RT HON PATRICIA HEWITT MP, MR DAVID NICHOLSON AND MR HUGH TAYLOR

29 NOVEMBER 2006

  Q200  Dr Stoate: The question still remains; you said there will be a 5% shift but you have not got any way of measuring it and, therefore, was it realistic to predict such a thing?

  Ms Hewitt: We have some ways of measuring it; they are not good enough and we are improving them. We will be able to track the shift but we will be able to track it more accurately as the data becomes more available.

  Q201  Dr Stoate: Are you not concerned that you have put your money on a particular figure? If it turns out to be something completely different does that change your future plans for affordability?

  Ms Hewitt: We will have to have a look at that. There are many, many different aspects of affordability: some are purely in the control of the acute trust; some require practices and the PCTs to be working with the acute trust; some are very much in the hands of PCTs and practices themselves, and many, as Anne Milton has just been saying, require very close working with local authorities.

  Q202  Mr Amess: Just before coming on to Foundation Trusts and information technology, I want to go back to the point on which we had an exchange about administrative staff. You corrected me rather nicely when I said that there were 70,000 more, and I think you said it was 60,000 more. I sat here thinking: "Well, this isn't very good; the briefing that I have been given is inaccurate", but since that time I have made inquiries, and in the Green Book, on page 60[2], it does actually say that I was even conservative in the figure: administrative staff and clerical staff increased since 1997 by 72,695. I am the first to admit it cannot be easy sitting there—

  Ms Hewitt: I was looking at the next table, 22B, "full-time equivalents", so we were both right.

  Q203  Mr Amess: There we are.

  Ms Hewitt: Yours was head count; my figure was full-time equivalents. Both are accurate.

  Q204  Mr Amess: We have got the record right; we are both right. Excellent. We are going to have to ask Mr Taylor something.

  Mr Taylor: I am sure you will get to something.

  Q205  Mr Amess: We will try and work something out for you. Mr Nicholson, in terms of Foundation Trusts, I think, said that it is now expected that only 70-80% of activity will take place in the Trusts by the end of 2008. Why has the pace of reform been slower?

  Ms Hewitt: It has not. I read the exchange from last week and, obviously, our goal was to have every Trust a Foundation Trust. The first thing they have got to do is apply to become a Foundation Trust and they cannot apply to become a Foundation Trust until they are fit and ready to become a Foundation Trust. We have, therefore, accelerated our work on the development of Foundation Trusts because it was very clear that if we had simply carried on at the same sort of pace we were not going to get anywhere near where we wanted to be by the end of 2008. That was one reason why we did the diagnostic across health communities in every part of England, which included looking at what the hospital Trust would have to do in order to put forward a successful application to become a Foundation Trust. The diagnostic that I think you were saying last week, David, has been very, very helpful to Trusts, indicating to them where they are strong, where they are not so strong and where they need to be making improvements.

  Q206  Mr Amess: That is very helpful. It is not because there has been resistance or—

  Ms Hewitt: Not at all.

  Q207  Mr Amess: It is still enthusiastic.

  Ms Hewitt: In Trusts all round the country they are very keen to become Foundation Trusts, and it helps focuses their efforts on improving the way they run themselves.

  Mr Nicholson: The 70% was what the diagnostic process showed us could be delivered. We think we can do better but there are things we need to do with those organisations, either themselves, with the SHAs or nationally, to enable them to bring forward their plans to become Foundation Trusts. So we are not settling for 70, we want to do better.

  Q208  Mr Amess: Ruth Carnall, Acting Chief Executive of the NHS London, stated that not all provider Trusts in London will achieve Foundation status, as some of these Trusts will be merged or disbanded. Was she right?

  Ms Hewitt: I am not sure which specific cases she might have had in mind.

  Mr Nicholson: When we went through the whole of the diagnostic process there were some Trusts, for example, that did not have a future on their own because the reconfiguration was changing and a new hospital was being built or something was being moved, so there are some organisations that may never be Foundation Trusts in those circumstances, or will be absorbed by other organisations. There are some, for example, like Ealing Hospital, who are looking for a different model; they particularly want to get involved in something integrated with community services, which is not part of the model at the moment. There are some with big historical financial difficulties that need to be solved, and it may be that in some of those circumstances organisations are absorbed by others.

  Q209  Mr Amess: So there was some truth in what she said.

  Mr Nicholson: Oh yes.

  Ms Hewitt: Yes.

  Q210  Mr Amess: I am sure the last thing you want to hear about is the national programme for information technology.

  Ms Hewitt: It is an excellent programme and it is already helping to improve patients' care.

  Q211  Mr Amess: We do have to touch on it because there does seem to be an extraordinary disparity between what the Department has identified in terms of savings and the way the National Audit Office looked at it. The Department is saying there will be £4.2 billion worth of savings associated with the programme and the National Audit Office did not even seem to notice it, which is a bit surprising. It is a huge amount of money.

  Mr Nicholson: I will try and help with this because, sadly, Richard Douglas is not here. I will do my best to do it. There are two figures in the evidence to the Health Select Committee: one was a saving of £1.73 billion and one estimated local cost saving of £2.46 billion. When added together they come to the £4.2 billion that you refer to. As far as the £1.73 billion is concerned, there are three elements to that: there is the enterprise-wide agreement which saved about £800 million, which the NAO did count; but in their savings they did not count the other two, which is NHS Mail and PACS. NHS Mail is renegotiation of an existing contract which saved significant amounts of money, and the PACS savings are to do with aggregating all the PACS together nationally and getting a better price. The NAO did not include those in their savings, that is true. The second part is the estimated local cost reduction of £2.46 billion, and they were savings that accrued because when the national programme goes in and replaces a PAS it pays for the running costs. So those savings accrue to the local NHS. That information came out very late in the NAO process and they did not have the opportunity to count it in; it came right at the end of that process.

  Q212  Mr Amess: In the absence of the Finance Director you have successfully blinded me with science. I accept that. The final point: this £4.26 billion is a huge figure. Is it wise for the Department to be so sort of gung-ho? Should you not be a little bit more conservative?

  Ms Hewitt: These are not gung-ho figures. I have spoken both to Richard Douglas and to Richard Granger, the Head of NHS Connecting for Health, about them. Imagine the hundreds of different NHS organisations who previously had been buying their own Microsoft licences, their own spreadsheet licences, their own patient administration systems, their own this-that-and-the-other; paying for the licence, paying for the installation, paying to train their staff and all the rest of it. By aggregating that, renegotiating the contracts in the enterprise-wide agreements that David Nicholson referred to, we can get much better value for money because the NHS is one of the biggest users of IT in the world, providing it acts to use its collective buying power. That is what we have done and that is what has produced, just from the enterprise-wide agreements themselves, an £860 million reduction in costs. That is much better value for the NHS and that is real money that has been released in those Trusts. You can go through each of these. These are not gung-ho. The 2.46 is an estimate based on actual case studies of the patient administration systems, and so on, that are being installed and they then replace the system that previously the Trust was having to pay for itself. None of this includes the improvements in patient safety or the savings in time, for instance, from the PACS system, the digital imaging system, which in some hospitals has cut the reporting time on an X-ray or a scan from anything up to about 24 days down to less than 24 hours; really big improvements in the effectiveness of care as a direct result of better use of IT, but not counted as part of these savings.

  Q213  Mr Amess: It will be wonderful if these savings are made.

  Ms Hewitt: We will continue to report on them. I am sure you will not let us avoid it.

  Q214  Dr Naysmith: Secretary of State, there have been lots of changes in the National Health Service and the Department over recent years. Certainly the Department itself has not missed out on this. Do you have any evidence that the Departmental Change Programme and the review of Arm's Length Bodies have improved the efficiency and effectiveness of central bodies?

  Ms Hewitt: I think I will ask Hugh to respond to that.

  Mr Taylor: If we just take the Department first, we have, as we were saying last week, reduced the number of people employed in the Department and, compared with 03-04, the administrative budget which we employ to manage the core department has reduced by about 20%. In relation to the total figures for the NHS these are not huge sums of money but it is quite a substantial saving. If you want to look at an effectiveness measure alongside that (but it is only one measure), over that same period the volume of correspondence which the Department deals with has risen by over 30% and at the end of 2002 we were, I am ashamed to say, on almost any version of a Whitehall league, right at the bottom; we were dealing with something like 30% of our correspondence on time. We are now dealing with three times as much correspondence and we are hitting our target figures for dealing with correspondence at around about the 90% rate within 20 days. So I think that is a good measure of departmental effectiveness. Similarly, I have to say, PQs are a good part of the democratic process, and we are now dealing with three times as many PQs from Parliament this year than we were three years ago.[3]

  Q215 Dr Naysmith: There is no MP who would disagree with you that this has been a good transformation and something that is really welcome. How did you manage to do it with fewer staff? What changes did you introduce to enable this to happen?

  Mr Taylor: We introduced significant process changes in the Department. At one stage, the management of the process of dealing with correspondence was, first of all, distributed right across the organisation, and no one group or person had responsibility, oversight, for the whole package. So what we did was centralise, effectively, a significant amount of the process for dealing with correspondence in the customer service centre. We lined the people responsible for dealing with e-mails, the official correspondence we get, the ministerial correspondence, in one place, alongside the people who deal with incoming `phone calls, which is a very helpful dimension. We took that responsibility out of the lined groups and that was one of the ways we were able to reduce the number of people in the Department.

  Q216  Dr Naysmith: This is really interesting, and the reason this is really interesting is because that was the situation for years, long before the present Secretary of State was there. Why did you not introduce some sort of change like that sooner? Why did you have to wait for some sort of review to tell you what to do? What was wrong with the management?

  Mr Taylor: It is a good question. Every government department that I have been in was operating the same sort of system. To be honest, I joined the Civil Service in 1972 and right across Whitehall similar systems existed for dealing with correspondence. I do not want to claim too much credit for this because the detail was done by the person I appointed to manage it, but it was a source of constant frustration to me. We were planning to do the centralisation for quality reasons rather than efficiency reasons. As we came to do our Change Programme we recognised that one of the ways we could increase our efficiency and reduce our numbers was by doing this kind of work more efficiently.

  Q217  Dr Naysmith: That is very interesting. To return to the main point of this question—you have diverted off on MP's correspondence, which has been something that the Speaker has been glad to hear about because he was asked regularly about Department of Health correspondence for a long time—last week you said that the changes had put the Department under a great deal of strain (actually you said "gave them a tough time"). Was it not, therefore, rather a bad idea to be doing all these changes at the same time as you were implementing changes throughout the National Health Service?

  Mr Taylor: I do not think so because, in a sense, what they were doing was mirroring some of the changes that were happening in the NHS. The Change Programme we went through in 2003, which preceded the recent structural change in the NHS, really reflected the move which was called "Shifting the Balance of Power" at the time. What we were doing was trying to move more of the decision-making process down to the NHS. We reduced our regional presence in the Department at that stage, for example.

  Q218  Dr Naysmith: Might it have contributed to the problems over tariffs that really upset people?

  Mr Taylor: I do not think so.

  Q219  Dr Naysmith: You feel it achieved that more efficiently.

  Ms Hewitt: If I could just add to what Hugh Taylor has said on this, the more recent set of changes in my own time as Secretary of State, I think, were absolutely essential to ensure that the Department could support the NHS in a new stage of the reforms and the changes that we are making. Just as we are ensuring a much stronger focus on commissioning down in the local NHS, we needed a much stronger focus on commissioning in the Department itself. Given the situation that had arisen with the finances, we clearly need to strengthen the financial capability. On the tariff, as far as I know, there were no changes, certainly in the last calendar year, to the tariff team. When the problems emerged in January and caused real difficulty for the NHS, as you know, we commissioned an independent review, learnt lessons from it and we strengthened that team. So these were necessary changes that have actually strengthened the ability of the Department, with both Hugh Taylor and David Nicholson, to support the NHS through the next stage of reform.

  Dr Naysmith: Thank you.

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