Finance Committee, 30 Sep 2003

Meeting date: Tuesday, September 30, 2003

Official Report 197KB pdf

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National Health Service Reform (Scotland) Bill: Financial Memorandum

The bell has rung for 10 o'clock, so I welcome members, the press and the public to the Finance Committee's eighth meeting in session 2. I remind people to switch off their pagers and mobile phones. We have received no apologies from committee members.

Agenda item 1 relates to the National Health Service Reform (Scotland) Bill, which the Minister for Health and Community Care introduced on 26 June. We have several witnesses to assist our consideration of the financial memorandum that accompanies the bill. From NHS Argyll and Clyde, we have John Mullin, who is the chair, and Neil Campbell, who is the chief executive; from the Scottish Association of Health Councils, we have John Wright, who is the director, and Dr Kate Adamson, who is the convener; and from the Convention of Scottish Local Authorities, we have Alan McKeown, who is the health and social care team leader, and Alexis Jay, who is the director of social work and housing services, at my local council—West Dunbartonshire Council.

Members have copies of the written submissions from NHS Argyll and Clyde, COSLA and the Scottish NHS Confederation. I welcome all the witnesses to the meeting. I am not sure whether we require opening statements, unless anybody is anxious to make one. We will press straight on to questions. Did the Scottish Executive consult health boards when drawing up the financial memorandum?

We were not consulted in a significant way. As a chief executive in NHS Scotland, I have been involved in general discussions at meetings of chief executives with the chief executive of NHS Scotland, but I am not aware of a specific consultation.

General discussion has taken place in the chairmen's group of NHS Scotland, but a specific consultation was not held.

Paragraph 33 of the financial memorandum claims that community health partnerships can be created without additional expenditure, but I am a bit concerned about the extent to which that is possible, because many local health care co-operatives are not up to speed. Are present funds sufficient to sustain the current locality structures and to develop new structures when communities need them in addition to larger and fewer CHPs? Will the funds meet the infrastructure needs of enlarged representation on CHPs?

The structure and organisation of LHCCs is diverse between different health board areas. In some areas, significant opportunities will be presented to consolidate organisation and management arrangements upwards into community health partnerships. In some parts, opportunities are likely for financial savings on the basis of that consolidation upwards. At the same time, a strong and cohesive set of organisational and management arrangements can be created to deliver for communities what community health partnerships can do with local authorities. As that consolidation upwards will link with local authorities, I am sure that it will open a door to the better use of joint local management resources by health services and local government. Those opportunities will vary throughout Scotland.

In areas where LHCCs cover significant geographic areas with large populations, that consolidation upwards might not be as straightforward, because the need to maintain close contact with local communities at a more community-sensitive level will cause community health partnerships to consider how to devolve those relationships to local community areas.

As a health board manager, you recognise that establishing CHPs will cost money.

Yes.

How many CHPs can Argyll and Clyde afford?

We hope to form three partnerships that have co-terminous boundaries with our local authorities and two that are in partnership with Glasgow and the local authorities whose areas straddle Argyll and Clyde and Glasgow. We will need to contribute towards the cost of two partnerships with Glasgow and our local authority partners and three partnerships directly with our local authority partners. We are looking for a relationship with five partnerships in Argyll and Clyde.

How much will that cost?

We are working on the assumption that we will have to manage the cost within the costs of the seven existing LHCCs.

Health boards will be responsible not only for community health partnerships, but for public participation forums. I would be interested to hear from Neil Campbell about that, because funding for such a purpose is not currently part of a health board's remit and would be in excess of the funding for a local health care co-operative or community health partnership.

The question has been raised whether managing public consultation should be the sole responsibility of CHPs. Our policy response strongly suggests that considerable added value would be created if we used the mechanisms that have been developed for community planning, which is a statutory responsibility. That is not highlighted. We suggest that we should make those links as a matter of policy, to benefit from the advantages and to make the potential savings.

Perhaps it is a bit early to tell whether enough money is available for CHPs. We can all accept that cost savings can be made. However, in the short term, it is unlikely that those savings will be realised, so an additional early hit might be needed. We must consider resources to support the formation of CHPs and all that accompanies them to make them effective on the ground with communities and partners.

There is a parallel with the joint future agenda, which involved integrating older people's services. In our case, that was across two NHS boards and one local authority—such integration has happened throughout Scotland. That experience showed that there must be investment in development time to allow such changes to happen effectively. Although the costs of the joint future agenda were transitional, they were absorbed entirely by the partners.

We were supportive of the agenda and glad to undertake it, but there were hidden costs attached to it and nobody has calculated them. Those costs related to secondments, which nearly every partnership developed to ensure that the work progressed, and to staff training. We need to invest in front-line staff. Local leadership is needed with such a major change to ensure that the system is as effective as possible.

I concur with the comments of colleagues in COSLA about the role of community health partnerships in public involvement and about the community planning process. As members will know, we in Argyll and Clyde became a single system on 1 July. We have been keen to avoid unnecessary duplication. We believe that community planning can play a crucial role in the development of the health service not only locally but nationally. We are keen to see whether we can work with our local authority colleagues to take advantage of some of the positive work that has been done in Scotland to involve the public. I have a local authority background and I feel that the health service can learn a lot from how local authorities have engaged with the public over many years. We are keen to explore that avenue and to cut out any unnecessary duplication.

There is a point about which I am not clear and no one is giving me an answer. Are there savings from the LHCCs that could move across into the community health partnerships? If not, how can the partnerships operate without additional resources?

It is difficult to say exactly how we will align the management arrangements in partnerships that do not yet exist. We have not received formal guidance on what the partnerships will be like or on the nature of their work. From work that we have done to develop LHCCs and from work that has been carried out over many years to develop relations with local government—through, for example, community planning—we have a good general idea of what CHPs will be like and of the kind of opportunities that they will present. However, we have not yet received any detailed guidance on the establishment of CHPs or on exactly the sort of work that they will do.

In Argyll and Clyde, the organisation and management arrangements relate to seven LHCCs. We have general managers, lead clinicians and some administrative functions in place. We will have five CHPs, two of which will be shared with Glasgow because of the cross-boundary organisation of the local authorities. Therefore, in establishing management arrangements, there will be a shared cost with Glasgow. In Argyll and Clyde, we will be able to redeploy the resources from seven LHCCs into three CHPs in our area and two that are shared. Standing back to consider that from my perspective as a manager, I see an opportunity to redeploy costs. In addition, by creating a single system, we change the whole nature of the work of a health board, which will also give rise to opportunities. We can consider how some work can be conducted more locally. Through CHPs, some resources can be redeployed from what was the health board work force.

If I understood it correctly, the question was whether that redeployment would fit with the cost of CHPs. It is very difficult to say. There will be hidden costs. I expect that the management of CHPs will be of a higher calibre, with higher skills, than that of LHCCs. CHPs will have wider responsibilities and will be more accountable. Their work responsibilities and their relations with local authorities will require a higher calibre of manager. We have to identify those people. What do we do with people in existing LHCCs who have yet to achieve that level of competence—if they ever can? Do we make them redundant? Do we wait for them to move to other jobs? Do we carry them as excess in the system? As a manager, I have to recognise that there will be hidden costs.

My impression is that, in the short term, the establishment of CHPs will have a cost for the NHS that is above the cost of LHCCs. However, over time—a couple of years—that cost will be taken out of the system as we take the opportunities that arise. In making that comment, however, I am making assumptions. I do not have hard evidence. It is too early to be precise because the exact nature of CHPs has yet to be worked through. The detailed work that will be required with local authorities will have to be worked through and, in Argyll and Clyde's case, there will also be detailed work with Glasgow.

So you are saying that there will be an initial cost that might fade away over time but that you cannot quantify it.

Reform is at the core of the bill and the Scottish NHS Confederation is about to launch a major project to help to define and shape the CHPs. How will you focus on value for money, on improved effectiveness and outcomes and on avoiding exporting costs on to patients? I am thinking particularly of the delivery of services in the community—close to the patient wherever possible. How can we play a full role in energising communities and making them more attractive places for people to live in—to invest their lives in, if you will?

I will comment on that first; COSLA may want to comment after. We have good experience of working with local government, both in community planning and in joint future work. Bringing together expertise from local government and the health service creates opportunities for better cross-boundary working between professional groups. Sharing expertise and skills among work forces creates real opportunities for services and local communities. CHPs will be a vehicle for that kind of work. We have not yet been provided with the exact details of what would be expected of us, as an NHS board, in that work. However, our experience to date of working with local authorities has been positive. It has enabled the kind of integration that creates opportunities for communities and it has allowed for substantial scrutiny of cost-effectiveness and value for money.

I will pick up on a point from that and then Alexis Jay will perhaps talk about the Chartered Institute of Public Finance and Accountancy guidelines. We have to consider more than simply value for money. Added value has to be seen in improved services—not only must we be able to say that there are improved services, but the people who use the service must be able to see a direct benefit. I am not saying that that has to happen immediately; it would be naive to suggest that. Partnership working with local government and joint future work take time and a lot of continued effort. We are not just changing services; we are changing culture in the way that two fairly monolithic organisations come together to work. That will take time. We have to consider more than just value for money.

That is why my question was multifaceted. The key point was on improved effectiveness and outcomes and on the avoidance of exporting costs on to patients. The bill gives you an opportunity to be new brooms. How are you stepping up to the plate to address all the issues?

The bill represents a real challenge, but it has to be seen as an opportunity. It is a chance for us to start, right at the beginning, to work on the structure. We have to work through the guidance, get the culture right and get the key messages across. What we do has to be about partnership. We have spoken about community planning and the role of consultation. There is no point in twin-tracking things and then, at some point, saying that we need to bring them together. We should bring them together right here, right now. We should move forward collectively. That is a strong part of the COSLA response.

I absolutely concur with what has been said on cost-effectiveness. In rural areas, there is no doubt that the economy of scale that can be achieved through amalgamating LHCCs will be significant. However, as for delivery close to the ground, there is certainly a perception in Highland, where I come from and which is a very rural area—the most rural area—that services are being taken away from local areas. That is the perception among the professionals and local people.

I want to explore some of the fears expressed by Argyll and Clyde that the costs of the powers of intervention are not correctly calculated. You have said that the costs may be higher than the Executive suggests. Given the financial difficulties previously experienced by some health trusts, what would be a better estimate of the costs of those powers of intervention? I know that that is difficult to get a feeling for, as intervention would happen only under particular circumstances.

Are you concerned about the fact that the costs of intervention had to be borne by the trust when the problems might have arisen in the first place because of financial pressures? Are you concerned that intervention might make the situation worse rather than better?

I will start and Neil Campbell will follow with more detail. This time last year, I had to approach Trevor Jones, the chief executive of NHS Scotland, and ultimately Malcolm Chisholm to ask for support because I believed that, at that point, we had a major systemic management failure in Argyll and Clyde. We can therefore comment in some detail on the cost implications of the task force that was put into Argyll and Clyde. The task force spent a couple of months in Argyll and Clyde and prepared a report that has led to our taking a series of actions to ensure that we recover the system and finances of Argyll and Clyde and consider clinical recovery and clinical redesign.

To me, the suggested figures seem to bear no relation to the figures that we had to address within Argyll and Clyde. I will ask Neil Campbell to have a stab at specifying what those figures were and to comment on what they are likely to be in the future for other authorities.

I can perhaps answer the last part of Elaine Murray's question. I agree that, in many cases, intervention will probably happen when organisations have experienced major financial problems. I have mentioned Argyll and Clyde, but members will also know about the problems that occurred in Tayside. For health boards such as Argyll and Clyde, which has to save £35 million over three years, any costs on top of that will be a considerable additional burden.

Before Neil Campbell responds, I want to mention an issue that arose in relation to the Beatson intervention, which took place to address a specific example of service failure rather than to address issues across the health board. If NHS Quality Improvement Scotland identified other service failures, could there be further demands for ministerial intervention? Would not that also be a cost within the system?

I cannot see how intervention can take place without substantial cost. I believe in intervention. Intervention is an important tool that needs to be available to the Scottish Executive Health Department in order to secure safety, quality and development of services for local communities, but it is a costly option. It requires people to be available to intervene. However, what do those people do while they are waiting to intervene? That is an issue, which must have cost implications.

Intervention requires people who are competent to carry out a variety of roles to be available to intervene. Such people are often at a significant point in their personal career development, so they are expensive. There may well be other work that those people can do while they are waiting to intervene, but it is unlikely that we can have any number of those people ready at the drop of a hat to go anywhere in Scotland to provide the necessary support.

In addition to the financial costs, the system of intervention involves a significant cost by the very fact that it displaces people who are carrying out certain roles. Often, no management decision can be taken to remove people from the system without cost. In the case of Argyll and Clyde, four chief executives were removed, at significant cost to the NHS. There was also the cost of the intervention team, which has only now, with effect from 1 September, come to an end. That was nine months of cost. Including salary costs, living costs and so on—the people were drawn from across Scotland—the intervention team probably cost in the region of £300,000.

That is considerably more than the estimate that is given in the financial memorandum.

There is a cost to intervention.

The intervention team also brings other people in its wake. In Argyll and Clyde, there were three people in the intervention team, but other people with expertise had to be brought in to do the other work that needed to be done. On behalf of the board, I commissioned work to validate financial data, because the system was in crisis and needed that kind of support. For all those reasons, intervention is a costly process, but I believe that it is a necessary process.

As I said, not all the costs are financial. There is a need to have available within NHS Scotland a high-quality group of people to be deployed. Those people will not be available to do other things.

The dilemma for the lay observer is that, although the financial memorandum assures us that the cost implications of the reform are negligible, that is not what we have heard from the witnesses so far. How can we—and you—reassure the public that the outcome of the reforms will be a better health service? How can we reassure people that the reforms will not simply be an exercise in diverting scarce public money away from front-line health provision and into yet more health board management?

The consequence of not having the ability to intervene in an NHS system that is failing is disaster for that system, which affects not only the management or the board but front-line services—the disaster strikes the people who need those services.

Let me describe Argyll and Clyde's circumstances before intervention. Crucial front-line services for surgery and maternity services were not able to move forward to a position where they could be sustained for a large proportion of the population in Argyll and Clyde. The knock-on implication of our not being able to sustain surgery was that we were unable to sustain accident and emergency services, medical receiving and high-dependency unit and intensive-treatment unit facilities and services. That lack of decision making and inability to move forward as a system had a consequential impact on a diverse set of services. In mental health services, we were unable to recruit and retain staff in part of the patch. There was an impact on the continued development of community infrastructure and reprovision programmes. In rural services, there was an impact on recruitment and retention in primary care.

System failure has a massive knock-on ripple effect on front-line services and care. There is a need to invest so that opportunities are developed to deal with such failure through a power of intervention. That is crucial for the services that the public require and to which they have a right. I believe that intervention is an important aspect of the bill and that it should be developed. However, I am saying that there is a cost to it.

Are you refuting the guidance that we have been given, which is that the cost implications are negligible?

I am taking a view, which is based on my experience in Argyll and Clyde, that intervention involves a very significant up-front and on-going cost.

We have opened up an important issue that we will need to explore with the Executive next week. Neil Campbell has highlighted that there are reservations not only about the costings that have been given for the power of intervention but about the scoping of that power. Perhaps between this week and next, the clerks could develop a line of questioning that examines the benchmarks. I am struck by the fact that we have experience of central intervention in schools. The Accounts Commission for Scotland might offer benchmarks for intervention in a single school, but that kind of intervention cannot be compared with intervention in health boards, which have budgets that run into hundreds of millions of pounds. I think that the proposal is neither scoped nor costed appropriately. It would be helpful to develop that line of questioning before we discuss the matter with the Executive next week.

I am aware that time is pressing, but I have one more question to ask. The bill raises the matter of public involvement in the NHS. In the evidence from Argyll and Clyde NHS Board, it is noted that many parts of the service are undergoing considerable redesign, and that the pressure for public consultation is, therefore, perhaps stronger now than it was in times past. Ted Brocklebank pointed out the dilemma in the balance between trying to direct as much resource as possible to front-line services and making the public aware of service redesign in their areas. With a view to the discussion that we will have with the Executive next week, do the witnesses have any observations about public involvement in the NHS and the associated costs, given the need to keep as much resource as possible for front-line service delivery?

First of all, I apologise to the committee for not submitting a paper earlier. The request to attend the meeting coincided with our association's annual conference last week. However, I gave a paper to the clerk this morning.

The association is the membership organisation for health councils in Scotland. Members are aware that there are currently 15 local health councils, which are the statutory bodies. I clarify that for reasons that will be important later.

Although we are unable to determine whether the implementation of the National Health Service Reform (Scotland) Bill will be cost-neutral, we have some concerns about the statement in paragraph 37 of the financial memorandum, which says that existing budgets that have been allocated to health councils in Scotland will be sufficient for the new Scottish health council. Our reasons for that assertion of concern are based on feedback that we have requested from all the member health councils.

I will go through some of that feedback. First, the increased importance that has been given by the Scottish Executive to public involvement in planning, delivery and monitoring of health services was mentioned. The new Scottish health council will be fundamentally different from the organisations that exist at present. We are talking about an organisation—

Perhaps we are straying into matters that are the subject of the submission. We are looking for a response to Wendy Alexander's question.

Okay. In paragraph 37 of the financial memorandum, it is stated that the existing financial arrangements are adequate. We believe that there are likely to be significantly increased costs for the new organisation.

One of the areas about which we are concerned is that, in addition to the budgeted figure of £2.1 million that is quoted in that paragraph, the 15 existing health councils are currently dependent on funding in kind from NHS boards. That funding varies from health council to health council, but it typically covers costs such as property rental, rates and IT expenditure. If the new organisation is to be truly independent of health service providers, we argue that those costs should be refunded directly to the Scottish health council and that the current in-kind funding arrangements should not continue. However, we do not suggest that that money should be taken away from NHS boards. Suffice it to say that funding must continue to be provided to the new Scottish health council. Although I cannot quantify the amount at this stage because I do not have the information from local councils, the funding from the existing budget of £2.1 million could be significant.

If we are serious about public and patient involvement, there must be some commitment to enabling and supporting people to participate. That means investment in capacity in communities; not just in formal organisations, but in groups that represent the different interests of patients so that we avoid making the initiative tokenistic.

I hope that I understood the question about public consultation correctly. As the bill is drafted, there is an issue about accountability of CHPs; we are concerned that they would be accountable only to NHS boards. That would be an opportunity missed to examine ways in which to marry accountability with communities through local government. I recommend strongly that the committee reflect that. COSLA takes the view that we should try to ensure that, rather than be accountable only to the local health board, CHPs are accountable to more people than that board. That goes to the heart of ensuring that local government and the NHS work more closely in order to deliver better services.

You refer to what is primarily a policy, rather than financial, issue.

Before we move to the health boards' responses, I will pick up on a question that Wendy Alexander asked. Can we do any benchmarking for consultation processes? We have examples of a number of major consultation processes in various health boards. Is it possible to quantify what a major consultation process costs in time involved and associated staff time?

There will be an opportunity to benchmark. We could track significant changes that the public has been consulted on throughout Scotland. Whether that would be helpful is a matter of individual opinion. Much of what happens during consultation is discussion and provision of information. It is often a one-way process rather than a two-way process and it is not that good. It is not that intensive effort is not made and it is not that the intention is not good. Such a consultation process is not what the Finance Committee would expect of the health service and it is not what I expect as a chief executive with accountability for proper engagement with communities on major issues. Any figures that a benchmarking exercise came up with would not necessarily tell us what was effective.

The major challenge that consultation presents is to move beyond the process and into proper engagement with communities about the sort of issues that we face. In Argyll and Clyde, we must deliver a major reform programme in order to sustain our health services during the next five to 25 years. Engagement will be a major issue among the challenges that we face. Our challenges are similar to those that are faced throughout Scotland, but we have a set of acute circumstances on which we in Argyll and Clyde must engage now. That will mean a heavy draw on our resources over the coming years.

We are beginning to decide how we will undertake that process; there will be a cost of doing it effectively. That cost will not be for a brief process that concludes with a submission to the minister for approval of plans for change; rather, it will be a continuing process. When we have approval for plans to change, the education process of engagement needs to continue in order that we ensure that we get the best from that service change in whatever form it takes. That is a continuing responsibility of boards that goes way beyond the conclusion of formal consultation of the public and ministerial approval's having been given for changes.

I agree with everything that Neil Campbell said. I also voice my support for the comments that were made by Alexis Jay. There is a need for community capacity building. One can see from a number of consultations that have taken place the length and breadth of Scotland that some people still feel totally disenfranchised.

Whatever debates relate to—whether they are on maternity services or the west of Scotland secure unit—many people feel that some people are better able to register objections or to speak in public meetings and are therefore at an advantage. We are losing opportunities to engage with communities in the way in which Neil Campbell mentioned.

If we want people to get involved in the health service—or in any other service that is provided by a public agency—we must also support people's desire to become involved. That means that we have to invest in capacity building at local level. Argyll and Clyde NHS Board has started to speak to its local authority partners in that regard because we see this as a win-win situation. We must work on capacity building. Speaking as the chair of that health board, the kind of consultation that currently exists is not the kind of consultation that I want.

Our task is to find out how much the bill will cost. The financial memorandum does not say that the cost will be negligible; it says that it will be zero. However, we have learned from you that there might be far greater costs than are included in this paper.

My understanding is that, essentially, the bill replaces trusts with community health partnerships—that is to say, it replaces one sort of administration with another. I am struck by what constituents of mine have told me. For example, a husband and wife in my constituency, both of whom are waiting for operations, view the bill with some scepticism because they had hoped that the proposal would lead to less money's being spent on administration and more on ensuring that the waiting lists that they are on are cut. That is not to criticise the health professionals; those whom I know in the Highlands are wholly committed to their task. However, having set that scene, I ask two simple questions. First, can each of you suggest what efficiency savings can be found in the administration that currently exists? Secondly, have you been asked by the Executive to volunteer such proposals in the context of the bill?

Those are probably questions only for the representatives of the health boards.

Not really. All of our witnesses have relevant expertise; I am interested to know what proposals they have for efficiency savings that would turn money that is spent on administration into money that is spent on front-line medical services? I would also like to know whether the Executive has asked them about that.

The overall changes that will be brought about by the partnership for care system under the National Health Service Reform (Scotland) Bill are much more far-reaching than it would be simply to replace trusts with community health partnerships. In fact, trusts will not be replaced by community health partnerships at all. There will be integrated NHS systems with one board of governance and an accessible organisational arrangement with one chief executive and a tier of management under that.

The configuration will differ across board areas but the principle is that trusts will disappear entirely. Community health partnerships are a stepping up of local health care co-operatives, which are not statutory organisations. I understand that CHPs will not be statutory organisations, either.

There will be significant efficiency savings as a result of creating an integrated system. In Argyll and Clyde, we have four separate finance functions—one for the health board and one for each of the three trusts. After the changes, there will be one finance function with devolved components, which we expect to result in a saving of between £600,000 and £700,000.

Similarly, hiring and recruitment, which currently has three and a half distinct parts, will become one corporate function; we have taken the same approach to planning and to other corporate functions such as facilities management. To configure such matters in one organisation, rather than in four, will present opportunities for savings, which will put into the system money for some of the changes that are envisaged in the bill. However, it is too early to say whether the additional costs that I have described today will be met by those savings.

We have to ensure that in creating a single system in order to gain efficiency savings, we do not create a centralised bureaucracy in the image of the health boards of the 1990s. The thrust of the partnership for care system is to create at community level devolved organisational arrangements that are connected to local authority partners. The community health partnerships will be a key driver in that regard.

Thank you. I ask for brief replies from our other witnesses because we are keeping the minister waiting.

I am not aware of the Scottish Executive's having asked us specifically about efficiency savings. There are examples of people trying to ensure that efficiency savings are made, however. In my area, for example, we would examine first-line managers of specific health and community care services, local health care co-operatives and social work teams to examine where there is overlap and duplication. Where the overlap means that it would be possible to have one manager instead of two, we will do that, to the extent that it would work best for the people involved.

I do not think that I can answer the questions that were asked.

I apologise to the witnesses for having to cut off our discussion at this stage, but I thank you all for coming to the committee today. If there are any further points that you would like to make following this discussion, we will be pleased to receive further submissions in writing.