Attached please find a copy of the Department of Health's additional written evidence promised in answer to issues that arose during the evidence sessions last November.

  I hope that these are to your satisfaction.

Richard Douglas

Director General, Finance and Investment

Department of Health

1.  NHS WORKFORCE

  In the response to Q22 of the PEQ, the Department details increases in staffing numbers since 1997. One of the categories is "Administrative and Clerical staff". Is it possible to get a further breakdown of what this staff group consists of as it is a very large group (about 230,000 staff). We have previously been given similar breakdowns for the "Management" staff group (Q22, written evidence).

Answer

  1.  We cannot provide information on the numbers of administrative and clerical staff broken down by job role as this information is not collected centrally.

  2.  However, staff in this group will include the administrative and clerical staff who work in direct support of clinical staff for example medical secretaries and medical records officers. It will also include those administrative and clerical staff directly involved in the day to day running of the organisation and its infrastructure for example in personnel, finance, IT, legal services, library services and health education.

2.  NHS PRODUCTIVITY AND EFFICIENCY

  "Better Care, Better Value" improvements. Confirmation of estimated potential savings (Q18, officials hearing)

Answer

  1.  The first set of "Better Care, Better Value Indicators" calculated a "productive opportunity" which is an estimate of the potential financial gain from achieving a level of performance in line with the "top" quartile of trusts. The productivity opportunity is not solely the sum of money that could be released through an improvement in performance as it includes the potential gain which might be achieved through re-investment and re-use.

  2.  The data on the 2006-07 Q1 performance of the NHS shows that the annual productivity opportunity was up to £2.2 billion.

3.  PAYMENT BY RESULTS

  Emergency admissions and the effect of the PbR tariff—specifically, which PCTs were negatively affected by changes to the incentive payments for reducing emergency admissions (Q32, officials hearing)

Answer

  1.  The threshold for the 2006-07 differential tariff for emergency admissions was based on projected 2005-06 outturn in order to balance financial risk between providers and commissioners. Therefore, any PCTs which reduce their emergency admissions in 2006-07 will be "negatively affected", ie they will still be required to pay 50% of tariff for the difference between the threshold and the actual activity in 2006-07. We will not be able to assess the precise extent of this until after the end of the financial year.

4.  NON-NURSING AGENCY COSTS

  Non-nursing agency costs, provision of like-for-like comparison (Q44, officials hearing).

Answer

  1.  The information requested is given in Table 44.

Source:

Non-HNS staff Salaries and wages expenditure from Trust financial returns (TFR), PCT financial returns (PFR) and HA/SHA financial return (HFR).

Footnotes:

1.  In 2004-05, there were 10 NHS foundations trusts which did not submit the TFR data. These trusts have been removed from the analysis for all years to enable like-for-like comparision to be made.

5.  DH WORKFORCE

  DH use of contract/consultant staff, provision of current numbers (Q66, officials hearing).

Answer

  1.  In 2003, the Department of Health's Change Programme reduced headcount funded from our Admin budget by one third. Starting from a total of 3,645 full-time equivalent (fte) posts, DH set itself a control limit of no more than 2,245 fte posts funded by our Admin budget.

  2.  We achieved this by the end of 2004-05 financial year and have lived within, or been very close, ever since. At present, we fund 2,215 posts from our Admin budget.

  3.  For many years DH has supplemented its civil service employee workforce with consultants who are not employees but who provide contractor services. In 2003, we were clear that we intended to continue to do so in part using our Admin budget. This year we supplemented the 2,215 posts with some 228 consultants.

  4.  This is not a means to circumvent the 2,245 control total. The number of consultants is controlled by the overall Admin budget that has and continues to reduce.

  5.  Outside our Admin budget, we do also use Programme or Vote 1 funding to pay for consultants. This year we have some 361 consultants who work on implementation of front line service delivery. Use of consultants in this way is subject to central rules that apply across Whitehall to all departments.

6.  PURCHASE OF HEALTHCARE

  Provision of latest figures (ie 2005-06) for purchase of healthcare from non-NHS bodies (Q102, officials hearing)

Answer

  1.  The information requested is given in Table 102a and Table 102b.

  2.  The large majority of spending in the non-NHS sector is by PCTs (approximately 93% in 2005-06).

  3.  We do not collect information about where this money is spent—it is for practices and PCTs as commissioners to use their knowledge of local communities and extensive public and patient involvement to get the best value within available resources.

  4.  Of the remaining £319 million spent by NHS trusts in the non-NHS sector in 2005-06, approximately £219 million was spent by mental health trusts. It is reasonable to assume this was spent commissioning, or in support of, mental health services.

  5.  Information on ISTCs has been provided separately to the Committee.

  6.  Work is now underway considering what might be the most useful way to disaggregate the non-NHS spend further.

£ thousands
       

Year	Health Authorities/ Strategic Health Authorities	Primary CareTrusts	NHS Trusts	Total Expenditure
1997-98	985,746	n/a	122,436	1,108,182
1998-99	1,108,471	n/a	121,954	1,230,425
1999-2000	1,166,412	n/a	134,784	1,301,196
2000-01	1,328,208	33,774	187,190	1,549,172
2001-02	1,136,793	409,936	246,238	1,792,967
2002-03	27,234	1,873,925	338,172	2,239,331
2003-04	3,329	2,903,763	408,801	3,315,893
2004-05	0	3,353,036	312,988	3,666,024
2005-06	0	4,096,300	319,231	4,415,531
Source:

  Annual Financial Returns of Health Authorities, 1997-98 to 2001-02.

  Annual Financial Returns of Strategic Health Authorities, 2002-03 to 2005-06.

  Annual Financial Returns of NHS Trusts, 1997-98 to 2005-06.

  Annual Financial Returns Primary Care Trusts, 2000-01 to 2005-06.

  Note: 2004-05 and 2005-06 NHS trusts data does not include NHS Foundation Trusts.

£ thousands

Code	Strategic Health Authority Name	1998-99	1999-2000	2000-01	2001-02	2002-03	2003-04	2004-05	2005-06
Q01	Norfolk, Suffolk and Cambridgeshire	39,806	46,762	42,090	73,882	68,237	140,457	149,726	156,555
Q02	Bedfordshire and Hertfordshire	44,021	49,133	55,356	48,211	47,660	119,754	169,105	234,300
Q03	Essex	36,180	26,600	46,867	24,628	53,407	106,468	109,839	126,902
Q04	North West London	94,586	66,732	66,537	70,142	119,629	172,271	195,550	218,944
Q05	North Central London	58,232	54,160	52,487	52,931	104,568	114,221	124,498	139,629
Q06	North East London	39,271	45,214	66,741	62,032	80,048	81,619	113,435	110,464
Q07	South East London	69,142	87,534	95,202	91,889	86,462	115,428	146,168	162,822
Q08	South West London	43,275	33,613	56,803	43,171	63,877	92,037	105,592	122,728
Q09	Northumberland, Tyne and Wear	31,493	43,645	45,013	54,871	77,570	77,219	109,415	135,366
Q10	County Durham & Tees Valley	6,380	9,911	26,593	41,517	52,830	79,283	69,452	87,497
Q11	North-and EastYorkshire and Northern Lincolnshire	39,672	39,136	46,451	47,217	46,438	92,699	92,168	123,333
Q12	West Yorkshire	40,121	45,932	65,013	86,975	97,819	104,696	142,239	167,477
Q13	Cumbria & Lancashire	30,159	36,990	53,316	26,391	64,958	115,729	133,162	173,343
Q14	Greater Manchester	52,884	58,949	75,451	82,670	99,738	128,916	134,738	181,567
Q15	Cheshire & Merseyside	73,311	77,722	85,389	121,558	88,475	169,490	182,589	233,055
Q16	Thames Valley	35,746	26,565	12,376	25,565	89,803	109,123	126,816	186,218
Q17	Hampshire and Isle of Wight	35,704	43,214	28,212	47,052	81,381	108,239	104,347	151,832
Q18	Kent and Medway	47,449	32,986	39,078	43,304	70,697	98,475	111,495	133,305
Q19	Surrey and Sussex	95,556	109,838	138,250	159,064	222,605	247,173	237,768	283,067
Q20	Avon, Gloucestershire & Wiltshire	76,807	89,234	72,097	151,874	97,303	135,731	194,153	241,272
Q21	South West Peninsula	39,375	38,780	49,692	66,326	101,657	98,717	113,718	123,841
Q22	Somerset & Dorset	9,534	15,078	13,921	23,252	55,846	84,253	69,942	93,035
Q23	South Yorkshire	24,982	30,528	33,069	12,679	28,357	91,931	83,797	90,612
Q24	Trent	31,461	38,371	90,466	137,533	114,289	179,144	155,591	186,628
Q25	Leicestershire, Northamptonshire & Rutland	18,607	24,072	27,436	29,869	37,228	63,235	69,430	96,728
Q26	Shropshire and Staffordshire	17,684	31,947	39,914	56,816	55,682	90,956	113,858	111,731
Q27	Birmingham and the Black Country	63,231	74,600	84,870	92,899	84,621	179,801	199,758	217,620
028	West Midlands South	35,755	23,952	40,484	18,649	48,146	118,828	107,675	125,660
	England Total	1,230,425	1,301,196	1,549,172	1,792,967	2,239,331	3,315,893	3,666,024	4,415,531

Source: Annual Financial Returns of Health Authorities, 1997-98 to 2001-02.

Annual Financial Returns of Strategic Health Authorities, 2002-03 to 2004-05.

Annual Financial Returns of NHS Trusts, 1997-98 to 2004-05.

Annual Financial Returns Primary Care Trusts, 2000-01 to 2004-05.

Note: 2004-05 data does not include NHS Foundation Trusts.

  Changing pattern of expenditure between public and non-public sectors (Q104, officials hearing).

Answer

  1.  The spend in the non-NHS sector includes expenditure on services provided by all non-NHS bodies, including local authorities and other statutory bodies, as well as independent healthcare providers. As previously noted, the figures cannot be split further and so no detailed analysis is available.

  2.  From PCT accounts, the proportion of total healthcare commissioned from the non-NHS sector has changed from 5.6% in 2004-05 to 6.3% in 2005-06.

  3.  We are now looking at whether it might be appropriate to break the non-NHS spend down further for future accounting periods. Further, the implementation of "Our Health, Our Care, Our Say" depends not on the sector in which funds are spent but on where and how services are delivered.

7.  INDEPENDENT SECTOR TREATMENT CENTRES

  Table 36 on independent sector treatment centres gives the total procedures for the five-year contract in most cases, and again, in respect of the Kidderminster one, it says total procedures for the five-year contract is 9,000.  In our independent sector treatment centre inquiry we discovered that they were funded to do 20,000 FCEs per year. How does that tie up with 9,000 operations in five years? (Q121, officials hearing)

Answer

  1.  Both the independent sector and NHS provide services from the Kidderminster NHS Treatment Centre. 9,000 procedures are contracted as part of the ISTC programme. The 20,000 FCEs that NHS Elect provided in evidence was an estimate of NHS provided capacity at the Treatment Centre.

8.  NATIONAL PROGRAMME FOR IT

  National Programme for IT (NPfIT), savings within the NPfIT and reconciliation of NAO (June 2006) and DH figures (Q126, officials hearing).

Answer

  1.  The NAO Report recorded that the investment appraisals carried out at the time of the award of the main LSP contracts in late 2003 and early 2004 estimated that the local NHS would incur gross IT expenditure totalling some £2.6 billion over the life of the contracts, for example on staff training, data conversion and strengthening local IT networks. NHS Connecting for Health also estimated that the contracts for PACS would involve local IT spending of £775 million, subject to confirmation of the exact spending required in local business cases.

  2.  The NAO also reported that the investment appraisals made clear that the local NHS would make significant savings as a result of the Programme which would substantially offset the local costs, for example as a result of existing systems no longer being paid for once they had been replaced by systems supplied through the Programme. The NAO went on to give a number of examples of areas where savings were expected, recording that NHS Connecting for Health had not sought to monitor systematically the actual impact the Programme was having on local IT spending or the extent to which the initial estimates of its impact were being borne out in practice. However, NAO recorded NHS Connecting for Health's belief that experience of individual deployments so far had enabled local savings on a substantial scale.

  3.  It was the experience of these early individual deployments that led to our initial estimates of the offsetting savings potentially amounting to £2.457 billion. The figure is an extrapolation based on illustrative case studies from actual deployments, as follows:

(i)  Taking account of early experience in the North East and the East Midlands Cluster areas, the average net cash savings available from changing from an existing GP system supplier to the National Programme solution were estimated at £71.5k for each GP Practice. This does not take into account that the functionality of the new system will increase over time at no additional cost and is therefore a conservative estimate.

Extrapolation across all GP practices in England (around eight and a half thousand) produced estimated overall savings of £607 million over 10 years.

(ii)  The lowest cost bid over a ten-year term for a Level 3 Patient Administration System at a specimen large acute trust in the NW/WM Cluster area was in the region of £25 million. By taking a programme solution providing the same level of functionality, the trust would incur only the implementation cost, which at £1.7 million produced a local saving of £23.3 million over the 10-year term. This figure does not take account of savings made from avoiding the need for local procurement, or the fact that the functionality of the national programme system will also increase over time at no additional cost to the local NHS. It is therefore also a conservative estimate.

The specimen trust had 1,779 beds within a NHS total of some 142,000 beds. Using this ratio as the basis for the extrapolation, the local savings across the whole of the NHS were estimated at £1.85 billion.

(iii)  These figures added together suggested aggregate total savings to the local NHS of at least £2.457 billion.

  4.  These estimates were not included in the NAO Report as the details were just emerging and there are of course risks from the extrapolation. The NAO therefore recommended "that the Department, NHS Connecting for Health and the NHS should commission a study to measure the impact of the Programme on local NHS IT expenditure—both costs and savings—where systems are now being deployed, and, together with its quantification of financial and non-financial benefits (recommendation (d)), use this to provide an up to date assessment of the overall investment case for the Programme."

  NPfIT, estimation of training needs within the figures—specifically within the figure for local costs of NPfIT (Q135, officials hearing).

Answer

  1.  As their report makes clear, the NAO £3.4 billion estimate of the local NHS costs of implementation of the programme is based mainly on the forecasts of expenditure made in the investment appraisals carried out around the time of the award of the main national programme contracts in late 2003 and early 2004. These estimated that the NHS would incur gross IT expenditure totalling some £2.6 billion over the life of the contracts, "for example on staff training, data conversion and strengthening local IT networks". Of the £2.6 billion, some £500 million represents forecast expenditure on training, comprised of estimates of both once-off training expenditure, and ongoing expenditure for additional training.

  2.  This training cost estimate, and the figure for offsetting local savings described in the response at above, are entirely separate calculations. The latter derives from savings following local deployments due to the following factors:

—  IT products that no longer have to be purchased locally;

—  switching off redundant IT, which removes their running costs;

—  efficiency gains from the move from paper to electronic records; and,

—  further efficiencies from improved business processes and the transformation programme enabled by the IT.

  3.  Neither the NAO report, nor the Department's submission to the Committee, attempted to quantify whether the cost of training required under the new systems will be greater or less than that which would have been required for the NHS to continue to employ local systems. It is at least arguable that there will be efficiency savings available from the use, over time, of common applications across the NHS, relative to the costs incurred in training the significant numbers of staff who transfer between NHS employer bodies each year in the specific systems used by the new host employer.

  4.  The forecasts made in the investment appraisals were produced before the national contracts were in place. Following recommendations in the NAO report, work is ongoing to refresh them in the light of recent implementation experience.

9.  INVESTMENT

  Monies spent on community-based facilities and acute hospitals (Q188, SofS hearing).

Answer

  1.  There is no agreed definition of what precisely constitutes an acute hospital or community facility, but experience and knowledge of capital investment schemes allows us to place most build schemes into three possible categories—general & acute, mental health and community services.

  2.  The term `community' is conventionally used to encompass a wide range of primary care facilities such as GP surgeries, clinics and health centres as well as specific Community Hospitals.

  3.  The main elements of the general & acute hospital and community services building and improvement programme and set out below. We consider these give a fairly accurate picture of the relative proportions spent on each, but note that some figures for spending and activity in this area are not collected or monitored centrally.

ACUTE HOSPITALS

  4.  Since 1997, general and acute facilities worth approximately £9.1 billion have been opened or are under construction.

  5.  £8.6 billion of this is accounted for from a mixture of PFI and conventional public capital funding as part of the hospital building programme. To date, 52 acute hospital schemes have opened to patients worth £3.8 billion. Another 24 acute schemes worth £4.8 billion are under construction. Another 30 to 40 schemes worth approximately £8 billion are currently at different stages of preparation and negotiation and are expected to open over the period from 2009 right up to 2013.

  6.  A further £540 million of smaller scale general and acute developments (mainly sub £10 million) have so far been completed (construction finished or open) under the Procure 21 initiative.

  7.  It should be noted that the major hospital build schemes are undertaken with a "whole health economy" approach and some therefore involve the simultaneous reprovision of both acute and community or mental health facilities, although the latter two will represent a relatively small part of the overall project value.

COMMUNITY FACILITIES

  8.  In total, approximately £6 billion has been invested in primary care facilities and community hospitals to date. These have been funded from a number of different sources/initiatives:

—  Since 1997, from within the unified PCT allocations, £4 billion has been used by PCTs to help fund the refurbishment and replacement of GP premises (Source—response to question 18 of the 2006 HSC Public Expenditure Inquiry and £674 million allocation for 2006-07);

—  £230 million of community facilities with values over £10 million[6] have been opened or are under construction as part of the PFI and public capital funded hospital building programmes;

—  £976 million is accounted for from private investment to date as part of the NHS LIFT programme. This is supported by £211 million of DH enabling funding for the same initiative;

—  In July 2006, it was announced that DH would invest £750 million of capital funding over the next five years in a new generation of community hospitals and services. SHAs submitted their bids as part of a first allocation round in October. A second round is expected in the new year; and,

—  Finally, £61 million has been allocated to PCTs to help fund the creation of walk-in Centres.

10.  ARM'S LENGTH BODIES

  Arm's length bodies change programme cost and staffing number changes since baseline (Q223, SofS hearing).

Answer

  1.  The arm's length body (ALB) sector has delivered £55 million real cash releasing savings by 2005-06 against its Grant in Aid (GIA) 2003-04 baseline.

  2.  The Programme will deliver a further £95 million savings in 2006-07 and is on track to deliver the £250 million real savings by 2008-09.

  3.  Transitional costs of £10 million are included in the 2005-06 GIA expenditure. Transitional costs of £13 million are included in the 2006-07 GIA.

  4.  The operating costs are the total costs of the ALBs and are funded from DH Grant in Aid plus funding from the NHS and the private and voluntary sectors. The operating costs include all programme costs as well as administration costs (running costs).

  5.  The 2005-06 operating costs are the same as the 2003-04 once Connecting for Health has been excluded. Connecting for Health became fully operational in 2005-06 and therefore approximately £300 million of its costs were not included in 2003-04 and 2004-05 but included in 2005-06. These costs were transferred from existing central budgets. Therefore, to measure like for like £300 million should be deducted from the 2005-06 operating figures. Additionally inflation has been absorbed by the ALBs.

  6.  In 2003-04, there were 25,000 whole time equivalent (wte) staffing posts in the ALB sector. By the end of 2006-07, the number of wte posts will be reduced to approximately 21,000 and the target of a 25% reduction to 18,750 wte posts is on track to be achieved in 2008-09.

Full List of Additional Questions

  References to questions in the oral hearings are described as Q followed by a number, and either officials hearing (Thursday 23 November) or SofS hearing (Wednesday 29 November 2006). References to written evidence mean the Health Committee publication, Public Expenditure on Health and Personal Social Services 2006, HC 1692-i.

  In the response to Q22 of the PEQ, the Department details increases in staffing numbers since 1997. One of the categories is "Administrative and Clerical staff". Is it possible to get a further breakdown of what this staff group consists of as it is a very large group (about 230,000 staff). We have previously been given similar breakdowns for the "Management" staff group (Q22, written evidence).

  "Better Care, Better Value" improvements. Confirmation of estimated potential savings (Q18, officials hearing).

  Emergency admissions and the effect of the PbR tariff—specifically, which PCTs were negatively affected by changes to the incentive payments for reducing emergency admissions (Q32, officials hearing).

  Non-nursing agency costs, provision of like-for-like comparison (Q44, officials hearing).

  DH use of contract/consultant staff, provision of current numbers (Q66, officials hearing).

  Provision of latest figures (ie 2005-06) for purchase of healthcare from non-NHS bodies (Q102, officials hearing).

  Changing pattern of expenditure between public and non-public sectors (Q104, officials hearing).

  Table 36 on independent sector treatment centres gives the total procedures for the five-year contract in most cases, and again, in respect of the Kidderminster one, it says total procedures for the five-year contract is 9,000. In our independent sector treatment centre inquiry we discovered that they were funded to do 20,000 FCEs per year. How does that tie up with 9,000 operations in five years? (Q121, officials hearing).

  National Programme for IT (NPfIT), savings within the NPfIT and reconciliation of NAO (June 2006) and DH figures (Q126, officials hearing).

  NPfIT, estimation of training needs within the figures—specifically within the figure for local costs of NPfIT (Q135, officials hearing).

  Monies spent on community-based facilities and acute hospitals (Q188, SofS hearing).

  Arm's length bodies change programme cost and staffing number changes since baseline (Q223, SofS hearing).