I welcome people to the ninth meeting of the Finance Committee in the second session of the Parliament. I welcome the press and the public and remind members and anyone else that pagers and mobile phones should be switched off. We have received apologies from Ted Brocklebank, but I think that everyone else is present.
As we know that time is limited this morning, we thought that it would be helpful if we made a brief statement and responded to some of the main points that have been raised by those who have provided written evidence on the bill and those who gave oral evidence to the committee last week.
Thank you for your statement and for giving us a copy in writing. By and large, the processes that are needed to abolish the trusts do not need legislation. What is required of the bill is a legislative tidy-up. However, there is an issue about the costs that are associated with the abolition of the trusts. Would it not be better to give us an outline balance sheet to show how the savings might be arrived at and how any additional costs might be met, rather than to assume that they will somehow be netted out of the process, which seems to be the substance of your comments?
The work that we have done and our discussions with the NHS suggest that the direct cost of abolishing trusts is very low and is entirely administrative. As you suggested, the abolition of trusts is already going ahead under the legislative provisions of the National Health Service (Scotland) Act 1978. It is clear to us from our conversations with those in the NHS that, as I said, the costs will be very low. Other witnesses have suggested to the committee that opportunities for savings will be presented through single-system working and, for example, developing joint human resources and finance functions that cover the former trusts and boards in a single area. We expect savings from that, but we expect board areas to redeploy those savings towards improving patient care.
Would it not have been better to give us a true financial assessment of savings that can be clearly identified and of any additional costs, especially in the initial phases, rather than to assume that the overall effect on costs will be netted out?
Producing such a statement would be difficult for the Health Department because it would need to be accurate for each health board. In time, individual health boards may be able to describe costs that they have incurred and savings that they have realised, but we expect those figures to be small in comparison with the overall sums of money that are being discussed.
My question relates to scrutiny and our function is to scrutinise. I might want to accept your assurances, but I have the reasonable expectation that you can provide some figures.
We cannot give the committee figures today. Dissolutions are already beginning so I repeat with confidence that the costs that are associated with dissolutions are not material. I will not say that they do not exist, because some staff must be deployed to draw up consultation measures and undertake consultation, but the costs are very small. We cannot yet indicate possible savings from single-system working, but we are beginning to observe its results in the Borders and in Dumfries and Galloway, where trusts were formally dissolved on 1 April this year.
It is obviously the duty of ministers to provide a clear financial memorandum, which means providing a clear estimate of how much a bill will cost. Paragraph 42 of the financial memorandum says:
Your last point took me from the costs and savings that are associated with the dissolution of trusts to community health partnerships. One of my colleagues will have to comment on the partnerships.
I will bring the committee up to date on community health partnerships. As was requested in the white paper "Partnership for Care", each area is considering its current configuration of local health care co-operatives and what that might mean for community health partnerships. That exercise has not concluded, so although some areas have a fairly clear idea of the appropriate number of community health partnerships to deliver what the white paper requires, others have not reached that stage. However, the information that we have suggests that we are heading for about 50 partnerships. I stress that that figure is provisional and is based on the best information that is available. There are roughly 80 local health care co-operatives in Scotland, so the number of bodies will change.
We discovered this morning that one of the few times that ministers made any attempt to predict in the financial memorandum how much the bill would cost relates to the powers of intervention, whose use is expected to cost about £85,000. However, the witnesses today appeared to accept the figure of £300,000, so that error is of a factor of nearly 400 per cent.
I am not sure whether that was a political speech or a request for factual evidence, but I will allow the witnesses to respond on factual issues.
I will respond in a way that I hope is helpful on the costs of the powers of intervention. Mr Ewing is right to draw attention to the fact that the financial memorandum contains the figure of £85,000. The memorandum explains that that would be the cost of a task force that comprised six people and lasted 10 months.
I will pursue that point. The figure might have a factual basis, but that is not the issue that the financial memorandum deals with. The memorandum concerns estimated costs for the forthcoming four years. We all appreciate the difficulties of costing prospective interventions, but at least four examples can be found in the past of interventions that the Parliament would have sought if the new powers had been available.
I think that there were several questions there.
Ms Alexander asked that we write to the committee about the costs of the interventions that she listed. We would, of course, be happy to do that as soon as we can.
That would be welcome.
It may take us a little while to look back at papers that are now up to three or four years old.
Wendy Alexander raised a number of the points that concerned me. You have just suggested that the Tayside example may have been an exception because you had available to you a recently retired chief executive whose cost was relatively low. That would not be the case in every intervention. We have been considering Tayside and Argyll and Clyde but it is difficult to say which is the exception and which is the rule. It could be that Argyll and Clyde is more typical than Tayside. My genuine concern about the level of costs remains and, in its submission to the committee, the British Medical Association expressed a similar concern.
We have been giving thought to the very question that Dr Murray raises. The question of who would bear any additional cost of such an intervention would be for discussion between ministers and the department on one hand and the health board in difficulty on the other. The conclusion reached would depend on the circumstances. The financial memorandum certainly states that costs would be
Has that discussion taken place in the specific context of NHS Argyll and Clyde?
I cannot provide a factual answer to that question now. I will have to write to the committee with the information.
The public regard this exercise as rather meaningless. They believe that the structure of the NHS is top heavy. There are not enough people at the sharp end—the delivery end—doing the good work that nurses, surgeons, doctors and so on do, and there are too many systems analysts and people counting the number of patients who are bedblocking. Although the bill will not save any money, will it make the system more efficient?
We have figures for management costs in the NHS, which show them to be quite small.
For a number of years, management costs in the NHS have run at around 5 per cent of total revenue. As the financial memorandum makes clear, it is expected that that figure will not be exceeded as a result of the measures that are being taken and that management costs will be contained at 5 per cent of total revenue.
Like other members, I am concerned about the lack of financial clarity surrounding the bill. In response to Fergus Ewing's question about the cost of intervention, Alastair Brown cited the cost of the Tayside task force as an example. However, in response to Wendy Alexander's question he referred to various factors that kept the costs so low in Tayside. That leads one to believe that the figure that the financial memorandum provides for the cost of using the powers of intervention is inadequate.
Kate Maclean suggests that the £85,000 is inadequate. The financial memorandum makes it clear that costs would be incurred only if the new powers were used and that the amount spent would depend on how the powers were used. That is an obvious statement, but it is worth my putting it on the record.
If the savings are in personnel, are there no initial redundancy or early retirement costs?
Since the publication in December 2000 of the white paper "Our National Health: A plan for action, a plan for change", which indicated that the policy direction was to move towards unified NHS systems, the NHS has been preparing for what we describe as single-system working. Although the final policy decision to wind up all the trusts was made explicit only in the white paper that was published in February this year, boards have been planning prudently for that. Many of them have appointed chief executives of trusts on an acting or interim basis, so that the question of redundancy does not arise.
One reason why costs in Dumfries and Galloway NHS Board were not high was that a number of senior staff, including two chief executives of the board and the two trusts, had left and people were employed in those positions on an acting basis. It was relatively straightforward for people to be redeployed in the board. I do not know that we can be absolutely certain that it will be as easy for every board in Scotland to accommodate its personnel as it was for Dumfries and Galloway NHS Board.
I accept Dr Murray's point. However, like Dumfries and Galloway NHS Board, other boards have been planning with single-system working in view and have made what preparations they can.
I touch on the same issue in the context of Borders NHS Board, where there were previously three chief executives and where there is now one. In Borders NHS Board, redundancies and substantial costs were associated with the dissolution of trusts. Will a more co-ordinated approach to staffing reorganisation be taken throughout Scotland? When boards reorganise one by one, it is hard to relocate staff or to offer senior staff other opportunities in the NHS. Is it correct to say that if it were expected that the reorganisation would be carried out throughout Scotland, there would be more such opportunities for relocation and the burden of costs will not be that acute?
A co-ordinated approach to relocating senior staff would reduce severance or other costs. Each NHS board is legally a separate employer and must fulfil its contract with its employees, including its senior staff. We must be careful not to interfere with that situation, because it is governed by employment law and the private contracts between the parties.
Substantial management time was taken up and consultancy costs incurred in the reorganisation in the Borders. Am I right in saying that those costs were met by the Executive?
Are you referring to consultancy costs?
Yes. I am referring in particular to management consultant costs.
Do you mean in advising the NHS board on the move to single-system working?
Yes.
As far as I am aware—and subject to checking—those costs were met by Borders NHS Board. However, if I find that I am wrong, I will write to the committee.
Substantial management time will be taken up if each board wishes to move to single-system working. After all, a board might have to hire management consultants to advise it on such a major reorganisation. As a follow-up to Kate Maclean's question, are you confident that those costs will be met by efficiency savings that will result from single-system working? If so, have you received any indication from the boards that have reorganised about what they expect those greater efficiency savings to be?
We have received a general indication from the boards that have reorganised and from those that are planning to do so that they expect to realise efficiency savings from bringing together functions that are currently being repeated in the health board and each of the trusts. However, that is not the driving force behind the policy of moving to single-system working. The policy intention remains to make care more patient-centred, and to make the transition between primary and secondary care more seamless. That is reflected in some of the written submissions that the committee has received, such as that from the British Medical Association's Scottish office.
In the bill as drafted, there is a danger that, if a large board simply redesignates trusts into divisions, rebadges them, maintains the current management levels and in effect does not move towards single-system working, there would be increased costs without greater efficiency savings. Are you alive to that possibility?
One has to draw a distinction between what might happen in the very short term and the opportunity that will thereafter open up for NHS systems to rationalise, for example, their support services. I certainly do not want to say to the committee that in some cases existing trusts will not be more or less substituted by new operating divisions after the trusts are dissolved. However, where that happens, I would not expect the NHS systems to stop there; I would expect that in time they would use such a step as a basis for further rationalisation. Although we are not pressing boards specifically to do that, we and many other stakeholders would encourage them to run their operations as efficiently as possible to ensure that as large a proportion as possible of their total income from the Health Department is devoted to patient care and front-line services.
I want to build on that comment. In any other setting and in most other areas of endeavour, we would expect any reform to have measurable returns on investment, which would be laid out and carefully measured from the start and come with a firm cost ceiling. Surely that must also be the case in an area of expenditure that amounts to a third of the Scottish budget. Do you envisage establishing reporting mechanisms to monitor performance and to encourage adequate performance along the lines that you described a moment ago in terms of there being more resources for front-line services, bureaucracy that will decrease over time, higher staff morale, reduced staff turnover, shorter waiting times, better outcomes, increased throughput and cost savings from streamlining and rationalisation? Such firm measures could be taken then segmented to provide an appropriate bill of materials and to ensure that performance can be monitored at individual levels.
Mr Mather has provided a very full run-down of the aspects of NHS performance that we measure or that, in some cases—I want to make this clear to the committee—we would like to measure better than we do.
I want to move on to a slightly more technical issue. The primary care trusts that have already brought in LHCCs with extended involvement of the public and local authorities are probably not going to incur huge additional costs from the bill's proposed measures. However, I am concerned about less well-developed areas and locality structures in areas that will be overtaken by the new form of LHCCs. Given that the whole system depends on general practitioners' buying into it, are you concerned about moving from about 80 LHCCs to about 50 CHPs, and about sustaining locality structures where there is no correspondence between the existing LHCC and the proposed CHP? After all, such structures need to be sustained in some form.
One of the fundamental aims is to build on the best of the LHCCs, as you have described. Each area has to strike a balance between representing, and being responsive to, a community and having the capacity to deliver the functions that the white paper, "Partnership for Care", outlines for community health partnerships.
The two core questions are whether the smaller locality structures will continue to be supported under the new model and whether funds are available to ensure that the needs of enlarged representation will be met. I am not sure what your answer was to either question.
One has to consider each area to answer that question. We have already heard from a number of areas that wish to maintain within their community health partnerships' local identity—not necessarily a formal management structure, but something that maintains a locality's identity. That already exists within LHCCs. It is expected that there will be a shift of management effort from the LHCCs and other bits of the system, such as existing trusts or NHS boards, into community health partnerships. Equally, we will try to ensure that communication and other systems that exist are not lost in this new endeavour.
I move on to interventions and projected costs, on which we have had lengthy discussion. One thing that concerns me is the looseness of how the bill is drafted in relation to the possibility of interventions. It is clear that if there were a relatively limited number of major interventions, the costs could be contained by either the health board or NHS Scotland. What concerns me is that if NHS Quality Improvement Scotland finds many examples of inferior services, ministers could be obliged to intervene more than they have until now, for example in the four cases that Wendy Alexander mentioned. Would that have a substantial projected cost?
The section of the bill that deals with powers of intervention grants a power to ministers rather than imposes a duty on them. The simple answer to your question is that ministers would use the power only where they felt it was justified and they chose to do so. It is relevant to repeat what I said earlier: the power of intervention is clearly intended to be used only as a last resort. The necessity test to which we refer conveys the policy intention through into the wording of the bill. I hope that that will help to reassure you. All the same, it is important that the power of intervention is available where it is necessary. We have therefore not constrained the power heavily in the drafting of the bill.
I want to go back to measurement. It is clear that 90 measures are too many for external reporting. What smaller number of measurements should the Parliament use to judge future performance?
That is an interesting question. I will attempt briefly to justify why we have as many as 90 measures. We use the measures internally, although all 90 are reported publicly and are on the "Scottish health on the web" website. We use the measures to inform the discussions on performance that we have annually with NHS boards; it is important that we can look right across the range of their operations.
I believe that it would be helpful if there were three or four key indicators that all parties knew were being measured at the macro level and that would be reported on consistently on a long-term basis. Do you agree with that?
Relative priorities and importance is a matter for ministers rather than for me. Mr Chisholm has recently agreed the 12 NHS priorities for 2004-05—the planning year that we are looking forward to—and they are the same 12 that he agreed for 2003-04.
I am anxious that we are drifting a wee bit from the bill.
I have two quick questions on CHPs. We heard from the Scottish Association of Health Councils—this is supported by what Dr Wilson said this morning—that the nature of LHCCs' evolution from their initial voluntary basis meant that they received considerable funding in kind, which might not be available under a more structured system when they become CHPs. Do you share that view?
I wonder whether there is confusion between LHCCs and local health councils. Perhaps the comment that you referred to was made in relation to local health councils rather than to local health care co-operatives. LHCCs receive funding directly from the NHS boards or primary care trusts.
Is it anticipated that the new CHPs will incur more management costs because of the kind of work in which they may be involved. For example, their role in joint commissioning means that they will have a greater responsibility than their predecessors. Will not that increase the costs?
The creation of community health partnerships will not, in itself, require additional management to support joint working between the health service and local authorities in social care, children's services and so on. The CHPs will give local authorities a specific focus at the individual community level. That is why there is a wish for greater coterminosity between community health partnerships and local authorities.
There is an issue that I am still slightly unconvinced about. You are placing additional duties on CHPs with regard to public participation. I suspect that you will have to consider staffing issues and get more skilled staff into some positions, and other issues might arise in relation to liaison with local authorities that will incur other costs. The financial memorandum suggests that those additional costs can be met out of the existing funds for the LHCCs. Can you give us any further information about how you went about making that estimation?
The financial memorandum makes reference to a reallocation of existing resources within each board, including the funding that is allocated to LHCCs; it does not refer only to the funding that currently supports LHCCs. As Alistair Brown said, as NHS trusts change and operating divisions or their successors come into place—and as NHS boards themselves change—they have the opportunity to enhance the support that is given to community health partnerships for specific functions that may be devolved from NHS boards or from what are currently NHS trusts. It is about not just the money that is used to support LHCCs, but the whole management infrastructure that exists in the NHS.
That gives rise to a further issue. The LHCC money is at least identified. Now you are talking about other money that might be reallocated, which you have not been able to quantify for us. You are saying that health boards might be able to contribute other money to the process of establishing the CHPs. To make your argument convincing, you must be able to say how much more than the LHCCs the CHPs will cost and how funding to meet that additional cost will be derived.
Yes. That takes us back to our earlier discussion about the timing of events. At present, because local NHS board areas are considering how best they can configure their services for the future, it has not been possible for us to do what you have described.
I want to press you on another issue. One of the specific requirements of the bill is more systematic public consultation. Last week, we had some difficulty in getting from the health boards a sense of what that additional consultation would cost. Your assumption seems to be that health boards can meet the cost of the additional consultation from their current allocation. The same assumption is made in relation to the new Scottish health council being able to absorb the money that goes to the local health councils. It seems quite convenient that we can get more for less. Can you say more to convince us of that?
Public involvement is not a new duty; it is something that NHS boards ensure routinely. The extent to which there is public involvement will depend on what sort of service change is being considered. For example, if a health board or a GP practice is considering a small change in how it operates, it will undertake a reasonably small consultation exercise on that. If a major service change is being considered, one would expect the consultation to incur a bit of a cost. Boards have been consulting in that way for years; it is not something new.
Yes, but there is an issue about how ministers are expressing the policy intention of the bill. They are presenting the change in the volume of public consultation that people can expect as a major step change, yet the financial memorandum seems to suggest that that can be achieved at no additional cost. I wonder whether those two expressions of intent can be reconciled.
The Executive is investing something like an additional £4 million a year, as part of our patient focus and public involvement programme, to help with capacity planning, to ensure that NHS staff are better equipped for the commitments that are required of them, and to ensure that patients and the public are better equipped to be equal partners with the NHS in being consulted and in reacting to consultations. Additional central money is being allocated over and above what NHS boards receive at the moment. That commitment is on-going and is not a direct consequence of the bill. For some time, we have been working on increasing capacity and NHS boards' ability to undertake public involvement. The bill formalises that; it does not do anything particularly new.
The general lesson to draw from that response—which perhaps came out of the earlier questions about the abolition of NHS trusts—is that, to get a better assessment of what is going on, we require more information than we are being given. If the information that we receive focuses narrowly on the specific impact of the legislative process, we will not get the full perspective that we require. If significant resources are already going into public consultation and participation, which the bill formalises, we need to get the whole financial picture of that.
I want to return to our core function and the prediction that the minister has made, which is supported in paragraph 42 of the financial memorandum, which states:
We are confident that no additional costs will be attached to the bill. My colleagues and I have gone through the different sections of the bill and tried to explain how we have come to believe that. A lot of what the bill seeks to do is evolutionary—it builds on things that we are already doing. Boards have been working towards single-system working for some time and have been planning what they need to do.
So there is no chance that you could be wrong.
It is important that we understand that the financial memorandum expresses the Executive's and ministers' expectation that there will be no additional expenditure; we are not providing an absolute guarantee. Within the world of the NHS, an NHS board could decide to use the occasion of the dissolution of its trusts to do things better locally. It might decide—and it would be quite within its rights to do so—to put more money into some aspect of its administration and less into something else, or it might decide to allocate more of its annual increase to something flowing from the dissolution of trusts.
I think the Finance Committee tends to be sceptical at all times.
Health boards are given an annual allocation and it is up to them to determine within the sums that are available to them how they will manage and deliver local health care systems that meet the health care needs of their local population. A lot of boards have been doing work on health improvement. As with the duty on public involvement, we are building on and making more explicit what a lot of boards have been doing already.
That would be helpful. On behalf of the committee, I thank the witnesses for coming along this morning.
Meeting suspended.
On resuming—