Health and Sport Committee

Meeting date: Tuesday, October 30, 2012

Official Report 626KB pdf

---

Draft Budget Scrutiny 2013-14

Good morning and welcome to the 29th meeting in 2012 of the Health and Sport Committee. As usual, I remind everyone present that mobile phones and BlackBerrys should be switched off, as they can interfere with the sound system.

Agenda item 1 is our continuing scrutiny of the Scottish Government’s draft budget 2013-14. I welcome our final panel of witnesses. We have Alex Neil, Cabinet Secretary for Health and Wellbeing—welcome, cabinet secretary, to your first meeting of the Health and Sport Committee in your new role. We look forward to working with you over the future period. From the Scottish Government, we have John Matheson, director of health finance and information, and Derek Feeley, director general health and social care and chief executive of NHS Scotland. I offer the cabinet secretary an opportunity to put some remarks on the record.

Thank you, convener. It seems that every time that I get a change of ministerial portfolio, you end up as the convener whom I report to. However, it is a welcome development.

Since the Government was elected, our record of achievement has not only led the way in the United Kingdom in, for example, improving patient safety and massively reducing waiting times, but it is recognised internationally as innovative and aspirational in its scope and potential for improving health and healthcare. All that has been undertaken in the context of the most dramatic reduction in public spending ever imposed on Scotland by the UK Government. Within those constraints, we continue to deliver on our manifesto commitment to pass on the Barnett consequentials to health.

Resource funding will increase by £293 million in 2013-14 and national health service territorial boards will receive allocation increases of 3.3 per cent in 2013-14 and 3.1 per cent in 2014-15, which will be directed towards front-line services. That means that the core budgets of our territorial health boards will have been protected in real terms in each year of the spending review period.

The core health capital budget will be supplemented by identified revenue-to-capital transfers of £320 million in the spending review period. Further investment in improving the NHS estate will be available through delivery of revenue finance projects, equivalent in capital terms to an additional £750 million of investment. That means that there will be over £2 billion of capital investment in the NHS estate over the spending review period.

In delivering our NHS healthcare quality strategy ambition of effective care, we have made significant improvements to health and healthcare outcomes for the people of Scotland. We have made a significant contribution to the marked reductions in mortality rates for the three big killers: cancer, heart disease and stroke. The Scottish Parliament has passed world-leading legislation to introduce minimum pricing for alcohol. The national keep well programme of inequalities-targeted health checks has successfully engaged more than 180,000 people, and we have rolled out our detect cancer early programme, which aims to increase the early detection of cancer by 25 per cent.

We must be bold enough to visualise the NHS that will best meet the needs of the future in a way that is sustainable, then make the changes necessary to turn that vision into a reality. The key priorities for 2013-14 will be, first, to develop a shared understanding with everyone involved in delivering healthcare services; secondly, to secure greater integrated working; thirdly, to prioritise anticipatory care and preventative spend; fourthly, to prioritise support for people to stay at home as long as appropriate; and, finally, to take action to ensure that people are admitted to hospital only when it is not appropriate to treat them in the community.

That is a brief overview, convener; I hope that it gives you a flavour of the direction of travel that we intend to pursue. I will be delighted to answer any questions from the committee.

Thank you. Our first question is from Dr Richard Simpson.

Thank you, cabinet secretary, and welcome to the Health and Sport Committee.

In your opening remarks and in the letter that you sent to the convener, you paint a really quite rosy and optimistic picture. That is slightly paradoxical, given that you opened today by referring to the largest public sector cuts that have ever been imposed, which is the case for the rest of the UK as well as for Scotland.

The health service in England is said to be facing cuts over the spending review of £20 billion, which is a massive amount. The equivalent cuts here would presumably be in the region of £2 billion and yet you have painted for us again this morning a highly optimistic picture of a health service that is delivering—in fact it has delivered—and will be able to deliver all your aspirations. That is all well and good, but we know from Audit Scotland, for example, that three health boards last year were lent funds—that is in paragraph 24 of the “NHS financial performance 2011/12” report from Audit Scotland. We also know that there are high-risk efficiency savings—that is in paragraph 41, exhibit 8 of that report. Indeed, in the case of NHS Lothian, 62 per cent of the efficiency savings are regarded as high risk.

In your letter to the committee, you said that the local development plans were on track at the end of September to deliver the financial balance laid out in the local development plans and their efficiency savings. With regard to the three boards that were lent funds, why was that not reported until we got the Audit Scotland report? When will the money be repaid by the boards? Will it be this financial year or the next or some other time? The boards are all on track to have a zero balance at the end of this year and yet they have those loans.

I have significant concerns about the budget situation. I will illustrate that by saying that, having exposed the waiting list games in NHS Lothian—we await with interest the Audit Scotland report on waiting times—we now know that Lothian is about to offer 500 patients treatment abroad so that it can meet its targets. The capacity problem, in Lothian at least, is significant. If it is significant for Lothian, I wonder how significant it is elsewhere.

NHS Borders is offering patients treatment in England—not just for procedures that are never available in Scotland, which would be appropriate, but for other procedures that one would normally expect to be performed in Scotland. In the last full year for which we have statistics, we learned in an answer given in the Westminster Parliament that 8,000 Scots were treated as in-patients in England and 17,500 Scots were treated as out-patients in England.

Can you get to your question?

That does not include accident and emergency. Will the cabinet secretary comment on those points and will he undertake to ensure that increased transparency in financial reporting is put in place, as Audit Scotland has called for, to ensure that the committee can scrutinise the NHS finances as we would wish to?

I am delighted to answer. First, I refer to the beginning of Richard Simpson’s remarks regarding the savings of £20 billion in cuts in the NHS south of the border. Those cuts were introduced by Andy Burnham, the Labour health secretary and then kept by Andrew Lansley and now Jeremy Hunt—the Tory health secretary south of the border.

I will not get into a macho competition with the south of the border on who can make the biggest cuts to the NHS. Unlike those south of the border, we do not intend to tear up the NHS. We intend to keep it as an integrated, fully equipped, well-manned and high-outcome service that is free at the point of use. If the people south of the border want to destroy the NHS that is entirely up to them, but the NHS in Scotland will adhere to and continue to build upon the founding principles on which it was established in 1948.

My second point is on the Audit Scotland report. All those transfers of funds were reported. They are already in the public domain. They were always in the public domain. Audit Scotland’s point was that the way in which we put them in the public domain should be more obvious; it should be more glaring. We are happy to look at that to see how we can do that, but it is not true to say that the information was not in the public domain. The information was in the public domain and I will hand over in a second to John Matheson, who will give you chapter and verse on when and where the transfers were reported.

Let me also make the observation that Audit Scotland is the auditor of the three health boards that are referred to in the report that Richard Simpson mentioned. Audit Scotland signed off those accounts. Clearly, as the auditor, Audit Scotland would not have signed off the accounts if it had thought that there was a major problem, so we need to see the issue in context.

Thirdly, on the Audit Scotland report, the amount involved is less than 0.1 per cent of the £11.5 billion or so that we spend on the national health service every year. The procedure whereby we vire resources within the national health service at the end of the year was endorsed by the Public Audit Committee when it was convened by Hugh Henry, who said that that was the right thing to do. Unlike south of the border, where health trusts are profit centres, the health boards in Scotland are cost centres and are part of a national health service. We do not have 14 separate health services under each of the health boards; we have a national health service. Therefore, we allocate and, if required, reallocate resources as and when required.

For two of the three boards that were mentioned, the specific reason for viring funds was cash-flow implications arising from building projects, such as the new Victoria hospital in Kirkcaldy. Not just in the health service but across all departments, every Government vires resources and is perfectly entitled to vire resources, particularly in the final quarter, to ensure that we do not end up with a massive underspend that must then be sent back as a cheque to the Treasury. I make absolutely no apologies for that clever and intelligent management and use of resources, nor do I accept in any way that we have not reported these matters, as we have done for years, in the public domain. I further emphasise that we did that in the way that was endorsed and recommended by the Parliament’s Public Audit Committee. We have adhered to every one of those rules.

We will accept the Public Audit Committee’s recommendations to make matters even more transparent; we are happy to do that. However, there is a difference between making something more transparent or more obvious and not reporting it. We have reported it. As auditor of the three boards, Audit Scotland knows that.

Richard Simpson’s final point was about people being treated outwith Scotland. That is always very much a last resort, which will be done only if it is absolutely clinically essential. Clearly, our job is to ensure that the capacity exists in Scotland. Until this year, anyone who required a procedure such as a transcatheter aortic-valve implantation for a heart condition had to have that done furth of Scotland. Under this Government, the TAVI procedure has been introduced in Edinburgh, so people can now have the procedure in Scotland without having to travel down south. It remains our strategy to treat people outwith Scotland only as a last resort. You should not always believe every word that you read in the newspapers, even those as reputable as the Evening News and The Scotsman.

I ask John Matheson to quote chapter and verse on when we reported those virements.

Before he does so, I point out that the matter relates not only to Audit Scotland. In evidence, the Royal College of Nursing, the British Medical Association, Unison and Professor David Bell have highlighted at previous committee meetings the lack of transparency in health budgets over a period of time. We have had a raft of evidence raising that issue, including papers from our budget adviser. I hear the cabinet secretary’s robust defence, but I think that it is important to address the issues in the broadest terms.

09:45

I will start with some introductory comments. We have regular contact with boards on the financial issues that they face, and we get into detailed discussions with them. We do not automatically give them support; rather, we look to ensure that any issue that they have is transitional and will be managed on a recurring basis so that we have confidence that they have financial sustainability.

As the cabinet secretary said, two of the three boards that Audit Scotland highlighted had double running costs associated with a move into new premises. I will focus on Forth Valley NHS Board as an example. We got a reassurance from that board that it had a sustainable financial plan. In its finance report for the four months to the end of July 2011, it talked about a potential overspend of £3 million and a worst-case scenario in the region of £10 million to £12 million. It entered into detailed discussions that involved the chief executive and me about how that issue could be resolved, and we offered it support, which was primarily funded from capital receipts generated from hospital sales within Forth valley. That was money that was going to come in in later years in Forth valley, and the board would repay that support.

In the finance report to the board for the nine months to the end of December 2011, it was highlighted that non-recurrent transitional costs of £4 million and non-recurrent support of up to £6 million had been received. We still tried to keep the pressure on the board to minimise any financial issues that it had, which was why we capped the level of support that we were willing to offer it. There is a repayment profile for the board that takes it up to 2015-16. It is on target in its financial position in the current financial year, as are Fife NHS Board and Orkney NHS Board.

We will, of course, consider transparency and see how we can be more transparent. For example, I meet a lead official in the Royal College of Nursing on a quarterly basis to discuss financial matters. We share the monitoring returns from each individual board with the RCN at its request to try to be as transparent as possible in the information that we provide.

The context is important. We are talking about 0.1 per cent of the total health budget. We are trying to enable boards to plan for the future in a sustainable way, but also to manage the reality of the current pressures in a controlled and effective way. That is what we have done with the three boards.

The approach is not new. Just after the turn of the millennium, NHS Lothian received support from the Scottish Government in recognition of the double running costs with the move to the new royal infirmary. Even in the current financial year, Dumfries and Galloway NHS Board has returned £4 million to the Scottish Government and asked that it be banked and carried forward for two or three years. We will do that on its behalf. It will then receive that money back to cover the double running costs with the move to the new Dumfries and Galloway royal infirmary.

Derek Feeley will supplement that a bit.

We are very keen to be transparent, and if there are issues that the committee wants to bring to our attention, we will respond to them favourably.

I would like to supplement what John Matheson said. There is one thing that we already do. John Matheson gives a finance report to the Scottish partnership forum, where the Government and the management side of the NHS and the trade unions in the NHS, including the BMA and the RCN, meet. Therefore, they regularly hear financial reports from John Matheson. That is a unique feature of the NHS. We openly share such information with our partnership colleagues.

If there is more that we can do, we will do it.

I remember NHS Argyll and Clyde selling the family future. From my personal experience, that is not a sustainable position.

Tayside, too, got into real financial difficulties. Our concern is seeing the future and whether there will be problems. Thank you for the explanations that you have given. At least we know that the loans are related to capital issues in which double running is required, so we can be clear about that.

I return to the cabinet secretary’s robust defence and his suggestion that we are different in Scotland and that we face a different situation. I accept that his party and mine have moved the health service in Scotland down totally different lines compared with the health service in England. That has been the choice of the Scottish Labour Party and the Scottish National Party.

However, despite the cabinet secretary’s comment that we are not going to have cuts in Scotland, we have lost 2,500 nurses. Forth Valley, whose financial situation has just been mentioned and which serves a population of only 180,000, has lost 50 nurses in the past year. That is a very substantial cut and, as I have repeatedly indicated in the chamber, we cannot have a situation in which we do not recognise that the loss of 2,500 nurses has front-line consequences. If that kind of unreality continues, we will be in significant trouble in a year or two.

One of the streams that was mentioned in the letter to which I referred was workforce planning. Cabinet secretary, will you provide us with the most up-to-date workforce plans setting out the posts that will be lost this year? I have been unable to obtain that information through a freedom of information inquiry. Grampian replied, highlighting my use of the word “axed” in my FOI request—I do not care what the thesaurus says; the posts have been axed—and denying that any posts have been axed. That sort of response from a health board does not provide the sort of transparency that allows this committee or indeed any MSP to operate. Will you give us those workforce plans and, furthermore, acknowledge that 2,500 posts have been cut and that that is putting the system under massive pressure?

I am happy to deal with all those points. First, however, I want to give you an example of the kind of financial pressures that we are under. The £45 million that NHS Lanarkshire has to fork out a year for the rip-off private finance initiative costs of Hairmyres and Wishaw is making a huge dent in the Lanarkshire budget, and we are having to pick up the PFI tab and all its consequences. I do not think that those who supported PFI are in a very strong position to criticise the national health service’s budgetary position.

As for nurses, I want to make three points. First, there are in total more qualified nurses working in Scotland today than were working in the health service when we took over five years ago. Secondly, if you look at the number of nurses per patient and per bed, you will see that we are far better staffed with nurses than any other part of the United Kingdom. We have in general a very good staffing position in relation to nurses in comparison with the rest of the UK. Thirdly, we need to recognise that the national health service is being reconfigured. Last year, Dr Simpson himself said that he accepted the shift in the balance of care that

“could result in a reduction in the number of acute beds.”—[Official Report, 8 June 2011; c 430.]

By definition, we are moving more towards day surgery and moving away from hospitalisation to treatment in the home. That is why in recent years there has been a 30 per cent increase in the number of community nurses in Scotland.

Nevertheless, we must be absolutely sure that we have the right number of nurses with the right skills mix throughout the health service, irrespective of the department that they work in or their hospital or whether they are working in the community or the acute sector. That is why, with our partners in the trade unions such as Unison, the RCN and others, we have developed the world-leading workforce planning tool, which has been 90 per cent implemented and will be 100 per cent implemented in the first quarter of next year. We will make that tool, which has been agreed with the trade unions and the RCN as the proper way to plan our workforce, mandatory for every board in Scotland from next April and it will ensure that we have the right numbers and the right skills mix, that the nurses are in the right place at the right time and that we can reduce substantially more our reliance on bank nurses. Indeed, we have already eliminated our reliance on agency nursing, and I believe that that is the way forward.

I have to say that conducting a debate on the basis of raw numbers is a very juvenile way of planning the workforce. However, speaking of raw numbers, I note that they have increased in the past five years.

The key thing is to ensure that we have the right number of nurses and that they are in the right setting, whether it be acute, community, or accident and emergency; that they have the right skills mix; and that we de-layer the management structure to ensure that maximum resources go into front-line nursing. That is exactly what we are doing. As I said, the workforce planning tool will be mandatory from April next year. That is the way forward rather than just bandying about numbers.

Again, it should be borne in mind that we are talking about the evidence that we have received. Audit Scotland highlighted a significant cut in the number of nurses in that area. That is an indicator that we are moving. In 2009, we had 58,428 nurses; by 2013, that will drop to 56,100, which is the loss of a couple of thousand nurses. I recognise that we will see an increase of more than 1,000 people who are involved in personal and social care.

We received other evidence that was not so much about the squeeze. Unison talked about the non-filling of vacancies and the increased pressures that are being put on professionals working in the hospital sector. Is that issue being dealt with? I am talking about day-to-day pressures. You highlighted the level of planning, and I think that we can see that, but there are fewer nurses and more people in personal and social care. However, there is a question about what is happening every day when people are not being replaced and vacancies are not being filled when, at the same time, nurses’ overtime is being cut back to keep costs down. All that puts pressure on and, as you say, no one is measuring the quality of the patient experience and the risk to the reputation of the health service. We have heard horror stories about care for the elderly in the acute hospital sector. What is going on here?

I will make two or three points in response to the very reasonable issues that you have raised, convener.

First, on vacancies, at the moment there are 900 vacancies for nursing positions in Scotland. Because of the controversy over numbers, I have been taking a close look at the profile of the vacancies as well as the numbers profile. I have been checking that boards have not been prolonging the length of time for which vacancies have gone unfilled for budgetary reasons. I am absolutely satisfied that the figure of 900 vacancies is fairly reasonable given the totality of the levels of employment of nurses in the national health service.

If we take your figure of 56,100—

It is not my figure; it is Audit Scotland’s figure.

We need to remember the distinction between the number of employees and the full-time equivalent, and we can see that 900 is not an unreasonable level of vacancies to have at any one time. However, I have sought assurances and I am keeping the situation under constant monitoring, to ensure that no board is using vacancies as a way of saving money. It goes without saying that nursing vacancies should be filled at the earliest opportunity. If a nursing vacancy is advertised, that means that we need that nurse. The time that is taken to fill the vacancy should not in any way be prolonged. Vacancies are being filled in the normal time.

Will you share that information with the committee?

No problem. As I said in our bilateral meeting last week, if the committee feels at any time that it does not have the information that it should have—financial or otherwise—let me know and we will provide it. We have nothing whatsoever to hide. As Derek Mackay said, we believe in total transparency.

You referred to pressure points. There is no doubt that there are sometimes pressure points; for example, the overall level of sickness absenteeism in the national health service is higher than we would like. Sometimes that absenteeism can create pressure points, which have to be dealt with. The point of the workforce management and planning tool is to deal with those pressure points. The tool is 90 per cent applied already throughout the NHS in Scotland. That will be 100 per cent by the spring of next year; after that, the tool will be mandatory. That should ensure that pressure points are identified early on and are therefore dealt with more speedily than in the past.

10:00

You said that everybody was happy with the evaluation of that tool.

Yes. We have involved Unison, the RCN and others.

When people come along and give us evidence, it is important that we test it with you.

I will hand over to Derek Feeley to give you some supplementary information. However, my understanding from talking to other people, such as international medical visitors to Scotland, is that the tool that we have developed is seen as the leading workforce planning and management tool in Europe, as far as health service provision is concerned.

Just to confirm, we have developed the tool in partnership. The RCN can speak for itself, but my understanding is that it has been advocating the use of the tool beyond Scotland. For example, it would like to see it being used in England, where it is not in current use.

The tool is about trying to identify the pressure points to which the cabinet secretary referred and that you, convener, were keen that we understood. We need to identify those pressure points and translate that information into the staffing numbers that are required.

The tool will not be a panacea—we are not pretending that it is—and we have other things in place. For example, we have introduced the one-year guarantee scheme, and we have the internships in nursing to ensure that people get good experience while they are waiting for permanent posts. It is easy to overlook those opportunities for nurses as we have become accustomed to them, but they are unique to Scotland.

I will pick up on something that Dr Simpson said in his opening remarks, because it is important to acknowledge his comments about these matters. The quality of healthcare in Scotland is good. It is safer, infections are down, hospital standardised mortality is down, waiting times are low, and care experience is high and being sustained. No one is pretending that there are no pressures, but the NHS is performing well and we expect it to continue to perform well.

In a previous evidence session, John McLaren challenged us all—politicians and Government—on the issue of the top health target of raising healthy life expectancy. Healthy male life expectancy is down a year and a half in Scotland, up three years in England and up four years in Wales. The top target has not been met and no one has done anything about it.

I have seen John McLaren’s presentation of those figures and it scared me a bit, too. I immediately asked my resident expert on these matters, the chief medical officer, whether those figures are right. Harry Burns has explained to me that they are an artefact of the way in which the data is collected. We will get that explanation to the committee.

John McLaren did give us a caveat, so we look forward to further information.

On that issue, John McLaren made a point about the accuracy of the information that we had. However, if raising healthy life expectancy is genuinely our top target, it leads us to question why we do not have better information—although I do not know if that question is going too far off course.

It may also be a feature of how other people collect their information—it might not be as robust as ours. We will provide you with the detail, because it is fairly technical and complex.

That is useful, cabinet secretary.

At last week’s evidence session, I asked witnesses whether they would want to reallocate some of the real-terms increase in the revenue budget to health boards and, if so, how they would do so and what their priorities would be. If I recall correctly, only two of the witnesses responded. Unison said that it would have greater efficiencies in accident and emergency units, and it mentioned Ayr and Monklands hospitals. I did not ask Unison to clarify what it meant just in case it was going to suggest that we close those hospitals—that is clearly not a priority for the Scottish Government. The voluntary sector said that more money and more of the change fund should be allocated towards it, funnily enough.

Given that we can see what financial support the Scottish Government is delivering to health boards, what representations have you had to reprofile your spending priorities? We could not really get anyone to take up the question at committee, but when we consider the draft budget we must take such issues seriously.

To be honest, apart from general comments from people about delayering management and, without being specific, other issues of that nature, we have not had any information. I have only been in the job for five or six weeks, but I have not received any detailed proposals from anyone on reprofiling the budget, either for this year or any of the next two years.

It might be useful if I explain where we are with the budget. Obviously, we made a manifesto commitment to pass on all the Barnett consequentials to the national health service and we have done that.

We have also done two specific things for the next two years. First, we have ensured that there is a real-terms increase in the budget allocated to the territorial boards as they are primarily—but not exclusively—involved in front-line services. That means that next year, with a deflator of 2.5 per cent, the boards will get an average increase of 3.3 per cent, which is a real-terms increase of 0.8 per cent. The year after that, with the deflator still at 2.5 per cent, boards will get an increase of 3.1 per cent, which is a real-terms increase of 0.6 per cent.

Secondly, we have shifted money from resource into capital. Clearly, there are major capital works that we must ensure happen so, as well as shifting more than £300 million over the next three years, we also have the £750 million non-profit-distributing programme. I have already announced the go-ahead for the new Royal hospital for sick children in Edinburgh, which is a long overdue project that has been wished for for many a year. There is a new neuroscience unit in Edinburgh and a range of other things, too.

Despite the massive cuts imposed from London, we have made very good use of our resources. Over the four-year budget, our efficiency savings, which will not in any way undermine our clinical objectives, will accumulate to almost £1 billion. Every penny of that is going back into front-line services.

Okay. I note that you did not say how any particular group has asked you to reprofile the heath budget, but I will move from the general to the specific.

Yesterday, I met staff at the Greater Glasgow and Clyde NHS Board’s psychological services. They have an interest in pushing forward the targets for children’s access to psychological services. Only a year or two ago, the waiting time to get clinician-led psychological support was one or two years. The waiting time is currently at 29 weeks. That is still not good enough, which is what the clinicians would say, too, but there has been dramatic progress in the correct direction.

The board has prioritised a budget line for that particular area, which is an example of how we start to get the results that are required when a health board sets its budget in correlation with the health improvement, efficiency and governance, access and treatment—HEAT—targets. The Scottish Government has set out a series of priorities. How do you monitor health boards to ensure that they are financially prioritising those targets? The issue is about not only the money that is given to health boards but how they then prioritise the agreed targets.

A great deal of monitoring goes on. For example, I meet—and my predecessor met—all 22 health board chairs regularly, and Derek Feeley meets the chief executives once a month. There are also a lot of bilateral meetings. John Matheson meets his finance counterparts on the boards regularly, and John Connaghan, who is in charge of workforce development, meets his human resources counterparts regularly too. There is also monthly reporting on a range of performance indices.

I will pull that information together at ministerial level to produce my own internal monthly management information report. It will have a number of sections, but the most important one to me will be on treatment outcomes. That information is core to how we decide on the success or otherwise of a health system, so I want to look at it regularly. Obviously I will not look at every treatment outcome every month, but I want to look closely at outcomes and their costs, and benchmark them against the best to see how we are doing on treating cancers, heart disease, stroke and all the rest.

A lot of the work is already being done, so to some extent the report will be a collation exercise. However, I assure members that we get regular reports on cancer and heart disease treatment waiting lists, HEAT targets and a whole range of other things. Members would need only to look at my ministerial box of an evening or a weekend to see how many reports we get from all around the health service in Scotland on meeting performance and outcome targets.

I have one final question on that subject.

It is not only the financial budget that local authorities set to achieve the HEAT targets and the Scottish Government’s variety of priorities that is important. The outcomes are important, too—the budget is the input. NHS Greater Glasgow and Clyde did not dramatically increase the financial resources that it put in, but it achieved quite a dramatic improvement, so it is not always about the amount of money that is put in. If we organise our services correctly, we get a quality output.

Do you monitor the money that is put into specific budget lines across the 14 health boards and compare the outputs? If one local authority is performing well in a particular area and another is not, it is important that best practice is shared. We need to ensure not just that we monitor the money that we put into health boards but that we get the outcomes that we desire. Is that monitoring done as standard?

Absolutely. The emphasis on targets has been changing. As you know, the HEAT targets have been consolidated into 16 targets, and we are carrying out further reviews to see whether they need to be updated or changed in any way to reflect the dynamic situation in the health service.

The current situation can be compared with the many targets that existed previously. One can set too many targets and end up not achieving any. The fact is that we look at the outcomes, and we are much more outcome-orientated than ever before. It is the outcomes that matter.

As the minister who is in charge of the health service in Scotland, I am keen to look at a lot of things such as finance, staffing and all the rest. I even look at what the Opposition parties are saying to see whether there are any good ideas, although I have to say that I have not seen a lot recently.

I look at all the outcomes and the costs and we benchmark the outcomes so that we can get a clear picture of how well we have done historically, how well we are planning to do in the future, and how well our outcomes compare with the best.

John Matheson wants to add something about the relationship between outputs and inputs.

I have just a couple of points. In financial planning, we do not want surprises. With regard to the draft budget for 2013-14, the boards welcomed the outcome and also the fact that the uplift was what they were expecting, as they had been drawing up their financial plans on that basis. The spending review has been helpful in giving boards some assurances about what to expect in the next period.

The boards want as much as possible to go into their baseline, so we have been putting more resources in at that end. For example, we have put in an additional tranche of access moneys directly into the boards’ baselines.

The cabinet secretary is right to say that we have been focusing, and getting the boards to focus, on outcomes and outputs. We have tried to move away from a micromanagement approach in which we give boards smallish allocations for specific targets. We have succeeded in bundling allocations around themes such as primary care, early years, mental health and so on. That gives the boards local flexibility, which is important, as to how they use that resource, provided that they deliver the required outcomes and outputs.

10:15

We explicitly connect finance and performance. The local delivery plan that every board is required to construct contains both its commitments to meet its HEAT targets and its financial profiling. When the cabinet secretary conducts annual reviews with boards, as he did yesterday in Fife, we talk about performance and finance together. We do not talk about the two things separately. Likewise, in the mid-year reviews that officials do with boards, we talk about both performance and finance.

I will say two other things that might give Mr Doris a bit more comfort. We have done specific benchmarking of boards, looking at what they spend against their outcomes, in a number of areas including mental health and theatre utilisation. That enables us to ensure that we get value for the spend. We have also started to develop some tools to help boards to make assessments. For example, the integrated resource framework is a tool that is intended to help boards to look at what they get for the investment that they make. Quite a lot of effort is going into that.

I think that Mr Matheson hit the nail on the head when he said that, in financial planning, we do not want any surprises. The evidence that we have received is all about that. Are we planning properly for a shrinking budget? I think that we are already there as a committee, but there are a number of potential surprises. There is a £1 billion maintenance backlog. I understand that some of that work just involves a lick of paint somewhere, but some boards are having to use revenue funding because they do not have capital funding, including in your constituency, cabinet secretary.

We have a recent report from Audit Scotland—I came across it just last night—on planning for a legal decision on equal pay. I think that the situation might have been turned upside down. That is no surprise, because local authorities have been involved in it for many years and it has cost us an absolute fortune. Equal pay is therefore a factor, and many thousands of people are involved in the issue.

When we look at efficiency savings, again Audit Scotland is saying that people have not identified where that money is going to come from. There is a risk that boards might not make the savings.

We are looking at the robustness of what is happening in the health service. As we heard last week from the RCN and the BMA, the worst thing that we could do is to not plan for eventualities and to see services collapse. I think that that is where we are. There are still many surprises lying in there, or there could be.

I would not describe them as surprises, convener. We do scenario planning. If we take the backlog as an example, it was the subject of a full review earlier this year, under my predecessor, and there is now a fairly advanced estate strategy operating in the national health service. It would be a lot easier to implement if all the surplus properties were bought up in the market but, because of the condition of the economy, properties that might have sold quite quickly a few years ago are not now moving as quickly. However, we are clear about the matter. We know where the risks lie and we look at contingencies where they are required. In life, we inevitably get the odd surprise, but—

It is a big number, cabinet secretary.

Absolutely, and I think that we are very much on top of where the risks might be.

If we look at the big, top-line figure that covers everything from a lick of paint in a reception area to the cladding on Inverclyde royal hospital, what is the figure for the big risks?

There is a detailed analysis of the backlog, which I will be happy to send you. The £1 billion figure includes, for example, buildings that have been declared surplus to requirements.

I understand that.

Clearly, they will not be a high priority in terms of backlog spend. When we boil it down and look at where we really need to spend money in the next few years, the figure is substantially lower than £1 billion.

What is it? Does Mr Matheson know?

John Matheson will give you the detail.

This is a good example of transparency. I know that we went down to the level of the lick of paint, but we looked at low risk, high risk and significant risk as well as medium risk, and the final figure was just over £1 billion.

I will give you one board as an example in a moment but, when we break down the overall figure into significant risk and high risk, as opposed to medium and low risk, it roughly halves. When we take account of what is in the planning programme, which includes Dumfries and Galloway royal infirmary, the new sick children’s hospital in Edinburgh—the cabinet secretary mentioned it earlier—Ayrshire and Arran community hospital, and Balfour hospital in Orkney, that brings the residual figure down to just over £400,000.

£400 million.

It is £400 million—thank you for the correction.

I wish it was £400,000. [Laughter.]

I am normally quite good with numbers—the figure is just over £400 million.

Dumfries and Galloway is a good example. The gross figure in Dumfries and Galloway, as part of the £1 billion, was £61 million, of which £40 million will be dealt with through the new Dumfries and Galloway royal infirmary and £5 million will be dealt with through disposal of properties, and a backlog maintenance programme will deal with the balance. Therefore, we immediately come down from £61 million to just over £10 million for Dumfries and Galloway.

So the money is not just for the fabric of buildings but for high-tech diagnostic equipment. Audit Scotland suggested that the latter is not included.

The equipment is not included in that figure. We have a separate programme for equipment replacement. That is one of the reasons why we have transferred £320 million across from resource to capital over the three-year spending review.

Where is the figure for that equipment replacement?

I do not have that detail in front of me, but I can give it to the committee later.

We would welcome that as well.

We are happy to send you the detail, convener. I point out that some of the spend actually saves money. I will give you a very good example that you may be aware of, which is the electronic pen that was developed by community nurses in the Western Isles.

After doing an exercise that showed that 41 per cent of their time was spent on administration, the community nurses developed an electronic pen, which basically means that when they are out in a remote cottage or wherever, attending to a patient, and they have to write up their notes, the electronic pen automatically updates their computer so that they do not need to go back to the office to type all the notes into the computer.

The electronic pen has many other applications, but the community nurses in the Western Isles reckon that that single application reduced the time that they spend on administration from 41 to 20 per cent. As more people use the electronic pen, the unit costs come down. Therefore, the fairly modest spend on that will save a lot of time and ensure a lot more throughput for community nurses, which will make their job much more enjoyable because they are spending only 20 per cent of their time on administration instead of 41 per cent. That is a good example of where the application of technology has knock-on savings and efficiencies.

I look forward to getting on to that preventive agenda later.

Have we established a liability for equal pay for the boards?

We work closely with the central legal office on equal pay. Our current advice is that there is a differentiation between the position in local authorities and that in the health service. For the past number of years, we have recognised it as a potential risk. We are not in a position to put a value on that risk, but we are working closely with the staff side in taking that forward. At the moment, it is what we have described as an unquantified contingent liability in the accounts, so we recognise it as potential risk, but it is not possible to put a value on it.

Has the risk increased since the decision in the Birmingham case? I note that Audit Scotland referred to an expectation that the time bar could be favourable for the health service. Perhaps you can come back to that question.

I am aware of that issue, and we stay close to the central legal office on it.

That does not fill me with confidence, Mr Matheson, because the legal advice for local authorities on the issue has not been great over the years and it has ended up costing us more.

I will make a final point on that, if I may, convener. We stay close not just to the central legal office but to Audit Scotland, and every year we sit down with them both and come to an agreed position for the annual accounts for transparency on how we are going to report equal pay. We will continue to do that.

We will be happy if you can keep the committee up to date in that regard.

I thank the cabinet secretary for his evidence so far. My question follows on quite neatly from comments made by Bob Doris, who pointed out that, in the first of last week’s evidence sessions, the witnesses were asked how they would reprofile spend and whether there was anything that they would stop funding. At that point, the BMA flew the kite of homeopathy. I do not want to get into that debate today; I simply note that that organisation, too, has highlighted a service that might need to be looked at.

The question of what we spend money on in the health service—or, indeed, in general—has become more in vogue with recent interventions about whether we should stop providing certain services or whether we should reintroduce certain charges or elements of means testing. Is the Scottish Government doing any work on the data that lies behind not just the cost of providing a particular service but the cost saving that the service makes? In a recent briefing, for example, Optometry Scotland told me about direct and indirect savings that had been made as a result of universal free eye tests. I was actually quite shocked at the savings it identified, and I have asked it to send me a copy of the report in question, which was carried out by a number of universities.

What work is being done to ensure that we look at not just input measures and the amount of money that we are putting in but health and wellbeing outcomes and the knock-on effects and costs arising from not spending money later on?

It is not just a matter of spending money; some of our measures should, when fully implemented, save the health service money. Indeed, minimum unit pricing is a very good example of that. Once we get it introduced, it will have quite a dramatic impact on not just the health budget but, for example, the criminal justice budget. As well as spending money, we must also consider measures that do not necessarily involve our spending a great deal.

With regard to spend, I could simply highlight the example of free personal care or, indeed, free prescriptions. Before they were made free to everyone, 88 per cent of people in Scotland qualified for free prescriptions. Of the other 12 per cent who did not qualify, 600,000 were earning £16,000 or less. Some might say that £16,000 is a lot of money, but it is worth remembering that people start paying income tax and making national insurance contributions at 11 per cent on earnings over £8,100 and that they pay council tax when they earn under £7,000. By the time those three taxes alone come off the top line, those who earn £16,000 are actually getting a lot less than that.

If someone goes to the doctor with an ailment and then has to fork out £7.45, which is the cost of a prescription for each item south of the border, they will, quite frankly, think twice about doing so. However, by not paying for the prescription, not taking the medicine and therefore not dealing with the ailment at the earliest possible opportunity, such a person might well have to make a greater call on health service resources. I also note that the productivity gains arising from the introduction of free prescriptions, free eye tests and so on were phenomenal when the health service was established in 1948—although I am not suggesting, of course, that they have the same impact now.

When we add the 600,000 who should have been getting free prescriptions to the 88 per cent who were already getting them and then take all that away from the total, we are left with a relatively small number. The costs of collecting prescription charges from those people were not worth the candle. Such examples show that it is better to follow the old maxim, “From each according to their ability to pay, and to each according to their need”. Prescriptions are a need that I believe should be free at the point of use.

In any case, we monitor the health benefits and the pluses and the minuses arising not only from free prescriptions but from free personal care. After all, if free personal care and that kind of contact were not available, what would be the cost from dealing with the additional falls and admissions to hospital and accident and emergency? Some work has been done on that matter, but we need to do more work on it. There is certainly no doubt in my mind that free prescriptions are the right thing to do and that the cost benefit of introducing them is a plus.

10:30

Another issue that has already been raised today is the transparency agenda, on which I welcome your remarks thus far. The committee has identified that £341 million is being transferred from health budgets to local authority budgets, so I guess that the committee’s question is about how closely that money is scrutinised once it has gone to local authorities. Within an £11 billion health budget, £341 million might seem small beer, but the sum involved is still substantial in and of itself.

A perhaps linked issue is the change fund. We did not take oral evidence from Age Scotland, but its written evidence indicates that it has concerns about how certain local authorities administer the change fund, which may not be spent along the lines intended. How closely do you monitor the use of NHS resources once they are transferred to local authorities, either directly or through the change fund?

We monitor that use very closely, and John Matheson will be able to give detail on the monitoring processes that are in place.

It is early days yet for the change fund, and we will carry out an evaluation of the fund and how it has worked after its first year. However, there are clear guidelines on what change fund money can be spent on. To give just one example, 20 per cent of the money has to be spent on carers support.

At the right time, once the fund has been fully up and running for at least a year, we will undertake a proper evaluation, which we will also share with the committee. Obviously, when people tell us that the change fund is not being used for certain things, we talk to the people concerned to find out what is going on.

Ultimately, we will do a full-scale evaluation of the change fund once it has been up and running for a reasonable period of time. We will ensure that people follow the guidelines, and we make it very clear what the money can be spent on—for example, we prescribe what money must be spent on carers support—within those guidelines.

The flow of money from the health service to local authorities is obviously something that we keep a close eye on. John Matheson will spell out the detail of how that is audited, but at the end of the day it is all audited by the Auditor General because it involves a flow of money within the public sector. A very good example is the £1 million that NHS Lanarkshire recently gave towards the cost of a refurbished car park in the centre of Airdrie, where there is a need to accommodate additional footfall from the new health clinic that has been built. NHS Lanarkshire can clearly ensure that the £1 million was spent on the car park because the car park is physically there, so that is a good example of where it is fairly obvious that the money has been spent for the intended purpose.

I ask John Matheson briefly to outline the detailed audit process for ensuring that the money is spent where we said that it would be spent.

For the £341 million that relates to resource transfer, the accountable officer is still the chief executive of the individual board and the responsibility remains with them. As we said in the previous discussion, there is a need to focus not just on the money but on what the money is intended to deliver, so discussions about the effective use of such moneys would also focus on where the delayed discharge position is going within the individual board area. Over the next two or three years, more aggressive targets will be brought in on delayed discharges.

Another important point is that there needs to be partnership between the health board and the local authority—and indeed, in the context of the change fund, the third sector as well—so that plans are brought forward in partnership.

The accountability relationship for the core resource transfer money sits very clearly with the health board, and that is picked up through the audit process. However, it is important that we focus not just on the money but on what outcomes and outputs we are expecting that money to deliver and that we ensure that they are delivered.

Looking forward to the establishment of the 32 partnership boards for the integration of adult health and social care, it is very important to have an integrated budget made of money flowing from the health board and the local authority into those partnerships. Ensuring that the money is spent properly will obviously require specific audit and monitoring arrangements.

There is obviously a question around the public sector pension changes. I understand that there was a vote on the issue in Westminster last night. I am aware that there is a letter from the Chief Secretary to the Treasury, which states that, if we attempt to do something different in Scotland, the money will be clawed back. Do you have any data on the implications for the health budget if we follow the calls that some are making to resist passing on the changes to health service professionals? Could the data be provided to show the impact on the health budget of the clawback?

It always depends on how many people join or stay in the pension fund. If we picked up the tab for all the additional contributions and everyone stayed in the pension fund, it could go as high as £80 million a year for the health service in Scotland. A more realistic figure might be slightly less than that, but our potential exposure is up to £80 million a year.

We think that the pension reforms and the way in which they are being imposed is absolute madness of the first order. It is important to have high morale right across the public sector workforce, and issues such as pensions, productivity, pay, and efficiencies should be matters for negotiation, not imposition, except in the most extreme circumstances in which we cannot get a negotiated settlement. The proposals are extremely ill thought out, and the way in which the Westminster Government has gone about them is draconian.

If we could do something differently in Scotland, we would be keen to do it, and we are talking to the BMA and others about the possibility of that. However, I would not like to raise any expectations because of the strictures that we have been put under by Danny Alexander, who is certainly not living up to the spirit of devolution when he says that, if we choose to do something different in Scotland, the Westminster Government will take the money off us and the money will have to come out of front-line services. That is where we are at.

Just to clarify, the top-line figure of £80 million that you mentioned would be the cost of covering the contributions. The equivalent would be clawed back, so the overall cost would be £160 million once the clawback was included. Is that correct?

I think that is probably right, although Danny Alexander has not spelled out how it would actually work. All he has said is that he will keep back £80 million from the Scottish Government’s budget, if it is £80 million. Although we are keen to do something different, we cannot lose £80 million from front-line services in the health service in Scotland.

I just want to go back to a point that the cabinet secretary raised earlier. I do not want to go into the detail, but you spoke about prescriptions and the effect on individuals. When I was collecting evidence for my palliative care bill, I came across issues around that and I would be happy to share them with you. It would be very interesting for you to understand the exact impact on individuals.

I have a question on preventative spending which, by its very nature, means that we spend money upfront, now, but do not see the benefits for a considerable length of time. What progress is the Government making on preventative spending that it can share with the committee?

A core part of what the health service does is around preventative and anticipatory spending. One issue that does not involve us spending a lot of money is minimum unit pricing, which is a preventative measure. The detect cancer early programme is also a preventative measure. The reasons behind the integration of adult health and social care are to do with prevention as well as treatment. Therefore, a lot of what we are doing is preventative; it is not always described as such, but it has a huge preventative element within it. The change funds are obviously dedicated prevention funds and we will use the lessons that we learn from them to look at how we can do more on prevention and allocating funds specifically to prevention.

I also want to emphasise anticipatory spend. One of the first things that I did when I became the Cabinet Secretary for Health and Wellbeing was to ask Derek Feeley and his colleagues to prepare an implementation plan on data mining, data management and microtargeting. The techniques are very similar to those that are being used by Barack Obama in his campaign and, indeed, in all the campaigns now in the States. The health service collects a lot of information about people through our general practitioners. I have been told that, every year, doctors will be seen 6 million times by patients in the national health service in Scotland. A lot of data are collected and, with modern techniques, we can use them to try to anticipate particular conditions, who are the most vulnerable people and so on. The people in Stirling are probably the most advanced in Scotland in pulling together data from all the different agencies, and they are now finding that the data are used for preventative spending, as they can identify problems before they arise and anticipate them.

Tonight, I will be at a meeting involving the chief medical officer, the new chief constable for Scotland and Kenny MacAskill, the subject of which will be how we can pull together so that we identify people with drink, drug or mental health problems, for example, before they get into the criminal justice system and how we try to prevent them from getting to the point at which they commit crime. That kind of activity—the tools are now available to do that kind of work—is a revolution in preventative spending, prevention and anticipation. We are looking at and will apply every technique and way of doing things. It is not a matter of doing things ourselves; the real benefit of this approach is in doing things with our colleagues in local government, the police service, the Scottish Court Service, across the entire public sector and in the third sector.

A wee while ago—perhaps around six or nine months ago—Harry Burns came to the committee and informed us about interventions with women who lead challenging lives. There was a support team for pregnant women, which intervened not when the baby was born—I would have expected that to happen, but that is the old-fashioned way of doing things, right or wrong—but as soon as it was identified that the woman was pregnant. The outcomes and the benefits for the children and the mothers were quite dramatic. To put another hat on and talk about pounds, shillings and pennies—in old money—the health service also benefited enormously from the aftermath of that compared with what would normally happen in such circumstances. That is a really good outcome from preventative spending.

I listened to what you said earlier about caveats. A person can say anything at the beginning and the end; it is the bit in the middle that counts. People are saying that the Government has taken its eye off the ball in perhaps listening to the folk with caveats and putting up the attack on the basis of how much money is being spent now on services compared with last year. However, if there is preventative spend, the money should go down at some point because there has been front loading. My direct question to you is this: has the Government taken its eye off the ball in relation to preventative spending?

10:45

Absolutely not. In fact, the family nurse partnership project to which you referred is a very good example of the innovative approach that we are taking to prevention. It is based on international research that has, in many ways, been led by our chief medical officer, Harry Burns. That research shows that a child’s life chances are largely decided during the nine months in the womb and the first six months of life. There are chemical changes in the brain resulting from how the baby was treated in the womb and during its first six months of life. The research shows that that period is extremely important in deciding the life chances of children.

The family nurse partnership programme to which Gil Paterson referred involves early intervention with vulnerable young women who have become pregnant and their partners. They get a substantial support package throughout their pregnancy and the early months of the child’s life. I attended the awards ceremony for the first parents to graduate from the programme. The drop-out rate is extremely low. That alone is a good indication of the success of the programme.

The programme is not just of major benefit to the mothers, partners and children involved. There are already clear signs that it is beginning to break the generational legacy of problem families. Some of the young women who have been through the programme are pregnant again and they are applying what they learned in the programme with their next child while it is still in the womb. They are still getting support from health visitors and so on.

There are clear signs that the programme is working extremely well, which is why we announced a couple of weeks ago that we are rolling it out immediately to a further four board areas, and to the entire country by 2015. It is a good example of where preventative spending and imaginative, innovative, targeted approaches can prevent problems, anticipate problems before they arise and identify the people who need this kind of service and support.

On whether budgets should start to go down as the preventative measures work through, I have two things to say. First, I am happy if budgets do not go down as long as the preventative measures have an impact on children’s lives. I would rather invest the money and know that in five, 10 or 15 years’ time those children will not be truants, will not end up in the criminal justice system and are doing much better at school than they would have done if they had not had that support in their early months. This is not a quick-fix approach to reduce budgets in the short term.

Secondly, where those preventative measures do release cash savings, we are reinvesting those back into other areas in the health service to improve the service elsewhere. The whole point is to keep reinvesting to ensure that we keep improving the quality and level of service provision in the national health service. It is a much bigger return on the investment but we will not necessarily reduce the budget; we will reinvest it in other priority areas where we can.

We need to look at the longer term, particularly of something like the family nurse partnership programme. The programme has many identifiable and measurable short-term advantages and benefits. Measured over a 20-year period, the benefits of the programme will be enormous, primarily because the human beings involved will be able to live a much better, more enjoyable life, free of some problems that might have occurred if they had not had that support in the early period of their life.

I remind the cabinet secretary that he has a Cabinet meeting to go to.

I have indeed.

We still have some questions to get through. Mr Feeley wants to respond to Gil Paterson’s question.

I have two brief points. First, the benefits of these measures sometimes come through quicker than we might anticipate. An example is the impact of smoking legislation. We did not think that we would start to see a difference in people’s health as quickly as we did after the smoking legislation was introduced. We may get some earlier benefits.

I also want very briefly to highlight the prevention programme launched last month called early years collaborative, which is putting some of the scientific improvement techniques that we have been using in patient safety into a multiagency improvement programme aimed at reducing infant mortality, improving what Harry Burns calls attachment or the connection between the child and family and improving readiness to learn in three strands of the early years: minus 9 months—or, if you like, pregnancy—to 1 month old; 1 month to 3 years old; and 3 to 5 years old. As far as we know, this very exciting initiative is the first big public sector attempt at improving outcomes in this area.

I was more wanting to know whether you have the balls to keep all this going, given the attacks that you have been getting.

We have.

Absolutely.

I encourage you to do so.

Earlier, you used the word “anticipate” with regard to things within your control in the budget. What about the things that you cannot anticipate and the other cuts that are coming down the road? What contingency plans can you put in place or what forward planning can you do to mitigate impacts on the health budget? That said, I think that the word “mitigation” is, in the real sense, meaningless here.

The core of my answer would be a quotation from Nye Bevan, who talked about applying “the language of priorities”. If resources get even tighter and if the cuts agenda continues into the long term, we will have to prioritise on the basis of clinical need and prioritise resources for areas of greatest need. After all, we are talking about a national health service and clinical need has to be the key criterion in the allocation of resources.

Thank you for that, cabinet secretary.

You have just stressed the importance of e-health. Is that an indication that you are going to reverse the £1.6 million cut to that budget?

If you look across the board, convener, you will find that we are spending more money on e-health. However, the spend might not come under that particular budget line; it is one of those areas that permeates a number of budget lines. The fact is that we are absolutely and totally committed to the development of e-health. Indeed, Grampian has taken a great lead on the matter, although I note that other areas are involved. Of course, e-health might just be a matter of certain simple measures. For example, when I did my first annual review, which was at NHS Western Isles, one of the senior medical people told me during the lunch break that money could be saved if St Andrew’s house put in a teleconference system that everyone could use because they would not need to travel to Edinburgh as much.

Have you really never had such a system?

We do have a teleconference system. I think that the key phrase was “that everyone could use”.

Ah, right.

Although that sort of thing will not appear in the telehealth budget line, it is a very good example of it.

I think that everyone agrees with you about the importance of pushing this agenda, but the contradiction between that view and the fact that the budget heading was being cut by £1.6 million was noted in evidence to us.

In response to Mark McDonald, cabinet secretary, you mentioned the third sector. Although there is general agreement that the sector should be involved—and should be encouraged to get involved—with the NHS in providing services, is enough being done to encourage it? Can you put pressure on the NHS and local government to make faster progress in involving the third sector?

I also note that when changes to the NHS are being considered—and I am thinking in particular of the forthcoming integration of health and social care—we keep coming up against professional barriers, vested interests or whatever you want to call them. How can we approach that matter? After all, cultural change is going to be important if that legislation, for example, is to be effective.

In answer to your first question, I could also cite the example of the integration of adult health and social care, in which the third sector will have a major role to play at every level.

There is clear evidence that third sector organisations can be better, more effective and more cost-effective at delivering a range of services. That is why the third sector is represented on the ministerial group on integration of adult health and social care. The third sector needs to be heavily involved, because it has huge expertise and huge experience in the area. I am extremely keen that we involve it at every level—at local, national and regional levels, and at operational and strategic levels. You are absolutely right about the need for that.

As far as vested interests are concerned, we must take policy decisions that are based on what is best for the Scottish people. In the case of the health service, we must take such decisions primarily on the basis of what is best for Scottish patients. Although we listen to those with vested interests and take into account what they say, they cannot dictate our health agenda in Scotland.

An issue that will undoubtedly be challenging when it comes to the integration of adult health and social care is marrying the cultures of the health boards and the local authorities. It is my understanding that where the integration agenda is at its most advanced—for example, in West Lothian—that has tended to happen much more quickly and effectively than people anticipated. That does not mean to say that that will be the case across the country; it is something that we all need to work at. When we pull two organisations together to work in an integrated fashion, we need to be highly proactive in ensuring that the partnerships develop a culture of their own, to which health boards and local authorities adhere.

Nanette Milne makes a good point, which we and our friends on local authorities are extremely conscious of. The issue will need to be worked at, and that is what we will do, to ensure that it is in no way a barrier to success on the integration agenda.

I am glad that you said that the patient was the most important focus.

Absolutely.

That is what we are looking for. Thank you.

There are some follow-up questions that we could ask, but we are aware of the time constraints.

I have two brief questions. NHS Health Scotland, which is our national health promotion agency, and Healthcare Improvement Scotland would seem to be two special boards that have a particular role to play in preventative health. Why has Audit Scotland expressed concern about consistent underspending by those two boards?

Sometimes they are more efficient in doing things than they anticipated. I come back to the original point. We are a national health service. Although there are 22 boards—14 territorial boards and eight special boards—when one board does not need as much money as was thought, we do not spend money just for the sake of spending it; instead, that resource becomes available to the wider NHS. I am not concerned about underspend per se; I would be concerned if the bodies were underperforming. The reality is that they have been given a budget. If they do not need the entire budget, it is far better to free up some of that money for other things. I will bring John Matheson into the discussion shortly.

We need to get out of the culture of thinking that it is necessary to spend every penny, even if that means not spending as wisely as we should. We must get out of that mindset and into a mindset that recognises that we are all part of a national health service and that we should spend the money wherever in the NHS we get the best returns for patient care, our health improvement, efficiency and governance, access and treatment objectives and all the rest of it.

But does not the existence of a consistent problem suggest poor financial planning?

I do not agree with that, but I will let John Matheson deal with the specific point.

I do not think that it does indicate poor financial planning. We need to put the figures that are being talked about in context—they are quite small figures.

We need to remember that Healthcare Improvement Scotland is a reasonably new organisation that is developing its strategy and how that strategy will be delivered. One of the key factors that I always look for is how much of an organisation’s money is being spent on direct patient care services, or public services, which is where its focus should lie. That is why I was pleased to see that HIS has now co-located with the Scottish Ambulance Service in the headquarters of NHS National Services Scotland, so it is minimising bureaucracy and backroom services to do with aspects such as facilities, and is directing more of its expenditure towards the public services that it should be—and is—focused on.

11:00

I will move on from a specific question to a slightly broader one. The Audit Scotland report identifies a concern around the nine boards that are relying on non-recurring funding to break even. To what extent does it concern you that that is still the case?

We might accept that those boards need to move on to make recurring savings rather than just trying to get through each year. Is it the case that they have now gone past the easy part in making the savings that they need to make, and that in reality they will, in the next year and years, be cutting to the quick?

That is a broad question, cabinet secretary, but a brief answer would be appreciated because I am keen to let in Aileen McLeod before the evidence session comes to an end.

Okay. As time goes on, it becomes more difficult to identify easy savings. The savings agenda will have been going for four years at the end of next year, and will have saved nearly £1 billion. I do not share the concern about one-off savings, but we need to recognise that, for the foreseeable future—certainly until around 2015-16—it looks as though we will continue to be subjected to spending cuts from Westminster.

Therefore, we are trying to ensure, in an innovative fashion, that we generate internally in the health service the necessary resources to provide the quality and level of service that we believe is essential in Scotland. That will remain as a combination of recurring efficiency savings and cost savings as well as one-off cost savings.

We mentioned the property portfolio earlier. If the commercial property market—or even the housing market, as some of the buildings would be suitable for housing—improves, we will get one-off capital receipts when we sell those buildings.

One of our problems in recent years has been that the property market has been so depressed that the capital receipts that we would normally have expected from surplus properties have not been forthcoming. If there is an improvement in the property market, that situation will change.

I am not concerned per se, as long as we can continue to identify the sources of funding that we need to provide the quality and level of care that Scotland needs.

Audit Scotland makes a fair point, but we keep a close eye on the level of dependency on non-recurring savings. We are a £12 billion organisation and, in that context, the level at which those savings sit—around £20 million or £30 million—is less than 0.5 per cent.

It is the same with efficiency savings. People will develop efficiency savings in-year and get the full-year benefit in the following year, but some non-recurring support may be required in the current year. We look at those levels on a board-by-board basis through annual reviews, detailed monthly discussions and mid-year reviews.

One of the areas of the draft budget that the committee has not yet touched on concerns health research and innovation. That area has an important role to play in maximising the outcomes for patient care by turning clinical research into clinical practice. Through the support that we give our universities, our research community and our business sector, we can improve health promotion and disease prevention, understand disease and improve diagnosis and develop better preventative medicines.

The European Commission has identified healthy and active ageing as one of its global challenges. Does the cabinet secretary welcome the support—in particular the financial support—that is likely to be forthcoming under the future European Union research and innovation funding programme for 2014 to 2020? That is of course the horizon 2020 programme, for which €80 billion has been proposed, but it depends on what comes out of the current EU budget negotiations in Brussels. Do you see an opportunity to use that particular measure to support research and innovation in that area in Scotland?

One of my jobs is to chair the life sciences advisory board. As you know, the Scottish Government has designated life sciences as one of the three major target growth areas in our economic development strategy, but research and development are also crucial to our health strategy. The office of the chief scientist for the health service, Andrew Morris, has been doing a great deal of work both on the research side and with companies to try to get more of the development done in Scotland. As you know, we have had recent announcements about the successful completion of work, with companies doing clinical trials in Scotland and seeing Scotland as a hotbed for growth in the sector.

I absolutely welcome the prospect of additional funding from the European Union, given Scotland’s research base and the fact that we have so many high-quality universities. Three of our universities are in the top 200 in the world—I do not think that even Germany has that—and we have particular centres of excellence such as my old university, which is the University of Dundee. It used to be a centre for training brilliant young economists. [Laughter.] Now it is a centre for training brilliant young medics and life scientists and it has a particularly important role in cancer research.

We will be proactive in pursuing that agenda at a European level as well as within Scotland.

Thank you.

As we have no further questions, I thank you and your colleagues for your attendance this morning and the information that you have provided. We might wish to write to you with some additional questions.

No problem. We will be glad to provide any information.

Thank you.

I suspend the meeting to allow us to set up for the next panel.

11:06 Meeting suspended.

11:10 On resuming—