UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1499 - i i

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Health Committee

PUBLIC EXPENDITURE

TUESDAY 11 october 2011

rt hon andrew lansley cbe mp, una o’brien cb, sir david nicholson kcb cbe and richard douglas cb

Evidence heard in Public Questions 99 - 193

USE OF THE TRANSCRIPT

1.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2.

Any public use of, or reference to, the contents should make clear that neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

3.

Members who receive this for the purpose of correcting questions addressed by them to witnesses are asked to send corrections to the Committee Assistant.

4.

Prospective witnesses may receive this in preparation for any written or oral evidence they may in due course give to the Committee.

Oral Evidence

Taken before the Health Committee

on Tuesday 11 October 2011

Members present:

Mr Stephen Dorrell (Chair)

Rosie Cooper

Andrew George

Grahame M Morris

Dr Daniel Poulter

David Tredinnick

Valerie Vaz

Dr Sarah Wollaston

________________

Examination of Witnesses

Witnesses: Rt Hon Andrew Lansley CBE MP, Secretary of State for Health, Una O’Brien CB, Permanent Secretary, Department of Health, Sir David Nicholson KCB CBE, Chief Executive of the National Health Service, and Richard Douglas CB, Director General of Policy, Strategy and Finance, Department of Health, gave evidence.

Q99 Chair: Can I begin by welcoming, in particular, Una O’Brien-it is your first visit to the Committee-and your three colleagues, including the Secretary of State, all of whom are old hands of the Committee? You are all very welcome.

This is a relatively brief inquiry we are conducting to seek guidance on where the NHS is getting to in the delivery of what we call the Nicholson challenge for reasons that are familiar to everyone present. To set the scene, I would like to begin by asking where you feel you have got to if you look at the plans being prepared within the Health Service to meet demand to deliver the desired quality standard within the significantly tighter resource framework we are now living in, and, in particular, to react to the sense, reported to us in evidence, that, while there is reasonable confidence the Health Service will be able to deliver its objectives through the current financial year, that is being achieved by taking some nonrecurrent savings which will have the effect of making it more difficult in later years. That is the sense we have been offered by the NHS Confederation and by other witnesses and we would be interested to hear where you feel you are against that starting point.

Mr Lansley: Thank you very much, Chair, and thank you for the opportunity to be here. It is rather a good moment to do so because the regular publication, The Quarter-which the Deputy Chief Executive of the NHS publishes on a regular basis-a few weeks ago gave the Service a good opportunity to look at what had already been achieved and where primary care trusts, in particular, in that context were in terms of the preparation of their QIPP plans for this year.

I will not go back-you know the history-but it is fair to say there is a tendency to treat these as major financial challenges since the election. In fact, they were major financial challenges anticipated before the election. David Nicholson, to my left here, first, was clear to the Service about the need to deliver efficiency savings up to £20 billion in May 2009. That was in the context of doing so by 201314 and, potentially, of a cash freeze. We are not in that position. We have real terms growth in the NHS in each year through to 201415 and the efficiency savings through the QIPP programme are intended to be achieved by 201415. We have been working together with QIPP, essentially. The QIPP support from the centre is in terms of understanding the nature of the support that can come from central budgets-the reduction of central budgets and the reduction of administration-but also a series of work streams that help people to understand what is possible in terms of things like better prescribing management, better procurement, redesign of services, management of longterm conditions and so on. The bringing together of all that to see what it means in terms of efficiency savings in any single health economy is the responsibility of the NHS organisations themselves.

The strategic health authorities have carried out that process overall and, essentially, what they have been telling us in different places is that the composition of those savings differs. The Quarter, published a few weeks ago, showed that significant progress had already been made. The QIPP programme, technically speaking, began on 1 April 2011 but, in truth, people in the Service have been working for this right through last year. That has delivered administrative savings in 201011 of £240 million beyond what was originally expected. The Audit Commission reported efficiency savings over the Service as a whole in 201011 of £4.3 billion and primary care trusts have reported to the chief executive planned efficiency savings in 201112 of £5.9 billion. If those savings are fully achieved in 201112, it puts us ahead of schedule.

The total expectation across the Service as a whole is that the strategic health authorities are, themselves, anticipating delivering about £17.5 billion of total efficiency savings and probably £1.5 billion on top of that is deliverable directly through central budgets. So we are looking at anticipated total savings of the order of £18.9 billion. That equates quite closely to what we, ourselves, had estimated-looking at it from the top down-of about £18.7 billion as required to do the job we have to do: delivering improving services in response to rising demand and taking account of changes in costs.

Q100 Chair: Understanding those numbers, is a separate question being asked-because I cannot see it in The Quarter-that identifies what level of those savings are nonrecurrent? The problem is going to be, is it not, the delivery of continuing service if we are relying on nonrecurrent savings as the means of living within the cash envelope?

Mr Lansley: I was intending to see if David, in particular, wanted to add a bit about that because, at that point, you need to look at what it is the strategic health authorities and primary care trusts are doing in terms of the structure of these savings.

Sir David Nicholson: In The Quarter we do not produce a running total of savings for the NHS as a whole. We will be doing that in the second quarter. We are currently working through it because, as you say, it is quite complex. It is not only a question of saying what is going to be recurring and what is nonrecurring. It is where the savings are falling-whether they are falling in community services, acute services, or whatever. Hopefully, in quarter two we will have a better picture of how that is looking. Whether that will give you a definitive picture on recurring and nonrecurring, I doubt-partly because people describe things in different ways. It is quite difficult to get the real detail underneath all that.

As to the savings that we need to make overall, we have identified 40% coming from national action, 20% from service change and 40% from operational efficiency. If you look at the first bit, which is the national action, we have achieved all of the things we said we would and they are all recurring. Whether it is the amount of cost savings or the implications of the pay freeze, all that sort of thing is recurring and of benefit-

Q101 Chair: It is only recurring if you assume no bounceback in the pay in the later period-

Sir David Nicholson: Absolutely, and we have to make assumptions about what that might be in the future. That, in a sense, is much more for years 3 and 4 than for years 1 and 2. In terms of all of those, we think we are in a good position.

Operational efficiency is more mixed, though from our experience and the information we have from our reporting system-and obviously you have been taking other judgments and points of view-we think the vast majority of those are recurring. We would have to look at the evidence that people have described around all of that.

The area where we have had least success in year 1-and we always knew this would be the case-is the benefits of service change because it is complicated and difficult and takes a lead time to do it. If you look at the way we worked out the savings profile, we thought that the national action and the operational efficiency would be much more in year 1. However, we have offset some of that because of the savings we have made in management costs. The Secretary of State identified that we have made £250 million more than we imagined. In the NHS, in 201011, we reduced the total number of people working in management and senior management jobs by about 13,000, so it has been a substantial set of changes. Some organisations-and London is an example of that-have moved to make all their management cost savings in one year rather than trying to do them over three years. We have offset some of that but, particularly in years 2 and 3, I think service change will increasingly become an issue for us to tackle.

Q102 Chair: It is quite noticeable, as to your description of 40%, 40% and 20%, that when you came before the Committee previously you described the second 40% as being related to movements of the tariff, but today you described it as operational efficiency.

Sir David Nicholson: I am sorry. It is through the tariff I am describing it. We get the effect through changing the tariff. Organisations deliver it through operational efficiency, and they get it by being better at what they do.

Q103 Chair: Changing the price as merely a transfer price does not get you anywhere. You have to actually change what is going on on the ground to achieve a saving.

Sir David Nicholson: Yes. That is right.

Q104 Chair: You believe that that 40% is on track, recurrent.

Sir David Nicholson: Yes, we do.

Q105 Valerie Vaz: Secretary of State, can I start by apologising? I have to leave at 3.30pm because I am moving an amendment to the Public Bodies Bill. In fact, it is an area where, hopefully, I can lobby you now. It is on the Human Tissue Authority and the Human Fertilisation and Embryology Authority. They would like to stay as separate organisations rather than be subsumed into the CQC and they would like to be accountable to you only. Anyway, I am moving the amendment this afternoon.

Mr Lansley: I am sure you will get an excellent reply from Nick Hurd, the Minister from the Cabinet Office.

Q106 Valerie Vaz: Or it may even be David Heath. I thank my Committee colleagues for allowing me to ask you a few questions in the beginning and give my apologies again because I hate leaving early. It is no disrespect to you whatsoever.

The Department of Health is monitoring certain efficiency gains and, clearly, you have some indicators. It would help if you could set out what those indicators are and how you are measuring those efficiency gains.

Mr Lansley: Across the Service, we are setting out not only to be very clear about the need to use resources more effectively and deliver efficiency savings but, at the same time, to strengthen our reporting in terms of the quality and the outcomes we are achieving. For example, we have already published-indeed for the second time now-data on accident and emergency quality indicators. It takes us beyond the fourhour wait to include such issues as whether patients have arrived at the emergency department and left without being seen, how long it took before they were seen by a qualified professional and so on. It was interesting on the latest data to see, on a couple of those measures, the reduction in numbers of people leaving without being seen. For example, from memory, it went from 3.4% down to 3%. So we are starting to measure quality at the same time.

From my point of view, we are aiming to make sure everybody in the Service is constantly focused on those two things side by side: delivering within budgets through greater efficiencies, which obviously includes managing within tariff and managing against issues of redesign of services, and, at the same time, looking at the quality to ensure that these financial objectives are not being achieved by eroding quality of services.

Q107 Valerie Vaz: Where is that information coming back to? Who, specifically, is the accounting officer for that?

Mr Lansley: Inside the NHS, that information comes back to David. It comes back both on the financial side and on the quality and reporting side, and The Quarter, as a document, captures and reflects precisely those two sets of information.

Q108 Valerie Vaz: What about in terms of the Department of Health as a whole?

Una O'Brien: You asked who the accounting officer is for the NHS side. That, clearly, is David and that has been the convention for some years now. My responsibilities are for everything that is not the NHS. If you are asking me specifically about the Department of Health as an organisation, we obviously track our own efficiency. We are a relatively small organisation compared with other Government Departments, and we have measures to track keeping within our budgets and so on.

In terms of the changes that we have made in the recent 12 to 18 months, the most significant has been the reduction in the number of staff following the closedown of many of our programmes. As we have sought to put more money into the frontline and to reduce what is being led from the centre, that has led to a reduction of about 1,800 staff within the Department itself. Clearly, we also have a responsibility for the efficiencies in our arm’s length bodies. You mentioned two of them earlier. That is why we have undertaken a comprehensive review of all the arm’s length bodies. In fact, there are now proposals on the table to see what we can do to get better alignment of the purpose of those bodies, on the one hand, and enable us to manage within their overall running cost objectives, on the other.

Q109 Valerie Vaz: What sort of programmes are you closing down?

Una O'Brien: Most of them have been completed, but they were programmes run centrally to do with national initiatives. Richard can perhaps help with examples, but they relate to public health, social care and the NHS across the whole piece. They were often things for which we would set up an action team in the centre to provide support on a particular initiative. Perhaps Richard can help with some examples.

Richard Douglas: They were mainly national support teams that helped people in the NHS and in the public health system. A lot of them were set up originally as taskandfinish-type programmes but they tended not to finish. What we really focused on was-

Una O'Brien: -finishing.

Q110 Valerie Vaz: Does anything finish in health-unless you are dead?

Richard Douglas: You get to a point where you should have transferred that learning across to local organisations for them to take forward themselves. Most of them were in that area. There has also been some reduction in administration staff and backoffice staff in the Department.

On the information side overall on the tracking of efficiency, David has his direct routes reporting from each organisation about what they are doing against their efficiency and QIPP plans. What we can also do at the Department is track, at a macro level, what is happening with things like unit costs in the system, productivity, activity and the prices we pay. We can triangulate what comes up from David’s bottomup reporting from looking at the aggregate numbers. Looking at the level of activity in the hospital and community health system and the numbers of staff there, we can say we are running at a rate of about 2% to 2.5% improvement in labour productivity over the last year or so. We can look at the prices that we are paying for nationally and locallyprocured goods and how that compares with the overall inflation figure to see what saving we are getting from that. There is quite a lot of aggregate-level information we can use to not second-guess what is coming up from the Service but triangulate it and make sure this really makes sense as a whole.

Q111 Valerie Vaz: We have all been through the Health and Social Care Bill-you more than anyone else-but there has been a lot of uncertainty around that and staff have left. To a certain extent, there has been some chaos in the whole system. In terms of the reorganisation costs, the QIPP costs and the £20 billion saving, how are you measuring where you have made all the efficiency savings among those three areas in particular? There may be other areas, but how are you measuring your efficiency savings in relation to those three different things?

Mr Lansley: First, I would not characterise any of it as chaos-on the contrary. What has been important to do and has been done, both for reasons of securing efficiency and a reduction in administration costs, is to manage with fewer management staff. That is true right across Government. It is not, in any sense, being done in the NHS in a way other than is common right across Government. As David said, since the election, we are at a total of 13,000 fewer administrative staff. For managers and senior managers, that is in excess of a 5,000 reduction. Of course, that is in the context of the primary care trusts coming together into a clustering process, which is now essentially complete, creating reduced demand for managers and senior management staff. In fact, that is part of what has already delivered the £240 million reduction in administration costs in 201011 which we were not anticipating. There are further administration costs. After the election we established direct control in relation to the running costs of these organisations across the whole of the NHS. So we control that directly, which did not happen previously.

As far as efficiency savings are concerned, as Richard was explaining, that is done on a bottomup basis. Primary care trusts, together with their developing clinical commission groups, have their own PCTled plans, and strategic health authorities bring those together at an SHA level-now clustered together as well-but Richard and his colleagues are able sometimes, in some of these respects, to look at them from data available from a topdown basis to crosscheck against that. So we can look at the level of savings directly in administration costs and impact on that, we can look directly at central budgets and-

Q112 Valerie Vaz: I am sorry to interrupt, but my question was how you allocate the costs between the three distinct areas. You have lots of people leaving the Service because they are not quite sure what is happening-you know that in PCTs people are leaving-so you have costs associated with the reorganisation, with QIPP, and with the £20 billion. My question is: how do you know which bit you are getting the costs from?

Mr Lansley: Where administration costs are concerned, clearly there have been managed programmes for people who are leaving the Service. We did that through the mutuallyagreed resignation scheme. We have had redundancy costs, if memory serves me right, of £225 million in total in 201011 across the Service.

Sir David Nicholson: I will have to check.

Mr Lansley: But we directly manage the administration costs. You are making a distinction between QIPP and efficiency savings, which is not a distinction I would make. As far as I am concerned, the Quality, Innovation, Productivity and Prevention programme incorporates within it the necessary level of efficiency savings to deliver improving quality through innovation, productivity and performance enhancements.

Q113 Valerie Vaz: Is that part of the £20 billion?

Mr Lansley: It is one programme. The "up to £20 billion"-I should say that because it is "up to £20 billion" and not necessarily £20 billion-efficiency savings is an integral part of the QIPP programme. It is a measure of what the QIPP programme needs to achieve allied to the £12.5 billion increase in cash resources for the NHS in order to deliver improving quality by these various routes.

Sir David Nicholson: When we set out on this road in May 2009, it was pretty clear that administration and management would have to take its fair share of reductions during this period. In fact, we said we would reduce it by a third. It went up a little. Our target went to 40%, largely because we had quite a big increase in management costs in 200809. What we did not know, when we said we were going to make that change, is how we were going to do it. But what was clear to us at the time was that it was going to be quite difficult to do in terms of the existing organisational shape of the NHS, sustaining 10 SHAs and 152 PCTs and reducing management costs. Was there a better way of doing it? As we were thinking that through, we had the election, the new Government came in and they answered for us how we were going to do it.

What we have tried to do since then is shape the reductions, pointing in the direction of the new world. That is why we have clustered PCTs, but it is also why we have assigned quite a lot of staff to clinical commissioning groups. People are associated now with clinical commissioning groups-not that they have jobs permanently there, because they will not have until legislation is passed and organisations are formed, but, in a sense, pointing them in the direction. That is what we have tried to do with the way we are organising ourselves at the moment.

Q114 Valerie Vaz: I have one final question. You mentioned management and administrative costs. Are you employing any consultants from McKinsey? If so, how much are they costing?

Mr Lansley: I hesitate to say we are not because we probably are somewhere, but I am not sure where. Are we?

Sir David Nicholson: Do I have any McKinsey contracts at the moment?

Mr Lansley: When you say "we", do you mean the Department of Health or the NHS?

Q115 Valerie Vaz: The Department. I didn’t mean you. I meant anyone.

Mr Lansley: Clearly, the NHS will be doing so in some respects in some places, but since we are not directly-

Q116 Valerie Vaz: You must know whether you have management consultants or not. You must know that.

Richard Douglas: McKinsey were engaged in some work around the foundation trusts pipeline. That is the most recent piece of work.

Mr Lansley: Yes, they were.

Q117 Valerie Vaz: Are you sure that is all they are involved in? Could you find out and write to me, perhaps, and give me a figure for how much you are paying them?

Mr Lansley: McKinsey and the Department.

Valerie Vaz: Yes, all the work they are doing for you.

Mr Lansley: Yes.

Rosie Cooper: Is it only McKinsey or all consultants, Valerie?

Q118 Valerie Vaz: Let us extend it to all private consultants.

Sir David Nicholson: I am happy to. It is very little. I cannot think that it is very much at all that we have engaged in.

Mr Lansley: I know that, since the election, we have reduced the management consultancy expenditure at the Department by more than 50%.

Una O'Brien: We can let you have the figures, but it has come down significantly. The area where we spend money on management consultancy, obviously, is in the area of IT. There is a whole separate body of work to do with that which the Committee is very familiar with. We are very happy to share all the information with you, but I can assure you that the expenditure on management consultants has come down dramatically since the election.

If I may add one point on this, the management of costs, it might help to illuminate the general approach we are taking to this. Whereas, in the past, prior to the election, the running costs of the Department of Health itself were under very specific controls-and they were dealt with separately from the running costs of the NHS-what is different about this spending review is that it is all together in one pot. We are looking at the totality of the running costs of the Department and its arm’s length bodies now and in the future. When we think about how we are going to reduce the management costs, we are also bearing in mind the journey from PCTs and SHAs to the new Department and to the new arrangement around ALBs. That is the fouryear journey that frames the management costs reduction as a whole rather than looking at the Civil Service bit separately. This is obviously a different thing for us because we have to approach it managerially, but when it comes to the discussions about where work should be done between the Department and its arm’s length bodies, it also enables us to have a more sensible discussion to ensure that we are not duplicating work and that each organisation is properly focused on its own objective. By that change we have a much stronger opportunity to use our resources effectively.

Q119 Valerie Vaz: May I have that information-the work they are currently engaged in now as well.

Una O'Brien: Yes.

Chair: We need to speed up a bit.

Q120 Dr Poulter: Secretary of State, you outlined at the beginning that there are very big financial challenges facing the NHS just to stand still, regardless of any reforms that may take place-obviously, tackling the increased healthcare demands of an ageing population and increased demands from all patients from the NHS are all key part drivers of that-and that there needed to be 20% efficiency savings over a period of five years, by 2014, I think. A number of organisations have told us that they are looking at setting annual saving targets of 6% year on year. Is that something you had anticipated, because that is probably higher than the 4% figure we may have expected? Also, do you think that is sustainable? We have heard a lot about administrative savings. Sir David Nicholson made the point that 2.5% was the figure attributed to labour savings. Is that figure of 6% savings a year sustainable? That seems to be the main driver of what we have been talking about so far.

Mr Lansley: The 2.5% figure was a calculation in 201011 of the increase in labour productivity. It is interesting to contrast that with what had been, as you know, declining levels of productivity across the NHS as a whole, and particularly in the acute sector-the hospital sector-over the last decade. To that extent, it is a figure that we can look at and see is a positive figure, from my point of view. It is not the same figure as the total efficiency savings because many of them are not necessarily reflected into labour productivity data.

You are quite right that, over the Service as a whole, we are looking for what is, broadly speaking, a 4% efficiency saving. We have always expected that, for some organisations, there would be impacts derived from the tariff of that order, but that, in addition, in so far as there are changes associated with the redesign of clinical services, there may be impacts on the budgets of organisations that go beyond that 4%. From what I have seen, over hospital trusts across the country, the efficiency savings being looked for are in excess of 4% but not greatly in excess of 4%. I suspect they will sometimes be in excess of that if they are the subject of acute services being managed to a greater extent in the community. However, if they, as organisations, are themselves also responsible for the provision of community services and hospital services-delivering pathways of care-they may well be in a situation where, in budgetary terms, the overall scale of the budgetary impacts on that are not necessarily as great.

Q121 Dr Poulter: On that theme, changing the tariff is obviously quite a crude mechanism in terms of dealing with things. You have spoken about managing services in the community in perhaps a more costeffective way and a more patientcentred way as well. But if you are looking at changing the tariff on an annual basis, is that not going to force shortterm thinking from organisations and private providers in adult social care rather than necessarily encouraging the redevelopment of services that we all would want?

Mr Lansley: That would be true if we were not, at the same time, developing the tariff and the way in which the tariff itself is structured. For example, we were expecting increasingly to extend into best-practice tariffs which, in themselves, incentivise, through the structure of the tariff, the ability of providers to be able to provide quality services. I have here an example or two of how that works.

The best-practice tariff, for example, for a fragility hip fracture incentivises for quality characteristics like time-to-surgery being within 36 hours from arrival in the emergency department and being admitted under the joint care of a consultant geriatrician and consultant orthopaedic surgeon and so on. I will not go through all those in detail. What we have begun to see, and in this particular example we have seen since the introduction of the fragility hip fracture best-practice tariff last financial year, is that the proportion of patients receiving all the elements of the best-practice tariff increased from 24% to 37% and the mortality rate declined from 9.4% to 8%. So the tariff itself is a driver of the QIPP programme. It is about quality as well as efficiency. As I think I heard Ara Darzi say in another place, quality and efficiency can be two sides of the same coin-in fact, are two sides of the same coin. We will be doing that and, of course, we will be shifting also to best-practice tariffs more widely. We will be shifting into the community precisely because we do not want to be in a situation where the acute sector feels it is under the pressures of tariff reform and the community services are completely outside that. We want people to be able to manage services in a more integrated fashion across hospital and community and if the tariff is confined to the hospital sector and is not in the community, it creates a considerable organisational and financial barrier to that happening.

The extension of tariffs out into the community is very important. The same will be true for mental health services. We are in a position, I hope, where, by 201213, the currencies established for local use will be mandated for contracting for mental health services. That is another £4 billion. We will be taken, across the NHS, from a position where 60% of acute services are subject to the tariff to a position where an increasing proportion of community services are likewise subject to the tariff. If it is best-practicedriven, yes, there is an element of reducing to deliver efficiency below the average cost. In this financial year there is a 1% reduction-am I right, Richard?-below the average calculation.

Richard Douglas: It is 1.5%.

Mr Lansley: It is 1.5% below the average in order to drive that. That is part of the process of delivering greater efficiency.

Sir David Nicholson: Please do not think we underestimate the scale of challenge that people have here. This is a very, very different way of working, particularly for the acute sector. If you think back over the last seven or eight years or so, the business model of the acute sector essentially has been, "We do more, we get paid more." That has driven a whole set of ways of working and operating. Very successful organisations have done that and worked really well. This is very different. This is looking at an environment where there is no more money anyway, so generating huge amounts of activity will not drive huge amounts for you. We are going to have to focus much more on outcomes and integrated care. If an acute hospital thinks they can carry on as they are and, in a sense, salami-slice their service through efficiencies, it will not work for them. They will have more and more difficulty. They increasingly need to look at how they integrate with health and social care and to think about what sort of organisation they are going to be. They also need to look at the disposition of their services: can every DGH do everything? All those things are what people need to do. A substantial proportion of them are getting into that, but it is tough, absolutely.

Q122 Dr Poulter: In what you have seen so far are you concerned at all-you have mentioned salami-slicing-that in order to make shortterm cost savings some-particularly acute trusts, because they are still paid by results, as you indicated-are making frontline cuts rather than looking at the efficiency savings they should be making in the back office and in terms of administrative savings?

Sir David Nicholson: Can I explain what we have tried to do with all this, because the potential-

Q123 Dr Poulter: I want a simple answer, the answer "Yes" or "No" really.

Sir David Nicholson: I understand the need for a simple answer.

Dr Poulter: There is no need to be elaborate.

Sir David Nicholson: I will not be elaborate. One of the things we have tried to do, right from the beginning, is to build some kind of assurance system into the cost improvement programmes that people carry out. We have set out, very clearly, that we expect the chief doctor or the chief nurse in every organisation to sign off their cash-releasing cost improvement programme, so you have, in a sense, clinical oversight for that. We have also asked SHAs to quality assure those. Even when you have done that, there is the potential-and we are very alert to that, and as we get examples of people doing it, we want to intervene, help and support-

Q124 Dr Poulter: You are safeguarding against that sort of thing happening.

Sir David Nicholson: We are absolutely trying to do it, but even if you safeguard for it sometimes it will happen. Hence, we meet every month with the Royal College of Nursing through their Frontline First system for them to alert us to things that are going wrong or other issues. There is no benefit to the system to do that. We want people to make proper efficiency gains.

Dr Poulter: That is very helpful. Thank you.

Q125 Dr Wollaston: Sir David, can I draw your attention to an item on page 13 of The Quarter which could be an example of that? In figure 10 is the "Diagnostic waiting times" and it refers to the "over six week waiters and median waiting time April 2008 to June 2011." Looking at the graph for the six-plus-week waiters, there does seem to have been just such a drift upwards. Do you feel that is an example of where people could be salami-slicing services rather than taking another approach?

Sir David Nicholson: What I would say about waiting times generally is that the NHS continues to deliver the operating standards.

Dr Wollaston: Indeed, absolutely.

Sir David Nicholson: There is no doubt that, in diagnostic terms, there has been a huge increase in the number of diagnostic tests done. It has gone up significantly more than certainly anyone planned for as we went through. Bearing that in mind, we have seen the increase in six weeks. It is an indicator. It is an alert for us to go back to organisations and see what is actually happening. That is the way we would deal with it.

Q126 Dr Wollaston: That is an assurance you can give the Committee today, that you are now aware that this is an issue-the six-week waiters.

Sir David Nicholson: Yes, and we will go back to organisations.

Dr Wollaston: Thank you.

Q127 Rosie Cooper: I have three substantial questions to ask. Initially, the huge cost to the Health Service is in staff costs. Many trusts currently, in a bid to reducing costs, are re-grading staff downwards and therefore reducing the pay bill. Pay is going to be a huge consideration in future years. Do the Government intend to do a national pay deal and, if not, what will your attitude be to local pay deals and potential industrial action?

Mr Lansley: I am not aware-my colleagues may be-of what you describe, that is, trusts who are seeking to manage their costs by the downgrading of existing staff. If you are aware of that, then, by all means, tell us, but I was not aware.

Q128 Rosie Cooper: Secretary of State, speak to any of the national organisations and speak to the nurses. All of them will tell you. The hospital of which I was formerly chair was an FT and has just gone through a massive programme and re-graded all its staff. Any hospital I know of seems to have either done it or are doing it currently.

Mr Lansley: I will gladly, by all means. David will know better than I do, but I have talked to the Royal College of Nursing and this is not an issue for the Royal College of Nursing. I talk to them regularly.

Q129 Rosie Cooper: They spoke to me about it at the conference.

Mr Lansley: They have not raised it with me. The whole purpose of Agenda for Change was to try to ensure that there was accuracy in terms of the grade of staff in different places across the country. Previously, the grading of staff had been very much the product of pay and related pressures in different places so you arrived at the position-and you will recall this very well-where there were anomalies in grading for members of staff doing the same work in different places across the country who had quite different grades because that was the only way in which they could respond to recruitment and retention pressures.

Q130 Rosie Cooper: That was all supposed to be sorted and now they are re-grading.

Mr Lansley: Agenda for Change was designed to deal with that and to deliver greater consistency. If there is inconsistency emerging for that reason, then I am not aware of it, but I will take that away and certainly find out if we know to what extent that is true. As far as I am concerned, the legal position is unchanged and we have no plans to change it. Each of the NHS trusts and foundation trusts are their own employers. They have the legal right to establish their pay, but across the NHS there is an expectation that people will pay in relation to what are, effectively, collectively-negotiated structures of pay advised by the pay review bodies for professional staff groups. That, as far as we are concerned, is still true. The exception to that is a position where the Government, for reasons of broader public finance, has established a pay freeze. That began on 1 April this year and lasts for two years. It applies to staff earning above £15,000 per year and, for a salary below £15,000 per year, there is an acrosstheboard £250 pay increase. That is the position. We have no plans to change that position.

Q131 Rosie Cooper: There will be no national pay deal.

Mr Lansley: Do you mean in this year or next year? The pay freeze is as we have described it.

Q132 Rosie Cooper: Thereafter.

Mr Lansley: In so far as the question below £15,000 is concerned, we asked the review bodies’ advice-

Q133 Rosie Cooper: When that comes to an end.

Mr Lansley: We asked the review bodies last year to advise on that and they endorsed the £250. That applies this year. Clearly, I am not in a position to talk beyond 2013.

Q134 Rosie Cooper: That is fine. Thank you. Secretary of State and Sir David, I have listened as carefully as I can, because the answers are long and sometimes you get lost in those answers, and brief answers would help me. When you speak, everything sounds wonderful: everyone supports the current Bill; everyone supports all the changes; the doctor and everybody is on board; everything is fine; everything is on target; QIPP is fine and the majority of savings are being met recurrently. But you don’t quite have the details yet, so okay.

Let me suggest to you that the majority of the Service would not recognise that. I am sitting here with a letter from a chief executive of a hospital-and, Secretary of State, a little while ago I think you said that QIPP included its own efficiency elements-which I will read to you. Remember that QIPP is all going fine: "Experience of QIPP has been fairly negative to date, with delays to the pathology centralisation and when schemes have delivered savings to the North Mersey economy, as in the Capita bid for HR and payroll services, we would have lost a million pounds had we joined. QIPP is unlikely at present to deliver major contributions to our CIP". Their cost improvement programme currently-and they are an integrated care organisation-is 5% as against the national 6%. Monitor, if they become a foundation trust, would expect them also to make a profit each year of 1%, which is very nearly £2 million. They are going to find it really difficult to do.

My questions to you are about the reality out there. It is not quite the pretty picture you are painting. Take nonrecurring savings. You may not be able to tell me exactly now, and I understand that-although you will have a feel for it and be able to let us know-but, for example, in foundation trusts how many of them have used their reserves to prop up the Service to get through this year? Also, an element of that is that Monitor’s risk rating is falling backwards. It is clear that services are being affected. It is not as simple as saying, "Oh, dear, hospitals are just cutting the frontline because that is the easiest thing to do when they do not cut back service operations." You have heard what a chief executive said to me. People do not cut frontline services if they do not have to.

Also, what evidence do you have that trusts have kept in financial balance at the expense of waiting times? We have heard that from another member of the Committee. The Service is desperately trying to keep its head above water and you sit in front of us telling us it is all okay and everything is marvellous.

Mr Lansley: Clearly, Monitor will want to report in due course about the extent to which foundation trusts are meeting their financial objectives and how they are doing so. It may be that some-I do not know-will use their reserves to help them to do so because I do not think any of us are under any illusions about the extent of the financial challenge. David said that a few moments ago. We recognise this is a very considerable financial challenge and the challenge is greatest in the acute sector because of the combination of a need to make efficiencies driven through best-practice tariff development and the redesign of services in the course of the QIPP programme which is clearly going to have an impact in terms of delivering more care closer to home. The cumulative impact of that is to create unprecedented pressures inside the acute sector. Where foundation trusts are concerned, many of them are in a good financial position to do so. I make no bones about it. Of course, there has been a shift in some of the risk ratings in some foundation trusts because the financial pressures are considerable, but we are doing it against a background of a £12.5 billion increase.

I might say: what do people think about QIPP across the Service? I noted in the staff attitude survey-published in June of this year-that 62% of NHS staff felt that QIPP would have a positive impact on the quality of care patients receive overall.

Q135 Rosie Cooper: Secretary of State, forgive me, but that is not what I am saying. It may eventually have all these repercussions. My problem is that your good self and Sir David are sitting there telling us that all these things are being met, these savings are recurrent, you are going to be able to do it and QIPP and everything is fine.

Sir David Nicholson: You are absolutely right. We have not surrendered. That is absolutely true. I have not said, "It is all too difficult. We can’t do it."

Q136 Rosie Cooper: But it is not all fine either.

Sir David Nicholson: Of course not. For heaven’s sake, I have run hospitals for 20 years and I do know how it works and how tough it is for people. Hopefully, I have described to you that this is unprecedented. No one has ever done this before in the history of the NHS. We are all learning how to do it. All I am saying is that-

Q137 Rosie Cooper: The patients are paying the price.

Sir David Nicholson: No, they are not. Absolutely they are not paying the price.

Mr Lansley: No, they are not, because we are measuring the quality and ensuring that they do not pay the price.

Sir David Nicholson: That is the difference. That is why we invented QIPP. It was not that it was a fancy slogan, but that you should never talk about productivity without talking about quality, innovation and prevention.

Rosie Cooper: Absolutely.

Sir David Nicholson: That is what we have tried to build into this at every stage.

Mr Lansley: And the alternative is?

Q138 Rosie Cooper: The alternative is to do it in a measured way, to do it taking the people in the Health Service with you. The way to do it-

Mr Lansley: That is exactly what we are doing.

Q139 Rosie Cooper: But you are not. Secretary of State, you have got to be demented if you believe that the people in the Health Service are behind you-absolutely demented. You have got to be.

Chair: This is an evidencegathering session where we ask questions-for the avoidance of doubt.

Rosie Cooper: Forgive me, Chair, the Secretary of State did ask-

Mr Lansley: It is nothing to do with whether people agree with me or not. When you talk about QIPP, the whole point is that it is measured. That is why it is not about me and it is not even about this Government. It was about a recognition, in May 2009-

Q140 Rosie Cooper: So it loses a bit of the impact that they had lost £1 million.

Mr Lansley: No. You said have brief answers. You then had a sixminute question.

Rosie Cooper: Okay.

Mr Lansley: David and his colleagues were very clear in May 2009 that there were going to be unprecedented financial challenges whatever the situation. That is why I think from May 2009 to April 2011 is a considerable period of time over which to have supported the NHS to do that. The National Audit Office-you talk about measured-on this issue said to your Committee about the Department, the NHS and David and his colleagues, that most strategic health authorities told them that the model the Department had put in place to support the development of QIPP plans and integrated plans had been very helpful and effective, that they considered it had brought a necessary discipline to the process and that they received an appropriate level of follow-up, feedback and challenge. It is a measured process. It is absolutely not as has happened in the past. You will remember when the NHS fell into a loss of financial control in 200506. One of the things David and his colleagues did was to restore financial control after that period. At that time there were shortterm expedients, salami slicing and budgets being cut without regard to the impact on quality. We are not contemplating any of that. We are working across the Service to our utmost to ensure that we deliver against these financial and other efficiency challenges while continuing to improve the quality of the service provided to patients.

Q141 Rosie Cooper: Can we go to the other end of it then?

Chair: You can have one more go, Rosie.

Rosie Cooper: Absolutely. The Department’s report and accounts show an underspend of £695 million on the capital budget. The initial question is: are you satisfied with that and are you disappointed that that budget was not used? I do not have the exact figure here. How much did you save on the revenue budgets? I understand that might be towards £1 billion. Would that be right? If it is right, can you tell me-

Mr Lansley: Hang on a minute and he will tell you the answer.

Q142 Rosie Cooper: Yes, if you just say the figure. Is it £1 billion?

Richard Douglas: The revenue underspend was just under £1 billion. It was £970 million.

Q143 Rosie Cooper: Are you happy that you managed to save £1 billion out of your revenue budget that could have been used in social care, that could have been used in the Health Service and that could have been used to fund operations? Is that money going to be carried over so that money is not lost to the Health Service? People out there will be really incensed. They have not perhaps been able to get the operations, the waiting lists have become longer and you have saved all that revenue. You have not used it.

Chair: It is a technical question, I think, Rosie, if I may help. Is there yearend flexibility around that?

Richard Douglas: There is not yearend flexibility from last year into this year.

Q144 Chair: On either the capital or the-

Richard Douglas: That is on either the capital or the revenue. There has not been for at least four or five years. This is not new. What there will be is a degree of flexibility from this year into next year. There is a new scheme that will allow flexibility from one year to the next. On the revenue side for last year-to be clear on it-about £0.5 billion of that was savings from the Department’s own spending around the efficiency controls, the efficiency measures that were put in, so about £0.5 billion of that was the Department itself. There was about £400 million from the NHS, in that we ended up in a slightly better position than had been planned. There will always be some degree of underspend. That is inevitable in the system we have. You cannot overspend at the end of the year. If you cannot overspend and you have a £100 billion budget, none of us can manage it to three and sixpence. There will always be a degree of underspend and most of that came from the Department. The NHS element was probably not dissimilar to previous years. On the capital side-

Sir David Nicholson: I am sorry, but it is worth saying that when we realised the potential for the underspend we made £160 million available in January this year to support local governments through winter.

Richard Douglas: We did.

Q145 Rosie Cooper: Could you have made more available? This is the question. You have £1 billion sitting there.

Sir David Nicholson: They could not have spent it.

Richard Douglas: They could not have spent it sensibly at that point in the year.

Q146 Rosie Cooper: I don’t mean just to them, but there would be stuff in hospitals. There will be people right round this country that were not able to get the services they desperately needed and you were sitting on it. You were not intending to make that saving, but it was there for you to spend and you did not spend it on them.

Richard Douglas: We were not sitting on it. Some of the saving emerged quite late in the year and at that point you cannot use money sensibly. What we do not want to do is push money into a system where we know it could not be used well. If you get to the point that late in the year, there is not-

Q147 Rosie Cooper: Could you not have negotiated, because the Health Service-

Richard Douglas: There were no negotiations around carrying forward underspends. As I say, there have not been for the last four or five years, at least, to my knowledge.

Q148 Chair: To be clear, there is yearend flexibility around the end of the financial year.

Richard Douglas: There is. It is a different form. It has to be declared earlier on in the year and you have to surrender money in-year. There is a system now running for this spending review period, but it was not going to run from one spending review period to another.

Q149 Rosie Cooper: Can somebody write and explain that to us because I find it really difficult?

Chair: Is there a simple formulation of how the rules will work?

Richard Douglas: We will provide a simple formulation but-

Chair: If not simple, preferably comprehensible.

Richard Douglas: We can give you a copy of that. On the capital side, the bulk of that capital underspend was around the national programme for IT, where it was based on the fact that things had not been delivered and we were not going to pay for things that had not been delivered. If you strip out the national programme for IT, the other elements were relatively small on the capital side.

Q150 Dr Wollaston: I have a followup question on the issue of capital budgets, an issue to do with capital that several people have raised with me. It is around the position of community hospitals. I have been hearing some concerns that we are going to see a decoupling of the ownership of community hospitals from local control. Formerly, of course, they were owned by PCTs, but if, in future, the NHS provider loses a service contract or vacates or ceases to exist for any reason, the outgoing organisation, I understand, could dispose of the property with the Secretary of State having half the proceeds for that. Could you please clarify that for community hospitals?

Mr Lansley: I will go first and my colleagues might want to add to that. The first step is, as we set out a few months ago, that our expectation is that in community services-you will recall the Transforming Community Services programme, which is now effectively complete-if there were property assets integral to the delivery of those community services and essential for doing so, they should be transferred with those community services. The way it works is that if, at any time in the future, that organisation were not in a position to deliver those community services, the ownership of those property assets would revert to the NHS- to the Secretary of State-for all intents and purposes. Where there are community assets that have been owned by the primary care trust, we are still considering and consulting on the question of where those additional assets should be housed, but the intention is that they will continue to be NHS assets. There is no process involved where these assets will transfer out of NHS ownership.

Q151 Dr Wollaston: Do you understand the concern that local communities have that they would have less say through, for example, clinical commissioning groups about the ownership of that and that it could potentially transfer out of NHS control?

Mr Lansley: Strictly speaking, it gets us into the vexed question of whether people had any say about what primary care trusts did with the assets they owned in the past-

Q152 Dr Wollaston: Indeed, but we are supposed to be improving things with these reforms.

Mr Lansley: -where very often people felt they had no such say. Yes, we are looking at what the best route is and we have not reached a conclusion yet about that. In so far as they are managed by community services and are integral to the delivery of those community services, the expectation of any public locally would be-in the same way as they would expect a hospital trust, in effect, to own the hospital from which they provide their services- that their community services will own the clinics and the community hospitals from which they provide their services. There is no change where that is concerned. People should not regard that as, in any sense, disturbing their current expectation. For the rest of the property assets, many of which will not be needed directly necessarily to provide clinical services-they may well be office accommodation and the like-if they are NHS owned, then we are looking for an NHS mechanism by which they will be owned in the future.

Q153 Dr Wollaston: One crucial difference is, of course, that many local communities have put a great deal of funding themselves into community hospitals and, naturally, feel rather threatened by the prospect of losing ownership and control locally.

Mr Lansley: Yes. In a sense, they should not feel that because it will continue to be NHS owned.

Q154 Dr Wollaston: Thank you for clarifying that.

Mr Lansley: In particular, for example, if it is owned by a community trust and it becomes a community foundation trust in a very real sense, it will be a locallyowned community hospital.

Q155 Dr Wollaston: It would be helpful for them if you were able to clarify what degree of local control would be enhanced under the new arrangements.

Mr Lansley: It will vary from place to place, depending upon the nature of the community services organisation that runs community services in that area. It might be a hospital trust or it might be a community services trust.

Dr Wollaston: Thank you.

Q156 Andrew George: When does a cut become an efficiency gain?

Mr Lansley: The question should probably be the other way round: when does an efficiency gain become a cut?

Q157 Andrew George: I am happy for you to answer either way.

Mr Lansley: The answer is, in my view, in circumstances in which there is prejudice to the quality of the service you are providing, which is why we are very fixed upon the two things. QIPP is not an efficiency programme. It is a quality and innovation and performance and productivity programme. The title is absolutely deliberate. To put it in simple terms, if we are spending £100 now and in four years’ time we would expect to be spending £130 but we managed to only be spending £112, yes, the amount we spent has gone up. It is not a cut in the sense that the budget has been cut, but if we can continue to deliver better services, I am not sure there is any cut there at all. If the service is being provided and the budget has increased, where is the cut?

Q158 Andrew George: In our previous evidence session-and I am going to characterise, which I know is probably unfair, the views of the King’s Fund, the NHS Confederation and the Nuffield Trust-the theme was that this is largely a budgetdriven process, that the Department is exhorting the local NHS to ensure that there is not total carnage and that is what the QIPP programme is about. If we take it to the particular, where, for example, we have an outofhours GP service which is erring on the side of using nurseled telephone triage rather than handson doctor visits, resulting in perhaps taking risks in certain circumstances, the question is-this could apply across a range of services where we see in The Quarter that the number of hospital beds has clearly been cut by earlier discharge of patients, which I know is desirable in many ways but there is also greater readmission in certain trusts-to what extent are you content that what you are achieving in terms of budget savings at this stage, the lowhanging fruit, as it were, will be sustainable through subsequent quarters?

Mr Lansley: You took evidence from the King’s Fund and Nuffield Trust, among others. I would be surprised if they would recognise that characterisation as saying this is a purely budgetdriven process. Of course we live within a budget, but this is an unprecedented focus on how we can deliver quality in the long term through the clinical redesign of services. I know, in particular, that the Nuffield Trust has done a great deal of work on issues such as a development of tariff to develop quality and efficiency side by side, and the King’s Fund are working with us on how we can integrate services more effectively in order to deliver improvements in quality and efficiency, as I say, as both sides of the same coin. I would be surprised if they, themselves, would characterise it that way. None the less, we do live within a budget and we have to deliver the best possible quality we can within that budget.

In the past, talking about competition-for example, with out-of-hours services, and we have all been there and seen it-in truth what happened in the NHS very often was that primary care trusts went out to competitive tender and it was cost and volume. It was, "Are we going to give the contract to somebody who is going to charge us £10.20 per head or somebody who charges us £9.40 a head?" Sometimes quality suffered under those circumstances. That is why we absolutely are looking to make sure that we have a clear understanding of the quality of services that are being provided and are developing quality indicators to make that happen. We cannot do that for everything from the centre. Much of that must be locally led and locally driven but, in the particular example you describe, my personal view is that there is a tremendous opportunity in the redesign of urgent care. When David and his colleagues are looking towards the latter stages of the QIPP programme from 2013 onwards, their expectation is that the redesign of urgent care services will be one of those areas where that will be achieved. It will be achieved by integrating the outofhours GP service with things like walkin centres, NHS Direct and some of the aspects of the ambulance response in a way that should get us to a place that is safe and with higher quality from the public’s point of view. It need not at all be anything other than financially cost- effective as well.

Q159 Andrew George: We will come on in a moment to whether that desired and-I entirely agree with you-desirable integration will be possible under the reforms. That is another question. It is very early stages, as you say. QIPP only started in April this year. Therefore, it is a question of how you are measuring the quality and whether you are satisfied at the moment that what you are getting from David Flory’s work so far is likely to be sustained-whether you have the measurements in place. The example I have given of urgent care being provided on possibly a greater risk basis is one which obviously needs to be watched. Early discharge needs to be watched. The extent to which that might result in increasing cases of early death or increasing readmission and so on is clearly going to be part of the measurement process as to whether you are achieving the quality we all desire.

Mr Lansley: You can see in The Quarter, as you know, there is a continuing programme of reporting on a number of quality measures. We have extended those. We are reporting on accident and emergency quality indicators that are wider than we reported on before. You will be familiar with the introduction of the National Outcomes Framework at the end of last year. Our purpose is continuously to improve and report on that as time goes on so that we will have a much stronger basis for measuring the quality and the outcomes that it achieved. Some of the things you describe would immediately be evident if the response to pressures in the service was to try and change that. For example, through the tariff we are working to ensure that hospitals take a greater responsibility for rehabilitation and reablement following discharge. It would become obvious if they do not but, in particular, if you look at the Outcomes Framework, people’s recovery following treatment is one of the central domains for that. As it happened, yesterday I did not so much launch as receive the winners of a competition looking at what the indicators should be in relation to the National Outcomes Framework. Where stroke is concerned, it is a modified ranking scale, looking at what level of disability people have six months after a stroke. That has not been measured in the past. From a patient’s point of view, measuring this makes an enormous difference because not only are we going to be saying, "Do patients survive a stroke?" which, to an extent, has been measured previously-mortality-but, also, we are looking at the worry that patients always had, that they left hospital and fell off the cliff edge and there were not enough services in the community. Looking six months out at people’s recovery following treatment is a very valid measure of that.

Collectively, we are moving to a world where there is much better information. If you were to ask me what I think, when we look at all of this data, financial and otherwise, is likely to make the biggest positive impact for patients, it is the availability of good information to clinicians that shows them how well they are doing and takes things like this-the NHS Atlas of Variation. This was the first one we published at the end of November last year, and we will publish it again later this year. In a sense, you might say that this is not a management performance tool. Managers in the NHS are not necessarily using this to bash clinicians around the head. It is clinicians who look at this and say, "Why are we doing worse than somebody else on this measure?" The more we do that, the more we will see improvement for patients.

Q160 Andrew George: Providing, of course, that those statistics are robust and fair in their representation.

Mr Lansley: Yes.

Q161 Andrew George: That is very helpful and you will obviously be pleased to know that we intend to repeat this inquiry on an annual basis, so we will be monitoring the process. Finally, I wondered-

Chair: They have broad smiles on their faces.

Andrew George: -to what extent you would agree with the BMA when they told us there is no doubt that, as a result of these changes, the need for hospitals to find savings has resulted in an adverse impact on access to hospitals? Are they, therefore, out of kilter with the general direction of services?

Mr Lansley: I do find this slightly surprising. There was some talk over the summer about people not having access to things like knee surgery and cataract surgery, and so on. When I look at the data, the numbers of patients being treated in the last year has gone up in some of these respects. Our objective is not to increase activity, but there is no evidence from the data that tells you people are getting less access. We are continuing, as David said, to meet the operational standard for more than 90% of patients having access to treatment within 18 weeks. The average wait to treatment on the last measure that was published was 8.2 weeks between referral and treatment. At the time of the last election, the average was 8.4 weeks. Not for the first time we have encountered circumstances where, for financial reasons, some primary care trusts were looking at setting minimum waiting times. There is a particular example which the Cooperation and Competition Panel saw in Wiltshire recently where the primary care trust was setting a minimum waiting time, I think, at 15 weeks because, of course, the only target they were looking at was 18 weeks. The Co-operation and Competition Panel have said-and we have made clear, including David and his colleagues-that that is not acceptable. The objective is to use our resources to deliver to patients the best service we can, not to make them wait under circumstances where the capacity is available.

Q162 Rosie Cooper: I am confused at that because it is a continuation of what I was saying before. Secretary of State, I have heard what you said about various operations that technically, we hear, are not being done on the NHS and yet they are going up-cataracts you mentioned.

Mr Lansley: Of course cataracts are being done on the NHS.

Q163 Rosie Cooper: In my own area, for example-and you mentioned cataracts-the PCTs do not now do varicose veins and various operations. Where I am at a loss is with the story, which you must have read in national newspapers last week, of a practice, in the Midlands I think, which had been taken over where they wrote to the patients and said, "You require X operation or X clinical help and this is no longer being agreed on the NHS. Therefore, here are three or four providers and one is us." How can you sit there and say that everybody is doing everything when it is quite clear that with the NHS there are certain categories of operation or treatment-whatever that is-that people are not doing? You cannot sit there and say that the numbers are going up and therefore it is not happening. It may be different in different parts of the country, but it is a reality. It was in the newspapers-or didn’t you read any?

Mr Lansley: I do not necessarily believe what I see in the newspapers. I tend, I think sensibly, to try and find out what the facts are. There is no primary care trust who will say, for example, "We do not provide any services for treatment for patients with varicose veins." They will have a local-

Q164 Rosie Cooper: I will give you central Lancashire PCT’s list that has gone out.

Mr Lansley: -discussion, a clinical discussion, to look at where, in their view, on a clinical basis, treatments are of very poor clinical value and cannot encompass excluding from treatment whole categories of patients and all patients. Even under those circumstances patients must be considered on their individual merits. The story you are referring to is the Haxby surgery in North Yorkshire, not in the West Midlands. The North Yorkshire and York Primary Care Trust made it clear that, in their view, they were not accurate in their description of access to services in their area. If they wrote to patients in the way described we would have our concerns about whether they did so using patients’ information which was provided to the NHS for NHS purposes and should not be used for other purposes. From our point of view, the NHS continues to provide a comprehensive health service and that will be true in North Yorkshire as well.

Q165 Chair: May I come back, Secretary of State, to something you said 10 minutes ago? You said there was a big opportunity to improve urgent care and that you were working with Sir David on plans to do this from April 2013 onwards. If that is going to deliver better care and do it more efficiently and all of the good things in the QIPP programme, why do we have to wait until April 2013?

Mr Lansley: Forgive me, I should have explained. I do not mean that we should not do it, and in many places they are doing it now, but, at the moment, we have four pilot schemes for the 111 telephone system. I say April 2013 because our intention is that by April 2013, across the whole of England, telephone and online access to the NHS for urgent care will be able to be achieved through the 111 system.

Q166 Chair: The reason I raise that question is that it is symptomatic of a concern that has been expressed to us-the proposition that Sir David put to us-that we can only achieve the £15 billion to £20 billion, the QIPP challenge, however we want to characterise it, by substantial service redesign. It is service reorganisation, whether it is classified in the 20% or the 40% operational. It is a substantial service redesign. Your comment about "This will happen from 2013" sparked in my mind a sense that those real service reorganisations are being left relatively late in this process rather than being brought forward in order to embrace the need for service redesign now. First, is that an accurate characterisation? Second, if it is, is it to some extent reflecting a degree of political support for necessary service reorganisation? I would be interested in Sir David’s view of the extent to which managers in the Health Service are comfortable with the level of political support they have for the service reorganisation which is implicit in the QIPP challenge.

Mr Lansley: David can obviously add to that but, from my point of view, where urgent care is concerned-and the case in point is a particular example-we are making rapid progress. Individual localities are able to make progress themselves on the redesign of urgent care, but in order to link it to the 111 telephone system, quite reasonably, many people are looking for a clear evaluation of a number of pilots which are using things such as the clinical assessment software of different characters and telephone response systems that have different characteristics. They want to see that evaluation before they make final decisions about how they structure an urgent care service. They are working in many places, because I have had these conversations with quite a number of clinical commissioning groups. They have, themselves, work streams looking at the proposition that they will have a more co-ordinated access-a gateway, as it were-and they are redesigning themselves urgent care behind that gateway to see how it best works for their area. It will vary from place to place because we are not creating a topdown, onesizefitsall design for urgent care.

Q167 Chair: But whether the driver for change comes nationally or from the clinical groups, surely the position we are in is one where we should be encouraging that change programme to speed up rather than slow down.

Mr Lansley: We are encouraging it to speed up and the QIPP programme does that. It is a very good illustration-and there are others-of how, in effect, you need a combination of a national approach and a local approach in order to make it work. It is very difficult for individual organisations all over the country to be trying to design an urgent care telephone triage system. You cannot do it. We want to arrive at a place where we have a 111 system and the public everywhere in England feel confident that, for access to the NHS, they can call 111 and it can be achieved. What the NHS offers in each area in terms of the structure of the relationship between general practice, the ambulance service and the hospital services is going to vary from place to place.

Do managers feel they have political support? I would say this before I hand over to David. It is not only about political support. It is about those four tests that give management great confidence. I have already seen, since the election, places where reconfigurations that in the past were thought to be intensely difficult to achieve have been achieved more readily, more successfully and more quickly because they have literally gone through the process of saying, "Are our GPs supportive as commissioners? Are our local authorities supportive on the public’s behalf? Are our patients supportive, even if reluctantly, but recognising that it delivers them the choices they are looking for? Is it clinically safe? Do we have a clinical evidence base for what we are setting out to do?" Meeting those four tests pretty much gets you to a very good place in terms of delivering service redesign.

Sir David Nicholson: Service change is very difficult but it happens all the time. Virtually every month an overview and scrutiny committee somewhere in this country is agreeing to a set of service redesign and changes going on in the system. There is quite a lot that goes off on a daytoday basis which never makes the national newspapers or whatever. Nevertheless, particularly for a manager, service change can be very difficult because it is often you who has to stand up in the village hall or the town hall and explain something to a whole set of people. No matter how many clinicians you have with you, it still is a very difficult thing to do. What managers want to know is if, in those circumstances, you are prepared to take that forward will you get the political backing to make it happen? That is the question they often ask. I have to say that this does, in my experience, depend on where you are in the electoral cycle as well. This is a general point I am making, by the way, not a specific point. That does matter in all of this. That is the position managers find themselves in.

We have been through the QIPP programme and certainly there are things Andrew and I have been saying over the last six or seven months or so in particular-we have been encouraging and supporting people in service change-because we want to improve the quality of service for patients. That has been well received by people. The fundamental issue is that you have to get your local politicians on side because, in a sense, if you do, it never gets to the national position. Getting that local agreement is going to be very important, and I think that is a really big challenge for local government as we go forward in all of this. Not only is the NHS transferring substantial portions of resource over to the local government at the moment, but we are also trying to develop Health and Wellbeing Boards and a much better way of working with local government. In that sense, the challenge for local government and politicians in local government is to stand up to that and to say, "Okay, how can we best organise services locally?" That is a big challenge. There is evidence around the country that that is happening.

When you have done all of that, the issue for managers is the Independent Review Panel, which is a wellrespected organisation that does fantastic work around the system. They are investigating and coming up with things. Then, I would say, do not underestimate the importance of the iconic-or what in management terms would be termed the iconic. Chase Farm is an obvious example. The decisions that have been taken around Chase Farm on the basis of the evidence and the process we have been through is a very powerful message to managers that it is worth taking that extra effort to get this service change. Irrespective of that service change, it is always very tough.

Q168 Rosie Cooper: But it is not managers who are going to make those decisions; it is doctors. That is what this is all about. Doctors are going to design the system. Doctors are going to be the people who cause that-

Sir David Nicholson: You are absolutely right. I was asked a question about managers.

Q169 Rosie Cooper: It is really important. The poor old manager gets slapped in every direction, sending him out-

Sir David Nicholson: Absolutely right, yes, I do. I get it constantly.

Rosie Cooper: You are sending him out surrounded by clinicians to tell the public, "Tell you what, let the manager stay home. Let the doctors go."

Chair: Let me bring a doctor in.

Q170 Dr Poulter: We can park that point for a second and talk about the local authorities’ issue, which is key in this. Putting acute service reorganisation to one side for a minute, people obviously absorb a lot of healthcare in the last years of their lives. The challenge of our ageing population is the essential and crucial issue we have to tackle, the tiein between adult social services and the NHS and how, at the moment, there are very arbitrary lines between what is social services and what is NHS care. Actually, we are dealing with a person or a patient. What, at the moment, is really incentivising local authorities to spend their social services budget, which is a different budget to the NHS budget, in any way that will make savings for the NHS?

Mr Lansley: Let us start with what we know-and I will ask Una perhaps to add a little on this-about the way in which local authorities are responding on their social care budgets. We know they are under pressure. We recognise that, which is why, from the NHS point of view, we are working together with local authorities with the transfer of resources that David was talking about. In this financial year it represents not only £150 million for reablement but £648 million for support for health and social care interaction. But there is money available through the Formula Grant Distribution from the Department for Communities and Local Government as well. We know, against that background, you have some evidence from your survey, and the ADASS report gives us survey evidence and so on, that local authorities, relative to the rest of their budgets, where there is, overall, an average of 4.4% reduction in spending power this year, are reducing their social care budgets less. I think on average it is a 1.1% reduction. They are making decisions which are clearly prioritising, relatively speaking, social care, but that does not mean it is anything other than very challenging in terms of the efficiency gains they are having to make.

Q171 Dr Poulter: It is a very good thing that local authorities are doing that, but, nevertheless, what we all want is integrated services, particularly around those elderly care issues. What I am driving at is how we are going to get that if we have separate budgets. There is nothing to incentivise, at the moment, local authorities to spend money on preventative measures, preventing elderly people getting into hospital when they do not need to, people with dementia, mental health problems and those sorts of things. There is nothing that incentivises local authorities to spend money on those things in an effective way. There is no mechanism to join up that care because of the separate budgets. What I am trying to drive at is: how are we going to make this work?

Mr Lansley: Let me trespass a moment on Una’s answer. There is an incentive. The NHS financial support to local authorities is a direct incentive to do that. It is focused on trying to deliver that kind of joint preventative approach. We make it very clear and the legislation-in fact, the Bill-makes it clear that we are not only sustaining the legal mechanisms by which local authorities with social care responsibilities and clinical commissioning groups with NHS responsibilities can go down the route of pooled budgets or joint commissioning. We are creating in the legislation a statutory duty to promote integrated care between health and social care which was not previously there. We are creating a statutory incentive and we have a financial incentive.

To be fair to local authorities, many have shown themselves willing to take a preventative approach, and they do so because they can internalise the financial benefits. In the past it has very often been the case either of the NHS doing prevention and having to measure the benefits themselves without reference to social care, or social care doing so and not being able to internalise the benefits from the NHS. I do hope we will be able to bring these things together. A great example would be the whole system’s demonstrator pilots for telehealth where we are able to see how joint investment into telehealth systems will be able to reduce local authorities’ subsequent social care costs and NHS subsequent medical costs.

Q172 Dr Poulter: What you are saying is that, as things stand, there are one or two very good examples round the country, and I think Sarah may mention those later on, but I did not get a feeling that there are any real mechanisms to force this to happen. There is quite a lot of silo working that goes on but what we are saying is that, down the line, Health and Wellbeing Boards will enhance cooperation.

Mr Lansley: They should, yes.

Q173 Dr Poulter: If you feel the way forward is probably towards pooling budgets and pooling resources, and because that is much more patient focused-

Mr Lansley: There is quite a chance of that. I should not leave out of account, because I made it clear, our intention, alongside the extension of access to personal budgets in social care by 2013-it is a slightly longer timescale, and I think it runs through to 2014-for patients who receive NHS continuing care to have the offer of personal health budgets as well. We are all in a situation where we have perhaps met people who are able, through a social care budget, to determine the shape of the care provided to them and who it is provided by, and then the NHS continuing care steps in and that degree of empowerment and control simply disappears. We do not want that to happen. So there is a range of mechanisms. Do I think that they are uniform across the country? No, they are not uniform and will not be uniform across the country. Are they able to be? Yes, we can get joint commissioning and pooled budgets, but we are not in a position where we can ignore the simple fact that they are separately funded. One is local authority funded, subject to a means test, and the other is NHS funded, not subject to any means test and free. The management of bringing those things together is inevitably going to be a co-ordination mechanism rather than a simple integration.

Q174 Chair: We have half an hour left. If Grahame will forgive me, we need to move on to social care. I know he wanted to raise a question. Hopefully there will be time at the end to come back to tariff, but Una O’Brien was going to come in on this pooled budget.

Una O'Brien: Not so much that necessarily, but to add to what the Secretary of State has said about this question of: is the incentive there sufficient for local authority social services departments and the local health service to come together? What has been significant about the arrangement made in the spending review is the decision to route some money for social care through the NHS. We have supplemented the support grant and the money has gone into that big pool for local government. In addition to that, we have made these two additional strands of money available, this year £800 million, through the NHS to social care. The conversations happen at a local level around local needs. Obviously there is the £150 million for reablement which is spent by the NHS. Then there is the second portion, which this year is £648 million, for a transfer from local PCTs to local authorities around an agreed programme of spending on social care support that will help people and, in the doing of that, help them to stay out of hospital.

We have been looking recently at some of the evidence about how that £648 million is being spent, and some of the examples are falling into the categories of protecting early intervention services, protecting prevention services, crisis response and intermediate care. You are seeing in that something that is new, the forcing of that conversation by the availability of a pot of money coming through the NHS side, the bringing of local authority social services and health together where there is a common interest around the needs of their patients. While you might say the mechanisms are not being forced from the centre, we are certainly enabling, supporting and driving that "jointness". For example, the operating framework goes out to all directors of social services and chief executives of local authorities, bringing people into a wider community of responsibility for addressing people’s needs so that we are not, if you like, limited by the route down which money flows. Obviously, we are bound by the legislative framework for social care, and what we are trying do is work within that as constructively as we possibly can.

Q175 David Tredinnick: It is very helpful to hear that and I am sure we welcome the £648 million that is coming across to social care. The Secretary of State touched on the importance of getting local politicians on board. As we look at the social care and efficiency savings, I would like to draw your attention to the fact that the Local Government Group has told this Committee that the social care system is close to collapse simply because it is not able to properly respond to the demands on it and that it is "reacting as a crisis service in many respects." How do you react to that statement?

Mr Lansley: The first thing I would say is that one of the reasons why we recognised the pressures on local authorities was one of the reasons why, in the spending review, we made the two additional supports to social care that I mentioned previously. The evidence that has come forward, as a result, is that local authorities have, in the great majority of cases, not had to reduce their eligibility. Some may have but, generally speaking, they have not had to reduce their eligibility. There was a process previously, and we know that there has been a movement away from access to social care for those with moderate care needs towards substantial care needs. The truth of the matter is that we always knew, and we made clear in response to the Dilnot report through the spending review, that what we were setting out to do was to give local authorities, effectively, a bridge to a longterm structure of social care-one that is not only about funding but also about quality, the workforce, the structural regulation and so on and so forth. It is necessarily something which we are looking at through the social care engagement this autumn with a view to all of those aspects, including bringing together their response to the Dilnot Commission for the longer term.

Q176 David Tredinnick: Thank you for that. In your memorandum to the Committee, and certainly in the written submission, you told us that "budgets for social care across England overall are only £200 million lower this year than they were in 201011, a reduction of around 1.5%. The Local Government Group and the Association of Directors of Social Services argue that, on top of that reduction in funding, increased demand and other cost pressures mean that local authorities are having to find a further £791 million in efficiencies, almost £1 billion in total."

Notwithstanding that amount, which Una O’Brien spoke about, the £648 million transfer, do you agree with that assessment? Do you think that is a fair assessment?

Mr Lansley: I said earlier that, so far as we can see, the estimates from surveys which have come back suggested that the local authorities’ social care budgets on average are reducing by 1.1% for 201112 compared to 201011. That is, of course, against a background of rising demand. Indeed, what is interesting is that, under those circumstances, there are some pretty challenging gains in terms of efficiency that are required. We know, because we have been working through the Department with ADASS, local authorities and the Treasury on supporting that kind of efficiency gain-I think we saw last year efficiency gains in the order of 3.5% to 4%-that many in local authorities, responding to your own survey, are suggesting they are looking for greater efficiency gains than that in the year ahead. That is pretty challenging, and I make no bones about that.

Q177 David Tredinnick: I accept that it is challenging. I think we all do. The Department has argued-developing this-that there is enough funding available to protect people’s access to care without tightening eligibility. On the other hand, the Association of Directors of Social Services-ADASS-has told us that 13% of councils raised their eligibility thresholds this year and that 82% of councils now only provide services where the level of need is significant or higher. Are you disappointed by this?

Mr Lansley: If I may, I will ask Una to add a word about changes in the eligibility because my recollection was not that figure.

Q178 David Tredinnick: We have been told that 13% of councils raised their eligibility thresholds this year and that 82% of councils now only provide services where the level of need is significant or higher. These are very large figures.

Una O'Brien: Clearly, we are disappointed where local authorities have made those decisions. It is also the case that a lot of local authorities have not made those decisions, so the decisions about how to distribute resources across a local authority are obviously something that is handled within those individual organisations.

If I may go back for a moment on the overall point you have made about the scale of the efficiency assumption, the ADASS construction is based around an assumption on pay and prices and on demographic pressure. Our understanding-our judgment-is that it is not as large as that. We would not agree with the scale of what they set out because that is their interpretation of the demand pressure with pay and prices. Our view of pay and prices is more conservative than the one they have taken, so we would not share the scale of the efficiency challenge that they have set out. Notwithstanding that, it still is challenging. Those decisions, then, are for local authorities in the distribution of their resources to come to a view about how they are going to manage it.

The point you are making about the eligibility criteria does go to this much broader and more challenging problem that we have as a country, which is to work out a new and different funding system for social care. What we have done is put an arrangement in place in this spending review, as best can be done, to hold the position steady. The starting position is one that is already challenged, and finding that new arrangement between the individual and the state around how we should fund social care going forward is very, very important. I would not want to take away from the significance of the work that is being done around establishing a new way forward because that is really the answer to addressing the question about eligibility, in addition to which, of course, we have had the Law Commission’s report on that.

Q179 David Tredinnick: I am sure my colleagues want to come in on this, so I will ask you only one more question on eligibility. How would you expect local authorities to cope with reduced funding and increased demand without tightening eligibility? Is it not trying to square a circle? Is it possible to do that? How can local authorities cope with this reduced funding and increased demand without tightening eligibility? Surely that is the valve, is it not? The safety valve is eligibility. How can you do it any other way?

Una O'Brien: I hope the Committee has seen the Demos report which was done with Scope, the organisation for people with disabilities, which is already demonstrating that, certainly for services for people with disabilities, there is not a direct correlation between pressure on resources and the type of service that is made available to people. Their report bears scrutiny and is very compelling in some of the stories that it tells about personal budgets and direct payments, where they exist. Of course, they do not cover the totality of social care by any means. Nevertheless, they can have a very significant impact on the way in which services are delivered. Only the other day I was talking to, for example, a different local authority in Westminster. The way they are approaching this is a fundamental redesign of how they deliver their services where they are absolutely focused around maintaining quality but doing it in a different way. The model that they have had, the conventional model, is being challenged and they are having to rethink that. It is not a case of everything stays steady and then the changes are simply made to money. Rather, as David was saying earlier on with the model around the acute hospital services, these financial challenges pose a fundamental redesign question around the way in which services are delivered.

Q180 Chair: Do they not, in particular, pose a requirement to redesign services across the health/social care divide, and is that not where more effective joint commissioning processes provide the opportunity for better use of resources in both social care and in the healthcare system?

Una O'Brien: I think that is right.

Mr Lansley: That is true. In her earlier answer Una made clear that that relationship between the NHS and local authorities is giving rise precisely to that kind of joint planning in order to do joint work.

Q181 Chair: Is there evidence that it is happening quickly enough to relieve the demands that are being placed upon the system?

Mr Lansley: Yes, in part, in response to what David was asking in terms of "Is eligibility the only route through which you then respond to these financial pressures?" It is interesting, looking at the data we have about the structure of the transfer from the NHS to support social care of £642 million in this financial year, for which the data has been returned to us about how this money is to be used, that nearly £116 million is for maintaining eligibility criteria, so there is an issue in terms of that. When you begin to look at all the other things that are being done, it is about community equipment and adaptation, £32 million, £28 million plus for telecare-I was mentioning those opportunities-integrated crisis and rapid response services are £50 million, and both in South Birmingham and Kirklees, where I have been, that makes an enormous difference. It is free for those who are getting access to that service but it is doing an enormous amount to establish people in a preventative way rather than simply letting them fall into care need and then providing them with an expensive package over a long period of time. There is £117 million for reablement services, £50 million plus for early supported hospital discharge schemes, and bedbased intermediate care services at £61 million. There is a range of different responses which are meshing the NHS and social care together. That is why we are doing this and it is demonstrating that kind of joint working in a way that was not present before. There were good examples in the past, especially where there were care trusts bringing people together, but they were far too few. This is in 151 primary care trusts-all over the country.

David Tredinnick: I am not saying it is all bad, but I attended the Hinckley and Bosworth Health and Wellbeing Partnership briefing meetings, and I am going back. There is no doubt there is a lot of work going on between our local doctors, the council and other organisations to make things happen. I merely wanted to alert you to what I see as pressure points and points that the Committee are concerned about.

Q182 Chair: Can I be clear about the facts and what these numbers mean to us. When it is said that the expected budgets of social care authorities are down by 1.5%, is that after taking account or before taking account of the NHS transfer money?

Una O'Brien: I do not think it does take account.

Richard Douglas: It does take it into account.

Una O'Brien: I beg your pardon. It does take it into account.

Q183 Chair: The total spend, including NHS money on social care, is still down by 1.5%.

Richard Douglas: It is down by just over 1%, yes.

Q184 Rosie Cooper: I was going to say those figures, Secretary of State, represent a drop in the ocean. What are you doing to measure, to evaluate and to quantify that huge amount of unmet need that is out there that will be a major part of the Treasury’s requirement for Dilnot? What work are you doing?

Mr Lansley: Local authorities and ADASS themselves are very clear. We have done work collectively, over the spending review period, on what our anticipated demographic pressures lead to in terms of rising demand, and that is of the order of 1.5% additional demand from demographic changes alone. My personal view is that that is an underestimate and I think most social services authorities would tell you it is an underestimate. The reason why is because of the relative morbidity of people, in addition to demographic pressures, when they are older. The extent of comorbidities and the degree of vulnerability is tending to add to those pressures, but we can offset that. If we offset it through more preventative work, then we may be able to manage those pressures more effectively. Our general calculation-our estimate overall-is that we are looking at least at a 3.5% efficiency gain each year in order to respond to the levels of demand and cost in the service. That is what we are aiming, at least, to achieve.

Q185 Rosie Cooper: So 82% of councils only provide service now to those people who are desperately in need of it. You are only putting in 3% or 3.5%, whatever the figure is. We all know there is a huge unmet need out there. Dilnot requires the Treasury to have a grasp of that before you can take off and deal with the problems that are coming in social care and I would have thought you would be wanting to try and really-and I understand how difficult it is-get a grip on much of that unmet need. Una said before, in a response, and I understand that the question was phrased like that, that she was disappointed if local authorities were changing their criteria basis, but if you are one of those people out there desperately in need of those services, or you have family who are not quite desperately in need but absolutely need help, you would be devastated, never mind disappointed, that you are not getting it.

Chair: Can I stop you there and have an answer to that? Andrew needs to leave and wants to come in but can we have an answer to that question?

Mr Lansley: From my point of view, and I will not repeat all that I said before, it is because we know that there are those pressures-and I make no bones about it-going back to previous spending reviews, and support for social care was very often a residual sum. In the spending review that took place last year social care was at the forefront of the coalition Government’s considerations of where resources should be provided and £2 billion a year additional resources were provided both through the NHS and the Formula Grant Settlement. We know that is a bridge for the future. We know that it does not escape from the fact there are considerable pressures. We know that the social services authorities have delivered something over a 3% or 3.5% efficiency gain last year but will need to do so in further years in order for the loss of eligibility to social care not to continue. In fact, the loss of eligibility for social care this year compared to last year is limited. The extent to which we are investing in prevention and other routes not only to respond to need but to try and offset rising need is considerable. This is not, in the way that the NHS is, a service which is provided with a comprehensive service in all parts of the country, that is free. It is a local authoritydelivered service and it is a local authority-led service. There will be differences in different places about the decisions that are made, the nature of the services provided, how they are provided and indeed the extent to which they are provided. But we do keep track, as we have said, of the way in which they are provided. Our objective is to work with the local authorities and ADASS, understanding the nature of the service they are providing and making sure that the support we give, as central Government, through the Formula Grant and the NHS, enables them to respond more effectively in the future.

Chair: I am sorry I did not get Grahame in. Andrew has a quick question.

Q186 Andrew George: On the big question which you were alluding to earlier, Secretary of State, Sir David said in previous evidence to us that health reform, reorganisation and the efficiency gain were not merely parallel but mutually reinforcing. While we are impressed by the elegance of the language, the question is: how? A lot of people are very sceptical that they are going to be mutually reinforcing, and in fact they may be quite the opposite. The costs of change, commissioning, achieving integration, which you mentioned earlier, the costs of recreating supra-local and sub-national strategic tiers, and so on, are going to be big challenges.

I will add the second question now rather than come in later. Secretary of State, you earlier talked-and I think with the agreement of everyone, I am sure-about the desirability of the integration, for example, of urgent care between outofhours GPs, telephone triage and the ambulance service. How is this going to be achieved in such a circumstance? One can see the budgetary efficiencies that are achieved by doing so, but how is that going to be achieved under the reorganisation?

Mr Lansley: On the latter point, it is perfectly clear that we are going to be looking to clinical commissioning groups themselves to provide leadership in this area, but that does not mean that clinical commissioning groups are in any sense bound to their own geography. In any case, they will be working together on a range of commissioning tasks. One of those commissioning tasks will be in relation to emergency and urgent care, and very often they would look beyond their own boundaries to make that happen. When you look at urgent care, the sensible thing to do, as in many of these areas, is for them to work together through the Health and Wellbeing Boards. For example, in Cornwall that would be the Cornwall County Council, a Health and Wellbeing Board, clinical commissioning groups-I forget how many there are in Cornwall, but there will be a number.

Andrew George: Three.

Mr Lansley: They should work together to see that. They may have local solutions, because the geography of Cornwall is quite challenging in terms of provision of urgent care, but they might well cooperate together in saying, "We want to work with the local authority and the ambulance service and others and the hospitals trust" because, to that extent, they have a combined single hospitals trust, to all intents and purposes. They might work together in order to try and devise what an urgent care structure looks like.

Can I talk about the mutually reinforcing? We published a revised impact assessment when the Health and Social Care Bill entered the Lords. The costs of the transition are estimated at between £1.2 billion and £1.3 billion. The longterm annual savings will be £1.5 billion in due course. The savings per annum over this Parliament rise from £643 million this year to £1.5 billion by 201415, so they are mutually reinforcing in the sense that the development of clinical commissioning groups and the abolition in due course of primary care trusts and strategic health authorities assist us in the process of delivering these administrative savings. That is the lesser part of this. The greater part is the fostering of clinical leadership and when we are talking, for example, about delivering operational efficiencies and about delivering clinical redesign of services, it is the bringing forward in the modernisation process of clinical leadership across the service, not least in the clinical commissioning groups, clinical networks and the like, that is most likely to enable us to achieve these secular changes in the structure of services.

Q187 Andrew George: Why are those who gave evidence last time-we referred to them earlier-so sceptical and what have you failed to do to persuade them?

Mr Lansley: In my experience, most people are sceptical, especially where change is concerned. That does not mean that all change is wrong-let us be clear-if the principles are right. From my point of view, it is my job to be clear about the strategy. We have been very flexible about the implementation, listened hard and changed quite a number of things. As the Future Forum and the listening exercise made clear, people support the strategy. They want to see a patient focus. They want to see clinical leadership and devolved responsibility close to patients in the hands of clinicians and they want to see a focus on outcomes. As it happens, they also, I think, want to support the fostering of a stronger public health structure with local government leadership for health improvement. They want all those things, so let us keep our eyes firmly fixed on that strategy. In this context, where QIPP is concerned, the strategy helps us to deliver that. If we did not have that strategy, we would still be sitting here discussing exactly the same financial challenge. We would still be living with exactly the same kind of challenge and you would be asking us a lot of questions about why we are not engaging clinicians more in the process of redesigning services in order to benefit patients. The fact is we are doing that.

Chair: We have been at it now two and a half hours. It is two hours. Although it may seem like two and a half, it is two hours. Unless any of my colleagues have any-

Q188 Dr Wollaston: I want to follow up very briefly on a couple of points. You twice referred to accident and emergency quality indicators, which I agree are very important, and also outcomes. Could you clarify for us what proportion of A&E attendances are currently related to alcohol, particularly on Friday and Saturday evenings; what proportion of ambulance callouts-I know I am rather tedious on this issue-how much this costs accident and emergency departments; the impact it has on the patient experience and whether you would commit to introducing a requirement for staff in A&E to record when it is their impression that alcohol is somehow implicated? I think the costs are huge. Have you made an assessment of the costs?

Mr Lansley: I am pretty sure we have. I do not have it immediately in front of me. Strictly speaking, the answer to your first question, "How many A&E attendances are associated with alcohol on a Friday and Saturday night?" is "A lot". "Does it cost a great deal?" I think it does. Across the NHS as a whole, we are certainly looking at in excess of £2 billion, from memory, as directly associated costs of alcoholrelated admissions. Across the NHS as a whole, alcoholrelated admissions and treatments have seen very large increases. That is a combination. The interesting thing is that that has continued to be true, and that increase has continued, regardless of the fact that the overall consumption of alcohol in this country rose but then plateaued and has slightly fallen in recent years. It is because the character of alcohol abuse is still a major problem for us. We have a minority of younger people who engage in binge drinking and a minority of older adults who engage in chronic alcohol abuse, but those are giving rise to immense pressures on medical and other services. A lot of public services are suffering from that. It is why, from our point of view, as part of our broader crossGovernment approach to public health issues, following up Healthy lives, healthy people last November, we undertook to publish an alcohol strategy and will do so soon.

Q189 Rosie Cooper: Could I ask the Secretary of State a very short question? Will providers be squeezed to give clinical commissioning groups a healthier start than they might have?

Mr Lansley: I do not understand the question. How do you mean?

Q190 Rosie Cooper: We heard from Cumbria, for example, that they were given a huge wad of cash to enable them to redesign services. We are asking clinical commissioning groups to implement this brand new vision, and some of them will have cash problems. Will there be any injections of cash in there? Where will you get the cash, or are you going to put any extra money in there?

Mr Lansley: What you have to understand is that from 1 April 2013, subject, of course, to them having been authorised, the clinical commissioning groups will get all the money for the NHS in their area. That is how the money will be distributed, so the idea that they will somehow have an extra bit of money, the money will be allocated to the CCGs-

Q191 Rosie Cooper: What will happen to the deficits they now have?

Mr Lansley: We have said-I have told the Committee previously-and have made clear to the clinical commissioning groups and primary care trusts that, if they do not incur deficits this financial year and next financial year, we will make sure, on 1 April 2013, they do not start with deficits that were incurred prior to 1 April 2011.

Q192 Rosie Cooper: Where will the Department-you-get the money for that bit? Is that where you are going to squeeze it out of acute hospitals?

Mr Lansley: No.

Q193 Rosie Cooper: No?

Mr Lansley: No.

Rosie Cooper: Fine, thank you.

Chair: That was three minutes of extra time. Thank you very much indeed.

Prepared 17th October 2011