechanism to get consistency of service across the NHS in a way we have not been able to do before. As you see there, what you have is two things happening simultaneously. On the one hand, you want to increase the amount of autonomy and freedom that people have locally to get on and make the changes in services that they want. On the other hand, there are things you have to do once centrally in order to get consistency. Very often people have had difficulty holding those two things together. They want to lurch either to one, i.e. we give the money out to GPs, "Do your best," or they want me to take every decision in the centre. Of course, in reality, in organisations, it is quite different.

Q287   Q287 Chris Skidmore: Since the introduction of the White Paper, do you feel that your views have changed over the level and nature of central control needed to be levered by the Commissioning Board itself? I know there are still a lot of things under debate. For instance, some GPs have criticised plans to allow the Board to decide whether consortia's accountable officers are appropriate, so the appointment of officers is still under debate. Obviously, all these things will shake down, but do you feel at the moment we are moving possibly towards a more Stalinist control mechanism where everything is decided in your office?

Sir David Nicholson: No. There are a whole series of things happening simultaneously here. It is very complex and difficult to do, even for myself because I am holding two different things in my head at the same time. On the one hand, we have the transition. In any transition, and particularly a transition of this scale, you need to have a firm grip on finance and other things as you go through. If we lose financial control as we go through this next period, it will all be irrelevant because the consortia will not have budgets to debate with. We need to centralise control in the first instance in order to give the freedom further down the line. That is what is playing out, that is what Chris Long was describing and that is what you can see. For example, in the planning round for this year, every PCT has to identify 2% of their budget that they can allocate non­recurringly but can't allocate continuously. They can only allocate it non­recurringly if they have the approval of the strategic health authority. That is a big shift in terms of central control and is absolutely essential, in my view, in order to deliver the transition.

On the other hand, we are trying to create a system where there is more autonomy in the consortia. We are trying to give consortia the maximum amount of freedom in order to deliver the shape and nature of the organisations that they want. We are trying to do both of those things together and sometimes they trip over. I perfectly understand how they do, but it is a complicated thing to have to do.

Q288   Q288 Chair: May I refer you back to the first half of that answer. It was, I think, when we both look at the record, very clear. You described the NHS Commissioning Board as a more powerful instrument for national commissioning—and I am not quoting, but I don't think I am misrepresenting—than we have had in the Health Service previously. I want to link that with what you were saying earlier about the authorisation regime, which very much sounded like a series of conditions that needed to be passed by consortia in order to be authorised. It seems to me that what you are describing is, as you say, something that is a more powerful and more centralised, as Beachcroft have said, commissioning process than we have had up until now with proper respect for local freedoms and so forth, because that is how to do it effectively, but the power starts off in the centre.

Sir David Nicholson: If I could just describe, in a sense, the thing that is driving quite a lot of that, which is the development of national quality standards that NICE are now producing. They are going to produce what really good services look like. The Commissioning Board, in a sense, will take those, turn them into commissioning guidance and then the commissioning consortia will work out how to do it and get on and do it. We have never had that before. We have never said, from the centre, "This is what the evidence shows is a really good stroke service, dementia service," or whatever, and then hold people to account to deliver it. I would argue that that is about getting consistency. In a sense, the Commissioning Board's bit is putting the "N" in the NHS. That is our unique selling point, and we have never quite done it in the potential way that we can now. In that sense, I think it is a powerful mechanism for taking services forward.

Q289   Q289 Chair: You also said, and you drew a distinction—I forget the precise words but you emphasised this—the consortia would be accountable to the Commissioning Board. They will have to account to local communities through Health and Well­being Boards, but where is the accountability? In a statutory sense, it is to you as the accounting officer for NHS Commissioning for the whole £80 billion. NHS commissioning rests in the Commissioning Board.

Sir David Nicholson: Yes.

Q290   Q290 Chair: Nowhere else.

Sir David Nicholson: Yes.

Q291   Q291 Chair: It is pretty clear.

Sir David Nicholson: I think so.

Q292   Q292 Chair: Now a related question. One of the questions we are quite often asked is where the responsibility rests for doing major service reconfiguration, where that is necessary, in order to deliver good value, high quality health care. Does it follow from the model of, frankly, delegated central responsibility for commissioning that it is for the Commissioning Board to determine who in the system has responsibility for planning major service reconfiguration?

Sir David Nicholson: No. Barbara explained the authorisation process in which consortia will need to explain to everybody how they are going to deal with services which cover a bigger geography than their individual consortia. We would expect consortia to have arrangements in place with other consortia in the geography in order to bring these things together. We would expect the drive and the push for any configuration that needs to be done would be exercised by consortia, either working individually, if they are large enough and cover the area, or collectively through the arrangements that we want them to put into place when we are going through the authorisation process. We don't see the Commissioning Board, in that sense, being a big player in terms of driving reconfiguration of services. It is much more about putting the systems and processes in place to enable local people to do it. The only exception to that, of course, would be with the nationally commissioned elements of the service.

Dame Barbara Hakin: Could I add something on that, if I might? What we see as the biggest driver is the quality standards that are set. Rather than that there is a non­evidence­based, "We will move this service here or there," the order would be, on the basis of the Commissioning Outcomes Frameworks and the quality and standards of the commissioning guidance that the NHS Commissioning Board has set. So that consortia will, in the methods by which they contract, be very clear that the services which they commission for their patients must meet these clear quality standards and criteria. That is what is then likely to prompt providers into examining, "Can we deliver those quality standards with the current shape that we have?" Again, the absolute primary thing here is to ensure that all patients get the best quality services they can and that there are no safety risks arising from things being done in units which really don't have the quality infrastructure in place.

Q293   Q293 Chair: I think I understand the pure milk of the theory. I wonder whether, in practice, it is enough in every circumstance to rely on the sum of the individual parts coming together to make the case for necessary service reconfiguration or whether there might also need to be a counterbalance looking at the totality and saying, "There is a better way of doing this if you look over the horizon."

Dame Barbara Hakin: The answer is that the Commissioning Board will always have a responsibility to oversee that things are being done properly and appropriately. Clearly, in part of the mix, there is obviously the local Health and Well­being Board and the fact that hopefully, constantly, during the joint strategic needs assessment and the working through of their plans, if the evidence is that there is an issue with a service because it can't meet the quality of standards then the local population through the Health and Well­being Board and the local authority ought—and local clinicians ought—to be able to understand the reasons and be party to identifying that. The Commissioning Board still has a role to ensure that, in all parts, the appropriate actions are being taken.

Sir David Nicholson: We have to start with the consortia and work through that. If the Commissioning Board has the idea that it is going to have some mega strategy, a service configuration for the whole of the country, and then expect everyone to do it, that is not going to happen. It doesn't work anyway. It has to start bottom up. Clearly, the Commissioning Board, if asked, could support and help them do that.

Chair: Fine. Thank you.

Q294   Q294 David Tredinnick: Let us move on to price competition—or lack of. Sir David, you are on record as saying "There is no question of introducing price competition", and the Secretary of State has said that there will not be price competition in the NHS but that providers can negotiate lower prices at the end of a financial year if they have spare capacity and the commissioner cannot afford full price. How will that fit with the rules on competition in the NHS, please?

Sir David Nicholson: I am sorry, in what sense?

Q295   Q295 David Tredinnick: I want you to explain the rules on competition because there have been challenges about whether or not there is going to be competition on price, and you are on record as saying there was not going to be and so is the Secretary of State. How do you reconcile that if, at the end of a period, there is apparently a change in the rules so that there is a degree of competition, or something that has been picked up? I really wanted to ask you about that.

Sir David Nicholson: Competition on the basis of quality, not price, we have made that absolutely clear right the way through. There is a fixed price through the tariff system. The example that you use is that, at the end of the year, a particular provider has some capacity, the commissioner has some money but he can't pay for the full amount of capacity that is available and the provider suggests a lower price. If they agree that, if they can show the tests around quality, the measurement of quality, the empowered patient, all of that sort of thing applies, and they can have—up to 1 April 2012—the agreement of the strategic health authority, then they can do it.

Q296   Q296 David Tredinnick: There is no reduction in quality, merely a reduction in price.

Sir David Nicholson: Yes. They have to demonstrate how they do it as well, not just that they can say it.

Q297   Q297 David Tredinnick: Moving on, if most care is open to Any Willing Provider and patients have a wide variety of choices, in what sense will commissioners be commissioning?

Sir David Nicholson: The first thing I would say is that the whole thing about Any Willing Provider is that we are on a kind of journey with it. There is not going to be a switch flicked on 1 April 2012, 2013 or 2014, which will suddenly open up the whole of the NHS to Any Willing Provider. That is not how it is going to work at all. We are slowly but surely experimenting, working and understanding before we move on to the next issue. The most obvious one, as I described earlier, was elective activity where we have essentially an Any Willing Provider process in place now so that you can choose any NHS and a selection of private and independent­sector providers for your elective care. We want to look at those areas next in terms of Any Willing Provider that are particularly susceptible to patient choice, and slowly but surely, by the end of this year, we are proposing to set out the next phase of that and, over the next few years, we will start to move that forward. There will not be a day when suddenly everything is Any Willing Provider. Simultaneously, we will also be working on tendering arrangements, so there are some services that will be more suitable for tendering rather than Any Willing Provider—some services that will be much more conducive to long- term arrangements between organisations to enable investment and—

Q298   Q298 Valerie Vaz: Who decides that?

Sir David Nicholson: The commissioners.

Q299   Q299 Chair: That is an important point because when David Bennett was with us last week we asked him whether a commissioner's decision to tender a particular service as an integrated package of care would be subject to being challenged by Monitor on competition policy grounds. He made clear it that the answer to that question was no, that the commissioners were accountable to the Commissioning Board and a decision to tender a particular range of services, for example, for diabetes care, would not be subject to challenge on competition grounds. Is that your understanding as well?

Sir David Nicholson: Yes.

Q300   Q300 Chair: Mr George then immediately followed that up and said, "If that is true for diabetes patients, presumably it is also true for A&E patients." In other words, that if a commissioner can tender an integrated service for a diabetes patient, then a commissioner can also define an integrated range of services for A&E for a local community—is that not the same principle—without challenge from Monitor on competition grounds? The importance of that question is clearly that if you tender an integrated set of A&E services then in order to deliver that you need a very wide range of emergency care within the hospital.

Sir David Nicholson: Yes. One of the things that will govern all of this is the guidance that the Commissioning Board sets out around it all. We simply have not done it, yet. We haven't got to that kind of place. It would seem to me unlikely. The diabetes is quite an interesting one—and I think you talked about it at the last sitting, didn't you—because you could see there that even within tendering you could have an Any Willing Provider element to it. The example I would give is you could tender for a diabetes service but, within that, you could stipulate that for podiatry, or one or two other services, individual patients would still have choice. It is perfectly possible to do all of that. As I say, we just haven't quite got there. I would think it is extremely unlikely that the guidance would say you can just do a whole hospital and call it an integrated organisation and tender for it. That would just seem to me—

Q301   Q301 Chair: The purpose of the question, I think, was to preserve the integration.

Andrew George: Yes.

Sir David Nicholson: But you don't have to manage everything to have an integrated service.

Chair: No. That's the point.

Q302   Q302 Andrew George: To tease out that point—I would like to come back on the issue of price as well in a moment—you only know that a patient has a specific requirement, if they come in as an emergency case, in retrospect. Therefore you do need to have the provision of a range of referral services, not just the A&E consultants and staff and other forms of emergency intervention. Rather than simply having an A&E service in a tent in the middle of a field, you end up with something which looks like a district general hospital, don't you, surely—

Sir David Nicholson: Yes.

Q303   Q303 Andrew George:—in order to be able to provide the range of services which would ensure that that is a safe, emergency­receiving facility. Isn't that fair?

Sir David Nicholson: But you would deal with a lot of that through, presumably, the designated service arrangements, wouldn't you?

Q304   Q304 Andrew George: You would use that mechanism, so a district general hospital could be a designated service.

Sir David Nicholson: No, it will be each individual service. People said that if you took stroke services, hyper-acute stroke, out of a DGH, it wouldn't really exist. They do exist. There are DGHs that exist without major trauma. There are different ways of organising your clinical services which are much more flexible. I know it is very easy to talk about—and people do and I can perfectly understand why they do—every bit of the DGH being completely dependent on every other bit of it. But when you dissect it, it is not absolutely true.

Q305   Q305 Andrew George: That is an interesting comment. Do you mind if I come back to the issue of price which David was asking about earlier? Just so I am clear—and you have said, and the Secretary of State is now saying, and there is going to be an amendment to the Bill taking the word "maximum" out, as I understand it, from the clause in relation to tariff—how is Monitor going to decide what the tariff is going to be unless it is receiving some kind of market signals? Are they going to have quiet words with providers and say "I think we can provide it cheaper?" How are they going to know how to set the tariff if they are not getting market signals?

Sir David Nicholson: They will get market signals, won't they?

Q306   Q306 Andrew George: In what way are they going to get these?

Sir David Nicholson: The first thing is there is a huge—I say industry, but it is not quite the word—amount of activity that goes into reference costs at the moment, so every NHS organisation sends all of its reference costs into the Department, and out of all of that analysis and work comes the setting of the tariff. All of that real reference cost information will go to Monitor and Monitor will have the full array of that—what it is costing in practice for every hospital in the country—in front of it, so that when it makes its assessment about what the actual tariff will be, it has that information. It will also have information from the Commissioning Board setting out, in terms of the structure of the tariff, the things that we regard as increasingly important. There might be a particular service or a particular arrangement for a service that we might want to set out in the tariff. They will have all that market intelligence, in a sense, from the commissioners as well.

Q307   Q307 Andrew George: But the tariff, when it is set, can only be based, surely, upon the information which is available to Monitor at that moment in time.

Sir David Nicholson: Yes.

Q308   Q308 Andrew George: In other words, if there is not competitive tendering on price, then I can't see how, unless you can provide us with some kind of written documentation which explains what kind of detail of reference material is available to it, it can take signals to vary the tariff without market signals. You are saying it is entirely based on reference material rather than on market signals, are you not?

Q309   Q309 Chair: Material drawn from individual providers within the NHS presumably.

Sir David Nicholson: Yes.

Q310   Q310 Andrew George: Yes, within the NHS, and also private providers. Private providers will be providing this reference material as well.

Sir David Nicholson: Yes, to Monitor.

Q311   Q311 David Tredinnick: Coming in on Andrew's question, you referred to patient choice, but what about patient preferences? If a group of patients comes forward with a preference, or there is a clear indication that they want a particular service which is not available, is there any mechanism to establish that? We heard Mr Long talking earlier on about the survey that he had conducted in Hull, which has been very helpful, but I am thinking of patients that, say, want to use herbal medicine, which is about to be regulated through the Health Practitioners Council, or wanted to use homoeopathic medicine. What mechanism is there to listen to those patients, please?

Dame Barbara Hakin: There are two areas on this. In terms of the individual patients and their choices, it is important to remember that Any Willing Provider comes into play when there are two criteria met. First, we have a currency—we have a fixed price to which all providers can meet such quality standards—and, second, that the patient is in a position to make a choice. Those are the areas where Any Willing Provider is a way of giving individual patients the best possible choice that they can have.

There are times when patients can't make a choice, either because their personal circumstances at the moment make it inappropriate, in other words, perhaps it is an emergency situation, or, as you rightly point out, when a range of services is not at the time available. That is when the commissioners would have a responsibility, would have due regard to working with patients and patients' groups and the public, to identify what range of services their patients would wish to see. But they would need to be evidence based, because, again, we are moving to a system where it is absolutely clear that the two central tenets are that patients and the public have much more influence on the service and many more choices in the service and that there is a clarity that we are delivering evidence­based outcomes. For any new service where there was evidence that this would have benefits to patients and the patient required it, then those are the sorts of services where we would be more likely to move into the tendering—the consortium would be more likely to move into the tendering—situation and tender for those services, or, alternatively, once we had a tariff for those evidence­based services, that they could be done on the Any Willing Provider. But it does all, I think, depend on the heavy evidence base.

Q312   Q312 David Tredinnick: Given the cross­constraints, it is very important that you look closely at the therapies that I have mentioned, which are much more cost effective than some of the mainstream ones.

Dame Barbara Hakin: That is the role for NICE, and again we are looking to put in place a system whereby all treatments are assessed more rigorously nationally. Over time, increasing numbers of treatments will be assessed by NICE on the quality outcomes, and we will be clear about the evidence and the cost effectiveness of those treatments.

Q313   Q313 Dr Wollaston: Could I come back to Dame Barbara, please? You came back to me referring to the question about the loss of support from the professions and the public, having previously been very positive, and I hope I am not misquoting Sir David in saying that he thought it was because they had not really understood the detail of the Bill and yourself saying you thought it was because they had misunderstood the Bill. What we have been hearing today is that there is a surprising lack of detail in the way that the new system will operate. Do you find it surprising that we are halfway through the Committee stage of this Bill and that these issues still have not been resolved?

Dame Barbara Hakin: There are two things. We have said from the very outset that this was a very significant change and that there was a lot to work through. Also, there has been a commitment in all of this that we would create a bottom­up process and try and work with patients, the public and clinicians to make this as good as it could be. Therefore, it might have been easier to create some of the answers in just a top­down process, but if we are trying to consult with people, work with pathfinders and the profession, then it will take us longer to get the answers, but hopefully we will get better answers.

The point I was making in the first instance is that from my discussions, and I perhaps have time for more detailed discussions with some senior members of the profession— ideally, we would be able to have these discussions with all members of the profession—is that there is really very considerable support for the policy intent. There are areas where there is a suggestion that the wording of the Bill could be better and could give more explanation. There are areas where people are simply worried about the detail that lies behind it, some of which will come in regulations and some of which will come out in the operating model for the Board and the commissioning consortia. There are areas where, with something like Any Willing Provider, which is really complex to understand, once that is explained, and the fact that the tenet behind that is ensuring that where patients can make a choice and that we have a currency, a tariff, for a particular procedure, then, rightly and properly, the patients should be able to have the choice from as broad a range as possible. All I was trying to say was that there is lot to work through on this in terms of people understanding how it is going to evolve, but I think there is more support from the policy intent than sometimes comes out, particularly in the media.

Q314   Q314 Dr Wollaston: I would certainly agree that there is support for the policy intent when it comes to having clinical commissioning and designing logical care pathways, but the reality is that clinicians, and all the professions and patient groups, are concerned about the role of Monitor and what Monitor will become. Will it become an enforcer rather than an enabler? They do genuinely see there is a risk of fragmentation of services and they do worry about the cost and scale of the reorganisation and, as I say, about the lack of detail. To say that there is broad support for the policy objective is correct, but would you say that it is reasonable for them to be concerned about the role of Monitor and a risk of fragmentation?

Dame Barbara Hakin: It is reasonable for any stakeholder to be concerned about the future of the NHS because, after all, it is something that everybody in this country holds very dear. What we need to ensure is that, as this policy is implemented—and by working with stakeholders, the public and clinicians—we implement it in a way that gets the best results. If everybody is agreed that the policy intent of giving patients much more choice and influence, and basing what we do on evidence of what are good clinical outcomes and that we do that by involving clinicians much more as patient advocates—if that is the right parcel—then, inevitably, as we work through the scale of changes that David has suggested, with the operating model, it will take us some time to work out exactly what the detail is of how we are going to get the best of that policy intent.

Q315   Q315 Andrew George: I want to ask about patient choice. You heard those giving evidence earlier when I asked them about what proportion were asserting their right to choose, and it is less than 5%. Is that your impression as well, or do you have robust data at present, or have you undertaken surveys as to the extent to which patients are demanding their right to assert choice, because it seems you are creating an entire system which is based on patient choice. I am not sure whether patients desire a great deal of that.

Sir David Nicholson: The first thing is we are trying to create a system which will sustain itself, i.e. we have also got to think not just about today but 10 or 15 years in the future. All the indications are in most of the way we live our lives, and if you look at it internationally, that people want more choice. That is the first thing. It is not just about now. It is about the future. In terms of what patients say about it, we do survey patients about choice. I think about half of patients, after they have been through the consultation, say that they were given choice and recognise that they were given choice. The issue is that more and more of them are taking that choice, but it is a relatively small number, so if you take elective care, about £400 million is currently coming from the NHS into the independent sector for people who have made a choice. That is a tiny proportion of the population, but all the indications are that that will grow.

Q316   Q316 Chair: Is it not also that choice is not just about where you are treated but about the type of treatment and engaging the patient in the type of treatment that is provided? Many of the decisions are micro­decisions, which probably don't show through in patient pathway charts.

Sir David Nicholson: No, and indeed it is one of the things in the QIPP work we are doing at the moment around all of this, because there is some really good evidence that shows that patients who are informed in this way tend to take the least expensive and the least invasive procedures when given that kind of choice.

Q317   Q317 Dr Wollaston: Do you worry that we are promising patients this brave new world of endless choice when, in fact, we have also heard evidence just today that because of financial constraints people aren't, realistically, going to be able make those choices? For example, in the field of fertility treatment, they may not have those choices. We are leading them to have expectations that we will not be able to deliver.

Sir David Nicholson: We are trying to create an environment where they can exercise choice in those areas that we have identified they can at the moment. As we have more resources available for the NHS, or less, or whatever it is that Parliament decides, we can adjust that accordingly.

Q318   Q318 Valerie Vaz: Obviously, patient satisfaction levels have been extremely high before this process started, so we would like you to take that into account, but I want to clarify something, Sir David. It was something that was in the paper, that you had had discussions with someone from McKinsey who is running a company and wants to float GP surgeries on the stock market. Is that where you see—

Sir David Nicholson: That I have had discussions with them?

Q319   Q319 Valerie Vaz: Yes. Apparently he ran the plans before you. Is that not right? Are you not having discussions with anyone?

Sir David Nicholson: I am having no discussions with anyone in relation to that. I can genuinely say "It wasn't me, guv."

Chair: Another David Nicholson.

Sir David Nicholson: Yes.

Q320   Q320 David Tredinnick: In answer to Sarah's question, you said that more and more patients, according to your surveys, are looking for non­invasive treatments. Surely there is a duty there to try and translate the choice of treatments into as close as possible what patients are requesting. I am thinking about the widespread concerns about the multiple use of antibiotics and things like that and, if there are other alternatives out there, then are you proposing to encourage NICE to look at them?

Sir David Nicholson: Yes.

Q321   Q321 David Tredinnick: Is this part of the whole patient choice agenda?

Sir David Nicholson: Absolutely, and there is a whole work stream underpinning quality, innovation, products and prevention to do that very thing.

Q322   Q322 Rosie Cooper: To go on with that, can I say to you that choose and book is an absolutely brilliant theory and I am totally 100% behind it. In practice out there, it is really difficult and that will possibly add to your low choice numbers.

The question I wanted to ask you was whether you had begun to firm up now your resource allocations, or the thinking behind how you are going to do resource allocations, to consortia and the question of rewarding GPs for hitting targets. I am wondering whether you will still work on the basis, and involve in your calculations, the starting points of our various populations—richer, more deprived, north­south, all these things. How are you going to figure all that into it?

Sir David Nicholson: The first thing is that the Department has allocated resources for 2011­12 but not for 2012­13 and the Department plans to do that sometime during this year. The allocation of resources out to PCTs in 2012­13 will be done by the Department sometime during this year, so it only becomes live for us on 1 April 2013. Apart from getting the allocations out for 2012­13, we have done very little work on what will happen in 2013­14. What we are trying to do in 2013­14 is, first of all, split the allocation between public health and the NHS. We have to do that because they are all in the consolidated PCT allocation. We have to do those calculations and work out what formula and what arrangements we will have in place for that. Then we have to decide how we split the allocation between that which only relates to services that are commissioned by the commissioning consortia and those that are commissioned by the Commissioning Board. Again, they are all in one at the moment, so there is quite a lot of work mechanically to get that in place. Clearly, the Commissioning Board has a duty in relation to health inequalities. Part of that duty, undoubtedly, will be allocating resources in order to deal with those kinds of issues. The kinds of formulae that we have now will be the kinds of formulae we will have in the future.

Q323   Q323 Rosie Cooper: The consortia are unlikely to have any great shocks at the level of income that they will have.

Sir David Nicholson: What we want to try and do for the allocations for 2012­13, as far as we can, is to indicatively split the PCT budget, so you can see, broadly, how much would go to public health and how much would go to the consortia. We would have a year, in a sense, of monitoring that and of seeing it so that by the time we got to the year after, people would be really clear about what they were going to get.

Q324   Q324 Rosie Cooper: I am going to ask one more question. I am wrapping up all sorts of things in my head. You talked before about reference costs and the tariff. For example, in the new order, how will Monitor deal with things where there is great dispute currently with specialist orthopaedic commissioning, where organisations—Wrightington Hospital in my constituency is but one—are doing really specialist work and they are going to be seriously threatened by the tariff? There is an ongoing dispute, which has gone on for a number of years now. How will that be handled in the new world?

Sir David Nicholson: It will be a matter for Monitor, in a sense, to identify if any subsidies or extras are going to be paid to individual specialist organisations or whatever.

Q325   Q325 Rosie Cooper: But if it has not been able to be resolved inside the Department of Health, how is this magic person who is just going to number crunch going to sort it out?

Sir David Nicholson: They have been resolved. The paediatric top­up, which is the obvious one, has been resolved.

Q326   Q326 Rosie Cooper: Specialist orthopaedics has not been resolved, has it?

Sir David Nicholson: In a sense, it has been resolved because we have said what we are going to do. We have not satisfied everyone's requirements in relation to that, but then again we seldom do.

Q327   Q327 Chair: Can I raise two questions to close? The first concerns PCT debt. As I understand it, the undertaking is that the consortia will not inherit PCT debt that has accrued before March 2012. If it is the intention of the Department to write off the PCT debt that sits on the balance sheets at 2012, what is happening to the compensating asset that sits in PCTs or trusts that have provided that cash through brokerage to cover the debt that is outstanding at the end of the financial year 2011­12?

Sir David Nicholson: What we have said is that they will not take any debt before 1 April 2011—not 2012, but 2011—on the basis that if they get into any debt over the next two years the consortia may have a responsibility for that, i.e. this is an incentive on everyone to work together over the next two years to make it happen. That is the kind of incentive that we have tried to put in the system to engage people in the here and now as opposed to having the consortia sat over here watching it happen. That may or may not be successful, but that is what we are trying do in relation to all of that.

As you know, there are resources currently held by strategic health authorities in the arrangements. Our ambition is to get every PCT into place, and all of the debt paid off, by 31st March 2013, so we want them to do it. If, in one or two cases, that is not possible, then we have enough flexibility in the system to sort it out.

Q328   Q328 Chair: The reason I asked the question—and I am sure you understand—is that this is money that PCTs have borrowed from somebody else in the NHS, and those other people, the counterparties here, look at those assets as reserves which are available to them. Are those reserves still available? That is the key question.

Sir David Nicholson: Yes, they are. We think there is enough money, as well as that, held by SHAs that will enable us to do that. If, however, the number becomes very large, then the items you have just described would not be safe. Our ambition is to get them to a minimum amount and to use the extra free money the SHAs have got, which is not linked to an individual PCT, of which there is a substantial proportion, to pay off any of those debts when we get there.

Q329   Q329 Chair: At this stage it is your ambition, but not your guarantee, that those saved reserves are safe.

Sir David Nicholson: We are currently going through the planning process for 2011­12. We will have completed all of those plans relatively soon. The indications are that we can deliver that ambition up to 1 April 2012. We then have another planning process to go through at that stage. Then I think I am in a much better position to be able to give a cast­iron guarantee. At the moment, it would be inappropriate for me to do so.

Q330   Q330 Chair: That is the first question. The second question concerns one of the things you said at the beginning of this session, Sir David, which surprised me, to be honest, where you said that you thought that the most radical changes currently planned by the Government were on the supply side of the NHS rather than on the commissioning side. I was fumbling back during the evidence session to the Government's response to our previous report on commissioning, of which I would like to read couple of sentences to you: "It is important to emphasise that the proposals do not involve fundamental structural changes to the organisations that provide the great majority of NHS care. The changes are to the organisations which commission these services."

Sir David Nicholson: The point I am trying to make is that although the organisational change—and often we focus on organisational change because that is the thing that you see—is on the commissioning side, the actual change to service, which is what this is supposed to do, is all on the provider side. If you talk about the shift from secondary to community services, that is on the provider side. If you talk about the drive for productivity, that is on the provider side. If you talk about Any Willing Provider or competition on quality, it is on the provider side. All of those things will affect the provision of service in significant ways.

Q331   Q331 Chair: What you are looking for is change of health care, not change of management structure.

Sir David Nicholson: Yes, that is exactly it.

Chair: I think that is an ambition that the Committee shares. Are there any other questions?

Q332   Q332 Andrew George: Yes, on price competition. When we were talking about the various options which were available through Any Willing Provider or the tendering process, can you explain in the circumstances where a service is provided on the basis of an open tender, for how long can those contracts exist? In other words, can the commissioners establish those contracts for a number of years, and to what extent might they be vulnerable, if you like, to requests to refer them by other providers who might then challenge those contracts and put an alternative offer during the period of the contract itself?

Ben Dyson: This is something that the NHS Commissioning Board would certainly be able to give advice to commissioners on, but it is reasonably well established—and it depends on the nature of the service—that for a number, particularly, of more complex services, maybe some of the more integrated services that were being described earlier, it would be, for instance, entirely satisfactory to have a contract that lasted for, say, five to seven years.

Q333   Q333 Andrew George: If any other provider of a service wished to come along and say, "We think we can do a better job or a more effective job than those that currently hold this five­year contract", to what extent can that contract be challenged, be referred? Not at all.

Dame Barbara Hakin: It couldn't if the terms of the contract were that it was in place for five years.

Chair: A simple question to end what has been an interesting and complex session. Thank you very much for coming.

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Prepared 5 April 2011