1.6  National Standards

   (i)  The National Service Frameworks on mental health and coronary heart disease set out clear service standards which are to be achieved within a 10-year timescale. Has the Department produced any costings for these programmes, based on the differences between current provision of services, and that envisaged by the Frameworks? The Committee would welcome both broadbrush information on the 10 year programme, and any more detailed costings which may be available over the three years covered by the spending review.

   (ii)  Has the Department produced any estimates as to the financial impact of forthcoming recommendations by the National Institute of Clinical Excellence?

   (i)  The National Service Frameworks on mental health and coronary heart disease set out clear service standards which are to be achieved within a 10-year timescale. Has the Department produced any costings for these programmes, based on the differences between current provision of services, and that envisaged by the Frameworks? The Committee would welcome both broadbrush information on the 10 year programme, and any more detailed costings which may be available over the three years covered by the spending review.

  1.  The National Service Frameworks (NSFs) for Coronary Heart Disease (CHD) and for Mental Health set the direction for prevention, diagnosis and treatment of these diseases over the next 10 years. They identify both immediate priorities that the Government expects to deliver in the short term, and goals and standards aimed for in the long term.

Coronary Heart Disease

  2.  As part of the preparation of the Coronary Heart Disease NSF, a number of scenarios for implementation were explored. These underpin the Government's commitment to the achievement of the NSF's goals and standards through a 10 year action plan, backed by its commitment to give continued priority to action on CHD. Funding to support the initial stages of implementation was announced when the NSF was published, the details of which are shown in table 1.6.1.

Mental Health

  3.  The Committee is already aware from the detailed evidence it has recently received as part of its inquiry into mental health services that £700 million of new investment is being made available to improve mental health services as part of the CSR settlement, over and above the £3 billion per annum which is already invested by health and social services in mental health treatment and care.

  4.  The Mental Health National Service Framework indicated that the Department had commissioned a review of the evidence of cost-effectiveness of the main interventions and changes proposed in the Framework. The results of this work should be available later this year.

CHD and Mental Health

  5.  There are a number of uncertainties which make it difficult to offer a definitive estimate at this stage of the full costs of implementation. NSFs are subject to review and updating in the light of progress, both in their implementation and in relation to developments in treatment. The pace of implementation will be shaped by early progress in implementation, by further work on service re-engineering and workforce developments, by maximising efficient use of existing resources and emerging evidence of cost effectiveness and rigorous performance management. A number of these factors will, in turn, affect the overall cost of achieving the NSF goals.

  6.  The next stages of NSF implementation are being considered as part of the Government's wider consideration of the Spending Review settlement and the working up of the National Plan for the NHS. Further details will be available when this process is complete.

  Resources for implementing the NSF and for reducing inequalities have been:

—  the increase of £18 billion in NHS funding for England over three years announced in July 1998 following the first Comprehensive Spending Review. These are the main sources of funding to implement this NSF, supporting improvements in primary and secondary care and funding increased prescribing of effective medicines, for example statins and antihypertensives. Local investment in CHD is a national priority;

—  a specific allocation of £50 million to increase the number of revascularisation procedures by 10 per cent (approximately 3,000) by April 2002;

—  £5 million revenue and £10 million capital in 2000-01 to support new rapid access clinics and begin to tackle long outpatient waits;

—  using £10 million capital from the NHS modernisation Fund specifically to fund:

  —  the purchase of equipment improving the treatment of life-threatening cardiac emergencies   eg defibrillators for treating cardiac arrest;

  —  the purchase of equipment for diagnosing CHD eg echocardiography equipment that can be   used to diagnose heart failure.

—  £18.5 million revenue and £2.5 million capital to improve ambulance response times;

—  £10 million has been made available in 2000-01 through the Health Improvement Programme Performance Scheme to encourage the implemention of this NSF through support for preventative and community-based initiatives in particular;

—  £3 million to fund CHD Partnership Programme, a new plan to test out how cardiac services can be streamlined to provide better and faster services for patients in different parts of the country, for example through one-stop diagnosis or re-engineering services to reduce waiting times and cancellations;

—  working to develop a new formula for allocating NHS resources which better reflects the needs of the most disadvantaged communities;

—  funding the new Information Strategy for the NHS within which developing information tools to support the implementation of this NSF is an early priority; and

—  creating a Public Health Development Fund to tackle health inequalities. The Fund will principally support the four priority areas of the White Paper, Saving Lives: Our Healthier Nation, including CHD and stroke.

   (ii)  Has the Department produced any estimates as to the financial impact of forthcoming recommendations by the National Institute of Clinical Excellence?

  7.  The National Institute for Clinical Excellence (NICE) will help the NHS to focus its growing resources on those interventions and treatments that will best improve peoples' health. By pointing out which treatments are less clinically cost-effective, it will help free up financial headroom for faster uptake of more appropriate and clinically cost-effective interventions.

  8.  Clearly we cannot predict what NICE will conclude on any individual appraisal, or the possible costs or savings from implementing particular guidance.

  9.  When Health Authorities were allocated on 28 March their share of the first £600 million of the extra resources for the NHS announced by the Chancellor in his Budget statement, they were advised that the extra resources should help to meet any additional costs arising from the implementation of recommendations by NICE, and that further guidance would be issued on the planned NICE work programme and on its possible cost implications for the NHS.

1.7  Children's Services

   (i)  Can the Department provide details of how the Quality Protects initiative and the associated investment is delivering the Government's objectives for children's services? Can the Department also set out details of how this is being monitored to ensure that objectives are achieved?

   (ii)  Can the Department comment on how it will go about dealing with the staff shortage in personal social services at a time when the numbers of children in care continue to rise?

   (i)  Can the Department provide details of how the Quality Protects initiative and the associated investment is delivering the Government's objectives for children's services? Can the Department also set out details of how this is being monitored to ensure that objectives are achieved?

  1.  Quality Protects has just entered its second year. Our main evidence of progress to date comes from councils' Management Action Plans (MAPs) that were submitted at the end of January this year. They reported on progress over the first year and plans for the next two.

  2.  Overall, the MAPs show encouraging progress and all 150 were passed as acceptable as announced by the Minister of State John Hutton on 12 April. Subject to Parliamentary approval, all councils will therefore receive the Children's Special Grant in 2000-01. Eight MAPs were assessed as being of very good quality—those from Blackpool, Manchester, Portsmouth, Stockton-on-Tees, Suffolk, Tameside, Wandsworth and Westminster.

  3.  The whole collection of MAPs shows marked development from last year. Virtually all the MAPs are better organised, and display ownership of the Quality Protects Programme. Much more effective attempts have been made to provide useful and comprehensive information, including statistical information. The accounts of work over the year have in general a coherence, energy and level of activity that was not always evident in the first round.

  4.  The MAPs contain a wealth of management information and Performance Indicators although there is concern about the quality of some of the information provided. The data is self reported and is not in a format that readily allows validation or aggregation into national estimates. The figures for March 2000 are projections, as the MAPs were submitted in January 2000. There are also discrepancies between the data emerging from the MAPs and the data collected through the Department's statistical returns. We will be examining these discrepancies with local authorities with a view to improving information quality. In the meantime, the data in the MAPs do allow trends to be seen and they show progress towards the Government objectives, although these trends need to be treated with considerable caution at this stage.

  5.  The MAPs show the proportion of children having three or more placements a year to have dropped over the year to March 2000, and councils project that they will continue to fall.

  6.  They show the proportion of looked after children being adopted is rising.

  7.  The MAPs show a drop in the proportion of re-registrations on the child protection register with the trend projected to continue. At the same time, the number of children on the register for more than two years is dropping.

  8.  Educational attainment of looked after children and care leavers is improving.

  9.  More children entering care are receiving comprehensive health assessments.

  10.  The proportion of looked after children cautioned or convicted is coming more into line with the generality of children.

  11.  The number of children leaving care at 16 is dropping and projected to drop further, with a commensurate rise in the number not leaving care until 18.

  12.  This all represents significant progress in just one year of the programme. However, we recognise that it is only a start and that more needs to be done. Much of the early work on Quality Protects has put in place the foundation on which to build improved services delivering better outcomes for children. As the additional investment through the special grant rises this year and next, we expect to see significant further improvements.

  13.  The Department is continuing to work closely with councils to help them deliver the Quality Protects programme, for example through:

(i)  the advice and support of the eight Regional Development Workers;

(ii)  Guidance and seminars for councillors;

(iii)  The Children (Leaving Care) Bill;

(iv)  The publication of Working Together to Safeguard Children;

(v)  The publication of the Framework for Assessment of Children in Need and their Families;

(vi)  Six Making it Happen Children's Participation events;

(vii)  New guidance on the Education of Children in the Public Care, and consultative guidance on promoting the health of looked after children; and

(viii)  The National Foster Care Recruitment Campaign.

  14.  The Department is monitoring progress under Quality Protects in a number of inter-linking ways. As discussed above, the annual submission on Quality Protects Management Action Plans allows us to assess individual councils' progress and plans. The Department is currently consulting on draft cross-Government guidance on Children's Services Planning. The guidance proposes that that Children's Services Plans (CSPs) should bring together all national and local objectives and targets for vulnerable children and set out the action to be taken by each agency to secure those objectives. It therefore proposes that MAPs should be a part of CSPs to ensure that work under Quality Protects is fully integrated with other action to support vulnerable children.

  15.  In partnership with councils, the Government has devised a new collection of activity and expenditure information on the full spectrum of children in need based upon a census carried out in February this year. Analysis of the full returns from this exercise will clarify how resources are allocated and will provide the overall framework for analysing local need and commissioning services.

  16.  Information of the delivery of children's services and the Quality Protects programme also forms part of the Department's new performance assessment arrangements for social services. These pull together information from a number of sources to provide a comprehensive overview of the performance of each councili:

(i)  Performance Data: the performance indicators associated with the PSS Performance Assessment Framework help to provide an overview of performance at the year-end and can be used with other relevant local and national data. The PSS Performance Assessment Framework provides finalised end-year data for a number of Quality Protects indicators. Data are published annually; the 1999-2000 data will be published in September 2000.

(ii)  Evaluation: in-depth SSI inspections and SSI/Audit Commission Joint Reviews covering the full breadth of social services will evaluate the performance of a council. The SSI will carry out at least one inspection of every council's child care services in each five year period. The Joint Review Team will visit each council once every five years. SSI will have completed 30 comprehensive inspections of children's services in the 12 months to July this year. They have just completed a three stage inspection programme of local council adoption services, and later in the year they will be undertaking an inspection of family placement services.

(iii)  Monitoring: the SSI Social Care Regions (SSI SCR) will be in frequent contact with councils and monitor progress in achieving national objectives and targets twice a year. They will also follow up concerns arising from performance indicators, inspections and joint reviews.

  17.  This information will be collated once a year, the overall performance of each council will be assessed and a banding given. SSI SCR will use this to carry out an annual review of councils and to advise external auditors on the signing off of Best Value Performance Plans. The duty of Best Value—to deliver services to clear standards covering both cost and quality, by the most effective, economic and efficient means available—was implemented on 1 April 2000. The aim of the Best Value process is to secure continuous improvements in performance, and to deliver services which bear comparison to the best. Councils will be expected to review all their services in every five-year period.

  18.  We are taking a rigorous approach to the evaluation of Quality Protects and making use of early findings to inform the future development of the programme. Our evaluation strategy draws on evidence from the evaluation of MAPs, inspection findings and independent research. We are involving children and young people in the development of policy and hearing their views; for example through six Make it Happen children's events held in April 2000 and the development of a shadow reference group of children and young people. This will create a consistent channel of communication between the department and the contemporary views of children of all age groups. We have also commissioned MORI to undertake qualitative research into awareness of, and attitudes to, Quality Protects on the part of front line workers and managers.

   (ii)  Can the Department comment on how it will go about dealing with the staff shortage in personal social services at a time when the numbers of children in care continue to rise?

  19.  The Department of Health is aware of the problem faced by employers in some parts of the country, and convened a workforce summit on 22 March 2000. This was addressed by the Minister of State John Hutton and attended by local authority and independent sector employees, training organisations, the trade union and other major organisations in the social care sector.

  20.  At the workforce summit on 22nd March the following points were agreed:

(i)  There is a serious problem in recruitment and retention;

(ii)  A concerted effort is needed to improve the public image of social care;

(iii)  Employers need to work with others at the summit to address the issues.

  21.  The Department, though not the employer, has a significant role to play in bringing together current initiatives for a focused programme to tackle the issues, working with employers and others.

  22.  The Local Government Authority (LGA) has set up a task force including a representative from the Department of Health. It held its first meeting on 27 March. It has commissioned survey work to identify the extent of the problems in recruitment and retention, including geographical variations and differences between services and is looking at supply side issues (attitudes to social care, exit interview information from staff who are leaving).

  23.  Specifically in relation to Quality Protects, we have made managing change—including human resources issues such as workforce analysis; training and development; and safe and effective recruitment—a priority area for children's services grant with effect from this financial year. Councils in England are planning to spend almost £6 million under the managing change category in 2000-01.

  24.  In addition, a workshop was held on 4 April by the Department of Health and supported by the LGA and the Association of Directors of Social Services (ADSS) to look at the human resource issues and their impact on the progress of the implementation of Quality Protects.

  25.  The workshop report summarises the strategies and positive ideas being taken forward by Local Authorities to address staff recruitment and retention difficulties specifically within child care services. It includes:

(i)  The components required to develop a Workforce plan;

(ii)  Good practice examples on what can be done to tackle the human resource problem and offers;

(iii)  A checklist for measurement for "What makes a good employer".

  26.  This report will form the basis for further work to develop a resource pack on Human Resource strategies.

  27.  Work force planning requires a long-term strategy. There is evidence from the Quality Protects Management Action Plans that these are being developed together with improved data collection and improved training resources and staff development initiatives. In addition local authorities are seeking accreditation for Investors in People.

1.8  March 2000 Budget

  Could the Department explain the basis on which the additional £1.42 billion promised for the NHS in England in the Budget (£2bn UK-wide) will be allocated? Could it also explain how the £250 million additional funding from tobacco revenues relates to the global figure of £2 billion?

  Of the extra £2 billion announced for the UK for 2000-01, £1.674 million was for England.

  Of this:

—  £250 million tobacco funding was included in Health Authority initial unified allocations;

—  £150 million is included in the Department's Unallocated Provision;

—  £660 million is being distributed pro rata to the Health Authority weighted capitation targets used to inform 2000-01 Health Authority allocations. £600 million was allocated on 28 March 2000. The remaining £60 million performance fund will be allocated during the course of the year.

  Of the remaining funding, the following sums have been announced:

—  £8 million for further development of services for wheelchair users and smoking cessation clinics;

—  a further £10 million for booked admissions to reduce waiting;

—  £54.5 million for access and enhanced services in primary care;

—  £5 million for the development of digital TV;

—  £2 million for the nurse leadership initiatives;

—  £150 million for the modernisation of critical care services;

—  £60 million for the flu vaccination programme;

—  £60 million for IT; and

—  £3 million for cancer.

  Final decisions on the remaining £261.5 million have yet to be taken.

2.  NHS AND PSS EXPENDITURE ISSUES

2.1  Overall Expenditure

  (i)   Could the Department provide an updated version of Table 2.1.1, and of the Department's commentary which accompanied it? Could it also show this data in graphical form? Could the Department provide a brief commentary, explaining what expenditure is included under each section of the table? Can the footnote to table 2.1.1 explain the measures and their applications for lines D to G?

  (ii)   Could the Department identify significant changes between forecast and actual outturn for 1998-99 and between the planned level of spending and forecast outturn for 1999-2000, by comparing figures in Table 2.1.1 with current figures. For each programme the planned level of spending in 1998-99 and actual outturn expenditure should be shown in tabular form.

  (iii)   Please identify and explain differences between the 2000 Departmental Report and the figures in Table 2.1.1.

  (iv)   What is the Department's assessment of each programme's performance in 1998-99 against plans for that year, and anticipated performance in 1999-2000 against plans for that year and outturn in 1998-99?

   (v)  Could the Department explain how the continuing use of efficiency targets, and their monitoring, will be integrated with the new Performance Assessment Framework? How are efficiency targets for trusts set? Have NHS Reference Costs been used to calculate potential efficiency savings? Has the Department assessed their reliability for comparing costs between trusts?

   (vi)  The supply estimates are now presented in a simplified form which does not disaggregate the different sources for appropriations in aid. This is now presented only in an annex to the Departmental Report (Annex D, Information formerly in Supply Estimates). For the sake of clarity, could the Department give a detailed reconciliation between table 2.1.1 and appropriations in aid for each year since 1995-96 by sub-programme and source (ie miscellaneous, charges, sales of assets, capital repayments, trust debt remuneration).

   (vii)  Could the Department provide, for each year from 1994-95 to 1999-2000 details of (a) the amount, gross of repayments, of Interest Bearing Debt and Public Dividend Capital issued to NHS trusts (b) the amount of Interest Bearing Debt and Public Dividend Capital repaid by NHS trusts and (c) the external financing limits of NHS trusts?

   (viii)  Could the Department explain the basis on which repayments of capital to Government are made by NHS trusts? How is the amount of capital to be repaid determined? What is the aim of the policy?

   (ix)  Any commentary which the Department wishes to append would be welcome, including information about efficiency gains and a table showing changes in the HCHS cost-weighted index of activity for the latest ten years for which figures are available.

  (i)   Could the Department provide an updated version of Table 2.1.1, and of the Department's commentary which accompanied it? Could it also show this data in graphical form? Could the Department provide a brief commentary, explaining what expenditure is included under each section of the table? Can the footnote to table 2.1.1 explain the measures and their applications for lines D to G?

  1.  The information requested on expenditure trends from 1995-96 to 2001-02 is given in Table 2.1.1. Information in trends in total expenditure is also given in Graph 2.1.1. Figures have been adjusted for classification changes, so that they provide a consistent series. The table also includes planned total NHS expenditure figures for 2002-03 and 2003-04 as announced by the Chancellor in the budget. The expenditure plans for 2002-03 and 2003-04 have not been broken down across the individual programmes as this will be dependent on the outcome of the NHS plan.

  2.  The NHS element of Table 2.1.1 are on the same basis as Figure 3.4 of the Departmental Report (Cm 4603). As a result, the presentation of HCHS revenue and FHS expenditure differs from previous expenditure inquiries. This is to reflect the move to unified Health Authority Allocations in 1999-2000. As a result, prescribing costs are now included in Hospital and Community Health, Family Health (discretionary) Services. Because of this change, it is not appropriate to apply the inflation indices for HCHS revenue and FHS (see answer to question 4.4) to the expenditure figures as presented in Table 2.1.1. Table 2.1.2 represents HCHS and FHS expenditure on a "pre-unified allocations" basis and shows the change in input unit costs adjusted for the appropriate service specific inflation.

Footnotes:

1 Cash figures have been rounded to the nearest £ million and therefore totals may not sum.

2 Percentages are rounded to one decimal place.

3 Real terms growth figures differ from those given last year because of subsequent changes in GDP deflators. Where not otherwise specified, percentage change figures are calculated on gross expenditure figures and therefore differ from the Departmental Report, where increases are calculated on net expenditure.

4 The measures in changes in expenditure shown in lines D to F are as follows;

Line D shows the percentage change in cash terms in gross expenditure

Line E shows the level of inflation specific to each area of expenditure.

Line F shows the percentage change in gross expenditure after accounting for service specific inflation

Line G shows the percentage change in gross expenditure after accounting for inflation in the overall economy as measured by the GDP deflator

Line H shows the percentage change in net expenditure after accounting for inflation in the overall economy as measured by the GDP deflator

5 HCHS figures differ from those used for allocations to health authorities, which include monies for minor capital items between £1,000 and £5,000 within HCHS current for accounting purposes.

6 HCHS currently exclude funding for that element of trusts' capital which they fund from charges to healthcare providers (£975 million in 1994-95, £1,053 million in 1995-96, £1,106 million in 1996-97, £943 million in 1997-98, £966 million in 1998-99 and £1,020 million for 1999-2000 and provisional figures of £1,001 million for 2000-01 and an estimate £1,192 million for 2001-02).

7 Includes trust charges and receipts (for current, £300 million in 1994-95, £331 million in 1995-96, £388 million in 1996-97 and £459 million 1997-98 to 2001-02; for capital, £50 million in 1994-95, £72 million in 1995-96, £116 million in 1996-97, £231 million in 1997-98, £157 million in 1998-99, £123 million 1999-2000, £209 million in 2000-01 and £226 million 2001-02.

8 Includes the receipts of interest on Interest Bearing Debt and dividends on Public Dividend Capital (PDC) paid by NHS trusts

9 HCHS capital includes NHS trust capital expenditure, ie that funded from charges to health care purchasers (see footnote 5) and that financed from their EFLs (£590 million in 1994-95, £401 million in 1995-96, £83 million in 1996-97, £85 million in 1997-98, £51 million in 1998-99, £44 million in 1999-2000, £454 million in 2000-01 and £378 million in 2001-02.

10 Figures for FHS non discretionary expenditure between 1998-99 and 2001-02 are not directly comparable because of transfers to the FHS discretionary provision, principally to fund successive waves of Personal Medical and Personal Dental Service pilots. The appropriate transfers from the planned provision for 2001-02 can not be identified at the date of publication.

11 The cost of collecting the NHS element of NI contributions is shown as non--voted expenditure in Annex B of the Departmental Report (Cm 4603)

12 The MCA became a trading fund on 1st April 1993. It previously operated under net Running Costs control. Prior to 1993-94 MCA figures were included in DH admin. The MCA is funded from fees from the pharmaceutical industry.

13 Of the £2.597 million additional money available money for the NHS in 2001-02 announced in the Chancellor's budgets, £1,023m remains unallocated and is included in the DUP.

14 The growth in PSS expenditure over this time period reflects the additional responsibilities taken on by local authorities as a result of the 1993 community care reforms.

15 There are no centrally generated "plan" figures for local authority expenditure, including personal social services. However, for 2000-01, the Government has announced the amount of local authority revenue spending to which it is prepared to contribute grant support (including specific and special grants).

Within this amount, the allowance for revenue spending on social services is £9,307 million. For capital spending, the following provision has been made:

	£ million
Annual capital guidelines	44.0
Supplementary credit approvals	18.7
Direct capital grants	7.7

Local authorities may additionally finance capital from receipts and transfers from revenue and they may use the Private Finance Initiative.

16 From 1997-98 figures for Port Health are no longer identifiable and are included in DETR's returns.

17 Local Authority, Health and Personal Social Services total excludes Central Government (Specific and Special) grants to Local Authorities and Credit Approvals (LA Capital) to avoid double counting. The total still does include an element of double counting (unquantifiable) with regard to joint working between hospitals and local authorities.

  Footnote:

  Percentages are rounded to one decimal place.

  3.  Table 2.1.3 gives a brief explanation of the main areas of expenditure in table 2.1.1

(ii)  Could the Department identify significant changes between forecast and actual outturn for 1998-99 and between the planned level of spending and forecast outturn for 1999-2000, by comparing figures in Table 2.1.1 with current figures. For each programme the planned level of spending in 1998-99 and actual outturn expenditure should be shown in tabular form.

  4.  Table 2.1.4 details significant changes between forecast and actual outturn for 1998-99 and plan and forecast outturn for 1999-2000. Table 2.1.4(i) details the comparison of net expenditure plans for 1998-99 and 1999-2000 with those of last year's health committee written evidence.

  The main areas of change (£10 million or over) to the spending plans for various parts of the programme other than LAPSS are as follows. The grant to local authorities for central government is unhypothecated. Local authorities determine their own expenditure.

			£ million
			1998-99
HCHS current	4,331	+4,339	transfer of that element of FHS discretionary, including prescribing costs, which are now included in to unified allocations
		-14	Underspend on GMS discretionary spend
		8	increased spend on HCHS revenue
HCHS capital	--102	8	increased non trust capital spend
		-110	underspend in NHS trust EFLs
FHS current	--4,470	--4,339	transfer of that element of FHS discrtionary, including prescribing costs, which are now included in to unified allocations
		--131	underspends against forecast outturns for FHS services
CHMS current	-10	-10	underspend against forecast outturns on CHMS current
Specific Grants	-22	-22	Final outturn reduced due to underspend mainly on asylum seeker grants
HCHS current	5,496	+4,826	transfer of FHS discretionary, including prescribing costs, to unified allocations
		+114	take up of EYF
		+267	transfer from HCHS capital
		+50	transfer from trust non voted expenditure
		+50	transfer from HCSH capital of the IM&T Modernisation Fund
		-49	transfer to FHS non discretionary
		+134	allocation from the reserve for generic drugs and clinical negligence
		+100	take up of Departmental Unallocated Provision
HCHS capital	--244	+14	addition from the HMT Capital Modernisation Fund
		+114	take up of EYF
		-267	transfer to HCHS revenue
		-50	transfer to HCHS revenue from trust non voted expenditure
		-50	transfer to HCHS revenue of the IM&T Modernisation Fund
FHS current	-4,777	-4,826	transfer of FHS discretionary, including prescribing costs, to unified allocations
		+49	transfers from discretionary spend to FHS non discretionary spend
CHMS current	-19	--11	Net of transfers to HCHS revenue
Specific Grants	47	47	Additional resources provided to local authorities to meet the cost of providing services for unaccompanied asylum seeking children.

(iii)  Please identify and explain differences between the 2000 Departmental Report and the figures in Table 2.1.1.

  5.  Estimated outturn for 1999-2000 and planned expenditure in 2000-01 have not changed since the publication of the Departmental Report (Cm 4603).

(iv)  What is the Department's assessment of each programme's performance in 1998-99 against plans for that year, and anticipated performance in 1999-2000 against plans for that year and outturn in 1998-99?

Assessment of Performance

  6.  After taking into account the change in the presentation of HCHS revenue expenditure, Table 2.1.4(i) shows that there were underspends of more than £10m between forecast outturn for 1998-99 and final outturn in the HCHS and FHS programmes and Specific Grants.

  7.  Overall, Table 2.1.1 shows that forecast outturn in 1999-2000 will be higher than outturn expenditure in 1998-99 in all programmes except Central Government Grants to Local Authorities.

(v)  Could the Department explain how the continuing use of efficiency targets, and their monitoring will be integrated with the new Performance Assessment Framework? How are efficiency targets for trusts set? Have the NHS Reference Costs been used to calculate potential efficiency savings? Has the Department assessed their reliability for comparing costs between trusts?

  8.  The Performance Assessment Framework (PAF) shifts the focus of performance management away from a narrow view of activity and cost, and concentrates on assessing the things that count most to patients and the public—high quality, cost-effective care that leads to improved health. But efficiency will always be important, since patients suffer if resources are not used efficiently or to best effect, just as they suffer if quality standards vary. This is why Efficiency is one of the six domains of the PAF, against which the service plans and assesses its overall performance.

  9.  Wide variations in trust performance suggest that there is scope for improvement, and the NHS Reference Costs (first published in 1999) revealed wide variations in the cost of clinical procedures across the country, suggesting scope for efficiency improvements. However, since the Reference Costs covered only in-patient surgical procedures, accounting for some 20 per cent (by cost) of trust activity, they did not provide a sufficiently broad base from which to make meaningful comparisons of whole trust unit costs, or to set targets for improvements in unit costs. Data from routine trust returns was therefore incorporated to give the best estimate of the Reference Cost Index extended to cover expenditure on inpatients (including daycases), outpatients, daycare and A&E in all general and acute (G&A) and maternity specialities. The resulting index was known as the "RCI Plus" index. This was used to derive trust efficiency targets for 1999-2000.

  10.  The Department has commissioned work from the York Health Economics Consortium on the reliability of the Reference Costs and the RCI+Index for comparing costs between trusts. As a result, a more complex but fairer measure of trust unit costs, the TUC2000 Index, was constructed for use in setting trust efficiency targets for 2000-01. This builds on the RCI+foundation, but takes into account additional explanators of unit cost (such as hospital capacity and configuration, scale and scope of activity etc) which cannot be influenced by managers and clinicians within a target year.

  11.  We recognise, however, that trust unit costs do not capture all the elements of efficiency in service delivery and may in fact be unreliable as a means to compare trust efficiency. The York Consortium have published a discussion paper "Have we been able to identify differences in the efficiency of NHS trusts?" which concludes that differences in Trust unit costs (and, by implication, efficiency) are not statistically significant and as such, differential performance targets based on unit cost data would be unfair. The paper also examines some possible reasons why the econometric analysis fails to identify variations in unit costs, and suggests more sophisticated means to encourage performance improvements among NHS acute Trusts.

  12.  In future years the new efficiency targets for the NHS will not permit a trade off between cost and quality. And they will be based on levels of service already being achieved by the best trusts around the country. We will use the Performance Assessment Framework to identify those Trusts with the best performance for fair access, cost-effectiveness and responsiveness to patients. The cost of providing care in thes high quality, high performing Trusts will become the benchmark for the whole NHS, with all Trusts expected to reach the level of the best (green light) Trusts over the next five years.

(vi)  The supply estimates are now presented in a simplified form which does not disaggregate the different sources for appropriations in aid. This is now presented only in an annex to the Departmental Report (Annex D, Information formerly in Supply Estimates). For the sake of clarity, could the Department give a detailed reconciliation between table 2.1.1 and appropriations in aid for each year since 1995-96 by sub-programme and source (ie miscellaneous, charges, sales of assets, capital repayments, trust debt remuneration).

  Footnotes

   (1) NHS contributions (collected by Inland Revenue on behalf of the Department) are appropriated in aid but are not part of the Department's Department Expenditure Limit and do not form part of HPSS table 2.1.1.

   (2) From 1995-96 until 1998-99 Trust Debt Remuneration was treated as an Extra Receipt payable to the Consolidated Fund.

   (3) VAT was not treated as an Appropriation in Aid for the years 1996-97 and 1997-98 due to a change in accounting treatment proposed by Treasury; this decision was later reversed. Appropriation Accounts do therefore not reflect VAT for these years.

   (4) Capital repayments represent income in the form of Public dividend capital payable to DH which does not provide additional resources.

   (5) NHS Trusts are public corporations. Their receipts do not have to be Voted and therefore do not score as appropriations in aid, but are included in table 2.1.1.

(vii)  Could the Department provide, for each year from 1994-95 to 1999-2000, details of (a) the amount, gross of repayments, of Interest Bearing Debt and Public Dividend Capital, issued to NHS Trusts, and (b) the amount of Interest Bearing Debt and Public Dividend Capital repaid by NHS Trusts.

  Details of the amount, gross of repayments, of Interest Bearing Debt and Public Dividend Capital issued to NHS Trusts in each year from 1994-95 (columns A and B in the table below) and the amount of Interest Bearing Debt and Public Dividend Capital repaid by NHS Trusts for the same years (columns C and D), are shown in the table below).

(vii) (c)—External Financing Limits of NHS Trusts in each year from 1994-95

(viii)  Explanation of the basis on which repayments of capital to Government are made by NHS Trusts including how the amount of capital to be repaid is determined and the aim of the policy.

  13.  Unlike Interest Bearing Debt, which no longer features in the NHS Trust financial regime, Public Dividend Capital (PDC) has no set repayment terms. Capital repayments of Public Dividend Capital are however required, where appropriate, to reduce excess cash balances to an acceptable level. The NHS Trust can make repayments at any time, subject to prior agreement with the NHS Executive. Similarly the NHS Executive can request that the NHS Trust make a repayment at any time.

  14.  NHS Trusts are currently required to make a repayment where their end of year cash balances are forecast to exceed a maximum sum based on a proportion of their annual turnover—for 1999-2000 this was set at 0.3 per cent of turnover.

  15.  NHS Trusts with a positive External Financing Limit (EFL) would not normally be expected to make any capital repayments of PDC (unless they ended the previous year with cash balances higher than their threshold). NHS Trusts with a negative EFL will be building up cash reserves and will be expected to make a repayment equivalent to the amount held above the threshold. Similarly NHS Trusts that sell assets are expected to use the sale proceeds to repay PDC unless there is an immediate cash requirement for capital spending.

  16.  The aim of the policy is to ensure that NHS Trusts do not build up excessive cash balances and to maximise the benefit from the cash in the system by recycling resources for re-investment elsewhere in the NHS Trust sector.

(ix)  Any commentary which the Department wishes to append would be welcome, including information about efficiency gains and a table showing changes in the HCHS cost-weighted index of activity for the latest 10 years for which figures are available. What underlying assumptions have been made over the past 10 years about efficiency gains?

BACKGROUND

  17.  The Department has traditionally measured the efficiency of the HCHS by the Cost Weighted Activity Index (CWAI—discussed in paragraphs 10 to 14), using retrospective, provider based data derived mainly from audited final accounts. Since 1992-93, the Department had complemented the CWAI index by an in-year estimation of health authority efficiency using the Purchaser Efficiency Index.

  18.  The PEI was abolished from 1 April 1999. The new Performance Assessment Framework, published on 9 April, which is to replace the PEI, sets out a broader-based approach to efficiency and takes into account performance over a range of areas (ie health improvement, outcomes as well as efficiency). Technical efficiency targets have been set against an extended Reference Cost Index. Question 2.1(v) explains this process in more detail.

COST WEIGHTED ACTIVITY INDEX

  19.  The index (Table 2.1.5) provides a broad measure of the overall growth in HCHS activity, in which the contributions of the individual components are weighted by their costs. Following changes in accounting practice within the NHS it has been difficult to gauge the increase in expenditure in both volume and real terms. However, estimates have been made using broadly comparable data and are shown in Table 2.1.5 and its associated graph (Figure 2.1.1). Over the 10 years since 1988-89 overall activity levels increased by over 33 per cent. Over the same period, the volume of inputs—that is expenditure after allowing for increases in HCHS pay and other input unit prices—increased by almost 22 per cent, suggesting an increase in efficiency of around 10 per cent. This measure fell by 0.9 per cent in 1998-99, which was driven by high growth in expenditure in the Acute sector (9 per cent).

  20.  Improvements in HCHS efficiency are dependent on several factors. An important driver is medical advance supporting new patterns of care delivery. For example, the introduction of minimally invasive therapies has reduced hospital stays for many treatments and thereby improved efficiency over this period. The relocation of much long stay care to community settings has also had a similar effect. Each has contributed to significant gains in labour and capital productivity. Other efficiency measures, such as the movement towards the use of Day Case procedures and the closure of long stay psychiatric hospitals, which in the past have contributed to efficiency gains appear to no longer deliver the same benefits. On the other hand, we can be reasonably sure that the ageing of the population works against improvements in efficiency. Elderly people tend to require more expensive care, and their increasing numbers have placed upward pressure on average unit costs.

  21.  Trends in efficiency are the inverse of trends in unit costs. The efficiency gains, which have been recorded, are consistent with unit costs, which have fallen compared to HCHS specific inflation.

2.2  PROGRAMME BUDGETS

Could the Department update the information on expenditure on Programme Budgets provided in Tables 2.2? Could the Department ensure that some information is provided for expenditures on District Nursing and Health Visiting in Table 2.2.5?

  1.  The response to this question is in two parts. The first part deals with the Hospital & Community Health Services (HCHS) programme budget for 1998-99 presented in the format introduced two years ago. The Department feels that this format more accurately reflects expenditure by the NHS in the latest year for which data is available (see paras 3 to 9 below).

  2.  The second part deals with longer-term trends in expenditure within the programme budget. Unfortunately, due to major discontinuities in the data, figures for 1996-97 are not comparable with those in earlier years and trends are reported on the period 1991-92 to 1995-96 and 1997-98 to 1998-99 (see paras 10 to 13).

  3.  Traditionally, detailed HCHS analysis has been carried out using provider data from directly managed units. Since trusts were created in 1991-92, provider data has become an increasingly poor proxy for healthcare commissioned by Health Authorities. The fundamental problem is that there are increasing differences between activity reported by Health Authorities and NHS providers. Figure 2.2.1 shows the relationship between the two sets of data.

  4.  As can be seen from Figure 2.2.1. the common ground between Health Authorities and NHS providers is activity which has been both commissioned and provided by the NHS in England. The traditional presentation of HCHS expenditure blurs the distinction between Health Authorities and NHS providers by fitting the provider profile of expenditure to the Health Authority total of expenditure. An alternative method of constructing the programme budget information has, therefore, been devised. This programme budget aims to capture the most recent year's expenditure by Health Authorities and present that data in a more easily readable format. The results are shown in table 2.2.3.

  5.  There are major differences between the new HCHS programme budget format and the traditional format:

  (i)  The new format covers Health Authority expenditure regardless of whether it was provided by NHS or non-NHS providers. Conversely, private patients at NHS providers do not affect the figures.

  (ii)  The programmes are more logically structured and the presentation is easier to follow. For example, all general and acute expenditure on the elderly is presented as one programme, whereas previously the geriatric programme (ie care led by a consultant geriatrician) was frequently, and wrongly, taken to mean all general care for the elderly.

  (iii)  A clear distinction has been drawn between programmes of care (columns) and methods of care (rows).

  6.  In 1998-99 overall HCHS expenditure rose by 7 per cent to £25,494 million. This is equivalent to 2.9 per cent growth in volume terms and 3.6 per cent in real terms. Table 2.2.2 shows the expenditure within the HCHS for 1998-99 using the new format for programme budget.

—  Over three-quarters of HCHS expenditure is in the hospital sector, with community taking a further 19 per cent, the remainder being other spending (6 per cent).

—  The largest programme in both the hospital and community sectors is for G&A elderly patients with 39 per cent and 28 per cent of spend.

  (See Figures 2.2.4 and 2.2.5 for a graphical representation of the proportions of expenditure each programme makes up in the hospital and community sectors.)

£ million

	Programme
						General & Acute
	Total	Maternity	Mental Illness	Learning Disability	Children	Adults	Elderly
Total Hospital	19,204	1,087	2,455	530	2,070	5,589	7,473
Ordinary admissions1	13,618	953	1,926	448	1,176	3,612	5,504
Day cases	1,397	-	-	-	126	854	417
Outpatients	3,001	134	230	16	611	860	1,148
Day care	513	-	298	66	-	40	108
Accident & emergency	675	-	-	-	158	222	296
Total community	4,888	215	790	873	729	927	1,353
Community nursing	2,113	215	441	118	46	456	836
Health visiting	381	-	-	-	247	120	15
Professional staff groups	679	-	-	-	55	317	307
Immunisation, surveillance & Screening	429	-	-	-	381	35	13
Residential care	1,285	-	348	755	-	-	182
Ambulance journeys	511	29	65	14	55	149	199
Other Patient related	815	44	110	47	95	220	299
Non-Patient related	77	4	10	4	9	21	28
Total HCHS	25,494	1,380	3,430	1,469	2,958	6,905	9,352

Footnotes:

  1  Includes regular day/night attenders.

  2  Figures may not sum due to rounding.

  3  Expenditure on RHA Direct spending including SIFT, R&D etc is now allocated centrally.

  7.  Table 2.2.3 shows a summary of Table 2.2.2 by service sector over the period for which data has been available in this form.

  8.  Figures on health promotion although available in the traditional method Programme Budget are not available from the data sources that are used in this format.

  9.  This section of the reply discusses trends in Hospital and Community Health Services (HCHS) gross current expenditure over the period 1988-89 to 1995-96, and 1996-97 to 1998-99.

  10.  In order to gain the maximum value and usefulness from the programme budget it is necessary to compare expenditure trends over a period. Major discontinuities in several years make long term comparisons difficult. The most recent changes occurred in 1991-92 and 1996-97. Therefore, although this section covers the period from 1988-89, trends are only shown for growth between 1991-92 and 1995-96. The change between 1997-98 and 1998-99, the latest years available, are also shown.

  11.  Expenditure on HCHS is shown in Table 2.2.6. The corresponding annual growth rates are also given. These rates are for the period 1991-92 to 1995-96 and 1997-98 to 1998-99. Figures 2.2.7 to 2.2.10 illustrate the breakdown of expenditure between the main programmes and how this has changed for 1991-92, 1995-96, 1997-98 and 1998-99. 1998-99 HCHS expenditure figures are provisional (final accounts figures will be available in the autumn).

  12.  The information collected to produce table 2.2.6 does not allow for the expenditure on health visiting and district nursing to be separately identified. Health Visiting is included within Professional Advice & Support. Although Health Visiting will consist of a significant part of this expenditure, other areas such as school nurses and community medicine, are included in this category which means that we are unable to identify expenditure within the separate areas. Similarly, with District Nursing details on expenditure in this area are included within General Patient Care. General Patient Care consists of all community nursing, excluding Community Mental Health and Community Learning Disabilities Nursing.

  Abbreviations used in Tables 2.2.6: IP=inpatient; OP=outpatient; DP=day patient; CHS=community health services; JF=joint finance; HCHS=Hospital and Community Health Services; Res=residential; YPD=younger people with physical and/or sensory disabilities; LD=learning disabilities; MH=mental health (previously mental illness); PSS=Personal Social Services; MI=mental illness; LA=Local Authority.