House of Commons - Public Expenditure

Public Expenditure - Health Committee Contents

4 Key findings from our inquiry

30. As noted in the previous chapter, we are only part way through the first full year of the implementation of QIPP plans and the Spending Review settlement. As such, it is not yet possible to conduct a full analysis of the impact and effectiveness of these measures. In the course of our evidence, however, we heard concerns about a number of trends arising from the Government's programme. In this chapter we note the most significant. A common thread running through these issues is the marked disconnect between the concerns expressed by those responsible for delivering services, and the relative optimism of the Government.

Progress on the QIPP programme

SETTING AND ACHIEVING TARGETS

31. The Nicholson Challenge requires the NHS as a whole to make 4% efficiency savings, year on year.[29] However, this will require many NHS organisations in the acute sector to aim for higher savings, due to the pressure placed on this sector through reductions in the tariff.[30] Monitor, the independent regulator of NHS foundation trusts, noted in its review of trusts' annual plans that trusts have set their most challenging Cost Improvement Plans to date, aiming to achieve a 4.4% reduction in operating costs. Monitor warned that "maintaining and improving quality whilst delivering this level of savings represents a significant challenge and a potential risk for trusts".[31] Monitor has also raised the levels of expected efficiencies that it uses to inform its financial assumptions when assessing applicant foundation trusts and when risk rating investments and transactions undertaken by foundation trusts.[32]

32. Similarly a King's Fund's survey of a panel of finance directors from a variety of NHS organisations found that this pattern was extending beyond just the foundation trust sector:

All but one of the provider organisations on the panel have a productivity target of 4% or more, and over half have a target of 6% or more. This confirms a recent Health Service Journal survey of 131 trusts conducted in April, which found a similar range of targets with an average target of 6%.[33]

33. Mike Farrar of the NHS Confederation told us that:

82% of our membership believe that it would be possible to remain financially stable this year, but they are worried about future years. There is a strong sense that most of this year's position on the money is being dealt with by taking account of reserves or a cushion that was in the system previously.[34]

34. Jo Webber, Deputy Policy Director of the NHS Confederation, added:

It is not just the reserves either. It is non-recurrent savings. It is savings that you will not be able to make again next year. So, although our members did feel, when we surveyed them, that they would be able to make it this year, it gets increasingly tough.[35]

35. She told us that, in her view, efficiencies would inevitably threaten quality in the longer term:

This year it feels like you can keep quality up and it would not be compromised by the savings. The vast majority of our members feel confident that they are going to make the savings this year. When you start projecting this two or three years out, then that balance between quality and savings becomes more finely balanced.[36]

36. The Secretary of State acknowledged that the acute sector was facing "unprecedented pressure" and that it was possible that the "extent of the financial challenge" could lead some foundation trusts to use their reserves to meet their financial objectives.[37]

37. Sir David Nicholson insisted that the "vast majority" of changes being made under the 'operational efficiency' heading (some 40% of planned savings) were recurring[38] and that the 40% of savings planned from national action were "all recurring", although he acknowledged that this would only be the case if pay levels did not "bounce back" in future years.[39] Sir David did note, however, that even as more data became available it would be difficult to get a definitive picture on whether savings were recurring or not, "partly because people describe things in different ways".[40]

38. It is far from certain whether the targets set out in saving plans will be met, even with trusts stretching themselves. For example, on the King's Fund July panel of finance directors, about half of those with a target of 4% or more were uncertain of meeting it.[41] Similarly, a July 2011 Health Service Journal survey of 244 senior managers and finance directors found that 55% were not confident that their organisation could make the savings needed. Past performance in this area is not always encouraging: in 2010-11 some 26 acute trusts delivered less than 80% of their cost improvement targets.[42] The Audit Commission, in its audit of 2010-11 cost improvement plans from a sample of PCTs and NHS Trusts, found that "plans have been more ambitious than in 2009-10 but achievement against them has worsened":

In 2010/11, 19 per cent of both NHS trust and PCT plans were not achieved. Overall, 23 per cent of the savings achieved were non-recurrent (2009/10 figures are not available). This means that NHS bodies will need to find extra savings in 2011/12 to match the one-off savings made in 2010/11, to reach the target of £20 billion recurrent savings.[43]

39. We were told in evidence that there was to be a return to some year-end flexibility over spending.[44] We welcome this development, because we believe it removes the well known perverse incentives that arise from excessive year-end inflexibility. However, this principle seems to be undermined by the case over the Christmas period of the Department of Health asking for bids for £300m of capital funding for projects beginning this financial year and ending in 2012-13. The Department asked for applications by 12 January for projects which would require at least £5m.[45] At a time when all NHS bodies are being required to make efficiencies and need to plan strategically to reshape services it is unhelpful for the Department of Health to require them to make bids for capital funding to such short deadlines and without adequate preparation.

40. It remains too early fully to assess the types of savings being made in 2011-12, the first year of the QIPP programme. The Government remains confident that savings are on track. Nevertheless, we have heard strong concerns from the NHS Confederation, the Foundation Trust Network[46]and the King's Fund,[47] among others, about the ability of NHS organisations firstly to meet their saving plans and second, to do so in a manner that is sustainable and releases further savings in future years. We are concerned that there appears to be evidence that NHS organisations are according the highest priority to achieving short-term savings which allow them to meet their financial objectives in the current year, apparently at the expense of planning service changes which would allow them to meet their financial and quality objectives in later years.

PROGRESS ON SERVICE RECONFIGURATION

41. The evidence presented by the Department of Health states that reconfiguration of services is an essential component of long-term sustainable change and is intended to account for 20% of QIPP savings.[48]

42. The Committee believes that service reconfiguration needs in fact to account for significantly more than 20% of QIPP savings and that it is hard to reconcile an estimate of 20% with the evidence presented by Sir David Nicholson and the Secretary of State quoted at paragraphs 6 and 8. They state in those paragraphs—and we agree—that delivery of the Nicholson Challenge depends on fundamental change in the way care is delivered; in the Committee's view that is simply another way of saying that services need to be reconfigured.

43. Genuine change in the way services are delivered will be necessary on both a large and small scale. Our evidence suggested that NHS organisations are focusing on trimming existing processes rather than developing new ways to deliver services. For example, John Appleby of the King's Fund told us:

One of my concerns with QIPP is quite often that the approach taken is, 'What is our share of the £20 billion as an organisation? How many millions is it and how do we squeeze that out of our budgets in, almost, cash terms?' I think the approach should have been, 'How can we improve care for patients? What is it they value that we can do more of?' [...] Traditionally, the NHS's approach to efficiency gains has been to lop the money off the top, that is not give it to the system in the first place and then ask questions later, as it were, and exhort the system to do as much as it can with slightly less money. I have to say, to an extent, that tactic is still being pursued.[49]

44. Mike Farrar of the NHS Confederation agreed with this to some extent:

My view is that what we have been doing in year one [...] is to approach the QIPP challenge in the way in which we have probably approached efficiencies previously, which is by small salami slicing around some of our costs. A lot of providers are trying to get leaner in the way they manage their processes.[50]

45. Dr Judith Smith, head of policy at the Nuffield Trust, suggested that PCTs were tending to "look at services at the margin, not at the core spend" and noted that this approach will make things even harder in subsequent years: "it is going to be hard for new commissioning groups that are just getting off the ground if they have to start with those difficult [core spend] decisions".[51]

46. Although therefore national policy guidance has emphasised the scale of service change required to deliver the Nicholson Challenge, the Committee is concerned that local reality does not reflect the national policy objectives.

47. The Committee is particularly concerned that the statistical distinction drawn by the Department between 20% of savings arising from service reconfiguration and 40% arising from reduced tariff is misleading. National policy guidance emphasises the importance of substantial service change, while the statistical presentation appears to suggest that traditional salami slicing will yield savings which are twice as large as the savings delivered by service change.

48. The Committee regards tariff reduction as a tool not a policy. It should be used to promote necessary service reconfiguration; the danger in the present approach is that it implies that service change has only a relatively minor contribution to make to the efficiency gain required to meet the Nicholson Challenge.

49. The Government's response to the Committee's 2010 Report endorsed this approach. It noted that "changes to tariff prices do not, in themselves, deliver efficiency improvements and NHS organisations need to identify underlying efficiencies to enable them to live within tariff prices".[52]

50. We are concerned that these important points are not sufficiently well understood. We have already noted that the squeeze on tariff payments has placed significant pressure on acute hospital services.[53] John Appleby of the King's Fund noted that this risked creating perverse effects:

If you squeeze down too much on price, trusts may think, "Is it worth us supplying this high cost service? We can't do anything more about the cost. We simply won't supply this service anymore and we'll focus on other things".[54]

51. Jo Webber of the NHS Confederation argued that the tariff was only partially useful: "tariff should help you to improve productivity, but there are still also the issues of rising demand and of those services that are not covered by tariff".[55] She added that "one could argue that if our demand is due to long-term conditions and an aging population, then [the tariff] does not cover, except for very precise episodes, the vast majority of where the demand is increasing".[56] Mike Farrar noted that the tariff may be effective in driving efficiency at an aggregate level, but that it could be a "crude mechanism" and did not take account of variations at a local level.[57]

52. The Secretary of State agreed that the tariff could be described as a "crude mechanism", but only "if we were not, at the same time, developing the tariff and the way in which the tariff itself is structured", for example through the development of best-practice tariffs and extending tariffs into community services.[58]

53. Sir David Nicholson acknowledged that the requirement to deliver efficiency gains through service redesign remained problematic:

The area where we have had least success in year 1—and we always knew this would be the case—is the benefits of service change because it is complicated and difficult and takes a lead time to do it. [...]. We have offset some of that [with the savings made in management costs] but, particularly in years 2 and 3, I think service change will increasingly become an issue for us to tackle.[59]

54. Both the Foundation Trust Network and the NHS Confederation noted that service redesign was difficult to achieve without political support.[60] But the Confederation warned of the consequences of not making such changes:

Without action, the NHS as a whole will start to overspend leading to serious compromises in quality. We therefore urge politicians—local and national; government and opposition—to start to make the case for change, to understand the difficulties in delivering this change and to back the leadership of the NHS to deliver it.[61]

55. The Secretary of State acknowledged that service reconfiguration on a large scale required action at both national and local levels, for example in developing a telephone triage system for urgent care.[62] In terms of political support, he argued that managers could achieve significant reorganisations "more readily, more successfully and more quickly" than in the past by ensuring their plans fulfilled certain tests, which he set out as follows:

Are our GPs supportive as commissioners? Are our local authorities supportive on the public's behalf? Are our patients supportive, even if reluctantly, but recognising that it delivers them the choices they are looking for? Is it clinically safe? Do we have a clinical evidence base for what we are setting out to do?[63]

56. The Secretary of State argued that if these tests were fulfilled managers could have "great confidence" in achieving the reconfiguration. Sir David Nicholson noted that there was service redesign "happening all the time" and that the Department had been encouraging and supporting people in effecting service change "because we want to improve the quality of service for patients". He did, however, acknowledge that it could still be difficult for management to achieve the political support they required, especially at a local level, and that getting local agreement was "a really big challenge for local government as we go forward in all of this".[64]

57. The Nicholson Challenge can only be achieved through a wide process of service redesign on both a small and large scale. These changes should not be deferred until later in the Spending Review period: they must happen early in the process if they are to release the recurring savings that will be vital in meeting the challenge. In the meantime, we are concerned that savings are being made through "salami-slicing" existing processes instead of rethinking and redesigning the way services are delivered.

58. The reduction of the tariff is intended to encourage service redesign. This link needs to be made much more explicit if there is to be a proper understanding in the NHS and among the wider public of the scale of service change which is needed to meet the Nicholson Challenge.

THE IMPACT OF THE WHITE PAPER RESTRUCTURING

59. Sir David Nicholson told us that the Government's White Paper process had answered the question of how to make QIPP savings a reality. He said "What we have tried to do since [the reforms started] is shape the reductions, pointing in the direction of the new world".[65] The Secretary of State told us that the restructuring process was a vital part of delivering the financial challenge:

Where QIPP is concerned, the strategy helps us to deliver that. If we did not have that strategy, we would still be sitting here discussing exactly the same financial challenge. We would still be living with exactly the same kind of challenge and you would be asking us a lot of questions about why we are not engaging clinicians more in the process of redesigning services in order to benefit patients. The fact is we are doing that.[66]

60. The Secretary of State also told us that the process of PCTs forming clusters as part of the reforms had reduced demand for managers and senior management staff, helping to deliver an additional £240 million reduction in administration costs in 2010-11 above what was expected.[67]

61. However, we also heard evidence that the restructuring process is frustrating NHS organisations in their efforts to make savings. The Foundation Trust Network told us "in the short to medium term there is significant disruption in relationships as experienced people leave the NHS or are redeployed" and "with the financial pressures on commissioners, combined with the changes in personnel and disruption of historic relationships, there is growing evidence that commissioners are making unsophisticated attempts to reduce costs".[68]

62. In a similar vein, Judith Smith of the Nuffield Trust warned that "undertaking that challenge at the time of major health system reorganisation risks compromising the process";[69] while John Appleby said "[making efficiencies now] is a more complicated job, which needs to galvanise the staff to feel enthused to search out new ways of working and new ways of delivering health care to patients".[70]Mike Farrar told us that the reforms had distracted his members and been a factor in organisations "starting slowly" on their savings plans.[71]

63. The reorganisation process continues to complicate the push for efficiency gains. Although it may have facilitated savings in some cases, we heard that it more often creates disruption and distraction that hinders the ability of organisations to consider truly effective ways of reforming service delivery and releasing savings.

Pressure on social care services

64. In its written evidence to our inquiry, the Department of Health told us:

The Government recognises that the Spending Review set out a challenging settlement for local government. However, the Department has sought to achieve a fair and sustainable outcome by listening to what the local government community has asked for. It has insulated the councils that are most dependent on grant funding by giving more weight to the levels of need within different areas and less weight to per capita distributions. It has also grouped councils into four bands, reflecting their dependence on central Government. More dependent authorities have therefore seen proportionally lower falls than more self-sufficient places.

For 2011-12 and 2012-13, no authority will face more than an 8.9% reduction in spending power (including income from council tax and NHS support for social care), with an average reduction in spending power for 2011-12 of 4.4%.[72]

65. The precise effect of the funding changes on local authorities' spending on social care is complex. The Department of Health has stated that it is monitoring budgeted expenditure data and notes that:

The Department for Communities and Local Government published 2011-12 budgeted expenditure data on 30 June 2011. This showed that budgeted net current expenditure on adult social care was £14,898 million for 2011-12, compared to £14,439 million in 2010-11. These two figures are not directly comparable, as local authorities have taken responsibility for commissioning services for people with learning disability from PCTs, funded through the £1.3 billion Learning Disabilities and Health Reform grant. The 2011-12 figure also does not include the additional income of £648 million received by local authorities from PCTs for spending on social care services that benefit health. Adjusting the data for these two funding streams suggests a like-for-like budgeted net current expenditure of £14,220 million in 2011-12. This represents a budgeted spending reduction of just over £200 million - or around 1.5% - compared to last year.[73]

66. Other data suggest that the difference may be larger than that 1.5%. The Audit Commission told us:

The picture of the impact on adult social care in 2011/12 from the 2010 Spending Review is far from clear. Data from several surveys is available, which each give different results.

The Association of Directors of Adult Social Services survey suggests spending on adult social care has fallen by 6.8 per cent.
Age UK found that spending on older people had fallen by 8.4 per cent.
The Department for Communities and Local Government found the fall was less than 1 per cent.
A CIPFA/BBC survey suggested a 2.6 per cent fall but with significant regional variation.[74]

67. In oral evidence, the Local Government Group (LGG) said that they accepted the funding figure, but added that "we feel it denies [...] the reality of the wider local government context in which this is set [...] It is our evidence that, in fact, councils, even with a degree of protection for adult social care [...] are taking £1 billion out of the system; that is the reality, rather than £200 million".[75] In a subsequent joint memorandum, the LGA and ADASS said that the ADASS survey showed that authorities were making £991m of savings on adult social care in the current year, caused by reductions in central funding, growth in demand and inflation and other cost pressures.[76]

68. Andrew Cozens of the LGG also said that the overall figure masked the very different challenges facing local authorities: "It makes a number of assumptions about the ability of councils to make efficiency savings on an equal basis across the country, and some councils are already more efficient than others and there is no mechanism for redistributing the savings that one council can make which are greater than another to that other council".[77] Councillor David Rogers of the LGG said that, "It is important to recognise that the average that comes from local taxes, from council tax, is 40% for social care spending and in some areas it is as high as 80% of the total".[78]

69. Local authorities, like the NHS, are being asked to cope with reductions in funding through efficiency savings. The Government says that the necessary programme of efficiencies is "ambitious", but that:

The Local Government Association and the Association of Directors of Adult Social Services both suggested, in their Spending Review submissions to Government, that efficiencies of 3% per annum were achievable in social care. The Department agrees broadly with this analysis.[79]

70. The Local Government Group told us:

...we estimate that local government faces a funding gap in the order of £6.5bn in 2011-12. This gap reflects the difference between what local authorities across England would need to spend to maintain frontline services in their current form, and the income they will be able to raise from grants, fees and charges, business rates and council tax [...]

Councils made savings of more than £3bn between 2005 and 2008 and a further £1.7bn in 2008-09. In 2009-10 councils made efficiency savings of more than £4.8m every day. Councils know that it is likely that more efficiency savings can be made, and the LG Group is investing heavily in a national productivity programme. But efficiency savings are not a quick, short-term fix and what has to be saved over the next few years goes far beyond what can be achieved by conventional efficiency savings.[80]

71. The Committee's own survey of local authorities found that local authorities are making lower levels of efficiency savings in social care (3.8% in 2010-11) than across the whole organisation (4.2%) and proposed increases in efficiency savings between 2010-11 and 2011-12 are less for social care (91% increase) than for local authorities as a whole (120%).[81] Andrew Cozens of the LGG told the Committee, however, that "The position next year is much more difficult to predict, and it is also difficult to predict whether councils will be in a position to continue to protect adult social care in the second year of the settlement".[82]

72. The Audit Commission encapsulated some of the problems facing authorities in making efficiencies:

The policy imperative is to transform services to deliver better outcomes for users. But the pace of change is slow and is unlikely to deliver short-term, or even possibly long-term, savings. Indeed, they may require short-term investment. Focusing management time on transactional efficiencies may deliver savings but will not deliver all the efficiencies required.[83]

73. The Secretary of State told us that "Our general calculation—our estimate overall—is that we are looking at least at a 3.5% efficiency gain each year in order to respond to the levels of demand and cost in the service. That is what we are aiming, at least, to achieve".[84]

74. Andrew Cozens gave a stark assessment of the position adult social care is in:

It has been our position [...] for some time that the social care system is close to collapse, if not fundamentally broken, at this stage simply because it is not able to properly respond to the demands on it. Therefore, it is reacting as a crisis service in many respects. That is a trend that I anticipate will continue.[85]

75. We put the LGG's assessment of the social care funding gap for 2011-12 to Una O'Brien, Permanent Secretary at the Department of Health. She thought their concerns were overstated:

[...] the ADASS construction [of the scale of efficiencies required] is based around an assumption on pay and prices and on demographic pressure. Our understanding—our judgement—is that it is not as large as that. We would not agree with the scale of what they set out because that is their interpretation of the demand pressure with pay and prices. Our view of pay and prices is more conservative than the one they have taken, so we would not share the scale of the efficiency challenge they have set out. Notwithstanding that, it still is challenging. Those decisions, then, are for local authorities in the distribution of their resources to come to a view about how they are going to manage it.[86]

76. The overall picture of social care is of a service that is continuing to function by restricting eligibility, by making greater savings on other local authority functions and by forcing down the price it pays to contractors for services. In each case, the scope for further efficiencies is severely limited. The Government's response to the Dilnot Commission's proposals due in the first half of this year will, we hope, set out how a sustainably funded system will continue into the future. The challenge for local authorities and the Government is to continue to provide a meaningful service until a new system is in place.

ACCESS TO SERVICES

77. In 2010, Andrew Lansley, the Secretary of State for Health, told us that under the Spending Review settlement there was in his view "generally" no need for local authorities to reduce eligibility to social care.[87] In our previous Report, we expressed concern that "the evidence submitted to us, including the evidence submitted by the Government itself, does not allow us to conclude that the Spending Review settlement, coupled with the pay freeze, is enough to allow councils to "sustain" care levels without restricting eligibility criteria".[88]

78. The Government's evidence to our current inquiry repeated the view expressed by the Secretary of State in 2010:

The Government believes that, if councils push forward with an ambitious programme of efficiency, there is enough funding available to make it possible to protect people's access to care, without tightening eligibility.[89]

79. The Government expects local authorities to make efficiencies of 3% per annum in order to achieve this. Our previous Report set out why the efficiency gains required were likely to be closer to 3.5%, and that achieving even 3% would be extremely challenging.[90]

80. It is clear that there have been changes in eligibility criteria. Of the 148 councils that responded to the 2011 Budget survey by the Association of Directors of Social Services (ADASS), 15 had raised their eligibility criteria between 2010-11 and 2011-12 from 'moderate' to 'substantial'.[91] The Association of Directors of Social Services (ADASS) told the Committee that in most of England eligibility is now restricted to those with needs which are 'significant'[92] or higher:

The ADASS Budget Survey 2011 analysis confirmed the extent of pressures being faced by Adult Social Care, identifying £1billion worth of reductions from 2011/12 Adult Social Care budgets and a corresponding movement in raising the eligibility threshold, with 13% councils raising eligibility and 82% councils now only providing services at significant or above levels of eligibility. This shift restricts the extent of future headroom for "planned" reductions over the spending review period being absorbed by "efficiencies" as opposed to service reductions.[93]

81. The Local Government Group agreed that there would be considerable pressure on councils' ability to maintain care services on current eligibility criteria in the coming years.[94] Andrew Cozens of the Local Government Group told us that:

It is too early to say what the impact will be on quality, but it certainly continues the trend of services being maintained for those inside the tent but with greater difficulties for those with lesser need in getting access to service. That is reflected both in the changes to eligibility criteria but also in the intention, for example, to reduce expenditure on care home placements and to try and cap fee levels and other issues of this kind.[95]

82. In evidence for this inquiry the Secretary of State described the changes to eligibility criteria as "limited"[96] in comparison with 2010-11 and said that "generally speaking, [councils] have not had to reduce their eligibility".[97] He did, however, note that nearly £116m of the £648m being passported through the NHS for spending on social care, and intended to support integration of the two services, had been spent on maintaining eligibility criteria.[98]

83. Una O'Brien, Permanent Secretary at the Department of Health, told us "we are disappointed where local authorities have made those decisions [to raise eligibility thresholds]" and said that the Spending Review arrangements were really a question of trying "to hold the position steady" until the establishment of a new and different funding system for social care.[99]

84. In spite of Government assurances, local authorities are having to raise eligibility criteria in order to maintain social care services to those in greatest need.

85. It is deeply concerning that £116m of the £648m intended to be spent through the NHS on improving the interface between health and social care is being spent on sustaining existing eligibility criteria. This suggests that this money (which was intended to support greater integration of services) is in fact being used to maintain the existing system. To the extent that this is true it is a lost opportunity to promote the necessary process of service integration.

86. ADASS has found that 82% of councils are only providing care to those whose needs are assessed as significant or higher. The Permanent Secretary at the Department of Health told us that the settlement was intended to "hold the position steady" until a new funding system for social care was developed. The tightening of eligibility criteria demonstrates that the settlement is not sufficient to achieve this.

Integration of health and social care

87. The Committee welcomed the higher priority which Government accorded to the greater integration of health and social care following the report of the NHS Future Forum in 2011. We believe this approach is the only realistic option which is capable of delivering service change on the scale required to respond to the Nicholson Challenge. We were therefore keen to assess the progress which has been made with the delivery of the objectives which the Government embraced during 2011.

88. During our previous inquiry, the LGA and ADASS told us that relationships between the two sectors was improving. This time, ADASS said:

[...] the maturing relationship [...] has seen integrated commissioning and existence of joint teams becoming common-place and the development of a shared, integrated outcomes framework binding the focus of health, public health and councils together. The attention upon the "patient pathway" and the mix of the health model of treatment alongside the social model of care has created an environment in which the inter-dependencies between two different cultures / organisations are now understood and evolving.[100]

89. On the other hand, the Audit Commission told us that their "analysis of adult social services efficiencies in 2009-10, and those planned for 2010-11, shows that integration and working more closely with the NHS was one of the least common ways of achieving savings".[101]

90. We asked the Secretary of State what mechanisms or incentives were in place to encourage integration and co-operation. He told us:

The NHS financial support to local authorities is a direct incentive to [join up]. It is focused on trying to deliver that kind of joint preventative approach. We make it very clear and [...] the Bill [...] makes it clear that we are not only sustaining the legal mechanisms by which local authorities with social care responsibilities can go down the route of pooled budgets or joint commissioning. We are creating in the legislation a statutory duty to promote integrated care between health and social care which was not previously there. We are creating a statutory incentive and we have a financial incentive.[102]

91. The Secretary of State did caution, however, that the two distinct funding systems limited the ability to integrate services:

Yes, we can get joint commissioning and pooled budgets, but we are not in a position where we can ignore the simple fact that they are separately funded. One is local authority funded, subject to a means test, and the other is NHS funded, not subject to any means test and free. The management of bringing those things together is inevitably going to be a co-ordination mechanism rather than a simple integration.[103]

92. Councillor Rogers of the LGG and Jo Webber of the NHS Confederation both argued that Health and Wellbeing Boards could have a key role to play in enhancing integration.[104] As Jo Webber told us, it is the only mechanism available to do this:

They will be very good if the joint strategic needs assessment works across the whole of the local community and that is the basis of some very joinedup planning. When you look at the reforms, there is not anywhere else locally where that planning is going to take place. It has to take place at the Health and Wellbeing Board level.[105]

93. Mike Farrar warned that there needed to be greater common understanding of what integration means:

The key thing in the short term is that there has been a rally round the phrase "integration", but in operationalising the nature of integration many people out in the system who are critical to whether we get these benefits have very different understandings and expectations of what that means in practice. It would be incredibly useful, while the Bill is still progressing, if we are going to have a legal duty around it, to have a degree of clarity about the expectation and try and get people on the same hymn sheet.[106]

94. A January 2012 joint report by the King's Fund and the Nuffield Trust, on the integration of health and social care, called on the Department of Health and the NHS Commissioning Board to "develop a consistent and compelling narrative that puts well-co-ordinated care for people with complex needs at the heart of what is required of local NHS and social care organisations" and to set "a clear, ambitious and measurable goal linked to the individual's experiences of integrated care that must be delivered by a defined date".[107]

95. Although the Committee welcomes the continuing interest and support for the priority accorded by the NHS Future Forum to greater service integration, it found precious little evidence of the urgency which it believes this issue demands—on both quality and efficiency grounds. It is a question to which the Committee will return in its Report on Social Care. In the meantime it calls on the Government and local authorities to set out how they intend to translate this aspiration for greater service integration into the reality of patient experience.

INVESTMENT OF NHS FUNDS IN SOCIAL CARE

96. In the Spending Review the Government did provide that there would be some funding from the NHS budget for use on social care. We said in our previous report that this money ought to be distributed with the primary aim of developing a better overall interaction between health and social care rather than simply spent on specific services, and this remains our view.[108] In its response to our previous Report, the Government said:

The Operating Framework specifically requires that PCTs will need to work together with local authorities to agree jointly on appropriate areas for social care investment and the outcomes expected from this investment. The Department of Health would expect these decisions to take into account the Joint Strategic Needs Assessment (JSNA) for their local population, and the existing commissioning plans for both health and social care. This is specifically to ensure that this funding is not used in isolation from the other plans for health and social care services in any locality to ensure that the funding provides the greatest additional value [...] PCTs should work together with local authorities to achieve these outcomes in a transparent and efficient manner, with local authorities keeping PCTs informed of progress using appropriate local mechanisms.[109]

The Department also told us that "This represents an important mechanism for encouraging PCTs and local authorities to work outside of traditional silos, and to collaborate in order to achieve maximum impact for their investment".[110]

97. The Audit Commission suggested that how well the money was being used depended largely on pre-existing relationships:

It is too early for robust evidence on how the additional funding is being used. The experience and views of our local auditors is that areas with a strong history of partnership working are collaborating on how best to use the funding to benefit the whole system. Where relationships are less strong, it seems that agreeing shared priorities and allocating funding has been less smooth.[111]

98. ADASS told us: "The recent transfer of £648m from Primary Care Trusts (PCTs) to councils (2011-12) is seen as a positive move in this shared understanding, and the ADASS 2011 Budget Survey affirmed that this allocation has been largely transferred across, of which 24% is to be deployed to avoid cuts to services, 10% to cover demographic pressures, 9% to spend on additional services, and 57% yet to be decided."[112] On that undecided 57%, the Local Government Group said:

Where those decisions are still to be made our anecdotal evidence is that this illustrates the, at times, difficult discussions on whether the money should be used as a substitute for services, for expanding existing services, or for meeting NHS demand for 100% additionality.[113]

99. On 24 August 2011 a letter was sent to all Directors of Finance at PCTs from David Behan (Director General, Social Care, Local Government and Care Partnerships, Department of Health) and David Flory (Deputy NHS Chief Executive) to establish how this year's allocation of £648m is being spent, under seven broad categories. The Secretary of State told us:

It is interesting, looking at the data we have about the structure of the transfer from the NHS to support social care of £648 million in this financial year, for which the data has been returned to us about how this money is to be used, that nearly £116 million is for maintaining eligibility criteria, so there is an issue in terms of that. When you begin to look at all the other things that are being done, it is about community equipment and adaptation, £32 million, £28 million plus for telecare—I was mentioning those opportunities—integrated crisis and rapid response services are £50 million, and both in South Birmingham and Kirklees, where I have been, that makes an enormous difference. It is free for those who are getting access to that service but it is doing an enormous amount to establish people in a preventative way rather than simply letting them fall into care need and then providing them with an expensive package over a long period of time. There is £117 million for reablement services, £50 million plus for early supported hospital discharge schemes, and bedbased intermediate care services at £61 million. There is a range of different responses which are meshing the NHS and social care together.[114]

100. Una O'Brien argued that the decision to passport a sum of money for social care via the NHS was encouraging new initiatives:

You are seeing in that something that is new, the forcing of that conversation by the availability of a pot of money coming through the NHS side, the bringing of local authority social services and health together where there is a common interest around the needs of their patients. While you might say the mechanisms are not being forced from the centre, we are certainly enabling, supporting and driving that "jointness". For example, the operating framework goes out to all directors of social services and chief executives of local authorities, bringing people into a wider community of responsibility for addressing people's needs so that we are not, if you like, limited by the route down which money flows. Obviously, we are bound by the legislative framework for social care, and what we are trying do is work within that as constructively as we possibly can.[115]

101. Early reports from the Health Service are that the transfer of money from the NHS to be spent on social care has been effective. That effectiveness may be because there was a very straightforward control mechanism: the money had to be spent by agreement. We do not underestimate the importance of this transfer, but the fact remains that it represents just 1% of annual funding for the NHS. Clearly there is scope to extend transfers of this kind.

102. In evidence to our inquiry on social care, Andrew Dilnot and his colleagues from the Commission on Funding of Care and Support pointed out that of the almost £150 billion spent per year on service and welfare/disability benefits for elderly people, only £8 billion is spent on social care services and around £50 billion by the NHS. A rebalancing of that expenditure, for example, could bring substantial benefits for quality of service, quality of life and cost-effectiveness. The Committee believes that, as a matter of urgency, the Department of Health should investigate the practicalities of greater passporting of NHS funding to social care.

29 Q 120 Back

30 Q 3 (Professor Appleby). The payment by results tariff is the main hospital payment system in England, accounting for about 60 per cent of acute hospital income. Providers are paid a national price (tariff) for a given unit of activity, multiplied by the number of patients treated. The Government is planning to achieve 40% of its savings through reductions in the tariffs paid. In its previous Report the Committee expressed concern about the use of the tariff to drive a significant proportion of savings and noted that there was a risk that reducing tariffs might lead hospitals to cease to provide services, or subsidise unprofitable lines with profitable ones, without actually improving efficiency (para 70-71). See p13 of the National Audit Office briefing for further information on the tariff. Back

31 Monitor, Review of Foundation Trusts' annual plans (2011-12), 4 August 2011, p4. Back

32 Specifically, the 'downside' case (the second, and more pessimistic of Monitor's pressure and risk scenarios; as opposed to the 'assessor' case which is in line with Department of Health estimates) had been revised upwards from an in-year efficiency requirement of 4.5% in 2011-12 to 5.3%. See correspondence from Stephen Hay, Chief Operating Officer of Monitor to (among others) foundation trusts and foundation trust applicants, 27 April 2011, available at http://www.monitor-nhsft.gov.uk/home/information-nhs-foundation-trusts/correspondence-foundation-trusts-0. Back

33 King's Fund, How is the NHS Performing? Quarterly monitoring report, July 2011. Back

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