Audit Committee Report (Government Response)
“Report on the 2006/07 Audit of the Western Isles Health Board”
Again, I welcome Sir John Elvidge to the committee. I also welcome Dr Kevin Woods, who is accompanied by Paul Martin. Do you wish to make an opening statement, Dr Woods?
Dr Kevin Woods (Scottish Government Director General Health and NHS Scotland):
Yes, with your permission, convener, I will give a brief update of developments in the Western Isles. I think that that would be helpful to the committee.
First—and it is good news—NHS Western Isles continues to make good progress in resolving its financial situation. For the first time in five years, in-year financial balance was achieved in 2007-08 and the board forecasts in-year financial balance again for 2008-09. The effect of that is that the board has reduced its accumulated deficit by about 8 per cent to just over £3 million. Of course, the accumulated deficit meant that the Auditor General for Scotland issued another section 22 report for 2007-08.
To support the progress that has been made, the Scottish Government has committed to provide brokerage to clear the cumulative deficit, subject to satisfactory evidence of continuing improvement in financial performance. We will get that evidence from our routine financial monitoring. In addition, we have asked the board to task its internal auditors with making an assessment, which will give us additional assurance that the board is in a position to move forward. If we get that assurance at the mid-year point, which is towards the end of October, we will begin discussions on a brokerage and repayment plan.
In order to provide a broader range of support to all three island boards, we have put in place partnership support arrangements with other NHS boards along with a commitment of £250,000 of additional recurring funding for each island board. In the case of NHS Western Isles, its partner board is NHS Highland. The arrangements will enable all three island boards to strengthen their capability in areas such as finance and governance.
Gordon Jamieson has been appointed as interim chief executive following the departure of John Turner to take up another substantive NHS post. The recruitment process has begun for a substantive, permanent chief executive. On the two previous chief executives, the board has told me that Laurence Irvine was dismissed with effect from 13 June 2008, following a disciplinary hearing, with an employment tribunal pending, and that Mr Manson, who resigned with effect from 5 September 2008, is to receive only his contractual entitlement on departure.
Finally, in your letter inviting me to give evidence today, you highlighted the committee's belief that the Scottish Government should accept some responsibility for the situation that arose at NHS Western Isles. I have a few brief points to make on that. At national level, formal accountability for the NHS in Scotland to Parliament lies clearly with Scottish ministers. However, the NHS in Scotland is comprised not of one single legal body but a collection of separate legal entities, each with its own legal powers and duties.
To support the formal accountability arrangements, successive Administrations have put in place a framework of administrative accountability. I operate that framework on ministers' behalf through the work of the Scottish Government's health directorates and in line with my responsibilities as accountable officer for those parts of the Scottish Government. That work is designed to support health boards in carrying out their functions and in fulfilling their responsibilities, as laid out in legislation. It is not designed to lessen or remove the statutory and other responsibilities that lie with health boards, as illustrated in the case of NHS Western Isles.
The operation of health boards is comparable to the operation of other NDPBs in Scotland and is consistent with the wider relationship between the Scottish Government and other public bodies, which is described in the guide for board members of public bodies in Scotland that is issued to all NHS board members. You may recall that I attached a copy of that guidance in my letter to you of 27 March.
I am happy to answer the committee's questions in relation to that and any other matters, and I acknowledge once again the good progress that is now being made in the Western Isles.
It might help the committee if I add one point that follows on from where Dr Woods finished and deals with my responsibilities in the accountability framework. Those responsibilities flow from section 15 of the Public Finance and Accountability (Scotland) Act 2000, which builds on section 70 of the Scotland Act 1998. Section 15 of the 2000 act confers on the holder of my post ultimate accountability to the Parliament—indeed, to the Audit Committee—for ensuring the regularity, propriety and value for money of expenditure within the budget that the Parliament sets for the Scottish Government.
Section 15 empowers me to delegate elements of that responsibility by designating accountable officers for parts of the Scottish Administration and for other bodies whose accounts are required by statute to be audited by or under the control of the Auditor General. Those other bodies include the health boards. It is, therefore, my responsibility to ensure that there is a person in each health board who has the capacity to exercise the demanding responsibilities of an accountable officer. The assumption is that the chief executive will be that person.
In making the initial designation, I normally rely on those who appoint a chief executive to assure me that the person whom they have appointed has the necessary capacity. In the case of health boards, I rely on the assurance that is provided by Dr Woods—previously, I relied on the assurance of his predecessor—given his role as an assessor in the appointment process. Accordingly, the chief executive or interim chief executive of NHS Western Isles has been designated by me as the accountable officer who is personally answerable to Parliament for regularity, propriety and value for money in the management of that organisation. That designation is conferred in a letter from the accountable officer for the health portfolio but is explicitly stated as a designation that is made by me.
I also have responsibility to revoke a designation if I conclude that the designated person is no longer fit to carry out the responsibilities of an accountable officer, or that it is otherwise in the public interest for a designation to be withdrawn. In considering the continuing fitness of a designated accountable officer to carry out his or her responsibilities, I am assisted by the annual certificate of assurance process, through which the designated accountable officers for the various portfolio budgets within the Scottish Government's overall budget provide assurances about the internal control arrangements relating to their budget responsibilities. Those certificates of assurance cover the continuing fitness of the designated accountable officers of bodies that are covered by the relevant budget.
It is, of course, my responsibility to ensure that those various processes are sufficiently robust to bear the weight of the important decisions about the fitness of individuals to be designated as accountable officers.
Thank you, Sir John. That clarification was helpful because it put into context Dr Woods's comments about each health board having its own statutory responsibility. It is clear from your comments that, notwithstanding that, there is still a line of accountability through you to the Government and, ultimately, to Parliament, for the performance of individuals who may or may not operate at arm's length.
I put on record the committee's appreciation of the way in which the health board has been performing recently. We recognise the substantial effort that has been put in and the contribution that has been made by a number of individuals. What Dr Woods has reported is testament to their efforts and we wish Mr Turner well in his new post. I am sure that he will bring the same determination and expertise to it as he has brought to NHS Western Isles. However, it is also fair to say that, as you have seen from our report and our correspondence, we are unhappy and concerned about what has happened in the Western Isles in recent years. It is hard to describe the depth of the failure and it is hard to understand some of the decisions that were made. There is no doubt that there has been poor management over a long period.
We welcome the fact that the health board has faced up to its responsibilities and accepted much of what was said. However, we are concerned that those in positions of responsibility in the health directorates in particular have not shown the same willingness to accept the historical failure. That is not a criticism specifically of Dr Woods, because we recognise that some of what happened predated your tenure but, nevertheless, you and Sir John Elvidge are now responsible for forming an opinion on what has taken place. The committee is not convinced that the health directorates can walk away from their responsibilities, particularly given what Sir John has said this morning about his role in the management process.
We remain concerned about how appointments are made and how the health directorates address failure. We also wonder whether that is a wider problem. Rather than a problem being dealt with when it arises, people seem to be moved to the side to other senior jobs. We think that the health directorates and Scottish Government officials need to face up to a number of fundamental issues, which we want to explore this morning.
I endorse the convener's comments. I am grateful to Dr Woods for his very helpful update. The committee is encouraged to hear that there is good news on NHS Western Isles. We have already taken evidence from Dr Woods on the issues in our report, so I address my question to Sir John Elvidge.
The committee has spent a great deal of time over the past year examining the situation in NHS Western Isles—probably more time than any of us would have wanted to spend. We produced a well-balanced and evidence-based report, which contained a number of recommendations. It was clear to us that, as the convener said, responsibility for what happened in the board had to be taken partly by the board, but it also had to be taken by the health directorates. In our report, some recommendations were addressed to the board and others were addressed to the health directorates. The board accepted, in whole or in part, the recommendations that we made to it and its response was constructive. We were all very disappointed that all the recommendations that we made to the health directorates were rejected.
To me, the response reeks of complacency and gives the appearance of a close-the-ranks approach to criticism that is directed towards the civil service. What assurances can you give that, when a committee produces a report along the lines of the one that we produced, Government will take seriously the criticisms that the report contains and the recommendations that it makes?
I give an absolute assurance that we never take lightly the views of committees. I regard it as a serious matter for this, or any, committee to have criticisms of the performance of the organisation. I give an assurance that the view that we have taken in this instance is not born of complacency.
The thorough investigation that the committee undertook opens up issues of fundamental importance to governance and accountability. I am not sure that there is disagreement between us that responsibility clearly rests initially with the individual public body. If one creates independent bodies with independent governance, the corollary of doing that is that those bodies have to take responsibility for what they do. In this case, the issue seems to be about the point at which one makes a judgment that the model is not working. One then has to decide on the nature of the intervention that one has to make.
It is my view that one should be very cautious about deciding that the governing body of an organisation—in this case, a health board—should be disempowered by an external intervention. The risk of using intervention in that way is that organisations are not encouraged to develop the capacity that they need to manage their affairs. That said, from time to time, one reaches a point at which intervention needs to be made. In this case, we reached that point and an intervention was made. The issue of debate between us may therefore be whether the timing of the intervention was right. Inevitably, when such decisions are made, fine judgment is involved.
We are clear about, and I would defend, the principles on which our view on being cautious about intervention is based. I would argue against a model that assumed that rapid intervention is always right. That is particularly the case when the intervention involves changes to key personalities. There is a price to be paid for taking key individuals out of an organisation. Even if the performance of an individual or individuals is imperfect, one has to reach the judgment that the organisation is going to be better run by withdrawing them and putting in their place people with less experience and knowledge of the organisation.
I have experience of such decisions in other settings. My mind tends naturally to go to the problems at the Scottish Qualifications Authority, because they were a significant event for me. At the SQA, we decided that it was right to take out—in effect—an entire board and the chief executive simultaneously. It was right to take the risks of doing that and of putting in a completely new team because of the performance improvement that we thought that we would achieve. However, in other circumstances, it might be right to reach a different judgment. The issue is not complacency but difficult judgments in a framework about which I do not think that we and the committee disagree.
I thank you for your response. I entirely take the point that deciding when to intervene involves judgment. I welcome the tone of your answer, which is more constructive than previous responses.
The committee wants you and Dr Woods to assure it that lessons have been learned from the episode with NHS Western Isles, that procedures will be monitored and that changes will be put in place, if necessary. That is the purpose of our report. We are not here to score points. We are trying to achieve improvements in how the public sector operates. The committee's concern was that the responses that we had received suggested complacency. If you are saying that you understand the need for improvement, we welcome that.
I reiterate that we are not complacent. We take the committee's recommendations extremely seriously and did so when previous reports were produced. The point about judgment is well made and well taken. Within our responsibilities as described in the accountability framework, we carefully assessed the situation in the Western Isles in the late summer of 2005, when I asked my colleagues to produce written reports on the situation. In the light of that analysis, we concluded with the minister that we would address the issues at the accountability review that was to be held just a few weeks later. I recognise that, given how the situation unfolded, the committee might say in retrospect that a different course of action might have been followed at that point. However, I emphasise that the decision was based on a careful analysis of all the information that was available to us. When the position deteriorated in 2006 in the way that I have described to the committee, we took further action.
A few moments ago, Sir John Elvidge said that he would be concerned about disempowering a governing body if decisions went to a central body or if a central body stepped in to take control. The points that the convener and Murdo Fraser made relate to the idea that a more teamworking approach should be adopted, instead of central Government taking a step back and allowing a body to sink or swim. I take on board Dr Woods's comment that, in hindsight, the decision to take a step back in 2005 might have been wrong.
Neither you nor the committee is in the game of disempowering any public body. The health directorates should work with health boards. However, I would like reassurance that the health directorates will be there to provide assistance when it is necessary.
I share that view. I will make some general points first, before making specific points about health. I absolutely agree that supportive teamwork among the different elements of the public sector is crucial. That needs to be the working ethos throughout the sector. However, the balancing factor is the possibility of undermining accountability. I am unapologetically in favour of the boards of organisations being accountable for performance. Teamwork and support have to be managed in a way that does not undermine accountability. However, I agree absolutely with the principle that we should be building the capacity of individual organisations, and not detracting from it.
Health bodies have a particular interdependence and, as accountable officer for the NHS budget, Dr Woods has to manage the aggregate consequences of what they do. In the public sector, it is generally true that what one body does has consequences for others, but the interaction is particularly acute in health. The health boards share the one defined pot, and Dr Woods is responsible for keeping that within budget.
In health, there is a slightly specialised version of the general principles, which I think we would all agree gives the interactions a different character from those in the rest of the public sector. For example, the relationship between us and Highlands and Islands Enterprise is clearly different from the relationship between us and the health boards. Because of the need to find a balance, the judgments that Dr Woods is asked to make are more complex than the judgments of other accountable officers.
We regard support as a very important function. Shortly after I took up my post in the Scottish Government, we created within our team an improvement and support group, with specialist expertise, to help boards. As I have said to the committee on previous occasions, we have tried to provide a range of assistance to NHS Western Isles at various times, and we continue to do so. I am pleased to say that the current chair and leadership of the board find our assistance beneficial.
A lesson from our experience with NHS Western Isles is that we need to be more systematic about our support. That is why we have introduced the partnership arrangements that I described in my opening statement. We believe that the recurrent funding that we have made available to the boards, and the formal link between the island boards and the mainland boards, will enable us to put in place additional capacity and capability in some key areas that were exposed as problems by the experience in the Western Isles.
To say that I am disappointed with the response would be putting it mildly. We are being told that the health department does not accept that it was in part responsible for the fact that the model of care previously developed in the Western Isles was not affordable. The department states that responsibility lies with the board. The defence put forward is an explanation of the relationship in legislative terms. Sir John has said that there is a point at which one makes a judgment and at which intervention is all important. I agree with what he says about caution, but I do not accept inaction—which is what we had before the committee intervened. If the committee had been as cautious as Government officials, very little would have happened.
I remind everybody that NHS Western Isles was only the latest in a long line of health boards in financial difficulties stretching back to Tayside Health Board in 1999. What we are offered is a monitoring role, but the committee, working with reports from Audit Scotland, got action for the people of the Western Isles. We are told that health boards are autonomous, independent organisations that are supplied with public funds in a hands-off central Government approach with no early-warning system. It was clear that something was terribly wrong in those health boards, yet no one seems to have spotted major problems or requested remedies. Surely, central Government is responsible for the overall performance of the health service and the individual performances of its component parts. After all, the public depend on those individual performances for their health needs.
I find your argument disingenuous. NHS Western Isles was only the last in a long line. Common sense, good business practice and a change of personnel to improve performance were introduced only after the committee intervened. Therefore, I find the reaction that we have heard today from the health department a legalistic one. Surely the health department is responsible for the authorities that it funds and to which it appoints officials. I find it unacceptable to be told that the health department did nothing wrong and that there was not really a problem. I think that there was. I am proud of the work of the committee and I am disappointed by the reaction that we have received today.
We accept that many things were wrong in NHS Western Isles. We have tried to explain how we tried to discharge our responsibilities as opposed to the responsibilities of the health board.
In the package of material that I supplied to the committee in earlier evidence, there is an exchange of correspondence between the chair of the health board and me, which is relevant in this context. The chair of the board—you may think somewhat ironically—was concerned about the extent to which we were trying to support and help the board and the nature of the involvement. I wrote back to him, explaining why we needed to have Paul Martin making close inquiries about the procedures and practices of the board in relation to a number of matters. I pointed out to the chair that that was one of the responsibilities that I had as the accountable officer for the whole system.
I believe that we have learned from the previous cases to which Mr Welsh has referred, such as NHS Tayside. For instance, in 2004, we published revised guidance on the function of audit committees in health boards and, in 2006, the Government as a whole published a very important document called "On Board: A Guide for Board Members of Public Bodies in Scotland", which is distributed to everyone who takes up a position on an NHS board and which sets out the obligations on them and the way in which governance should operate.
Since the situation in NHS Argyll and Clyde, we have taken a number of steps to ensure that such situations do not repeat themselves. We have changed the way in which we challenge and analyse the financial plans that are submitted to us. We have looked internally at our procedures, and I requested an internal and external audit opinion on the amendments to our procedures. One of the most important things that we have done, as a matter of policy, is reduce the dependence of boards on non-recurring moneys to sustain their financial position. As the Auditor General's overview report on the NHS in Scotland last year demonstrated, we have now reduced that to an all-time low. All those things, together with our revision of the performance management arrangements for boards, derive from the experiences of those regrettable earlier failures. We will continue to draw on those experiences and we are committed to amending our procedures if that is necessary.
In that case, why did action in NHS Western Isles take so long? Action came only after the intervention of the committee, and it was the end of a long line of clear problems in the health service stretching back almost a decade. I am glad that the situation has been addressed and I welcome the improvements that have been made. However, not only should the department have been alerted to what was happening almost a decade ago, it should have been on top of it. I am disappointed that the health directorates do not accept that they were responsible for what happened in NHS Western Isles and the other health boards.
I think that I explained in previous evidence that we were alert to the issues in 2005. We made a judgment and the minister intervened during the accountability review then. I do not think that anybody who was involved in that review or who attended the meetings could have been in any doubt about the minister's wish for the board to change its ways. Of course, we ultimately put in a support force in 2006. We welcome the developments since then, but we have been trying to get to grips with the issues in the Western Isles since 2005.
Sir John Elvidge spoke earlier about his responsibilities in relation to accountable officers, the appointment of individuals and the action that could be taken. You mentioned that the minister took action. Why did people wait until the minister took action? Why did senior officials not do something before then?
Senior officials were doing things before then. For example, I personally engaged with the chair and the chief executive of the board on the matters that we are discussing. We challenged their plans and occasionally were not prepared to accept them. At my request, Mr Martin went to the Western Isles to explore some issues in greater detail. Eventually, in the summer of 2005, I requested a formal written analysis of the financial and human resource issues, which was carefully considered. As the annual review that was to be chaired by the minister was about to take place, we decided that it presented an opportunity to make the point that we were not satisfied with the performance of NHS Western Isles.
But things were not sufficiently bad until then for Sir John Elvidge to decide to exercise his powers to effect change. Things could wait until the minister carried out a formal review.
It must be recognised that I have one power—which is a bit of a nuclear option—to remove an individual's designation as accountable officer. In practice, it is more likely that the chair of a public body would say that they were not happy with their chief executive, and we would help them to manage the process. If I wanted to remove a person's designation as accountable officer in other circumstances, that would imply that although the chair of the body did not want to take action to change the individual, I was going to override their judgment and take a step that would make it quite difficult in practice for the individual to continue in their role as chief executive. Our ambition in the case in question, as it would be with any public body, was always to work in concert with the chair and the board, because parting company with the chair and the board is very dramatic.
But in effect, you overruled the chair's judgment when you got the minister to take the action that was taken. Why did there have to be a delay until the minister took action? Why did you not take action earlier?
Because the minister was able to take more comprehensive action. The tool that I have in my hand is quite blunt. My reading of the situation in the Western Isles was that broader and more complex intervention was needed, rather than what would amount to my saying to the chair, "You've got to sack your chief executive whether you like it or not." Action by me on that narrow front would be tantamount to that.
Part of the problem is that the impression that the committee formed from past responses suggested—rightly or wrongly—that you were attempting to distance yourselves from the events at Western Isles Health Board. The committee expected you to embrace the criticisms. If something continually and habitually goes wrong—as it did in the Western Isles, which had a carousel of officials coming and going through a revolving door—the public expect ultimate responsibility for allowing that situation to continue to rest with you. Sir John Elvidge said that section 15 of the 2000 act enshrines the accountability framework, but the public's view is that, as the events happened on the watch of the permanent secretary and the director general health, those people will ultimately carry the can. We expect you at least to embrace the criticisms rather than reject them outright. That view is reflected in my colleagues' comments, but I prefer to express the point differently. I ask you to step up to the mark and embrace the criticisms, so that improvements take place.
I regard it as self-evident that when things break down in any part of the public sector, the failure is shared, because we all expend much energy on trying to ensure that that does not happen. We and the committee disagree on something narrower. We are not saying that we are not part of the mix. When failure happens, we feel that we have not done as well as we could, just as is the case elsewhere. We are saying that taking particular decisions ourselves is a different matter, if we believe that a sound model of governance requires those decisions to stay, as far as possible, with the health board. Perhaps that distinction is tripping us up.
I see absolutely no difference between the committee's objective and our objective. We are both strongly committed to ensuring that severe breakdowns, particularly in financial management, do not happen in the public sector. There cannot be a wafer between us on that.
The issues are subtle, and concern one's intervention and when to make it. I doubt whether we and the committee disagree in principle that such judgments are tricky and that hitting the nail on the head in timing terms is hard. We are not distancing ourselves from the responsibility for monitoring that judgment all the time and for ultimately judging the right moment for intervention.
What is Dr Woods's view?
Sir John Elvidge has set out the position clearly. I agree with him.
The committee has expressed concern about who is taking responsibility for what happened in the Western Isles. It is clear that disagreements about that exist. However, we can agree that it is important to learn the lessons from the exercise. Financial planning and management in the Western Isles completely broke down. Plans were put in place to try to reverse the adverse financial situation in the Western Isles. Not only did those plans not achieve their objectives, there was a complete breakdown in the monitoring of them. The realisation that things were going wrong came too late in the financial year to fix the problems.
Dr Woods, you said that you had learned lessons about your approach to financial planning from previous health board experiences. What have you learned from the Western Isles experience? How will you draw on that in your dealings with health boards in the management of their financial plans?
The central issue in financial monitoring is what we call our financial protocol, whereby we receive plans from boards and then interrogate them. We keep that protocol under continuous review. We made important modifications to it following the experience in Argyll and Clyde NHS Board, to which I referred earlier. I believe that the protocol that we now operate complies with the advice from the Chartered Institute of Public Finance and Accountancy. We will reflect further on the experience of the Western Isles and consider whether we can do more to strengthen the protocol. Boards have a responsibility to implement the plan, with our help. The key difference between the current and previous situations in the Western Isles is that the board has resolved the issues and is delivering the plan.
I want to ask Sir John Elvidge about employment practices. There is a perception that not just the health directorates but the civil service in general rewards failure or incompetence by moving the people involved to other senior positions rather than dealing with the consequences. Is that a fair perception?
I do not think so, although I understand how the perception arises. It is important to understand employment law in this context. Employment law requires us to demonstrate that the failures in question are sustained and irremediable, unless they proceed from such demonstrable recklessness that one can justify saying that the person involved cannot get any more chances, because what they did was so unacceptable that starting a process that is designed to lead to immediate dismissal is the right response.
More generally, employment law requires us to examine whether the failure in question is remediable. One has a choice between either leaving someone where they are, placing performance demands on them and working through the process of testing their performance, or taking them somewhere else and, in effect, running a parallel process of performance managing them, which is also part of the path towards dismissal—if that is the right outcome. For practical reasons, the judgment is often made that the process of testing performance should be done somewhere else, because the area in which the initial failure occurred is too mission critical to go through that process. Yes, you will often see us move someone about whom we have performance concerns, but that is certainly not intended to be a reward; it is intended to let them know that they have one more chance to demonstrate their performance and that, if they do not do so, the end of that process will be dismissal.
When Mr Manson was moved to a senior position in the NHS after his job in the Western Isles, was it to give him one more chance, or was it because he was the best person for that particular job?
I am more remote from the events in the Western Isles than the committee and Dr Woods are. It certainly fits the model that applies if one wants to examine somebody's performance issues, but one does not want to do it in the place where that person has demonstrated performance problems, and instead one wants to move the person somewhere else.
I do not want to imply necessarily that Mr Manson was undergoing some form of formal disciplinary process, partly because I am not close enough to the details of the individual case—Dr Woods is better placed to speak about that. Moving someone for reasons of priority is consistent with the model that I have described.
Before I bring in Murdo Fraser, I will follow that line of logic. When Mr Manson was moved to the health board from his previous employment at the state hospital—I realise that that pre-dates Dr Woods's involvement—was it because he was the best person for the job in the Health Department in St Andrew's house, or was it another example of allowing someone about whom there had been criticisms to be tested in a different environment for a certain period?
I know even less about the circumstances of his move from the state hospital than about his time in the Western Isles, but I understand that there was an operational reason for that move, and a judgment that he had the right skills to contribute in the role that he was given in the Health Department.
I prefer not to personalise my comments in relation to Mr Manson—I will talk in more general terms. I am concerned that we are dealing not with clerical officers but with very senior executives who are very well remunerated for the jobs that they do. You appear to be saying that if there are concerns about somebody's performance, they will be moved—sideways, presumably—into another role. I understand that you are constrained under employment law in dealing with that. However, if the person is moved into another senior and well-remunerated role, you are, in effect, saying that that vacancy is not necessarily being filled by the best person for the job, but is being filled by the person for whom you have to find another place.
I would not necessarily put it in the same language, but that is a reality for all employers. No employer goes to the market for every single job vacancy that they have, partly because there is a cost if one discards people with whom one already has an employment contract. The judgment is not simply about who is the best human being in the entire population who is available to do that job at that point in time—there is a balance between the risks and costs of going down that route and of using an existing member of staff. An element of compromise is inherent in that, but it is a compromise that every employer everywhere makes all the time. There is nothing peculiar about the view that, as far as possible, one makes the best of the resource that one already employs. That puts a lot of weight on the initial decision to employ a person, which is, in many ways, the really critical point in the equation. Once you have made mistakes, they are expensive to rectify.
If you keep on making mistakes, presumably they become even more expensive as the years go by.
I agree with Sir John's earlier statement that there is no difference in the shared objective of well-run health services, but what happens when health boards are objectively not up to the job and finance and management are simply inadequate, but officials are claiming that all is well? If the health directorates do not accept that there is currently a culture in the health service in which performance failures are not addressed, do they accept that there was previously a culture in which performance failures were not addressed? You have acted to cure the problems—which everybody applauds, and I wish you well—but I must ask for assurances that past lessons have been learned. Will there be vigilance in the future?
I do not claim to be an expert on employment practices in the NHS, so I shall leave that one to Dr Woods.
The question deals with issues broader than employment. I reiterate what I said earlier: we take the issues extremely seriously and are not complacent. We have already reflected on the events in the Western Isles, and we will examine the committee's conclusions to see whether we can do more, particularly on financial management. I assure the committee that we will do that.
If members want to explore employment matters in the NHS, I will ask Mr Martin to comment.
Paul Martin (Scottish Government Chief Nursing Officer Directorate and Health Workforce Directorate):
On the performance of individuals, the committee may be aware that we have revised the contractual and performance management arrangements of executive directors and senior managers in the NHS in the past two to three years. Using the performance management framework that executive directors work through, we have supported and increased the understanding of remuneration committees and the important governance role that they play in the organisation. In particular, we have emphasised the role of the non-executive directors of boards who make up remuneration committees in holding the chair and chief executive to account for the performance of both the chief executive and the other executive directors and senior managers.
As part of that arrangement, and to acknowledge some of this committee's concerns, we have moved the date of increase and allocation of any performance-related pay to executive directors and senior managers from 1 April to 1 October, so that we can go through the audit of accounts and annual reviews and therefore have more rounded evidence before boards make decisions on the performance of their executives and senior managers. However, it is the responsibility of the boards, supported by the remuneration committees, to make those decisions.
We have added a governance layer, which I have referred to in previous discussions, called the national performance management committee. In effect, the committee has a moderation role. It looks at the performance scorings of the executive cohort across all boards and determines whether the reflection is reasonable. As members will know, there is a normal bell curve for performance management, and the national performance management committee checks whether the bell curve is reasonable for the boards and across NHS Scotland. The committee has an independent chair, who is responsible for advising the cabinet secretary that he is satisfied that the governance processes in performance management and appraisal are robust throughout the NHS.
We now have a far more structured and rigorous process for monitoring the performance of executive directors collectively throughout the NHS in Scotland than we have ever had before.
Let me add one general point on board effectiveness. Having reflected on what we can do if a whole board is in difficulty, we have begun some work on board effectiveness and the induction of non-executive and executive directors to board positions. We are developing specific training materials that will supplement the "On Board" guidance and will be aimed specifically at audit committee members and remuneration committee members. We are developing a board effectiveness tool—as it is called in the jargon—that boards can use to appraise themselves on the extent to which they are applying the guidance in documents such as "On Board". I kicked off that work earlier this year, and we are working towards launching that programme later this calendar year. That will be an important addition to the range of things that we do to ensure the effectiveness of boards as a whole. As I commented previously, we need to remember that one difficulty in the Western Isles was that the board as a whole did not function well.
When the Parliament's Audit Committee and the Scottish Government's health directorates have locked horns on this issue, there has been a difficult atmosphere at times, but this morning's session has been significantly more constructive. However, as Murdo Fraser commented at the beginning, there is a real sense that the health directorates have denied responsibility by falling back on a legalistic explanation of the responsibilities of Government in relation to individual health boards. The committee's impression is that recommendations have been dismissed and people have closed ranks. Having re-read the correspondence and the Scottish Government's response, can you understand the Audit Committee's view?
Given all the good developments that have been described, can we find a way forward that breaks through the issues and shows that action is being taken on the recommendations? That seems to be what is being said, but there seems to be a reluctance to accept that action is being taken because of wrongdoing by the health directorates in relation to NHS Western Isles. Rather than look back at the past, we all want to move forward, knowing that the spirit and good intentions of the recommendations are being acted on. A lot more could be done to reassure us on that point.
That is a very constructive suggestion. As today's discussion has produced a lot on which we agree, it might be helpful if, rather than write a letter about where we disagree with the committee, we write a letter on where we agree. That might map out much of the territory that Nicol Stephen has suggested.
Thank you for that helpful suggestion. However, at the back of Nicol Stephen's comments is a desire on our part not just to see where we agree but to be assured that some of the fundamental criticisms have been accepted and are being acted on. To some extent, both Sir John Elvidge and Dr Woods have given us assurances this morning, but it appears to us that the correspondence represents a denial of any responsibility on the part of the health directorates. Frankly, that is unacceptable.
As Murdo Fraser said, we want to move on and learn the lessons. I hope that, as Andrew Welsh said, this is not part of a chain of events with more to come, and that what we have seen in NHS Tayside, NHS Argyll and Clyde and NHS Western Isles is the end of the process and we can all learn from what has happened.
Improvements can be made. Politically and managerially, we are all responsible for public funds. If we can demonstrate to the public that where there is failure it has been addressed and improvements have been made, we have done our job.
We do not intend to linger on this matter. We have other issues to address, so for us I expect this to be the end of the matter. We accept your assurances that changes will be made. I am sure that we can agree that this has been a regrettable and disappointing episode in public life in Scotland. We are all culpable in having let people down in the Western Isles, and as public bodies we are all working together to ensure that it will not happen again.
Thank you for your evidence. We will reflect on what you have said. We welcome the further information that you have indicated you wish to give us.
I say to Dr Woods that we had intended to discuss "A review of free personal and nursing care", but, with your forbearance, we would like to postpone it until our next meeting, given the time and the fact that we have other agenda items to discuss.
Fine. I have no problem with that.
Okay. Thank you. We will now go into private session.
Meeting continued in private until 12:35.