UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 26-iii

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

HEALTH COMMITTEE

PUBLIC EXPENDITURE ON HEALTH AND PERSONAL SOCIAL SERVICES 2007

Thursday 29 November 2007

RT HON ALAN JOHNSON MP, MR DAVID NICHOLSON

and MR RICHARD DOUGLAS

Evidence heard in Public Questions 230 - 313

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Health Committee

on Thursday 29 November 2007

Members present

Mr Kevin Barron, in the Chair

Charlotte Atkins

Jim Dowd

Sandra Gidley

Stephen Hesford

Dr Doug Naysmith

Mr Lee Scott

Dr Howard Stoate

Dr Richard Taylor

________________

Witnesses: Rt Hon Alan Johnson MP, Secretary of State for Health; Mr David Nicholson CBE, NHS Chief Executive; and Mr Richard Douglas, Director General Finance & Chief Operating Officer, Department of Health, gave evidence.

Q230 Chairman: Good morning, Minister, could I welcome you and particularly welcome back your two colleagues who were sat in those chairs this time last week. I wonder if I could ask you for the record if you could introduce yourselves and the positions that you hold.

Alan Johnson: It is a great pleasure to be here with these two old bruisers. Alan Johnson, Secretary of State; David Nicholson, Chief Executive of the NHS; and Richard Douglas Director General Finance in the Department of Health.

Q231 Chairman: Welcome to our final evidence session in relation to our Public Expenditure Questionnaire this session. Could I just ask a question of you, Secretary of State: last week David Nicholson used the words on the 2% budget variance that we had - whether it was surplus or deficit - "a reasonable place to be". Do you agree that it is a reasonable place to be and if it was a 2% deficit would you agree that it is a reasonable place to be?

Alan Johnson: I do believe it is a reasonable place to be. Perhaps, Chairman, I should just confirm, because we have laid a written Ministerial Statement this morning, to be absolutely sure, that it is a 2% surplus. At the end of 2005-06 the NHS had a deficit of £547 million with 123 organisations (that is 33%) building up to a total gross deficit of £1.3 billion. Today I am pleased to say we have turned that position around completely. The financial projections at the end of September show that the NHS is forecasting a very healthy £1.8 billion surplus for 007-08 with only 25 organisations forecasting a deficit, so this is a dramatic improvement. I think it is testament to the tremendous efforts of NHS staff over the last year and a half. I do think it is reasonable for a large organisation with a £100 billion turnover to have a 2% surplus. I certainly do not believe the NHS can properly function on a break-even basis, not least of all because those in surplus have to cross-finance those in deficit, and the old cash brokerage scheme, frankly, was a disaster in areas like mine where we had very large health inequalities, very serious health problems, and we always managed our books but had to put money into areas which had far better health outcomes to balance the books, so this is a much better place to be and I think 2% is a reasonable surplus.

Q232 Chairman: When it was a 2% overspend, as I think it was called, there were quite a lot of difficulties with that. Indeed, the last Secretary of State took a very brave decision to say that we should have transparency with our National Health Service budgets. Some people would feel that was probably one of the bravest decisions any Secretary of State has ever made who has ever held the position that you hold now. Do you think it is right that the Department should have reacted to the 2% deficit in the way that it did?

Alan Johnson: Yes, I think they should have done. I have said this before, I feel that my ministerial team and I, almost all of whom were new apart from one when we came in in June, owe a debt of gratitude to Patricia Hewitt and her team because they went through a very difficult period, but a very necessary period for the reasons I have mentioned. I was one of the MPs plaguing Patricia to say we cannot keep going on like this with this cash brokerage system; somebody had to get a grip of this situation. What we are seeing today is not just a result of tremendous efforts by people in the NHS, who I congratulate, but also the heavy lifting that my predecessor did.

Q233 Mr Scott: Secretary of State, in your written statement you have said that the forecast is for a record surplus of £1.8 billion in 2007-08. David Flory last week acknowledged that there was a potential problem of an underspend in some NHS bodies. How is that going to be dealt with and is there more money that could be spent?

Alan Johnson: All that money could be spent and, as David Nicholson and David Flory made clear last week, it is not in Richmond House, we do not have it in Whitehall; it is out there with the PCTs, not with the strategic health authorities, and it is there to be spent on other things. One of the things I think is so good about this, as I know David said in more detail last week, is that the NHS has never, in recent memory, been in a situation where you have the capacity that has gone in, you have the staffing in there, you have the new challenges on the next stage of the NHS journey, and you actually have a bit of financial flexibility over which local people have control. The second thing to say is that most PCTs recognised that we were going from a situation on funding from, if you like, spectacular increases to steady increases and that actually it would be good to ensure that they had some fat in the system to cope with that as well, so I think all round this is very good for the NHS.

Q234 Mr Scott: Secretary of State, my own NHS Trust, Barking, Havering and Redbridge, in glancing at the figures, has one of the highest deficits at £34.6 million. Before continuing I would like to thank you for helping me get some figures recently on the former Chief Executive of that Trust. Would you agree with me that it is obscene that chief executives should be paid the sums of money that the one for that Trust was when there is such a deficit in the Trust, and obviously he has been a failure in his job and then he is rewarded for it?

Alan Johnson: I am concerned about people at the top of the organisation getting a different deal and a more generous deal than other people in the organisation, so two things have happened. First of all, we have made it clear that redundancy terms in the NHS should be the same for chief executives as they are hospital for porters. If it is two times annual salary then that is what it should be. There should not be a more generous package for people the higher up the income scale you go. The second thing which arose because of the Maidstone and Tunbridge Wells issue is that David has now sent out to all strategic health authorities and PCTs the fact that if people are looking to give a more generous package - and this could well have been the case in Barking, I do not know the full details in Barking - than their statutory entitlement, then it needs clearance by the strategic health authority and it needs clearance by HM Treasury. That did not happen in the case of the Chief Executive of Maidstone and Tunbridge Wells. As I understand the situation at Barking, which brings me on to a third point, I think that part of that money was a seven-month lieu of notice, and the third thing that we have made clear is that nobody should have a notice period of more than six months. That is reasonable for someone in a senior position to give the time to find a replacement. Six months is reasonable, not seven months and not a year, so we are capping the notice periods in future at six months.

Q235 Chairman: Could I ask you about the CSR and the outcome of that. We think that the real term revenue increase in health funding in the 2007 CSR is 3.8%. If you compare that with the 6.9% increase throughout in the CSR 2004 period, that is substantially less. How will the Department manage with this reduced rate of increase in funding and what choices on spending priorities do you think will be taken in view of that?

Alan Johnson: Just on the figures, I think you are over-estimating just a little the CSR 2004 settlement and under-estimating the CSR 2007 settlement. CSR 2004 was a 6.7% real terms increase and the Comprehensive Spending Review that we have just concluded is 4% real terms. That compares with an historic increase for as long as it has been recorded, which is from the early 1970s, of about 3.1%. The increase over the Major years 1992 to 1997 was 2.6% and what it means is that in the period 1997 to the end of this spending review in 2011 we would have seen 5.6% real terms growth year on year. As I say, it goes from spectacular to steady. I do not think anybody was expecting spectacular this time but I think an awful lot of people were expecting less than 4%. I am an expert on CSRs now. I have negotiated two this year, one on education and then I got moved on to health, so I could do without doing another one for the next ten years. In both cases part of the deal was also a 3% efficiency saving which in an organisation the size of education, as I kept saying, and even more so now in health, is perfectly achievable. That will put another £8.2 billion a year in by 2010, and I believe there are all kinds of things that we can do to achieve those efficiency savings. I believe this is a good settlement; I think most people in the NHS now think this is a good settlement; and for those that have been around a few years, frankly, it is living in a dream world compared to what they were having to do in the 1980s and 1990s.

Q236 Chairman: In the last few years it has been good but nonetheless this is a 50% reduction in the increase. You cannot predict any implications for spending at this stage?

Alan Johnson: We will be publishing our Operating Framework soon. We negotiate a CSR that has sufficient money in there for all the things we want to do. There is always a long queue of things that you would like to do if you had the money. I do not think the NHS has ever been in a better place. First of all, do not forget we are locking in all that huge increase that we have had up to this year. It is not as if that disappears. It is 4% real terms on top of the record funding we have had this year. And on things like Stroke or the Cancer Strategy, all the things that we will be producing plans on over the coming weeks, we deliberately and very astutely, I think - and I pay tribute to Richard and his team who backed me on this - got the money to deal with all of that. I think this is a Spending Review that allows us to meet our priorities and to continue to close the health inequality gaps that we have had some depressing news on recently. There is nothing where we are saying because we only got 4% there is something we have to stop doing. The thing we have to do is to make sure on issues like procurement and on spreading best practice, all the issues within a huge organisation that you get those efficiency savings so you can use that for front-line care as well.

Q237 Chairman: I will move on to an easier subject for you now and that is NHS staff pay awards. You predict in 2008-09 to have a 2% increase for NHS staff. Are pay settlements below inflation likely to be the norm in the Health Service?

Alan Johnson: It depends which way you measure inflation. Inflation as far as the CPI is concerned, which is the one we really like, is 1.8% and certainly I think the Chancellor is absolutely right to ensure that we do not build in a temporary blip, which was the big argument last year, on energy prices and oil prices so that we build in an inflationary spiral that takes us back to the days of high interest rates, et cetera. When I was negotiating pay, the big deal every year was the Ford car workers and that set how the economy was going to go. Now it is public sector and so there is an obligation on a Chancellor not to say the popular things but to do the right things for the economy. I do also think, as I say on many occasions to nurses and GPs and consultants, if you look at the record since 1997 and if you look at what happened through Agenda for Change as well, no Government has done more to try to establish decent pay for people now. In terms of how we maintain that pay, we are going into a difficult set of discussions and negotiations, but I am hopeful that we will come out with a settlement - we settled last year in the end - and I hope that settlement will recognise the financial imperative to ensure we keep a strong economy. If we go back to high interest rates, if we go back to high rates of inflation, the people who will lose will be the lowest paid and those on fixed incomes.

Q238 Chairman: In both our former lives, of course, you rarely looked at what wage increases you had five years ago, four years ago or even one year ago; you looked at what was on the table and what was being offered at the time. Are you confident that there will be no disruption if we do get pay settlements in the National Health Service that on the surface look like they are below levels of inflation and clearly below what other people in the private sector may be getting in the UK?

Alan Johnson: I would argue that and so would you, Kevin, because we were sitting on the unions' side of the table. The employers' side of the table would look at recruitment and retention, they would look at the increase in wages and the increase in staff over the previous years, they would look at issues around affordability and what that would mean. We have a settled budget now for the next three years. The budget is not going to increase. This is an employer's argument; I am now an employer, I am not sitting on the unions' side of the table. We would also be entitled to point out on issues like pensions, where I personally took a lot of political flak to maintain a normal pension age of 60 for existing staff in the Health Service and indeed in Education and the Civil Service because I thought it was right that those people that had come in on that contract should have the right to do that, and we got the deal that all new entrants had a normal pension age of 65. I would point out all those things as an employer and say in that context and in the context of a 1.8% CPI rate actually 2% is not bad going.

Q239 Dr Taylor: Good morning, Secretary of State. I was at a dinner last night with a large number of London consultants across the specialties across the board, and their biggest worry of all was the employment of junior doctors in training. When we took the first session on Modernising Medical Careers, Liam Donaldson, was fairly tactful with his answer because we think there are going to be something like over 1,200 applicants a year from UK medical schools who are going to be in difficulty finding appointments and the Chief Medical Officer said: "Again I cannot commit myself to things we have not discussed as policy options yet, but I think every effort will be made to help these doctors, just as we did in the packages that were put in place in 2007." Last week Mr Nicholson said it was going to be something like three to one trainees who would find jobs. You did say last week: "As I sit here at the moment we are still working through how we can work that." I am really trying to impress upon you the tremendous importance and worry about jobs for UK doctors in training and ask you if you have ideas of how to get over this?

Alan Johnson: We had an idea and our idea was that you cannot have an open door policy and a self-sufficiency policy; the two things are diametrically opposed and I want the self-sufficiency policy. The reason we have increased the number of medical training places by 72% is so that we can be self-sufficient. We published our guidance again this year saying that international medical graduates would not be included unless there were spare places at the end of the process, that it was people that have been through the UK education system that the UK taxpayer had funded through their training who would have priority for these places. That is the same as in every country across the world and not least of all, incidentally, because 80% of international medical graduates actually go back to their countries after a couple of years, so it was a difficult decision to make but we made it. We have been judicially reviewed and that judicial review actually went in favour of the organisation BAPIO, the British Association of Physicians of Indian Origin. We are appealing but by the time the appeal goes through, even if we win it, it will not give us a solution for 2008. What David said last week is that the ratio in 2008 will be three applicants for every place whereas this year in 2007 there have been two applicants for every place, so we are ensuring that 10,000 or 12,000 international medical graduates were taken out of the equation, as we tried to do last year, and last year we won the appeal on judicial review but it was too late because we were already into the process. This year we made exactly the same arguments but lost the judicial review so it is quite frustrating. What we are looking at now is whether we can change the immigration rules to deal with this. We are doubtful that we can do that for this year. All Sir John Tooke's recommendations, and he did a splendid job but it is only an interim report, in his interim report made it clear that the solutions would be for 2009. I am afraid it is going to be a difficult 2008, not least of all, as you understand Dr Taylor, because we started the process of run-through places last year, which is a much better system whereby people can be assured and confident that they are going to run through right to the end and they do not have to keep reapplying every year. That effectively takes out 0,000 places that were available this year that will not be available next year because of run-through which is why the ratio has increased, despite the fact there will be 2,000 extra training places next year. We will see where we get. We are going to leave no stone unturned, as the saying goes, to try to get a solution for 2008 but our solution was keeping IMGs out of the equation, and I am afraid that is not open to us now because of the decision at judicial review.

Q240 Dr Taylor: I am sure you will be talking to the Royal Colleges about this because I think some of them may have some ideas to help.

Alan Johnson: We will indeed and they have been extremely helpful this year. We hope that there will be no people left without jobs this year. There will be people without training places but they will have jobs in the NHS. The reason we have got to this position is because of the co-operation and the assistance we have had from the Royal Colleges.

Q241 Charlotte Atkins: There is quite a wide discrepancy in spending on health between England and Scotland. We inherited it in 1997 and we have continued with that policy. How can we justify that?

Alan Johnson: We justify it because of devolution. I have to say we inherited it, yes, but we inherited a 21% funding gap between England and Scotland, it is now 14% so it has been reduced by a third. Scotland is free to make its own decisions. There are issues around waiting times where there is a bigger problem in Scotland than we have in this country. There are issues around cardiovascular disease where we have a better record in reducing deaths, so it is not as if the difference in the investment is mirrored in poorer outcomes. I think we could make a very good case on outcomes but I would not want to get into that kind of argument simply because when you agree devolution - and I have always been in support of it - if that is a devolved issue, it is a matter for Scotland to make their decisions on how much they spend.

Q242 Charlotte Atkins: Very often English patients feel that they get a raw deal by comparison with Scotland. For instance, that gives Scotland the flexibility to offer free care for elderly people and that is used often as an example of inequality between England and Scotland. How can we justify that? Of course they can make their own decisions but clearly you have very emotive issues like the care of our elderly and most vulnerable people, where it is being offered free in Scotland and not in England and we have this big discrepancy which appears to be unfair?

Alan Johnson: I think the point to make there is that we had the Royal Commission and we accepted every recommendation bar one. Scotland decided to go down that route. Scotland under a Labour administration went down the route of free care. We did not decide not to do that because we did not have the money or we would have liked to do it but, unfortunately, wait another ten years and we might get round to it. We did not do that because we thought it was the wrong thing to do. I still think it is the wrong thing to do. If you read Wanless's Report for the King's Fund, one of his numerous reports but the one on adult social care he makes the point firstly that it is not free in Scotland. The average cost is 400-and-odd pounds and there is a cap on the money the state pays of about £200, so it is not free. He also makes the point that given the demographic change and given the challenges that we face with an ageing population, whether this is progressive universalism, and it is not. He comes out with three proposed options none of which is the Scottish system. It is not an argument about the funding gap with Scotland. It is that we fundamentally disagree with the route that they are taking. I would not go down the free prescriptions route, as I would not in a previous life go down the free higher education route. I think there are better things you can do with your money to ensure that you target the people who need it the most.

Q243 Charlotte Atkins: We will not get into a discussion about higher education, as much as we might want to, but you said earlier on that the funding gap between England and Scotland had come down substantially, so is your aim to equalise that funding and, if so, when?

Alan Johnson: No, we do not have a particular aim to equalise funding with Scotland; we have an aim of matching the European Union average, that is the original EU 15 before enlargement, and this Spending Review settlement will bring us to 9% of GDP which is within touching distance of the European average, although that average of course keeps moving away. Scotland of course is part of that because it is in Europe but that is the only link between our targets and Scotland.

Q244 Charlotte Atkins: So you have no objective to narrow the gap between England and Scotland?

Alan Johnson: No, we have no objective specifically to narrow the gap between England and Scotland. As I say, what Scotland spends is a matter for their devolved administration. I cannot see a reasonable case for saying that we should hitch our wagon to Scotland.

Q245 Dr Stoate: I was going to say "this wheel's on fire" but of course it is not. Nevertheless, what I wanted to point out is that "times they are a-changin'" in the NHS and I am pleased that we are no longer in such a deficit situation, in fact we are in a position of surplus, which I think is very welcome news for everybody. However, I want to talk about efficiency savings which do seem to be very challenging this year. I think you have already mentioned the 2.5% efficiency savings this year, going up to 3% next year, which is considerably higher than 2004 and tougher because they will need to be cashable. Are you confident that you can make those efficiency savings?

Alan Johnson: Yes, as I "look all along the watchtower" I see possible savings! I am confident that we can and this is something that most organisations, particularly large organisations, would do as second nature. You look for efficiency savings all the time on a regular basis. We met the 2.5% Gershon savings. If we look at spreading best practice, if we look at better procurement, we have re-opened negotiations with the pharmaceutical industry on PPRS, and that is a very big and important part of achieving these flexibilities and achieving these efficiencies. I think community-based services will be another way that we can do this, so it is challenging, yes, and I am not saying it is going to be easy, but I think it is absolutely right for the Government to say that you should do this, recognising of course that the money they save does not go back to the Treasury, does not come up to Whitehall; it stays within the NHS for use in front-line services.

Q246 Dr Stoate: I am glad you have put that on the record that the money is not going to go back to the Treasury, the money will be kept in the NHS and I am sure that will be very welcome. Is this not increased pressure on cutting back through efficiency savings just another way of clawing back the money or could it not be seen that way?

Alan Johnson: No, it is not. We go from day-to-day. One day we may be criticised because the NHS is not as productive as it should be, and maybe it is something that you are concerned about as well, but we get told that lots of pay has gone in and lots of money has gone in but productivity has not gone up. When you talk about productivity measures, which is basically efficiency, efficiency measures have been introduced to get us into the happy position we are now of a £1.8 billion surplus which shows that it can be done when people put their minds to it. I do not want this to be an onerous process of people sitting down and looking at the things they can cut. It is saying we have extra money coming into the system, we have new ways of working, we have new technologies, we have modern sciences, we have better ways of procurement. The NHS has never been very good at spreading best practice. There are bits of best practice you stumble across and you think this is extraordinary, why are we not doing that everywhere? If we can help different organisations of the NHS to know and learn about that best practice I think we can do this and I think this is something that people will generally engage in.

Q247 Dr Stoate: Are there any areas you are particularly targeting for savings?

Alan Johnson: Those three things actually: best practice; community services; better procurement as well as the PPRS negotiations

Chairman: I think we have a couple of supplementaries on this.

Q248 Dr Naysmith: Yes, Secretary of State, you talk about efficiency savings but we have a 4% increase in real terms, as you said in answer to an earlier question, a £1.8 billion surplus sitting in strategic health authorities and hopefully some PCTs. There is a huge amount of pressure building up because all of these PCTs have little schemes that they want to put into effect themselves. They have held back on and have even top-sliced in previous years and have had to postpone things, so there is that pressure. You mentioned earlier on stroke services which, as you know, I am very interested in and I know there are plans to announce national things for stroke and that is really very welcome because there are only a handful of places in the country that really deliver proper stroke services. Finally there is cardiac services as well. The National Service Framework for cardiac has seven chapters. The seventh one has not even been implemented in many places. That is the rehabilitation side and that fits in with exactly what you have said about community services. There are huge dangers that some these important things will be cut instead of being implemented. I do not know if you have any observations.

Alan Johnson: I think you will be reassured. We are going to publish a document round about the end of December about how we intend to tackle efficiencies, and you will see from that it is not about cutting back on stroke services, et cetera. On all of that I think you will see very good news.

Q249 Dr Naysmith: It is not cutting back on it. You really need the money to expand on it and some of that money has got to be used for that.

Alan Johnson: We have got the money to do that and over this Spending Review period we have an extra £80 billion by 2010 to spend on top of the £92 billion we are spending already, and if we get the efficiency savings we have another £8.2 billion we can put into patient care as well, so it would be ridiculous to say that as part of efficiency savings we are going to cut back on an important priority like stroke in order that we can have more money available to spend on stroke, which is one of our priorities. I think you will be reassured when you see the nature of the document that we are going to publish to get everybody engaged in this and to ensure that people do not believe that it is about cutting back in services to the patient.

Q250 Jim Dowd: Alan, just on the question of the surplus, I asked your two colleagues about this last week and I just want to try and get a sense. The NHS is not a commercial organisation so it does not need to generate a surplus as such. We are not meeting all the health demands there are upon the Health Service as things stand. How then can you have a year-on-year surplus as projected by the operating framework document? Is it not a recognition that we are not meeting unmet needs, we are not treating everybody we possibly could or we are not treating them as quickly as we could. How can we have a surplus when we still have unmet need?

Alan Johnson: I think this relates back to the first question which you asked - is a surplus of around 2% reasonable - and I think it is. If you ask me whether a surplus of 5% or 10% was reasonable it would be a completely different argument, that would not be reasonable.

Q251 Jim Dowd: Parliament does not allocate money so that any government entity can be left with a surplus. Parliament will ultimately decide if we do this year-on-year and there is a surplus every year we just will not give them as much money.

Alan Johnson: Part of the problem before - and we found this in education as well - is that you will not get people to run their organisations properly. In the old days people were selling off bits of capital and using it as revenue. There were a lot of things going on out there that were done on the basis of "we are not an organisation that is meant to make profit; we are a public service" but it was actually wasteful for public money and actually was not good for patient care, so having a system where, as I say, Patricia and people like David and company did all the heavy lifting on, so that you move people away from this mindset that it does not matter if they run at a deficit because they will get the money from somewhere else in the organisation. Having them home to say it is reasonable to come down with a surplus as long as that surplus is kept by us and as long as it is not going to go back to the Treasury, it creates a discipline in finance that has an impact on patient care, because you usually find that if people are focused on what is the best way to provide patient care they actually come up with an efficient way as well as a good way for better care. I have not got those fears about this and I do think that it is important in a big government department to be focused on making a reasonable surplus and, as I say, 2% is reasonable. Above that you get into more problematic areas.

Q252 Jim Dowd: I was not advocating deficits at all; what I am talking about is a recurrent surplus in such an important activity as the NHS when there is still a lot of unmet need out there.

Alan Johnson: The other thing I would say, I was in Barking and Dagenham yesterday, one of the most deprived areas and an under-doctored area as well, with half the number of GPs they have in Northumberland, on this estate which has never had much help in the past, and the PCT were telling me there that the fact that they had got this surplus and were allowed to keep it, they had deliberately gone for that because they are thinking next years things they could not have done this year but they can do for next year they want to have a good launch pad for it. The PCTs are not just saying, "We want to keep this money because we want something in the piggy bank." Most of them are focused on actually what they want to spend it on next year and perhaps the year after. I get a feeling that this is not a problem out there amongst PCTs and trusts and that they actually prefer this system to the old cash brokerage system.

Q253 Jim Dowd: The wheel is still in spin basically?

Alan Johnson: Pardon?

Q254 Jim Dowd: The wheel is still in spin.

Alan Johnson: I just heard the word "spin" and it worried me! Yes, this wheel is on fire, absolutely.

Q255 Sandra Gidley: Turning to the consultant contracts, last week David Nicolson acknowledged that the consultant contracts had not yet delivered the hoped for improvements in productivity. In retrospect - it is always good with the benefit of hindsight - was it a mistake of your predecessor to give consultants extra pay before they had made changes to their way of working rather than wait until your aims had been achieved?

Alan Johnson: Unequivocally no. I am a great supporter of both of those deals. The trouble is - and this happens in lots of things - that people forget what life was like before that contract. I think consultants ought to get decent pay, so should GPs and so should nurses. I think they should get a good level of income; they do an important job. For consultants of course the position we were in prior to that contract was a world in which, as I understand it, trusts did not really know what consultants were doing. There was no monitoring of what consultants did. There was also a system where consultants would do work at weekends for the NHS on premium rates that lots of people in the NHS felt could have been done during the week. Consultants would be offended by this and say it never happened but there was a problem that the Department wanted to crack. In terms of what we have gained from the contract, we have an average annual growth in NHS productivity and when it is adjusted for quality, which is a very important adjustment, which the NAO did, it gave a 1.6% increase in annual growth, with an increased proportion of consultant time spent on direct clinical care. This is crucial because it is an almost 5% increase in the time they actually spend with patients caring for them. You have got an increased number of consultant hours devoted to direct clinical care up by something like 3,000 hours over the course of this contract. We are on track to achieve the Gershon savings. There is a significant reduction in waiting times which that contract has helped with. The other thing is about private practice. It was permissible in the consultants' own time - which was never monitored - to actually work in the private sector. Now consultants have to offer extra work to their NHS employers at single plain time rates, rather than demand private sector rates for doing extra lists at the weekend, so that particular problem has gone. What they are doing is monitored very closely now. They are much more likely to work in teams now and be part of the whole team effort whereas previously they tended to drift along as individuals. All of that was achieved because of the changes in that contract and I think it was a contract worth negotiating and worth signing.

Q256 Sandra Gidley: Why is it that others have come to an opposite conclusion? The Public Accounts Committee published a report stating the "productivity of consultants has decreased, consultants are working fewer hours than they did under the old contract, activity per consultant has reduced." It is all very well saying we have extra patient hours and extra patients treated but you have also got more consultants.

Alan Johnson: That is true but there are two things about that. First of all, their hours have decreased and I am glad they have decreased and I am amazed that there is - not from you - this view that somehow the Working Time Directive was a bad thing. It was part of the British system to have junior doctors in a sort of Carry on up the Hospital Ward where they did 110 hours a week; it was a crazy system. It was a crazy system that GPs were called out at 6 o'clock in the morning and were then expected to treat you properly at 9 o'clock the next morning. I think the Working Time Directive is absolutely a good thing and it means consultants are working fewer hours. That is the first thing. They are spending more of that time in direct patient care. The second thing is I do not think that that report was right to monitor consultant activity because if you measure consultant activity you will get all kinds of distortions in this. It is a very crude measure of performance. Just looking at activities does not take into account the fact that they have got an increased complexity in their workload. It does not take into account the improved quality. It does not take into account the extra time they are spending with the patients. It does not take into account the Working Time Directive. It does not take into account the fact that we have employed 11,000 new consultants and it takes them a time obviously to get up to speed, so none of those things are measured in that crude measure of consultant activity. I do not want particularly to be a spokesperson for the consultants. It is just that this idea that those deals were bad, whoever negotiated them, and John Reid had the wool pulled over his eyes, is wrong. We had very specific aims and we met those aims. I think it was a job well done.

Q257 Sandra Gidley: Would it not have done even better if you had waited a year and monitored consultant activity so you had a bit more of an idea what they were doing? I think it was a shock in some trusts to find out that consultants were doing a lot of work unpaid. I am not against anybody having a fair pay deal at all, but is it not the case that the Department and the trusts did not really know what the consultants were delivering?

Alan Johnson: That is absolutely the case but the opportunity comes up one time to grasp this and do a deal, and I think probably - and I am not speaking from any great knowledge of how the deal was negotiated - that if you had said let us leave it a year but monitor consultants very closely, you would have had a bit of a job monitoring the consultants because once the deal was done the monitoring arrangements came in as part of the deal and perhaps the monitoring arrangements just would not have been effective before the deal was signed.

Q258 Sandra Gidley: Changing tack slightly, we are also told that the jury is still out on whether the NHS will be consultant-led or consultant-delivered but the NHS plan in 2000 clearly stated that the NHS should be consultant-delivered. Why the change of view on this?

Alan Johnson: I do not know whether there has been a change of view since 2000. I do not know if David or Richard know anything about that. We are looking for an NHS - this is the whole point of the next stage review - that is clinician-led and locally driven, and part of this exercise is to get more clinicians to go into managerial posts as well. In America there is a very high percentage but a very low percentage in this country, but really that is by the bye. The main aim is to ensure that clinicians are at the heart of everything we do and they are doing it locally and not taking top-down instructions from Whitehall. Whether that has been a change since 2000 I do not know.

Q259 Dr Naysmith: If we can move to waiting times and access, Secretary of State. Can you confirm that with 12 months still to go there will be no further changes to the 18-week period for referral to treatment time for patients?

Alan Johnson: There have been no changes anywhere. We just announced a target. We said that we were going to get to 18 weeks by the end of December 2008. We said we would eventually publish how that would look as a target, so we published recently the fact that we think given that there are people who do not want their operations at the time when the clinician is ready to do it, either because their kids are getting married or they want to go away on holiday - and Ben Bradshaw tells me about the Mayor of Exeter who particularly wanted to put off an operation until he had completed his year as Mayor - if you take that together with people not turning up for clinical appointments and then you get a problem of clinicians saying that until this person has been on a certain drug for a while I cannot carry out the operation, all those things together means there is a 10% barrier there. We just published that; it is not a change and we are confident that we will make it.

Q260 Dr Naysmith: But it is a change because there have previously been targets and it was 100% but you allowed a system whereby if people could put up a good reason for not achieving the target each case had to be considered, so why did you this time decide on a percentage exception?

Alan Johnson: On this, as I say, we always made it clear that we would at some stage actually put detail on the target of getting 18 weeks from referral to actual treatment by the end of December 2008. We did not publish one that said there is a 5% wastage rate; we have only published for the first time this 10%.

Q261 Dr Naysmith: The system of suspensions and deferrals that had to be notified; is that not right Mr Nicholson?

Mr Nicholson: We have done both in the sense of, if you remember, the A&E target we made the target 98% and this was largely because of the volume of people involved. Tens of thousands of people will go through the 18 weeks programme. If you set out a whole series of rules from the centre, which my guess would be incredibly complex, you get a situation where the system goes into a "how can we sort all these suspensions out?" rather than treating the patients. We thought it was much more sensible to avoid the bureaucracy of that but to focus on a target which we think is effective and suits both patients and clinicians.

Q262 Dr Naysmith: The target will actually be 90% at 18 weeks.

Mr Nicholson: Our expectation is 90% of patients who have in-patient treatment and 95% of patients who have non-admitted care, but we will look very closely, as we do with the A&E target, to make sure that the system is not gaming in any way, so for example all the difficult and complicated orthopaedic work is in the 10%. We need to make absolutely clear that that is not the case. That is a much easier thing to do and a more patient-focused thing to do than trying to set up 1,000 different that every hospital has to apply for every individual patient.

Q263 Dr Naysmith: It sounds sensible but how did you decide on 90%? Was any modelling done?

Mr Nicholson: We did quite a lot of work with patients, patient groups and looking at the clinical outcomes of existing care and the 95% and 90% are stretching targets. It is at the top end of this.

Q264 Dr Naysmith: So why did you not use the same approach for the cancer target which I believe is 100%?

Mr Nicholson: The issue there of course is that the volumes are much smaller and we are much clearer about what the patient pathway is and so you can manage that much better. It simply is a matter of volume for the 18 weeks and the A&E.

Q265 Dr Naysmith: You told us that once the 18-week maximum had been achieved choice and contestability would be used to drive further reductions in waiting times. You told us that last week. If choice and contestability is an effective policy, why has it not been used up to now?

Alan Johnson: It is being used up to now. There is more choice coming on stream. From next year the Extended Choices network will mean that people have much greater choice than they have had up to now, so it is a continually evolving situation with more choice becoming available. Of course we concentrate a lot of choice in secondary acute care but there is now going to be a much bigger focus on choice in primary care as well.

Q266 Dr Naysmith: What we are saying really is that we need the 18-week target as well if choice and contestability is not good enough on its own. That is what it is saying.

Alan Johnson: I think the 18-week target is about the patient being able to choose to go to that hospital. Do not forget that the median length of time will be eight weeks and 18 weeks will be the maximum that someone would have to wait. If everyone is achieving very short waiting times, then people will not base their choice so much on that; they might base it on health care associated infections or whatever but waiting times has been a very important part of choice because people do see the record of certain hospitals and say, "I would rather go there because I will not have to wait so long."

Q267 Charlotte Atkins: The Lancet editorial suggested that the plans to deep-clean hospital wards was more of a publicity exercise than being evidence-based. How do you respond to that?

Alan Johnson: I did not read the article and I am a bit surprised that The Lancet, weighty and lofty journal as I understand it to be, spends its time writing editorials about deep-clean. It would be a fair point to make if the only thing we were announcing was deep-clean. The point about deep-clean is that it sits with a whole series of announcements from "bare below the elbows" to screening on MRSA for all patients, not just elective patients but including emergency patients by the end of this CSR period - a big, big change to introduce. The empowerment of those 5,000 matrons, the extra improvement teams - all of these things are having a real difference. Part of that was deep-clean. I do not think there is any evidence one way or the other about this, I am not sure - and David might know of some. What I do know is that in the hospitals where they do it (and lots of hospitals have this) it gives patients confidence. It is part of the perception of the public that this is a hospital that puts cleanliness and safety as a top priority and it is a clean hospital to go into. This was not some huge great suggestion that the one answer to health care-associated infections was a deep-clean. It is part of a series of measures.

Q268 Charlotte Atkins: The reality is if you just look at my own constituency North Staffs Hospital was one of the worst hospitals in the country in terms of infection control and 12 miles down the road, admittedly a small hospital, is Leek Moorlands Hospital which scored "excellent" on all three categories in its PEAT scores. Is it not about management, certainly the screening of patients, but also making sure that doctors and nurses wash their hands and that there is a culture within the hospital where the gels are not just sitting there but they are actually used, not just by professionals but by relatives and anyone who is involved with patient care?

Alan Johnson: It is indeed. It is about washing hands; it is about responsible prescription of antibiotics; it is about isolation of cohort nursing. It is about those three things but, as I say, the cleanliness of the hospital really matters to people. We spent £370,000 on the first deep-clean we announced at Maidstone because to the public in Maidstone we had to restore confidence in their local hospital. It is the most gleaming, clean hospital that I have ever seen and I do not think it was just for my visit. The problems there, if you read that report, were the very problems you mentioned: nurses were not trained properly; they were badly prescribing antibiotics; everything that could go wrong did go wrong. The deep-clean is just one part of restoring confidence and one part of tackling this huge problem of health care-acquired infections.

Q269 Charlotte Atkins: Given that, how cost-effective is it? Maybe you are factoring in there public confidence as being an element but if you are just looking in terms of deep-cleans managing to reduce infections, how cost effective is it?

Alan Johnson: It is important to ensure that all parts of the hospital are clean and that was second nature in hospitals, as I understand it, before antibiotics invented. The only way you tackled these issues was by scrupulous cleanliness. As to its cost-effectiveness, I think it will be cost-effective because I think what happens at the moment is that the cleaning that goes on is not as centred and focused as a deep-clean will be, so it will have an effect on the cleanliness of the hospital but, as I say, in terms of public perception and public confidence that that hospital is safe we are not able measure that in terms of whether that is cost-effective but I am sure that is the principal benefit that we will get from deep-clean.

Q270 Charlotte Atkins: You can have as many deep-cleans as you like; if after the deep-clean has happened the management does not insist on the cleaning regime being properly carried out and those sorts of infection control measures embedded within the culture of the hospital, then it is not going to make any progress.

Alan Johnson: The deep-clean on its own will not make any progress. It has to be seen within all those measures and of course the fact we now have a statutory hygiene code, which was not in force at the time of Maidstone and Tunbridge Wells; it has only been in force since the 2006 Act. That is now statutory and the measurement against that, as well as all the other changes we have made, I think is the reason why we have now seen a 10% reduction in MRSA and a 7% reduction year-on-year on Clostridium difficile; 13% on the last quarter.

Q271 Charlotte Atkins: How does that statutory control also relate to ambulances because a recent Unison report indicated that there was huge variation between different ambulance services. I am surprised, coming from Staffordshire, that there is not always in every ambulance service a dedicated team of cleaners going in there and making sure that an ambulance is absolutely clean.

Alan Johnson: I have just seen the Unison report. We do not think that this is a major reason for health care-associated infection spreading. We think that there are flaws in that report but we will look at it very carefully and we will consider it very carefully because this is an absolute priority for us. Safety is an absolute priority and it has got to be a priority right throughout the NHS. If that means looking at how we clean ambulances then we will look at that again.

Q272 Charlotte Atkins: Is not part of the problem though quite deep-seated in the sense that very often cleaning staff are not seen as part of the core workforce. Going back to the days when they were privatised and everything else, they are just really seen as a team of people that come in, sort out the ward maybe in the morning but are not on the ward all the time, and they are just a separate element within the hospital and not really embedded within the hospital workforce?

Alan Johnson: The major problems, as you have pointed out, were about washing hands, prescription of antibiotics and isolation of cohort nursing. I wish I could say there is absolutely clear evidence one way or the other about whether you have contract cleaners or directly employed. Maidstone had directly employed cleaners and it was an awful mess. It is the quality of that cleaning, it is the control of the matron and the ward sister - ward sisters are a very important component in this as they continue to remind me and we ought to mention them a bit more - it is their ability to ensure that they have the authority to say to senior trust management "there is a problem here and it needs to be tackled immediately" so they can cut through the different layers of the structure in the trust which is why we have given the power for nurses and ward sisters to report at least quarterly direct to the board on cleanliness of their wards. Cleaners are an element in this but whether it is contract cleaners or it is directly employed cleaners it has to be the right number of cleaners, properly trained and valued, I think you are absolutely right, as part of the health team in that hospital. I have seen them being a part of the health team when they are contract cleaners and I have seen them not being part of the team when they are directly employed, so it is management and how you manage those cleaning services.

Q273 Jim Dowd: Do you think it is reasonable though, and we have heard the story about the ambulance this past week, to expect the ambulance crews and paramedics to actually take some responsibility for keeping their equipment clean and in a safe condition?

Alan Johnson: Yes it is, absolutely.

Charlotte Atkins: But Staffordshire Ambulances actually have a separate team to do it as opposed to expecting the paramedics to do it.

Jim Dowd: That is what they are after.

Chairman: Let us not have a debate here. You can put it down for the adjournment if you want. Lee has a question.

Q274 Mr Scott: I visited my own daughter in hospital in Northern London earlier this year and although I washed my hands with the gel, people were wandering in and out and nobody was making sure they washed their hands, and most of them were not washing their hands. This does come back to the problems that were in Maidstone and Tunbridge Wells, and indeed in my own trust, where it starts at the top. Our doctors and nurses are doing a wonderful job and are under a lot of pressure but it is the bosses above them who perhaps are not putting the mechanisms in place to make sure that this regime works. How is that going to be tackled?

Alan Johnson: The "wash your hands" campaign has been very successful in drawing this to people's attention. I think you are right there is still a problem. The "bare below the elbows", incidentally, has been happening in the Royal Marsden and other hospitals for years. Some of the surgeons who would come along in a white coat perhaps would feel that they were somehow exempt from this policy whereas if everyone is bare from the elbows down it means you wash your hands properly, no watch, no jewellery, et cetera. That was very much to put people on an even keel, if you like. The other thing is making patients assertive enough and confident enough to say to a clinician, "I did not notice you washed your hands." It is a big ask of people when they are in that position, given the rightful respect that clinicians get. In Maidstone there was a failure on the hand-washing policy, a failure not just by members of staff or visitors or whatever, a failure by clinicians and by nurses to abide by that policy. You can pass all the laws and regulations you like, as you will appreciate, but this is a culture thing, that people when they walk into the ward have to be sure that they wash their hands and for C-difficile of course it is soap and water and not just the alcohol rub, which is why in some hospitals they insist on three alcohol rub washes and then a hand wash with soap and water. It was the case in Birmingham where I was last week. It is catching on now and there is a real focus on this because the public are empowered, they know more about it and they are watching to see whether people are washing their hands.

Q275 Dr Taylor: Can I pick you up on one thing you said. You said very clearly the matron and ward sisters were the important people. Does that mean you share my feeling that we should be going back to the days of the matron, the really powerful person working with a team of ward sisters where the powerful matron really was the figurehead?

Alan Johnson: You know better than I what the Hattie Jacques version of a matron was. I think they are as powerful now as they were then. When we get to 5,000 matrons we will have one for every two hospital wards and they will have the power over the cleaning contract as well as the power to report directly to the board, so I am agreeing with you, although I am not sure whether that is the total power that Hattie Jacques would have had in the Carry On film in 1959.

Q276 Dr Taylor: Moving on and coming to public health targets, particularly thinking of obesity, when we did an inquiry into obesity a couple of years ago it was obvious that the problem extends across health, education, transport, traffic, industry, sport, it goes across so many different departments. How are you going to try to co-ordinate the efforts across all these departments and which department do you think should actually take the lead?

Alan Johnson: We will take the lead and that is already decided.

Q277 Dr Taylor: Right.

Alan Johnson: The Foresight Review, which was very important, quite clearly made the parallel between obesity and climate change, not me, and they made the comparison on the basis that it needs cross-government work and if you are not careful you get to a point where it is too late to write back. They make these kinds of comparisons with the two. The inter-governmental committee which we are setting up at the moment is in response to that Foresight report so that we have all those departments, you are quite right, in terms of child obesity. The DCSF and the Department of Health have already got a joint committee up and running but on the general obesity stuff it is going to cross government; the Department of Health will lead and all those departments you mentioned will be part of it.

Q278 Dr Taylor: What will it be called just so we can follow its progress?

Alan Johnson: I hope it is not called the Obesity Committee. We are still thinking up a title for this but actually it is about much wider than obesity, it is about health and public health.

Q279 Dr Taylor: Cross department?

Alan Johnson: And cross-department working.

Q280 Dr Taylor: On a wide range of health issues.

Alan Johnson: On a wide range of health issues as well because some of it is about education, some of it is about lack of sporting facilities, and all of this has to be joined up together.

Q281 Dr Taylor: And you are going to take the lead?

Alan Johnson: We are taking the lead already as we speak.

Q282 Dr Stoate: I want to keep on the subject of public health and particularly health inequalities. According to your Department's answer to PEQ 119 health inequality, as measured by life expectancy at birth, is actually worsening despite it being a key departmental target. Why do you think this key measure is worsening despite the efforts that are being put in?

Alan Johnson: That is a very good question. Incidentally, we have just seen that evidence and it seems to be that there is a gap for males but it is not any wider and the gap has stayed at around 2%. Where the gap is widening is amongst women. From the very cursory analysis we have done already, it seems to be two groups of women, women between the ages of 20 and 29 and women over 70, and it is about respiratory diseases, it is about digestive problems, it is about cancers, so we can focus in on where the problems are to that degree. How do we resolve these issues? First of all, we are the first Government which has made health inequalities a big issue and we measure against it and we have a PSA target. I think that is important because it demonstrates that the Government is determined to tackle it. The investment we are putting in to tackle health inequalities in all kinds of areas is quite substantial.

Q283 Dr Stoate: Can you tell us how much because one of my questions was going to be how much are you putting into this important issue?

Alan Johnson: If you add the whole lot together, Richard?

Mr Douglas: In 2006-07 and 2007-08 we allocated an additional £211 million and £342 million specifically linked to Choosing Health.

Alan Johnson: So you have got these teams going into the spearhead areas that are very successful, these health trainers in the PCTs. You have got the Healthy Communities focus in these poorer areas. If you are in an under-doctored area, you are going to get something like three new GP-led practices coming along which are as focused on prevention as they are on treating disease that will be real centres of excellence. That is about a £250 million investment. It is frustrating although the other point to make is that this is wider than just the Department of Health, just going back to Dr Taylor's point about obesity. Health inequalities are about education; they are about people's lack of aspiration; they are about people's lack of assertive and not being confident enough to demand certain things. It is much wider than health; it is the social mobility argument, but we certainly can play our role.

Q284 Dr Stoate: One of the key determinants of health inequalities of course is smoking and we are slightly concerned that the prevalence of smoking amongst the routine and manual groups, which are the groups most likely to smoke, has only fallen from 33% in 2001-02 to 31% in 2005. That is in PEQ121. Are you satisfied that the amount of money you have put into smoking is justifiable for a fairly modest reduction in smoking prevalence?

Alan Johnson: What you have to remember is those figures, as I understand them, stop in 2005. There are something like 1.6 million fewer smokers between 1998 and 2005 but, you are right, our target is to reduce it to 26%. What has happened since 2005 is a £10 million investment in stopping smoking in those spearhead areas, the poorest areas, the ones with the widest health inequalities. The smoke-free legislation came in on 1 July and the age of purchase went up from 16 to 18. I would like to see the figures. An awful lot has happened since 2005 and I hope that continues to send the figures in the right direction because I think this is one of the areas where governments of all persuasions, back from the early 1960s, have had a success in public health, but I would like to think we have done more than most since we came in to tackle this by getting to the point where you take decisions in Parliament that could be unpopular but which have proved to be, I think all the evidence is at the moment, people are complying with it and it is having dramatic effects on people's health.

Q285 Dr Stoate: There is no question that your Government has done more than previous Governments in tackling this problem. My question is whether in fact it is having any effect. Is there yet any real evidence to suggest that the new legislation on smoke-free zones is making a difference? It may be too early but is there any evidence?

Alan Johnson: I think it probably is too early but you saw the evidence from Scotland I think something like a year after they had introduced the legislation which showed a dramatic 18% reduction I think it was ---

Q286 Chairman: 16% reduction measured in nine hospitals.

Alan Johnson: Of course in July of next year we will be able to judge what has happened in the first year and I think that is one of the reasons why 2005 onwards is probably the most dramatic and exciting period for introducing measures to reduce smoking.

Q287 Dr Stoate: Perhaps I will ask you this next year.

Alan Johnson: I hope I am still here.

Q288 Chairman: You mentioned earlier that the public are very conscious about the issue of hospital-acquired infection in terms of they have a role to play in some senses as well. Public information is still an issue inside the National Health Service. You put considerable emphasis on achieving targets and that is all right and proper but do you agree that the public would understand better what the Department's responsibilities are if was made clear what guarantees are offered to them when they need care now the NHS can be held to account for meeting these guarantees?

Alan Johnson: The simple answer to that question is yes. We could do far more and need to do far more on the information front. We are going to get to a position soon where we will have this information prescription, I think we are calling it, where people with long-term care needs will get a whole series of well-written, clear, concise help and advice and guidance on where to go in terms of benefits, where to go in terms of support and help, because information is key to actually improving health. I think it has been an overlooked part of health. I went to a hospital - this is going back to what we were talking about about spreading best practice - the other week where every incoming patient gets a very easy-to read information pack about everything about that hospital and the services that are available. It is something that probably was not thought to be important ten years ago but is now, you are right to say Chairman, extremely important.

Q289 Chairman: We had discussions last week and David Nicholson answered this question about how NHS Choices could be used better in terms of that. In answer, he said obviously that primary care trusts have a responsibility to publicise what the position was in each individual area and potentially the development of a NHS Choices website to enable people to get on and understand what is available and what is not part of the process is something as well, but there is no target for setting what I would call this public information about what they can expect or not. Are you thinking of setting targets on that?

Alan Johnson: No, we are moving away from top-down targets, Chairman. We spent about £12 million on NHS Choices and it is part of this exciting agenda where people can access information freely and make decisions on the basis of that information. We are also thinking about introducing a kite mark so that patients can be sure that the advice they are getting is from a reliable source, and we can also encourage other NHS providers to go for this kite mark on the grounds that they are committed to giving good, high-quality information.

Q290 Jim Dowd: Can I follow that up Alan. I remember a scheme a few years ago about publishing morbidity rates for acute units; whatever happened to that?

Alan Johnson: I do not know.

Mr Nicholson: There are all sorts of rates published. The cardiac surgeons are the most obvious ones which are published now and available for people to see. We have just appointed Bruce Keogh as the Medical Director for the NHS who was part of the leadership for this. Part of his responsibility now is to think of how we might extend that to cover other specialties and we would certainly use the NMS Choices website as part of that process.

Q291 Jim Dowd: It is certainly a fact as it is presented but do you regard it as informative to the average patient?

Mr Nicholson: It depends. If you look at what has happened in cardiac care, I think it is very informative because they have spent quite a lot of time developing it and improving it. In other specialties my guess is that people are not at as advanced a stage but certainly if I was going to be operated on by a surgeon, I would at least want to have a look at the information about their outcomes and then I would weigh that against a whole series of other issues. I think it is perfectly reasonable for the population to have that information.

Q292 Jim Dowd: The response to the PEQ indicated that there were relatively few either PFI or traditional capital schemes in the south of England projected over the near future and yet given the very ambitious plans the Government have for the Thames Gateway, for example, how are the two reconciled?

Alan Johnson: I am not so sure that we do not have PFIs in the south of England. That PEQ that you mention, I saw some information on that, but I think in terms of the number of PFIs in the South East there are 25 PFI schemes in London alone. In the South if you define the South of England as South East, South West, South Central and London, there are 64 schemes open or under construction worth £7 billion, so we will look at that a bit more closely, but I do not think there is an obvious "we do not like PFIs in the south".

Q293 Jim Dowd: I was not looking at what has been done already; I was looking at the planned new ones?

Alan Johnson: On the Thames Gateway.

Q294 Jim Dowd: Which is still in its very early days.

Alan Johnson: It is at an early stage but we are spending about £1.4 billion on new or refurbished hospital provision for the Thames Gateway. I have got a whole list of things that are happening that will have led to that amount being spent. I think you have to look at this coming year because by the spring of this year we will agree - the Department of Health and the SHAs - the mechanism for supporting improvements for general public health. We recognise you cannot just build this great area. That was the mistake of the past. This estate I was talking about in Barking, which is on the edge of the Thames Gateway, was built at a time when people did not think about any health provision or where they were going to work and you got an isolated community. The Thames Gateway has to have proper education facilities and proper health provision. That is all in the mix and we are spending a lot of money on it.

Q295 Jim Dowd: There is another aspect of this. I have been involved locally with Picture of Health, obviously, and the George Alberti Review, which indicates, if nothing else, that the feeling is there is very much too much acute provision, certainly in London and the South East generally. Is that your view?

Alan Johnson: I do know that clinicians in South London, who I know very well, believe that to be the case, that there needs be to a reconfiguration there in the interests of patient care. I also know from reading the Darzi Review of London that people have tried to address this issue constantly over the last 40 years and have always come up against a brick wall, which is usually a political one. I think now is the time to try and move beyond some of these fairly basic arguments of people defending bricks and mortar and not looking at a total vision for healthcare in the 21 century.

Q296 Jim Dowd: I think you will find the brick walls are those that comprise the great cathedrals of medicine that dominate central London, if nothing else.

Alan Johnson: I could not possibly comment!

Q297 Mr Scott: How do you react to press reports that the revisions and slow development of the Independent Sector Treatment Centres will cause firms to withdraw from them?

Alan Johnson: I react in the way that the King's Fund reacted, that that is nonsense. My letter to the FT might not be thought to be completely independent but Keith Palmer, the senior associate of the King's Fund, said the presumption ‑ and this was a presumption in the FT - that the recent decision by the Department of Health not to proceed with some independent treatment centres signalling a change in policy is unwarranted, and he says, "Alan Johnson, Health Secretary, is right" - I always like these bits - "to say that this does not mean that there is no role for the private sector in the NHS. As hospital productivity improves resources are freed up to expand and improve services closer to home, and in the home". I am bemused by this, quite frankly, because people have been trying since June to try and stack up a story that somehow there has been a change of policy here. I came to this committee in July, I think it was, and said there will be no third‑wave centrally driven ISTC procurement because having another top‑down from Whitehall procedure seemed absolutely to be unnecessary, and I am absolutely sure that if it was a Blair/Hewitt government they would have been saying exactly the same. What we have said now is for local PCTs we want this to be a bottom‑up process, not top‑down. That is point one. I also announced a huge investment in an ISTC in the North West. Now, on the second wave some of those procurements that had only got to preferred bidder stage, there had been no contracts signed, were not going to cut the mustard, not least of all if you look at the West Midlands, where we had signed a contract in one or two areas, where the waiting times had come right down, collapsed down to about three weeks, and in one area in particular we were getting 5% utilisation, so a 5% return on taxpayers' money. Now, no Secretary of State in their right mind is going to persevere with that against the fact that there is now sufficient capacity, that there is group productivity in that area, or that there is group patient care in that area, so the independent sector have a really valuable role to play, and I announced some more independent sector involvement in the acute sector, as part of the same announcement, and beyond that, in primary care, where previously there has been practically no role for the private sector, we have announced that we are going to set up these new GP led centres to improve access and the private sector will have a huge role in that as well. So I think this is kind of Orwellian, private sector good/public sector bad or the other way around. I am interested in good patient care and ensuring that we use the private sector efficiently and cost effectively and bring their skills in, but it has to be, as I say, on the basis of capacity, value for money for the taxpayer, and good patient care.

Q298 Dr Naysmith: It is very interesting what you are saying there, Secretary of State, because when you were here in July I do not remember you emphasising the direct‑from‑the‑centre quite so much; it was really a kind of statement that there would not be another wave of ISTCs, whether they came up from the PCTs or not, but it is interesting you have now made that clarification, I am sure we could look at the record and see. But last week - and he is lucky, I suppose, he gets two bites of the cherry but you only get one - David Nicholson was telling us that there was a big capacity issue for us, and much of the capacity of the National Health Service was saying it could not deliver. But now it has found ways of delivering and that is a bit of a surprise, I think. It has found ways of delivering whereas it said it was not going to have that capacity; they said there was the big capacity issue and they said they could not do it. Why were the contracts lasting for five years given to private companies to deliver ISCTs, while at the same time resources were being pumped into the National Health Service to increase its capacity?

Alan Johnson: Firstly you will not get private sector involvement if there is not a contract. As I just explained, six of these that we have cancelled were not at the contract stage, just at preferred bidder stage. Secondly, we have cancelled where there was a contract, one in the West Midlands where waiting times had gone down from three years to three weeks. Incidentally, if we had had a shorter contract time than five years, which would have been difficult to negotiate, it would have cost us much more to pull out because the deal for shorter contracts is you pay much more if you pull out, so I do not think there is anything about the propriety or the sound common sense of a five year contract; bringing in the independence sector, and David was absolutely right, galvanised productivity in the NHS, and you would not have got that without a contract of a certain span of time. And I do re‑emphasise, six of these that we cancelled were not at contract stage anyway; they were at the, as it were, preferred bidder stage.

Q299 Dr Naysmith: I know you were not around at the time but what people are arguing now is that it was a shot in the arm to get the NHS to perform better. Some people are saying what a waste of time it was putting that money into ISTCs when we do not really need them.

Alan Johnson: That was not the main reason for doing it. The main reason for doing it was to get these waiting times down, and if you go to somewhere like Shepton Mallet you see an operation by the private sector in an ISTC that has a 96% satisfaction rating of patients who use it. One of the problems we spoke about last time, and I remember Dr Taylor raising it, was this additionality rule and the fact that they did not feel they were part of an integrated healthcare system, and that is something we can improve upon now, but their role was valuable in improving patient care. As a by‑product of that it did raise the game throughout the NHS. The question I asked was if we are going to cancel these contracts, or cancel the preferred bidder stage, does it mean that somehow there would be a slip back, that we will move away from this very benign and happy state that we are in now, and that is not going to happen really because the indicators are in there and people are now involved, they have seen what they can do, and this is a very important point, by including the nursing staff and the clinicians in the way that these things are arranged. I was at a centre in the Derwent Centre in September, Bournemouth District General Hospital, where the Nuffield operated elective surgery on hip and knee replacements; they decided they could not operate it any more and moved out and asked the NHS to take it over, and the NHS engaged nursing staff in how they could do it more productively, and they have gone from an 8‑day turnaround to 4‑day. Patients come in on a Friday and walk out on the Monday. Huge productivity, very low levels of healthcare associated with patients ‑‑

Q300 Dr Naysmith: We saw some very good examples of good practice when we were looking at our ISTC report and some not so good, but one of the things that would really help to bring them into the National Health Service family would be if ISTCs were to be paid according to the national tariff so there is fair competition for NHS providers. When is that going to happen?

Alan Johnson: It is only the initial setting up stage ‑‑

Q301 Dr Naysmith: Perhaps we can give David a chance to come in again given all the comments.

Mr Nicholson: In practice most of the second wave now are at tariff, and any further would be at tariff. The extended choice network is at tariff and the free choice arrangements are at tariff now, so we have a position where all but a relatively small number of the first wave who had supplements are now at tariff.

Q302 Dr Naysmith: So they will be brought in eventually as well?

Mr Nicholson: Yes.

Q303 Charlotte Atkins: When we come to the end of the five year contracts for ISTCs, given what you have said about the whole process being driven locally, would you be happy for PCTs to decide to pull out of those contracts, or no longer commission ISTC services, even if that means that ISTCs may close down as a result?

Alan Johnson: Waves 1 and 2 are centrally driven, and whatever happens in them has to be cleared with us. What PCTs do now locally in setting up their own independent sectors is a matter for them, and they have total control over that.

Mr Nicholson: What we have said to the companies running them is that our expectation is they will be able to operate at tariff in a commercial way after the five years. We have not done any deals with them. That is what we say our expectation is they will do, to give them the incentive.

Q304 Charlotte Atkins: But will PCTs be pushed into commissioning services from them again?

Mr Nicholson: By the time we get to that, of course, we will have free choice, so individual patients will be able to choose where they go, so an arrangement with a PCT in that way would not have the same application.

Q305 Charlotte Atkins: We had a discussion last time you gave evidence that obviously some PCTs on take or pay contracts were paying vastly over the odds with very few patients being treated, and clearly those PCTs like North Staffordshire would wanted to get out of those contracts and not be forced to, as they were before, to conclude contracts which they know are not going to be cost effective.

Mr Nicholson: There is a small minority of PCTs in that position but that is not the case for wave 2, only wave 1. With wave 2 the risk is taken by the Department, not by the individual PCT, and we would not expect individual PCTs to take the risk in future.

Q306 Charlotte Atkins: Even if they were involved in wave 1?

Mr Nicholson: Yes. I would not expect so.

Q307 Chairman: In several tables in the written evidence there are footnotes or explanations that information from Trusts are missing. I have a couple of examples of that: income and car parking fees, table 9; capital schemes, table 16; and also table 32, agency staff. Are you and your officials confident that you have a full view of NHS monies?

Alan Johnson: I will let my officials take that up first. Why was that missing?

Mr Douglas: We do not collect information directly from Foundation Trusts other than that that is published. That is a responsibility of Monitor. As we look more at the operation of the NHS through the commissioning side of the business we are really collecting information through commissioners rather than rely on information directly from providers. So we feel we have enough information to allow us to fulfil our functions.

Q308 Chairman: You are monitoring Monitor, are you?

Mr Douglas: We work with Monitor.

Alan Johnson: A close and happy partnership!

Q309 Chairman: You are confident you have that view of NHS finances?

Mr Douglas: We definitely have the view of NHS finance. We have the accounts information; all the accounts for every Foundation Trust is published and publicly available, so you can access accounts data as necessary.

Q310 Dr Taylor: I am going to digress for one moment because the Chairman has just mentioned parking fees. In our questionnaire we were very keen to try to find out what sort of profit the private contractors who are running the parking are taking. We just got figures for the income the NHS is getting from parking fees but we did not get an answer to the sort of profit that the parking providers are making. Is that something that is available or not?

Alan Johnson: Probably not, I would not think.

Mr Douglas: I could not answer honestly at the moment, but I could check that up.

Q311 Dr Taylor: Thank you. My proper question is this. The Chairman and I can both commiserate with you, Secretary of State, because we have fallen off the bottom of the Health Service Journal "50 Most Important People Influencing the Health Policy in England", and you have been demoted from number one to number four. What is your reaction to this? Is it a deliberate policy to take a low profile?

Alan Johnson: The answer is blowing in the wind! Can I correct you though, I did not "drop" from first to fourth - I was not in it last year, so in a sense I have "come in" at fourth. My driver confidently expects to be higher than me next year, and probably if I drop much lower you will not want to speak to me at this Health Select Committee!

Q312 Chairman: Turning to the profile and some of the heat that is in the debate about health, you would probably be happy if you were not in the top 50 at all, would you not?

Alan Johnson: It does not bother me one way or the other. It is a matter of huge interest to people who read the Health Service Journal.

Q313 Chairman: And you do not! Can I thank you very much indeed, anyway, for this morning's session. Clearly we do not put any political commentary into our annual PEQ but both of these evidence sessions will obviously be published, so thank you again.

Alan Johnson: Thank you, Chairman.