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

29 NOVEMBER 2006

  Q220  Dr Taylor: Going on with Arm's Length Bodies, certainly I got completely confused last week. We know that the operational costs of the Arm's Length Bodies have gone up by £222 million (this is Mr Taylor again), but government funding has gone down by £150 million leaving a gap of £373 million. We were told that this is some magic transition fund which has appeared from somewhere. "A separate transition fund is being held which is there for the cost of redundancies and transition." Yet in the PEQ, question 100, the answer is: "Transition costs for relocation and redundancies as a result of the ALB review were £10 million in 2005-06 and expected to be around £13 million in 2006-07."

  Mr Taylor: Shall I start again?

  Q221  Dr Taylor: Yes, please. At the moment it seems you have found a sort of magic transition fund to obscure the real costs of transition.

  Mr Taylor: There are three separate factors at work here. The ALB change programme is targeted to have the effect of £250 million worth of recurrent cash-releasing savings in the year 2008-09 against the 2003-04 baseline. That figure applied to the grant in aid which we, as a Department, give to the Arm's Length Bodies. So far the budget has gone down, year-on-year, from that baseline by around £250 million so far. However, not all of that has been in recurrent cash-releasing savings. Those figures are the figures given in the evidence which we gave you, which is £55 million in 2005-06 and £95 million we are planning to do this year, 2006-07.

  Q222  Dr Taylor: So that is the £250 million in paragraph number two, from evidence 255. Fifty-five plus ninety-five.[4]

  Mr Taylor: That is correct. Those are, if you like, banked savings. We are planning to take out another £50 million savings next year and £50 million in 2008-09. That is from our grant in aid to the bodies, 2003-04 baseline to 2008-09 baseline. Within the remaining budget for Arm's Length Bodies we have been managing with the Arm's Length Bodies a certain amount of money—held back, if you like, but it gets redistributed—which I call the transition fund for managing non-recurrent costs, such as redundancy, relocation, closing offices and so on. Those figures are the figures which are given again in the evidence which we gave you.

  Q223  Dr Taylor: I am sorry, is that the 373 or the 10.

  Mr Taylor: No, that is the 10 and the 13. The figure which is causing confusion is that the total operating costs for the Arm's Length Bodies are higher than the grant-in-aid figure, and that is because they have other income. So, for example, the blood authority effectively works through a charging system with Trusts. So you will see in the column there the grant-in-aid figure, which is the one we are going to take you to, which is the one we are operating on for savings purposes, and then the operating costs figure. The operating costs figure appears to have gone up on the basis of the figures you have got because (I apologise for the complexity of this) it now includes a figure for Connecting for Health which was not counted into the original baseline figures for the Arm's Length Bodies Review because it was, at that stage, held in our central budgets. If you do a like-for-like comparison of the operating costs of the Arm's Length Bodies from the 2003-04 baseline to now you will find that it is broadly comparable; they are absorbing inflation. I think that is where some of the confusion has arisen. I am very happy to set out all that more clearly in a piece of paper if it would be helpful to the Committee.[5]

  Dr Taylor: I would be very happy with that, yes.

  Q224  Mike Penning: Last question, Secretary of State, Commissioning a Patient-led NHS. There has been much debate and argument about the number of redundancies. Last week you said you estimated there would be 100 people made redundant. Some of us find it quite difficult because we have got 750 in my own patch. Based on your own figures, how many people would you expect to be made redundant as the result of these cuts?

  Ms Hewitt: There have been 100 compulsory redundancies so far as a result of Commissioning a Patient-led NHS. Those were part of the 903 compulsory redundancies which have taken place in the first six months of this financial year. Those 100 arise from the restructuring of Strategic Health Authorities and Primary Care Trusts. There will be significantly more than that; we do not yet know how many and, rather than try and speculate or forecast, we will report on them as part of the quarterly financial reports that we now publish, so that everybody can see the level of job losses or redundancies that have come from the restructuring of the PCTs.

  Q225  Mike Penning: Will that be broken down, as Dr Taylor requested yesterday at Question Time, into jobs which are being removed—in other words, someone has left from natural wastage and that job is not there—and people that have actually been made redundant, and then break it down? There is much confusion about how many people are going to lose their jobs and whether those jobs are still going to be there in the future, and that, I think, is causing a great deal of damage to the Department and to the NHS as a whole. I think you would probably agree this confusion is damaging.

  Ms Hewitt: I agree there has been confusion but we might disagree about where the confusion has come from. In relation to Commissioning a Patient-led NHS, and a restructuring of Strategic Health Authorities from 28 to 10 and Primary Care Trusts from 303 to 152 (I think that is right), there were always going to be a very substantial number of redundancies. We are trying to keep the compulsory redundancies to a minimum but we are taking out a lot of management jobs as a result of that.

  Q226  Mike Penning: The figures, when you print them, will be those figures plus the acute Trusts and the PCTs where they have had to make people redundant because of the restrictions of their deficits.

  Ms Hewitt: We will report on both, as we did at for the end of September figures. What is happening in the acute Trusts does not have anything to do with Commissioning a Patient-led NHS, which is why I wanted to distinguish between them. It is 100 compulsory redundancies so far as a result of Commissioning a Patient-led NHS, the PCT and Strategic Health Authority changes. We will go on trying to keep the compulsory redundancies to a minimum but there will be a large number of redundancies—

  Q227  Mike Penning: In that area you think it is around about 100 but it is going to go up.

  Ms Hewitt: No, no, we know there have been 100 compulsory redundancies in PCTs and Strategic Health Authorities, as a result of Commissioning a Patient-led NHS by 30 September. In terms of total compulsory redundancies, there were 903 in the first six months of this financial year—that is up until the end of September. The great bulk of those were non-clinical; 803 of them, I think, by definition were not related to Commissioning a Patient-led NHS, but in the months to come there will be much larger numbers relating directly to the PCT and Strategic Health Authorities, where we have reduced management overheads in order to get £250 million released to go into frontline clinical care.

  Q228  Chairman: I know you have another appointment before noon. Could I thank you very much, all three of you, for coming along. If you have any problems of weaning yourselves away from the Committee, we are very happy for you to sit in the audience the next time we sit in public on this issue.

  Ms Hewitt: That is very kind of you, Chairman.

  Chairman: Thank you very much for that evidence session.

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