UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 651-iii

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

HEALTH Committee

PUBLIC EXPENDITURE

TUESDAY 13 November 2012

Rt Hon Jeremy Hunt MP, Una O’Brien CB, Richard Douglas CB and Shaun Gallagher

Evidence heard in Public Questions 214 - 324

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Oral Evidence

Taken before the Health Committee

on Tuesday 13 November 2012

Members present:

Mr Stephen Dorrell (Chair)

Rosie Cooper

Andrew George

Barbara Keeley

Grahame M. Morris

David Tredinnick

Valerie Vaz

Dr Sarah Wollaston

________________

Examination of Witnesses

Witnesses: Rt Hon Jeremy Hunt MP, Secretary of State for Health, Una O’Brien CB, Permanent Secretary, Department of Health, Richard Douglas CB, Director General of Policy, Strategy and Finance, Department of Health, and Shaun Gallagher, Acting Director General for Social Care, Local Government and Care Partnerships, Department of Health, gave evidence.

Q214 Chair: Secretary of State, welcome to your first visit to the Health Committee. I think all of your colleagues have been before, but you are welcome on your first visit.

The main burden of what we want to talk about this afternoon, as you know, is public expenditure and health and social care expenditure. Before we get into that, we would like if we may to spend, hopefully, no more than 10 minutes on the correspondence we have had on the inquiries that have been set up into how it came about that Jimmy Savile was put in a position in several NHS hospitals that, in retrospect, he clearly should not have been put in.

We have exchanged correspondence. You have made it clear that Kate Lampard is going to review these arrangements. The Committee continues to be of the view that it is surprising to us, given the sensitivity of these issues, that you feel this is appropriately handled by somebody who is very much an inside voice within the health service rather than somebody coming and looking at NHS practice and procedures from the outside and able to offer an outsider’s view on how it happened and what needs to be done to make certain that it does not happen again.

Mr Hunt: First of all, it is a pleasure to be at my first appearance with the Committee and I look forward to working with all of you over the years ahead.

On that particular issue, thank you, Mr Chairman, for your correspondence and the discussions we have had about that issue. I completely share the Committee’s view that there are some very important issues for the NHS to get to the bottom of. In my mind, the real issue is whether NHS procedures were tight enough, whether they were broken or whether they did not exist when they should have existed, and whether Jimmy Savile had access that he should not have had on the basis of either his celebrity or his fundraising importance to the institutions concerned.

We acted very quickly when the issue originally arose. Initially, it was an issue for three separate hospitals and the Department itself because we oversaw Broadmoor at that time. We wanted to make sure that we had an overall view and that the hospitals were being consistent, and to give the hospitals some guidance and support as to the co-operation they needed to extend to the police. Your correspondence was very helpful in that matter.

We also need to make sure that any broader NHS issues are addressed. I am satisfied that Kate Lampard is the right person. She is deputy chair of the Financial Services Ombudsman. She has a lot of experience outside the NHS. It is one of those roles where it is beneficial to have someone who knows how things work both from the outside and the inside.

The balance I had to make was whether it was going to impede things to have another independent inquiry-I think there are about 11 going on across different parts of the public sector at the moment-or whether the best thing to do was to widen her remit, ask her to see whether there were things that the NHS could learn as a corporate body, what those systemic lessons are, but give her the chance to ask for more help should she need it.

Chair: Barbara Keeley is particularly interested in this matter.

Q215 Barbara Keeley: I have to say that I don’t agree with you, from what you have said and written to us, that the person you have appointed is an appropriate person to chair the inquiry. The BBC inquiry into culture issues around Savile has appointed Dame Janet Smith, a barrister of 20 years’ experience in personal injury and clinical negligence and a former High Court judge. In 2005, there was the Kerr/Haslam inquiry into the concerns about two doctors and indecent assaults on patients, and that included culture issues, too-the same sort of thing. It came up with some recommendations around undue power and unclear accountability, among other things. This is very similar, but it is probably more broad-ranging than the 2005 inquiry. The 2005 inquiry appointed Nigel Pleming QC, a top-flight barrister and a deputy judge of the High Court. Those are two other inquiries.

This inquiry could be quite wide-ranging; it involves a number of hospitals and goes back over a long period of time, yet you have appointed somebody who you said in your letter to us is a barrister, but I understand that she has not practised since 1997 and is not currently a barrister. Either she is a barrister or she is something else, and I think we should be clear about that. She appears not to be a barrister and not to have the experience. I note that her experience area is insolvency, company law and property, which might be useful as a non-exec of an SHA, which she has been, but it is definitely not the arena she is in here. I note that in recent years she has held a number of NHS appointments. She appeared before this Committee last year as vice-chair of SHAs for the south of England.

We seem to have somebody who is, at one point, a barrister, but she is not, and at other points an NHS insider. I don’t see how you can have these reviews and have somebody that you are asking to be independent when she isn’t independent at all. She appeared before this Committee in that role. She has been a non-exec director of a health authority and the chair of a community care trust and a strategic health authority. She is the ultimate NHS insider. If the BBC had done this with their inquiry, there would have been outrage. I have to say that the first point is that I do not think she is the right person.

Mr Hunt: Okay, you are questioning her credentials. I am afraid I don’t agree with you. I think she is a highly able person, who will answer the questions that need to be answered. She has to do some things that are not necessary for the people conducting the BBC inquiry. She has to give advice and support to three hospitals in the way that they co-operate and manage their own investigations. For that, it is helpful to have someone who understands how the NHS works. But my-

Q216 Barbara Keeley: She could be a useful panel member. That is worth thinking about, is it not?

Mr Hunt: If I could just finish, my real concern is that setting up another inquiry at this stage is going to slow down the process of getting to the bottom of what went wrong and what lessons the NHS needs to learn. The judgment that I have to make is what is going to be the quickest way of getting to the right answer. I believe that Kate Lampard will help us get to that answer quickly and it will be the right one.

Q217 Barbara Keeley: Clearly, she could be a resource, but I still question whether she is the appropriate person to offer the independence. You say in your letter that you expect to receive her independent advice. She is an insider in that she has worked for the NHS and been a consultant. You quote that she has the support of an independent firm, of which she is an associate. There is no independence in these arrangements. I come back to the view that there would have been outrage if the BBC had appointed a BBC insider, were they associates, non-ex directors or anybody else. She is far too close to the colleagues she is going to have to be working with to offer the independence that you are seeking from her.

Mr Hunt: I am afraid that where we disagree is that I do not see why she would have any motive whatsoever other than to uncover the absolute truth of what went wrong inside the NHS. I do have confidence that she will do that. She is a very able person and her knowledge of how the NHS works will help her. But the proof of the pudding is to see the report, and you will see when we get the report that we get very high quality advice and we get it quickly.

Q218 Barbara Keeley: Do you accept at all the difficulty about her independence, given the number of roles she has had? She came here to this Committee as an NHS person to talk to us about workforce planning. She is not independent. If she can come here and be an inside-the-NHS voice to talk about workforce planning, she is not independent of the NHS. She has had this range of appointments in the NHS; that is not independence.

Mr Hunt: I do not accept that she is not able to give us a wholly independent view as to what went wrong and what we need to do, if anything, to put it right in terms of NHS procedures. I think that her experience of the NHS will help her get to that answer more quickly, but we will publish the advice that she gives us, and this Committee will have a chance to form its own independent view as to whether that advice is good advice or not.

Q219 Valerie Vaz: I want to be a bit helpful. If you are going to have someone internal, I don’t think you should call it an independent review. I was at the Treasury Solicitors’ Department. There is an inquiry section and you have panel counsel. The BBC have picked Diana Rose and Dame Janet Smith, who are both independent. The point is what comes out of it, and that is the confidence you can have in the report. You should not call it an independent report; you should call it an internal report. If you want an independent report, you really need to look outside the Department. I would suggest that you go to panel counsel and get someone to do a very quick inquiry, if that is what you want. It is not speed; it is the confidence that comes out of it.

Mr Hunt: I am grateful to you for the thrust of your question. Speed is important because I do want to get to the bottom of what has happened quickly. There is a risk, when something like this happens, that the whole system gets ground down in a lot of different inquiries that are going on at the same time. I want the NHS to learn quickly what lessons there are and what needs to change.

Let me reassure you, and indeed the whole Committee, that were anything to come to light where either Kate Lampard or I thought that she had a conflict of interest in the judgments that she was making, then I would of course take that very seriously, and I would reflect on whether she needed support or whether someone else needed to do that inquiry. I do not believe that is the case at the moment, but I understand and hear what the Committee is saying. I would reflect very carefully if you were to present evidence of a conflict of interest, or if I were to uncover any evidence, or if Kate Lampard were to feel that there was such evidence.

Q220 Barbara Keeley: It is not fair to suggest that I am questioning her motives or that I am saying there is a conflict of interest. I am not saying that. What I am saying is that somebody in her position, with her experience and closeness to the NHS, cannot be considered as anything but an insider. I think there is an important issue about language.

You also said in your letter that you want to ensure that all trusts assure themselves that their procedures in relation to vulnerable people are robust. They cannot be-they cannot be-because we have various accusations dating from the time when Jimmy Savile was given a totally inappropriate role at Broadmoor in the taskforce in the ’80s. He was able to come and go at will, and there are various claims of molesting patients, through to some claims of rape. Those are not situations where anybody could say that procedures were robust. That is the situation. It is important that the language questions that and does not say, "What we are here to do is assure ourselves that things are okay and robust", because that is the very thing of a cover-up, isn’t it? The very thing of a cover-up is, "Let’s assure ourselves that what we’ve got is robust." It can’t have been.

Mr Hunt: The question is what went wrong-not whether something went wrong. The question is whether what went wrong was that the right procedures were in place but were not followed or whether the right procedures were not in place. Then the next question is whether, in the time that has elapsed since these horrific alleged incidents happened, the right procedures have now been put in place, because a lot of things have changed since then; for example, the introduction of CRB checks and so on.

What we are asking Kate Lampard to assess for us is whether, in her view, looking systemically across the NHS, the right procedures are now in place or whether anything needs to change now. That is going to be a very important piece of work. I want to stress to the Committee that she does have my full confidence in her ability to do that work. I do not think that it is a disadvantage-in fact I think it is an advantage-for her to understand how the NHS works. But, were the Committee or anyone to present me with evidence that there is a conflict of interest whereby she is not able to form that judgment, then, obviously, I will take it very seriously.

Q221 Chair: I think, if we may, we will move on from that subject, because the main thing we want to talk about today is the public expenditure recent record and outlook, both in the NHS and in social care. As you know, Sir David Nicholson and David Flory were here this morning. I would like to begin the questioning with the same point we began on this morning, which is the £5.8 billion that the Department and the NHS is saying is the scored progress against the £15 billion to £20 billion target in the financial year ended in April this year, 2011-12. We cross-questioned Sir David about the methodology: where did this £5.8 billion come from, how was it measured, what did it represent, how sustainable is it and how much of it is one-off? I suppose the most surprising figure he gave us this morning was when he said that £850 million of the £5.8 billion is the amount that could be attributed to public sector pay constraint and that the rest of it, therefore, was attributable to other things.

I have to say that that is not the figure we were given by Mike Farrar of the NHS Confederation. His estimate was that roughly half, or £2.8 billion of the £5.8 billion, was attributable to direct action on pay. I wonder what your view is. Who is right? Is it Sir David Nicholson or Mike Farrar, or have we misunderstood what we have been told by one or other of those two witnesses?

Mr Hunt: Let me start and then hand over to Richard Douglas. I am not sure that there is necessarily as much of a contradiction between those two figures as you might think, because there is the direct impact of the pay freeze, which was a centrally taken decision, but there is also other action on pay that may happen at a local level, which is also incredibly important, such as reductions in sick pay or the structures around sick pay and entitlements to additional incremental increases in pay and linking those more to performance than has previously been the case. Richard Douglas may be able to give more detail on this, but my understanding is that pay is an issue that is being attacked from a local direction as well as from a central one, and that may account for some of the gap.

Q222 Chair: I understand. I am interested in what Richard Douglas has to say about it. There is a difference, is there not, between holding down pay rates-the activity that Sir David said was £850 million-worth-and avoiding bank nurses, and better management of sick pay and grade drift, which together only came to £1.5 billion in Sir David’s number, which is still a long way short of Mike Farrar’s number?

Richard Douglas: I would, as you would expect, agree with David Nicholson’s number. The £1.4 billion we can track back and explain, as David did this morning. He said that the £850 million is on the headline pay settlement, about £240 million is on reduced agency costs, £160 million is on reduced sickness and about £150 million on lower levels of drift. If I put that together, it comes to about 1.4, which is roughly half the number that Mike gave. Frankly, I would have to speak to Mike to understand where his 2.8 came from, because it is not, in my view, a credible number based purely on pay. All the numbers I have talked about you can track back in some way to the accounts and see what has happened to levels of pay. The 850 to 1.4 I think is absolutely fine. I don’t know where the 2.8 comes from.

Q223 Chair: There is not a lot of point pursuing that here. We asked Sir David to write to us setting out the methodology that got him to £5.8 billion, because, if only 1.4 is attributable to those various elements of pay, bearing in mind that that is 70% of the budget, it does rather beg the question as to where the rest of the £5.8 billion comes from, first of all, to understand what changes that has led to in terms of service delivery and, even more important, how sustainable it is. Can another £5 billion be built on top of that for next year or are we starting again and needing to score most of it all over again?

Richard Douglas: Perhaps I could say something about the other elements. If you look at the efficiency we put in the tariff of 4% on £60 billion of provider spend, it delivers, roughly, £2.4 billion of the £5.8-

Q224 Chair: Can I interrupt you, because changing the tariff doesn’t change anything. All it does is change a transfer payment between one bit of the NHS and another.

Richard Douglas: But you then see, in terms of how a trust performs, that they deliver the level of service and the quality of service we expect from that reduced level of income. Within that 2.4 there is a productivity element.

Q225 Chair: But that is what we need to understand, isn’t it? How is that productivity generated? What does it mean? Does it mean shorter consultation times? Does it mean lower costs in the way patients are treated? How is it made up?

Richard Douglas: Overall, it means that we are doing more activity for, broadly, the same amount of money, so the activity that is going through the system is increasing at the same time as we are holding spend at, broadly, flat real terms. That is reflected in the way that trusts are operating.

Chair: The further evidence that Sir David has undertaken to send us explaining how this £5.8 billion is produced will come from him, but hopefully, from the Department as well, so that we understand what those numbers really mean in terms of sustainable change in the care model.

Q226 Andrew George: I want to move on to the savings that you anticipate can be made in the service, particularly with regard to redesign and reconfigurations in the service. Of course all MPs agree at the strategic level that we are in favour of redesign and reconfiguration unless it affects the hospital in our constituency, which is fair enough. In relation to that, it seems that the Department believes that the benefit from those redesigns is something that is going to occur towards the end of the spending review period rather than being achieved early in this process. Where do you think we are and what prospects do you think there are for concentrations, further specialisations and service redesigns of the type that have been mooted on many occasions before?

Mr Hunt: You are talking to someone who, before he was Health Secretary, led the campaign in his own constituency to stop the closure of A and E at the Royal Surrey County Hospital, so I am aware of what it feels like to be on both sides of the fence, if I can put it that way.

Chair: You are now on the other side of the fence.

Valerie Vaz: Did you stop it?

Mr Hunt: I did. It was a successful campaign. Actually I am very pleased that I was involved in that campaign because it has given me a lot of understanding of how these issues can become so inflamed at a local level. I hope that the NHS in future reconfigurations will do things very differently from the way they tried to approach that particular reconfiguration.

The main thing that was wrong with that, if my colleagues don’t mind me saying this-because presumably you were in the Department at the time-was that there was a strong sense from local people that, basically, McKinsey were called in, given a blank sheet of paper, told to save an amount of money, and that involved the closure of our local A and E. Naturally, people did not like that very much. That is why my predecessor introduced the four tests as an absolutely critical part of the approval of any reconfigurations. The main point of the four tests is to be able to demonstrate that any changes are locally led, locally supported- critically-and in the interests of local patients.

Now that I am on the other side of the fence let me say first that, as I am sure Sir David Nicholson would have told you this morning, reconfigurations or improved service delivery does account for about 20% of planned QIPP savings, so it is a very important chunk. I recognise that there are very good clinical reasons why, in certain cases, centralisation and specialisation have huge benefits. Reducing the number of stroke units in London, I think from 32 to eight, and reducing the mortality rate by three quarters, was a very powerful example of how this can work. It has not been difficult to persuade Londoners of the benefit of that, although no A and Es had to be closed as a result, so perhaps it was not quite such an explosive thing as some of the things that are now on the table.

My approach to this will be, first of all, that they do need to be locally led. I want to see, particularly, that local GPs support any changes that are being implemented. I will want to be satisfied that there is clear evidence of clinical benefit from the changes, and I will take independent advice across all of those areas before I take any decisions.

Q227 Andrew George: Could I point out to you that there is a countervailing force as well, in that you have increasing competition in the provision of services, and the risk of fragmentation? As you are attempting to achieve efficiencies through redesign, you also have a plethora of new providers. Do you think that risk of fragmentation may contradict the attempts to try and rationalise?

Mr Hunt: I don’t, because my understanding of the way that the clinical commissioning groups will operate when they come into force from next April, although they are already in shadow form at the moment, is that the first thing that those GP-led groups are going to want to do is to integrate services at a local level. That will be their priority because they can see the immediate benefits to their own patients, and most of the people who run CCGs are practising GPs. So I think there will be a big push towards integration. In deciding the best integrated pathway, it is right that they should not just have to choose from existing providers and they should look, and be able to look, at voluntary organisations or indeed the independent sector if they are able to offer a better deal.

Q228 Andrew George: You kindly wrote to me after a question I asked you on the issue of the risk of cherry-picking in the NHS. I would like to pursue that point a little further. You clarified very helpfully that the tariff price would be varied if the provider was only taking the easiest patients, leaving the NHS trusts, for example, with more complex cases. The tariff would reflect that. Could you reassure me that your Department is monitoring the application of a variable tariff price that properly reflects the challenges that hospitals taking the more complex patients are facing going forward?

Mr Hunt: I can. I will maybe ask Richard if he knows more detail about that. Basically, the decision we took was that the best way to prevent cherry-picking was going to be through the tariff rather than through any other means, which is why we decided to go down that route. I don’t know if you have any further details, Richard.

Richard Douglas: The work on the tariff is currently within the Department, but it is going over to the Commissioning Board under the new system. The Commissioning Board’s role will be to develop a tariff that delivers exactly the results you are looking for. That will be something that the Commissioning Boards do. I couldn’t tell you where that actually is at the moment.

Q229 Andrew George: This development is happening now.

Richard Douglas: Yes.

Q230 Andrew George: You are seeking to achieve savings now. It appears, certainly in my own constituency and across Cornwall, that private sector providers are already making very significant strides in picking up-I would even describe it as "creaming off"-some of the easiest work. I wondered to what extent you know in your Department that where they are doing the easy work, they are being paid at a rate that reflects the fact that the cases they are prepared to take on are significantly easier than those that appear to be going to the NHS trusts.

Richard Douglas: We would have to accept that the way we have structured the tariff over the last six to seven years has not perfectly reflected the variable costs of different activities. We try to develop a system where we price based on the resources that any organisation needs to spend to deliver a particular activity. It has not been sensitive enough in every area, so I could not say precisely at the moment that it would do everything we want because it probably would not, but it is being developed in that direction.

Q231 Andrew George: The intention is that it will be sufficiently sensitive from April next year-or before then?

Richard Douglas: The tariff itself will not change from where it is now before April because it is based on information we have gathered in the past. I could not give you the precise date. I would have to come back to you with a date-I am sorry.

Q232 Chair: On a question of fact, you said that it is the Commissioning Board setting the new tariff. I thought that was a function of Monitor.

Richard Douglas: The Commissioning Board will develop the structure of the tariff, so it splits, essentially, into two parts. One is the structure. How you devise a system to deliver the things you want will be a Commissioning Board responsibility. What Monitor will then do is attach a price to that, but there is that separation between the two elements. If you wanted a year of care or something like that, it would be a Commissioning Board decision, not a Monitor decision. Monitor attaches the price.

Q233 Andrew George: This is slightly adjacent to the questions I was asking, but it relates to transparency in how NHS resources are being spent. The current system, where money is allocated under a resource-allocation formula to PCTs, is extremely complex but a relatively transparent method. Going forward under the CCGs, it is going to be less transparent. Anyone concerned with patients in a local health community will want to know and be reassured that they are getting their fair share of the cake. How will you go about ensuring that local health communities are transparent?

Richard Douglas: It will be as transparent as the system we have now. The Commissioning Board will do the allocation formula, but it will still be based on the same principles of capitation that we have now. They will probably see the evidence base for how the formula was done, and they will put all the same information into the public domain that the Department has done.

Q234 Andrew George: So the NHS Commissioning Board will be able to track the services they commission from York in any local health community and allocate that commissioned work to the budget that is available for that area.

Richard Douglas: Hopefully, they will improve what we have done, but the intention is that they will follow the same approach for allocation to CCGs as we have done for PCTs. It will be an evidence-based formula, based on the best evidence of what resources an organisation needs for its burden of illness. It will then publish all that information. I would expect them to use the same sort of research base that we have used.

Q235 David Tredinnick: I am staying on the theme of efficiency, Secretary of State, but may I say, as this is the first time you have come before the Committee, that if you do as good a job as Health Secretary as you did as Olympics Minister, we should be in safe hands?

Mr Hunt: It is like having the Olympics every week.

Q236 Valerie Vaz: You inherited that. It was all done beforehand, wasn’t it?

Mr Hunt: I inherited quite a lot with the Olympics as well.

Q237 David Tredinnick: I think you deserve that little plug for all that amazing work; we all enjoyed it very much. Is the burden of making efficiency savings at the moment falling disproportionately on the secondary sector?

Mr Hunt: I don’t believe it is.

Q238 David Tredinnick: I will help you with some figures. According to your figures, £2.8 billion of the £5.8 billion QIPP savings in 2011-12, which is nearly 50%-actually it is 49%-were made in the acute sector, while £0.4 billion, which is 7%, were found from the primary sector. Is the burden of making efficiency savings falling disproportionately on the secondary sector? We did look at that this morning, but I would just like your view, please.

Mr Hunt: I recognise that the secondary sector is playing a very important role in those savings. The only point I would make is that all the evidence I have been getting in my relatively short time doing this job is about the importance of investing more in primary care. One of the changes that we will see with the GP-led CCGs is more investment in primary care-effectively to be better at keeping people out of hospital and, in particular, to reduce unplanned A and E admissions. I would expect efficiencies to be found throughout the system and I do not think it is something that should only be borne by one sector.

David Tredinnick: I have a lot of important questions here. I will just give you a trailer and say that later on I am going to ask you about other ways of saving by looking at what the public are going to ask for through Healthwatch and things like that, and, as chair of the Integrated Health Group, in terms of complementary medicines.

Chair: But before that, Rosie.

Q239 Rosie Cooper: Welcome. If I might, I will ask you some questions about CCG allocations and planned changes in the formula. I understand you posted some detail on your website and it was pulled rather quickly. Could you tell us what is wrong with the current formula, what the key changes are and whether you are going to consult in any way on those changes?

Mr Hunt: I defer to Richard on that.

Richard Douglas: On the formula we run for CCGs, I was not aware of anything going on the web and being pulled; I apologise that I cannot answer that one. The difference, essentially, that the Commissioning Boards will have to make is that CCGs will do a slightly narrower sub-set of commissioning as opposed to PCTs; they will not be doing the specialised commissioning, so there will have to be some changes to reflect the fact that some money will be pulled out. Similarly, they have to make changes to reflect the fact that the public health money-health improvement money and health protection money-now goes to Public Health England. There are some technical things that people will have to do because you are commissioning on a different basis. I expect the Commissioning Boards, as I said earlier, to make public their proposals on how they would plan to allocate resources, and to take views on that, but it will be a matter for the Commissioning Boards themselves, not for the Department or the Secretary of State.

Q240 Rosie Cooper: In that case, are you saying that you will not deal with questions of deprivation? That is for the Commissioning Board.

Richard Douglas: It is for the Commissioning Board based on the objectives that the Secretary of State and the Government have set them, so the mandate will develop a formula to deliver those objectives.

Q241 Rosie Cooper: If that is going to be the Commissioning Board, then let me come back to the Department of Health in a slightly different way: how will local people be able to know that they are getting value for money, whatever it is, if there is no real standard process for the collection of GP information to allow the public to understand how much funding is being provided to the practice to provide core services? Using FOI, I have currently tried to get that information out from a number of sources and everybody serves it up in different ways. I have been absolutely shocked at some of the information. For example, GP practices do not count how many nurses they have. That information is not there-the PCTs did not collect it-so when you are dealing with under-doctored areas, how do you know what you are buying? How do you know what you have got? All of that is detail. My big question for you as a Department, and to the Secretary of State, is how would you make sure that there is real transparency-that people out there know and can work out the money that is being provided and the services that are being bought? How do I find out if my CCG is really doing it?

Mr Hunt: Can I start with that? I don’t know if others then want to say something on it, because it is an incredibly important question. The heart of the success of these reforms will be whether we manage to replace a top-down way of driving change through the system with proper drivers for improvement that come from the grass roots up. What we need to do to make that happen is to make sure that your constituents and my constituents are able, very easily, to find out how healthcare in their area shapes up, what it is good at and what it is not good at. That will be on the basis of how good their local hospitals are and how well they are performing, but also how well their CCG is performing relative to other CCGs, and how well their local authority area, which is going to be the bigger area for public health, is performing.

The key metric on this will be comparison of equivalent demographics. There is no point in comparing Surrey, where I live, to inner-city Liverpool, because you have completely different demographics. What you need to do is to compare areas with similar demographics to see who is doing better. What we will be doing over the next couple of years is the biggest exercise that any country has ever undertaken with respect to healthcare outcomes, so the measures that we were announcing this morning in the mandate will be something that you will be able to relate down, as far as we possibly can, to your local area. We are going to make it an outcomes-based thing. The formula for allocating resources will be done independently at arm’s length from Ministers and you will be able to scrutinise whether you think that process is good, but it will not be decided by Ministers. Then the objective is that you will be able to put in your postcode and see on behalf of your constituents that your CCG is not performing well on cancer survival but it may be doing extremely well on dementia, whatever the different scores are.

Q242 Rosie Cooper: I hear what you are saying, Secretary of State, and I can see the sense of it, but I still do not think it answers the point. You talked about outcomes. If I interrogate my CCG, I might be getting a minimal increase or decrease for a vast amount of money, but there will be some other part of the system that is suffering because of it. I pay my taxes and I want to get some information from my CCG and/or the cluster, or whatever bits of the outposts are left. How transparent is it? Are you going to ask them to collect the same information? In trying to understand bits of this, I have had databases going every which way but loose.

For example, tying those two questions together, if you do your resource allocation and weight it for age and demographics, as opposed to deprivation and other things that have been in there, central Lancs is likely to lose £40 million. My area, which includes Skelmersdale-which is incredibly under-doctored and incredibly in need of extra resources-looks to be £10 million light, but I cannot get that information properly. I just need to understand and the doctors there need to understand. You cannot have one practice doing one thing and another doing something completely different. That is under current resources. I do not want that to go into the future with people trying to make sense of it. This morning I accused somebody of pirouetting on the top of a pin. That is what the general public feels. Everybody starts talking about things at the margins. Just count it the same way and we will all understand.

Una O’Brien: Let me pick up one dimension of your request, first of all. Can you reliably say that localities will get fair shares based on a transparent formula in the new system? The answer to that question is yes. The Committee will draw its own judgment, but we have a reasonably good record in the Department of Health on the way we allocate the money historically. The NAO did a comparative study between health education and CLG last year and found that the Department of Health’s record on transparency, on how the formula was developed by experts and tested the scope of people to feed back, was fair and open.

Our expectation of the Commissioning Board is that we will at least secure that and they will take it further. Your question was, "Will I be able to see from my constituency or my CCG if they have got their fair shares based on need?" Yes, they will.

The second part of your question, which the Secretary of State was referring to, is at the other end of it: when the money has been spent, comparing like for like, can you say that that money was spent well or not so well if you compared 20 similar areas of the country? Our very clear intention, and we have had a very clear steer from the Secretary of State, is that the Department, in supporting and challenging the Commissioning Board, will be able within a reasonable amount of time-if we can do it within two years, we will, if we have the flow of data-to give you that comparative information. You are not only going to be able to compare providers but you are also going to be able to compare the quality of commissioning and whether you are getting value for money and value for your constituents. Can we get value for money as taxpayers? Can we see that? That is definitely our intention.

Chair: One more, Rosie.

Q243 Rosie Cooper: I can see and I absolutely understand outcomes based on the CCG level, but if you want to drive that down, are you going to ask GP practices to collect information in the same way-

Mr Hunt: Yes.

Q244 Rosie Cooper: So that GP practices within CCGs will be judged against each other? That is the really difficult bit.

Una O’Brien: Yes, we are. We already have a lot of data at practice level. What we need to do is to make that more readily accessible so that you can interrogate by practice, by CCG and by local authority on a like-for-like basis.

Q245 Rosie Cooper: And you won’t allow them to hide behind FOI rules about making that transparent.

Una O’Brien: We are going to make comparative data transparent so long as it does not impinge on patient confidentiality. That is what our intention is.

Rosie Cooper: Only patient confidentiality-that will be really good-not GP interests.

Q246 Chair: I am going to call Sarah. You said that there is a lot of information there already, which surprised me a bit. How well moderated, audited or usable is this information, because that is fundamental to delivering what you describe in any kind of reasonable time scale?

Una O’Brien: That is precisely the question we are asking. We certainly have got good population-level information, first and foremost, which is within the arena of what historically has been collected by public health observatories. One area where we will be able to make very rapid progress is making information about the health status of populations in given areas easily accessible. There is work to do to develop the metrics for comparing performance on commissioning. After all, the new CCGs have not even had their first allocations or done their work in the first year yet, but clearly our ambition is to be able to produce, as far as we possibly can, comparative information on a like-for-like basis.

Q247 Rosie Cooper: Forgive me-I will try and be quiet for the rest of the meeting-but what I am trying to get over is this. I am telling you how difficult it is because they do not keep the information in anything like the same order so you cannot compare it. You could have two nurses but they are only working two or three hours a week. You could only have one nurse but they are working 37 hours a week. We need to have the information collected in whole-time equivalence, but each bit will be different. It has to be collected and collated in a way that compares GP practices. You can’t say, "We don’t collect that information", and/or, "That’s nurses. FOI can’t do that." It’s crackers.

Chair: The Secretary of State is going to answer the question.

Mr Hunt: We are going to have a complete transformation in the way that data are collected. If I could reassure the Committee, I have weekly meetings on all the four priority areas that I outlined this morning. The real test for me as a Minister is to make sure that I continue to have those meetings throughout my entire time as a Minister and give it really sustained focus.

In the mortality priority, which is the first one in the mandate, about 80% of my time in these weekly meetings is about establishing how we can get proper and comparable information on outcomes at as local a level as we possibly can. It is so that we can understand what is happening in one CCG compared with another CCG, but also so that we can understand how different consultant teams do in success rates in operations at acute trusts and so on. It is an incredibly important focus of our work because it is so central to making the reforms work and the philosophy behind the reforms, which is that peer pressure is the way we will drive improvement through the system rather than top-down direction.

Q248 Dr Wollaston: Can I follow on from that point because I know that there have been huge problems with variation in GP practice and primary care for many years? In the past, PCTs have known which the failing practices are, but they have had real difficulties addressing that. Are you hoping that putting this information in the public domain will hold those practices’ feet to the flames?

Mr Hunt: Very much so. We are having a lot of very positive feedback. If a CCG under the new structures, which, of course, are generally led by practising GPs, finds that it is falling behind in its key measures, the first thing they want to do is to search out the practices that they know are underperforming and that are letting the side down. We believe that peer pressure will be a far more effective way of getting GP practices that are underperforming to raise their game.

Q249 Dr Wollaston: It is not just peer pressure but putting it in the public domain so that patients can see directly for themselves as well.

Mr Hunt: We will need to see as time goes on the extent to which we are able to publish publicly comparative data on a GP-practice-by-GP-practice basis. I would love to do it if it was easy to do. We think that the new structures will put a lot more pressure on underperforming practices. The reason why I am hesitating a bit, which you will completely understand, is that when you compare, you have to compare like with like. You may have one GP practice that happens to have a lot more cancer patients than another and, therefore, may have less good cancer results than another just because of the demography of the patient list. We are certainly confident that we will be able to make that assessment on a CCG level so that you can have fair comparisons between CCGs. We are confident that we can do it on a hospital and a consultant basis. We need to do more work to establish how much we can do it on a practice level.

Dr Wollaston: Equally, as Rosie pointed out, it is about patients being able to see which practices are investing in services for their patients, like practice nurse time, and which are putting that aside for practice profits. It would be good for people to see that.

Rosie Cooper: It is really important.

Q250 Dr Wollaston: I want to come to the Nicholson challenge. We are repeatedly told that the point about the Nicholson challenge is that it is not a cut but it is about reinvesting that money directly in patient care to improve the service and adapt to its changing needs. Yet what we saw in the last year was that £1 billion of those efficiencies was returned to the Treasury, and only £316 million was carried over. Earlier, I asked about this in the Commons, because it is really important that the public has confidence that every penny of those savings is going to be reinvested in the future of the service, yet that does not appear to have happened fully in either of the last two years. Can you give the Committee reassurance that it will not happen next year and that all those efficiencies will be reinvested in care, particularly areas such as transforming the services?

Mr Hunt: Let me respond and then pass on to Richard. If I may say so, I think you are confusing two different things that are happening. On the one hand we have the Nicholson challenge, which is having to make incredibly important efficiencies. We need to make those efficiencies because, effectively, demand is increasing throughout the NHS at around 4% on a year-on-year basis. That is why we are seeing nearly a million more people going through A and Es every year than we were at the time of the last-

Q251 Dr Wollaston: This is the £20 billion that people are talking about.

Mr Hunt: Yes, but one of the reasons why we need to make those efficiencies is because we have a budget that is increasing by 0.1%.

Q252 Dr Wollaston: We all agree with that.

Mr Hunt: But that is not the same as has happened in the last two years and, indeed, happened for the four years before that, and many, many years before the Nicholson challenge was invented, which is Departments underspending on their budget. That happened in each of the four years before the last two years that you are talking about, when the last Government was in control. There were underspends. We, like all Departments, try and manage our budget to reduce the underspend as much as possible. In fact, the underspend in the first year of this spending round was less than in three of the four previous years, but there was an underspend. So that the context is correctly understood, under the previous Government’s arrangements, all the underspend was returned to the Treasury, and under this Government, we have introduced something called "budget exchange", which means that we do not end up returning all the underspend to the Treasury. I don’t know if Richard wants to add anything to that.

Richard Douglas: I don’t think there is a lot to add. We have this conversation most years at this Committee-most of the 10 years that I have been coming here. We did underspend last year. It was on revenue. It was about 0.8% of our budget. It is a £100 billion budget spent by hundreds of different organisations across the country. If you were to say to me, "Can I guarantee that won’t happen again?", I would say that I absolutely cannot guarantee that. When you can overspend, it is inevitable that you will underspend.

Q253 Dr Wollaston: So why not allow the whole of the amount to roll over into future years, given that we have so many challenges in terms of reconfiguration? Why not pay off some of the PFI debt, for example, if it is such a burden?

Richard Douglas: There are two or three reasons. On the issue of rolling it all forward, to get budget exchange you have to take a cut in your budget in the year, so you have to be absolutely certain about the amount of the underspend. It is not that I would sit there and forecast an underspend of £700 million and the Treasury would say, "You can have that next year." The position would be that I would have to guarantee £700 million and the budget would come down that day in that year.

In terms of using it to pay off PFI or do other things, we try and identify the level of underspend as early as we can in the year so that we can do something with it. The capital underspend we had last year was around £500 million. It would have been about £800 million, but we identified early on in the year the level of underspending and we applied some of that money to buy the new accelerators and scanners and things the system needed. When we can identify it, we do try and spend it as early as we can.

Q254 Dr Wollaston: Even so, we have a huge issue with PFI debt in the NHS so why can’t more of it be used for that?

Richard Douglas: There is a question, for individual PFI schemes, whether it is value for money to reopen a scheme and negotiate your way out of it. On all the applications of the money, we have to pass the test of whether we can guarantee that we have got it and that we will underspend. Can we guarantee that it is a one-off spend, because it will not be there in the future year, and then can we guarantee value for money? They are all the sort of things we look at every year. I want to be clear that there will, inevitably, in a system like this, always be an underspend. It is impossible to land it to the penny.

Q255 Chair: Are we not missing a trick? Is the health service not missing a trick here? If the Commissioning Board was constituted as a trust, then the cash would go into the Commissioning Board at the agreed rate and it would simply carry it forward as a reserve. The health service has 240 trusts, all of whom do that. Why can’t the Commissioning Board do it?

Richard Douglas: This is where, I’m afraid, the public spending framework does get complicated. It does still score against our spending. If you look at the underspend last year, part of that £800-odd million on the revenue was the sum of the foundation trust and the trust underspends in that year. I cannot access that cash. It is there, as you say, in their bank accounts, but it scores as an underspend against our figures.

Q256 Chair: You can’t but they can.

Richard Douglas: But the minute they do, it scores against my spending.

Dr Wollaston: It doesn’t make sense.

Q257 Chair: In other words, these are 240 independent organisations, all of whom have their cash-treasury function carried out by HM Treasury.

Richard Douglas: No; they don’t have it because they have the cash. They have the cash and they spend it, but when we look forward we need to predict at what point they are going to spend it.

Q258 Dr Wollaston: Why not just give them the money and let them manage it?

Richard Douglas: But they do manage it. That is exactly my point. We are not managing it. The trusts themselves are managing it. When you look at the underspend, part of it is the surplus that has been earned by the trusts. If you look at my £800-odd million underspend, roughly £500 million or £600 million of that would be the surpluses in foundation trusts. They have that cash. It is there in their bank accounts and they can spend it in future years.

Q259 Chair: Hang on a second. Can they or can’t they?

Richard Douglas: Yes, they can. I have no control over them spending their cash-absolutely.

Q260 Chair: That is what I thought the situation was, but you appeared to say a moment ago that if they did, that counted against your future year budget.

Richard Douglas: It does count against our spending. It counts against spending but it is under their control.

Andrew George: It is a Treasury rule.

Q261 Chair: It would be useful to have a clarification of exactly how these rules work.

Richard Douglas: I might say that too.

Q262 Chair: It seems to me that there is an extraordinarily perverse set of incentives here. I understand the point that if you cannot overspend, you will always fractionally underspend, but the Government’s commitment is to a budget announced by the Chancellor for each financial year. Given that there are not now numerous different ways for cash to go into the system-there is now only one way into the system and that is through the Commissioning Board-why, subject to proper rules of public propriety, can’t that budget be provided to the Commissioning Board to commission healthcare for UK patients?

Richard Douglas: It can and it is.

Q263 Chair: With respect, it isn’t. That is what you are telling us.

Richard Douglas: No.

Q264 Chair: It is a budget that can be spent subject to a whole series of later controls.

Richard Douglas: It is not subject to the later controls. The budget goes to the Commissioning Board and they decide how to spend it-in that year.

Q265 Chair: Make it easy. If the budget for the year is £100 billion and they only draw down the amount in practice that they are able to, subject to a whole series of rules, why can’t that £100 billion be provided progressively through the year to the Commissioning Board as an independent entity, which is what we are always told it is, commissioning healthcare on behalf of the taxpayer for UK patients?

Richard Douglas: But they do draw it all down, so they don’t have to. They get the budget. Commissioning Boards will get the budget and they can spend it.

Q266 Chair: Do they get the cash?

Richard Douglas: And they get the cash to go with it.

Q267 Chair: They will get the cash.

Richard Douglas: They will get the cash to go with it.

Q268 Chair: Is it then handed back to the Treasury? In what sense is it handed back to the Treasury?

Richard Douglas: When people talk about things being handed back, it is not always cash that is being handed back. It is basically to say, "We have underspent by an amount in the year, and we can’t apply that underspend the following year unless we have permission." It does not mean that the cash has been handed back. The problem is that we are getting into quite a complicated discussion about the public finance framework. It is the difference between an accounting base and a cash base.

Q269 Chair: With respect, it is splitting hairs, isn’t it, to say that the cash is not handed back is docked against next year’s budget?

Richard Douglas: No. At the point at which the cash is spent-the point at which they use the cash-they incur expenditure, which then scores against the budget overall.

Andrew George: We need to have a Treasury Minister here.

Q270 Chair: I am not sure. It would be useful, first, to have a simple man’s and woman’s explanation of how these rules work. Perhaps you would copy it in to the Secretary of State.

Richard Douglas: I have one that I have used for a number of Secretary of States.

Q271 Dr Wollaston: Any normal person looking at this would still say that it is money handed back to the Treasury and that you have the health service making efficiencies to reinvest, but some of those efficiencies are, effectively, going back to the Treasury. It does not really matter if it has always happened that way. If it is going to be a free-standing, independent organisation, shouldn’t they just be given control of their funds to reinvest and underspend?

Richard Douglas: We do give the money back to the Commissioning Board every year. We have always committed to the Commissioning Board-we did this with SHAs and PCTs-that any underspend is returned in the following year. Although we do not get the underspend all returned to us from Treasury, we have committed to the NHS that we do that, and that is what we have done for the last seven or eight years.

Q272 Rosie Cooper: Brokerage in any other name. What you are saying is that the resources available to the area of the health service that has not underspent are less, because you promised it back to the organisations.

Richard Douglas: No, no, we don’t. We give it back to the commissioning system every year, so the surplus that has been generated by the commissioners since 2006-07 has gone back to them every single year. They then make a choice about how they spend that and over what period they spend it. When they are planning to spend it, I am notified and then can take that into account in our overall financial planning.

Q273 Rosie Cooper: But is the bit that you have paid back part of the NHS budget for the next year?

Richard Douglas: It is part of the Department of Health’s budget overall, yes.

Q274 Valerie Vaz: Welcome. You are my second Secretary of State.

Mr Hunt: You are my first Health Select Committee.

Valerie Vaz: I am one up on you then. I just want to clarify something that you said to me earlier, Secretary of State. You said in response to my question that there has been a real-terms growth in spending.

Mr Hunt: Yes.

Q275 Valerie Vaz: Could you clarify that in relation to what the Treasury has put out and what the Department of Health has said? Its press release in July 2012 said that NHS spending has decreased in real terms. The figures showed that it has reduced slightly by 0.2%. The figures for 2011-12, apparently, are down by 0.1%.

Mr Hunt: If you take the first year of the spending review, there has been an increase in real terms of NHS spending compared with the previous year, and there will continue to be increases. In that first year, which the previous Government set the budget for, and we followed that budget, there was an underspend, which is what we were talking about earlier, during the course of that year. There were underspends in the previous four years under the previous Government. That is a normal part of what happens, for the reasons Richard Douglas was explaining. We have increased the money available for the NHS to spend.

Q276 Valerie Vaz: It is slightly different then, isn’t it? It is not a real-terms growth. Both your Department and the Treasury are saying that that is not the case. Maybe you have to find another way of saying that.

Richard Douglas: On the numbers you were quoting, to be absolutely clear, in July the Treasury did say, based on the provisional numbers for last year, that there would be a small reduction in real terms. By the time the accounts were finally produced and audited the numbers had changed, and it was then a small real-terms increase. There was a change between the numbers quoted in July at the public expenditure outturn and then the final account numbers. The July ones were based on a forecast at the time.

Q277 Valerie Vaz: So when your Department says something, that is probably right, isn’t it? You cannot keep saying that it is an increase in real terms when it isn’t.

Richard Douglas: But it is an increase.

Q278 Valerie Vaz: It is now.

Richard Douglas: Let me be clear. It is an increase. We were quite clear in July that at that point, based on the forecast, it would have been a small reduction, but when the accounts were completed and all the data were in, it was then a small increase. We have been quite open about the change between those two figures.

Q279 Valerie Vaz: To clarify something else, you talked about the cancer networks having £18.5 million. Is that right-I am not quite sure-because the Commissioning Board design document says that there is only £10 million? Could you clarify that? You can write to me, if you want.

Mr Hunt: I have been asked a number of questions about this and I have been looking into it. There has been some concern about the clinical networks. I agree with everyone who says that they are incredibly important, and so does the NHS Commissioning Board, but the ownership of the clinical networks is moving to the Commissioning Board. In that process, some people are moving jobs. There has been some concern that they are being denuded, if I can put it that way, when if you talk to Dave Nicholson he is as committed to them as ever. The budgets for those networks are going to sit within the budgets that also include the new clinical senates. My understanding is that the Commissioning Board is as committed to them, and that includes the budgetary commitment.

Q280 Valerie Vaz: I am not talking about the commitment. The commitment is there from everyone. I am just talking about the figures. Which is the real figure? Is it £18.5 million or is it £10 million?

Mr Hunt: I think I will have to write to you on that.

Valerie Vaz: Great. Thank you very much.

Chair: Grahame wants to ask a question about PFI.

Q281 Grahame M. Morris: I have a number of related questions, Secretary of State. I want to ask about PPPC; in other words, PFI, proton beam therapy, privatisation and conflicts of interest. I will try and be as quick as I can because I know that time is short. Although a number of Members have raised the issue of the costs of servicing the PFI debt, and it is a legitimate concern, the NHS Confederation has pointed out, backed up by other evidence that the Committee has received, that only a relatively small number of trusts have financial problems arising out of the PFI debt, but given the criticism that has been levelled at the PFIs, what alternative vehicle are the Government using and what advice are they giving to NHS trusts and FTs in respect of raising capital to fund future developments?

Mr Hunt: Let me give a brief answer and then perhaps, Richard could give a more detailed answer on that. We are not against the use of private finance in the expansion of NHS facilities. What we are against is that being done on an unsustainable basis. The problem that we have, in a number of areas of the country, is that the finances of a trust have become unsustainable and that has been contributed to by an unsustainable PFI deal. We are only approving PFIs where we are absolutely confident that they are on a sustainable basis.

Richard Douglas: That is absolutely right. We are still using PFI. There are PFI schemes still in procurement at the moment. The alternatives are, broadly, that we use public capital. Some schemes are done as public capital. They tend to be smaller schemes. Also, we are increasingly looking at whether there is some combination between private finance and public capital where we could lever some more value from using public capital. In the past things tended to be either all PFI or all public capital. We are looking a lot more now at what contributions we can make to a PFI scheme as well. You are right. There are seven hospitals where there are financial problems that we believe are partly attributable to their PFI scheme, they cannot manage it themselves and we are providing some central support for that.

Q282 Grahame M. Morris: It has become a bit of an urban myth, hasn’t it? The evidence we received from the NHS Confederation was that there is only a very loose correlation between trusts in financial trouble and trusts required to make large PFI payments. At a time when the Government or the Treasury could borrow at historically low levels and are looking to boost the economy, it seems a no brainer. Given the Secretary of State’s commitment to probity and not wasting money on PFIs, can I ask a specific question about something that could, potentially, be a banana skin? It is in relation to the Department of Health’s plan-the Minister will, ultimately, take responsibility, and I know he is new to post-to spend £250 million on a proton beam therapy system. Actually, it is two systems. This seems a colossal sum of capital at a time when there are such pressures on the service. Will that be funded through a PFI? Have you revised the business case since you were appointed Secretary of State? Can you give any clarification as to where we are going with that? I was very interested to see that you were quite definite with the hon. Member for Southport when he raised the issue during the statement on the mandate about the debacle about the overspend on the NHS computer system. You said it would not happen on your watch. Potentially, this could be equally embarrassing.

Una O’Brien: Before Richard answers, could I say that this is a therapeutic intervention for children and young people with brain cancers, so there is an underlying clinical reason. At the moment a number of those children have to go abroad for treatment. It is important to understand that it is not just machines; there is a real clinical need for it. Did you want to say something, Richard, about the procurement?

Richard Douglas: To be fair, I do not know whether this has gone near the Secretary of State since he has been here. We are going through a proper business-case process for that. We will assess the value for money and look at the best procurement route. It is unusual in this sense. We are trying to get to a position where individual trusts finance their own capital. Our general approach is that if a trust wants to develop something, it finances it itself, either by going to the market or using its own money.

With proton beam therapy, it is very different because as Una said, you are, potentially, only going to have one or two of these, and it is not something that would be affordable and value for money necessarily for one trust to do on its own. So we have to provide the support for that. It is going through the normal process of value for money checks, and the business case in the Department, and it will go to the Treasury for approval because it is over our spending limits. It will go through the normal process.

Q283 Grahame M. Morris: I will have to pursue that separately and I will; I have flagged that up. I am interested to know about the role of the private sector in the decision making because I take issue with what Una said about the value. I have looked at the study that has just been published into it. It seems to me that a couple of private sector companies-HCA Healthcare and Varian-have lobbied incredibly hard for the Department to make this spending commitment. Is that usual? Is it normal that private sector organisations would be involved in such colossal spending decisions?

Richard Douglas: I don’t think that any private sector body has been involved in the decision on the spending. I am not aware of the detailed lobbying that you described, but the decisions on spending are made by the Department, the Secretary of State and the Treasury, not by any private sector organisation.

Q284 Grahame M. Morris: This is not related to the proton beam system. I would like to ask about the role of Baroness Bottomley of Nettlestone. What role is she playing in NHS reform?

Mr Hunt: None to my knowledge.

Grahame M. Morris: She has clear links with at least three major-

Chair: This is-

Q285 Grahame M. Morris: No, but, currently, given the new architecture of the service, she has declared links with three significant private sector healthcare companies. I would be very interested to know if she is exerting any influence in relation to the NHS budget and how it is apportioned.

Mr Hunt: None.

Grahame M. Morris: I am grateful; thank you.

Q286 Chair: Before moving on to social care, I would like to ask a question about PFI because I was struck by what Richard Douglas said-that PFI remains a mainstream source of capital finance for the health service, not surprisingly, in my view. That does reignite in my mind the rather important question that if a large trust has a PFI, the effect of the PFI is to internalise the cost of capital within that trust. If the same trust does the same project with public capital, is the public capital remunerated or does that create a disadvantage for the trust that does it through PFI?

Richard Douglas: No. The capital is remunerated, effectively, through the PDC, through the dividend.

Q287 Chair: At the same rate, roughly, as the private capital.

Richard Douglas: No. It is cheaper than the private capital-or it has been cheaper than the private capital historically, yes.

Q288 Chair: Why does the system build in that distortion?

Richard Douglas: There are issues about whether the capital regime works properly within the NHS. One of the things we have looked at is the extent to which we need to equalise that.

Q289 Chair: That goes to the heart of some of the questions about formula funding of CCGs in the future as well, doesn’t it, otherwise you have got a distortion built into the system?

Richard Douglas: Yes.

Q290 Chair: But if all trusts remunerate their capital, it is not right to say that PFI is somehow to blame for a well-judged investment project, is it?

Richard Douglas: Absolutely not. We have made the point that we have 100 operational PFI schemes, I think, currently in the NHS. We have seven hospitals where there are significant financial issues that can, in part, be linked to the scheme. It is about the scheme; it is not about the fact that it has been PFI, frankly. It is usually about the scale of the hospital rather than the financing mechanism.

Chair: To pick up Grahame’s point about an urban myth, perhaps it is a point that might be usefully drawn out. Barbara is going to take us on to social care. Mr Gallagher has sat in total silence thus far.

Q291 Barbara Keeley: Not for much longer now. Secretary of State, we have done a lot of work in the Committee over the last year-extensive work-on social care and it is still ongoing. Let me start, first, by taking the local authority position. Local authorities-they have been praised for this-have been able to find efficiency savings, but we know, and we talk about it in debates here quite a bit, that they have had to change their eligibility criteria and increase their charges, so there is some service reduction out there as well as some savings. We were told by the LGA and ADASS that the level of efficiency savings required was not sustainable for the future. They think that the Department’s approach to savings takes no account of the wider picture on local authority funding, with central Government funding falling by 26% over the spending review period. I have to tell you that my own local authority, which is Salford Council, is suffering quite substantially, as are all the local authorities around. Do you accept, given the history of efficiency savings required of local government, that there is a danger that further savings in years coming along will now eat into the bones of the service-that we have done as much as we can with efficiency savings? The LGA puts it that way-that anything further will eat into the bones of the service.

Mr Hunt: I do accept that there are huge pressures on the adult social care budget because of local authority financial settlements. It is something that Shaun and his team watch extremely carefully. I would not accept that the Department of Health has not been playing anything but an extremely constructive role in trying to deal with a challenging situation. Our budget was ring-fenced. We were very lucky that that happened. It did not happen to most other budgets and, as you rightly say, it did not happen to the local authority budget. That is why, over the course of the spending review, we are making available £7.2 billion to support adult social care services in local authorities. That money is not ring-fenced so we do not have control, but were it all to be used for adult social care services, the King’s Fund said that local councils would have to make 2% worth of efficiency savings as their mid-case scenario, in order to sustain services at their current level. They believed that was doable. We think that what has happened is that, on the whole, councils are making savings of more like 5%. That is not to say that because this is not a ring-fenced sum of money, some have chosen to cut their budgets. Some have chosen to cut some services. The majority are able to continue their services by making efficiencies, and, indeed, one or two have increased their budgets by up to 24%. It is a mixed picture, but it is one that we monitor very closely.

Q292 Barbara Keeley: Indeed, but the level of costs that they have been faced with is very different in different parts of the country, ranging up to £100 million in the case of Liverpool City Council. It is not the same, is it? Does the Department and do you, Secretary of State, acknowledge that the overall reduction in central Government funding for local authorities over the spending review period does have an effect now on their capacity to provide adult social care services?

Mr Hunt: As I said, the settlement we gave local authorities was one that should make it possible to maintain their current levels of service provision, and that was certainly our intention when we did the spending settlement. We gave them that extra money to support adult social care services. I do not accept that they are being forced to reduce adult social care services as a result of their central Government funding settlement. The funds are there. They do have to make some efficiency savings-but they are achievable efficiency savings-in order to do that. That is not to say, unfortunately, that every authority has got it right.

Shaun Gallagher: One of the questions that you asked is whether the Department had taken into account the broader local government context of the settlement and the reductions that they faced. The answer to that is yes, because it was the acknowledgment of the fact that local government faced reductions in its overall spending review settlement that led the Department precisely to put in additional money to attempt to support social care. As you said, and as local government representatives said to this Committee when they were here, they have been delivering the great majority of that through efficiency and service redesign. It is challenging and, in fact, they have been achieving a higher level of efficiency than we, and indeed the King’s Fund, had banked on. They have been doing that with, so far, limited reduction in what they take to be the service reduction available for people.

You mentioned eligibility criteria and the movements that authorities can make in that, and that is something that is within their discretion, as you know.

Q293 Barbara Keeley: That is a service reduction.

Shaun Gallagher: That is, indeed, one of the absolutely obvious ways in which service reduction would happen. When the Department issued the spending review, it said that the Department felt that there was not a need for service reduction through eligibility tightening as long as the right efficiencies were made and the choices about local priorities were made. Over the last two years 15 councils in year one of the spending review moved their eligibility criteria, and this year, in year two, it is six councils. All of those, so far, have been from moderate, which is the third level down of the thresholds, to substantial. Essentially, what those councils are doing is coming in line with what a fairly large majority of authorities now offer in terms of the eligibility thresholds-substantial and critical. No councils have moved from substantial up to critical. We would say that that is the right position because we would certainly be concerned.

Q294 Barbara Keeley: Some councils have tried, haven’t they, to move to critical?

Shaun Gallagher: Three councils in year one of the settlement made a proposal to do so and all three changed their view following a legal challenge.

Q295 Barbara Keeley: I think that does temper what they were trying to do, doesn’t it? Perhaps we do not have time to get into the Barnet "graph of doom", but we bear in mind as a Committee that local government is saying that their other services are now being very much affected. One reads of parks across London having serious issues because councils just do not have the money. The focus is going to be on waste, social care and transport. There is a theory, based on that Barnet "graph of doom", that in a few years’ time, that is all they will be able to fund.

Can I move us on to the Dilnot commission? Again, it is something that we have looked at and talked about quite a bit in our sessions. The context has jumped about a bit, so let me talk about the context first. The Government’s progress report on social care funding agreed that the principles of the Dilnot commission were the right ones. Across the summer we have been moving backwards and forwards with it. It appears that the Prime Minister agreed to set the cap at 35K, according to some reports, and the means test threshold at 100K. There were reports that that was being included in the Care and Support Bill. Obviously, Secretary of State, you have made comments on it, as has the new Care Services Minister. It seems to jump about, really, from week to week whether we can see moves forward or not. Can you clarify for the Committee exactly what the position is now regarding the Dilnot reforms, particularly as regards which funding options are under consideration and, importantly, what is the timetable for making a decision?

Mr Hunt: Hopefully, I can clarify the situation. There has been a lot of press speculation, some of which has been quite mischievous because, basically, every time I have been asked about Dilnot I have said the same thing, which is that I strongly support the principle. I think it is the right way to go. It is incredibly important that we create a structure that encourages most people to save for their social care in the same way that they save for their pension, and the cap is the right way to do that. With one in 10 of us going to have social care costs of more than £100,000, the sooner we are able to do this the better, but as a Government we have not identified, because there is a cost to it, where that money is going to come from. There is willingness across Government to do this but we have not yet been able to find where that money will come from.

The stated position of the Government-that this will be something that will be discussed as part of the next spending review-remains the case. But it also remains the case that we are looking hard the whole time trying to examine the different options, trying to see what the variables are, to see if there is any way possible to make it more affordable, because we are very committed to trying to do something. I am afraid there is not a substantive position. Hopefully, you will welcome the fact that there is not a substantive position-a change in the Government’s position. We are still very committed in principle and we are still trying very hard to think where we might be able to get the finance to do it.

Q296 Barbara Keeley: Do you envisage that being the subject of cross-party discussions and debate, because that was the way forward, seemingly, to achieve consensus, yet it seemed to fall very flat earlier this year?

Mr Hunt: I am always willing to discuss any issue like this with other parties, but it is something where because there is a direct cost-£1.7 billion was the figure originally touted at the time if it was introduced immediately-

Q297 Chair: But it was not for several years-the £1.7 billion-was it? This is five to 10 years to build up.

Mr Hunt: There is, none the less, some immediate cost. The first question is an internal Government one, which is about whether we feel we can afford to do that or whether we feel there is any way to make it happen. We need to do that first.

Q298 Barbara Keeley: In the spending review.

Mr Hunt: That remains the Government’s position, yes.

Q299 Barbara Keeley: You probably wouldn’t be looking to have cross-party talks until after that, or do you think it is worth while to have them before? Clearly, it is an issue, like pensions, on which you need to build consensus.

Mr Hunt: Yes, but our starting point needs to be to decide what we think we are able to do as a Government, and we have not reached that point yet. That would be my approach to everything I do. I would hope to be able to make progress on a cross-party basis and to secure consensus going forward, and the same would apply to Dilnot.

Q300 Chair: Is this not a slightly different case, however, because in deciding what the Government would regard as their central policy option, the view of other major Opposition parties ought to be, ought it not, a factor to be taken into account in reaching that decision rather than reaching the decision first and then going back to see how they are going to react to it?

Mr Hunt: Yes, you are right, because it is a decision that will impact on subsequent Parliaments. So it is very important that the end point is one where there is cross-party consensus.

Q301 Chair: It is an iterative process rather than a decide and consult, in the time-honoured fashion.

Mr Hunt: Yes. I think that is a better way of putting it. You are right. Getting cross-party support for the final outcome is an important part of this particular issue.

Q302 David Tredinnick: Chair, I want to go on to integrated healthcare, if that’s okay. I want to start by asking the Secretary of State a question on this point. Both the Local Government Association and the NHS Confederation argue that integrating care is the best way to use resources and services to maximum effect and for better outcomes and experiences for patients. Mike Farrar of the NHS Confederation said that he saw the future of the healthcare system as "a care service with a medical adjunct rather than a medical service with a care adjunct". Do you agree with that assessment?

Mr Hunt: Pretty much, yes. Integration is going to be very important, and it is interesting that under the new structures we are starting to see integration happening, because they have dramatically changed incentives in the system. We are starting to see integration happening that has never happened before. For example, the CCGs are sending GPs in Newcastle into care homes and they have managed to reduce unplanned admissions to A and E from care homes in that area by, I think, 9%, which is a very significant change. Getting proper integration between the health and social care system is going to be essential, but also much better integration between what GP practices do and the acute sector does as well. So, yes, I am a big supporter.

Q303 David Tredinnick: On that particular type of integration, you are confident that your Department has a good strategy.

Mr Hunt: I have to put my cards on the table as being a new boy in this job. My feeling, from what I have heard and from what people have told me, is that integration is not something that works well if it is mandated from the centre. You cannot command integration. The best type of integration happens locally when people form partnerships with other people that they know. Part of my role and our role as a Department is to remove the barriers to integration that have existed previously rather than actively to promote a particular model of integration as the one that everyone has to follow.

Q304 David Tredinnick: That is very helpful. We have been looking at integrating health and social care, and there is a nomenclature issue here. There is a parliamentary group, which I happen to chair, called the Parliamentary Group for Integrated Healthcare, and our remit has always been to promote the integration of mainstream allopathic medicine with complementary medicine and alternative medicine. We have done that with some success-I am not claiming all the success for it-but the chiropractors and the osteopaths were first to come in with statutory regulation through Private Members’ Bills, on which I had the honour to sit many years ago. Then, during the Major Government, when the Chairman was Parliamentary Under-Secretary at the Department of Health, he agreed to doctors who took clinical responsibility for alternative practitioners being able to use health service money providing the doctors took control. That was pursued when he was Secretary of State, and I used to write to him at that time about these things.

Chair: And you’re still writing to me now.

David Tredinnick: I now write to you instead. We now have an interesting situation where because of the reforms, rather than a direction from the top, we have Healthwatch England, as the consumer champion if you want integrated healthcare. We have the whole notion of putting the patients first, so we are going to get demand from below from patients for some of these services. Your Department’s trials, I am told, on personal budgets have been a great success. We have seen patients opting for a range of services and treatments that are not necessarily seen as mainstream. I am suggesting that it would be very helpful if the Department took a proactive view in dealing with, for example, just three treatments that I am going to list.

There are some issues to do with the regulation of Chinese medicine. I am sure that you have some awareness of Chinese medicine, although I will not stray into any personal things. There is a growing demand for herbal medicine, which is something that I am proud to have used. I think it has helped to boost my liver and kidneys-my internal organs, including my heart. I have used herbs over a period of time and acupuncture once a month for a number of years. I believe that has significantly enhanced my health. It is important that the Department is able to make sure that these are going to be available-that there will be at least not a block but some encouragement to commissioning structures to make use of these facilities. Would you agree with that?

Mr Hunt: I think my Permanent Secretary wants to come in. Do you want to respond initially and then I will come back?

Una O’Brien: Actually I was going to pick up your previous point. The central focus has to be on the outcomes of the patients and improvements for patients. The system that we have created now is for people who are best able to judge what is right for a patient, or the patient in partnership with their clinicians. That is the headquarters of the NHS and that is where those decisions need to be made. Those decisions have to be backed up by two things: evidence and good value for money. At a design level, rather than the Department necessarily saying at a Government level, "This treatment is in", or, "This treatment is out", it is for the system, the Commissioning Board, with NICE, and with feedback from patients about what works for patients, to determine the judgments that are made at that level. We are not going to sit at the centre and have a list of treatments that we say are in or out in that sense.

Q305 David Tredinnick: One of the fallbacks of the Department is to say "If there is clinical evidence". I am going to go on to another discipline. There are three homeopathic hospitals within the national health service. There is the Royal London Hospital for Integrated Healthcare, which used to be the Royal London Homeopathic, and is part of the health service. There is Glasgow, which is no longer a part of your remit. New Hospital was opened some time ago, and there is Bristol and there was Tunbridge Wells. We have in this country a large number of doctors who are trained in homeopathic medicine who frequently will use that if conventional medicine has not worked, or before they use it. There is the society and other regulated homeopaths out there.

I put it to you, as a victim of a vicious campaign by those who do not like homeopathic medicine, that it is very important that we support it. Anybody who has signed a motion in this House has had their inboxes jammed by a small group of "antis"-people who are against it-despite the fact that in Europe it is widespread. It is used in a very widespread way. Every French chemist will have a range of homeopathic medicines. It is no secret in the House that I have defended this over the years. I really encourage you, Secretary of State, to take a fresh look at the whole homeopathic community, which can provide-this is my last point-very low-cost, effective treatments, frequently to those who haven’t found satisfaction. I am sure that Dr Wollaston always provides satisfaction, but there are one or two doctors out there who may not be able to do that. I didn’t want to make a speech, Chairman. I was trying to ask a question, but it is very hard when you feel passionately about something sometimes.

Mr Hunt: The right perspective that I have to take as Secretary of State is to be guided by the evidence on this and to have an open mind. As a general philosophy, we have to be humble about what we do not know, but that is good scientific practice as well. We have to be guided by the evidence on this. The structures that now exist give the opportunity for local clinicians to take decisions locally. If the evidence suggests that a different way of approaching an illness is successful and then it is tried in one CCG, what we are trying to do is to construct a system where the evidence of that success will spread like wildfire. That is really at the heart of our reforms. That is where my role at the centre is. It is making sure that information is available and everyone is able to use it.

David Tredinnick: I come to my last point. The evidence is that you have three homeopathic hospitals with doctors who are trained in this discipline, and that is the critical point. Those who are opposed to it frequently obfuscate this point and try and make out that there is no evidence. The evidence is that you have already, in this country, a whole range of practitioners who are trained in this subject and I really respectfully suggest to you that you must not ignore them.

Chair: I invite Sarah to come in and perhaps we can go back to mainstream integration issues.

Q306 Dr Wollaston: David and I respectfully disagree with each other on the evidence base for homeopathy and I am very relieved to hear you confirm that evidence will be guiding it, and value for money. On the issue of the evidence base, one very important issue is the blockages that we see from the pharmaceutical industry in supplying all the evidence around treatments. In particular, looking at value for money, in relation to Tamiflu, we know that Roche is still withholding the data, and that was £1 of every £200 spent on the NHS budget in 2009. Is that something that you, as Secretary of State, will be committed to see change on-that we see full disclosure of the evidence base for clinical trials and clinical study reports?

Mr Hunt: I have heard your comments on this issue and I completely understand the point you are making. The only thing I can say is that we are in the process of quite big discussions with the pharmaceutical companies anyway, across a whole range of issues, but mainly to do with value-based pricing and the way that we price pharmaceuticals going forward. I am very happy to examine that issue as part of those discussions, but there are very big, important issues that we have to resolve going forward in terms of pharmaceutical pricing.

Q307 Dr Wollaston: One point I would make is that none of us would buy a car without seeing what its miles per gallon were and its safety data. Effectively, the NHS spends vast amounts of money without demanding to know all the safety data and evidence on performance of drugs. We have huge levers in the NHS. We are buying these drugs. We spent £500 million on Tamiflu without insisting on seeing all the safety data.

Chair: We do have two evidence sessions with NICE coming up.

Una O’Brien: We will come back to that. I would just say, for the record, that we properly license medicines through the MRHA and there is a job to look at the evidence there. It is, effectively, the FDA for the UK. Secondly, NICE does evaluate the effectiveness and deployment of those medicines and whether or not to deploy them within the NHS. Your points are very well made and well founded. There is a wider debate in the scientific community more generally about whether the evidence on failed trials, for example, should be made publicly available.

Q308 Dr Wollaston: That is the point.

Una O’Brien: This is a really important discussion-it is going on across the scientific community at the moment-which goes beyond necessarily this VFM issue to do with purchasing medicines. We understand the point you are making and that we are part of it and contributing to aspects of it. The Lancet has been very forceful in leading the charge on that.

Q309 Chair: Thank you for that. We will come back to public expenditure and the implications thereof, if we may. I was struck when the Secretary of State was talking about the integration of different bits, in particular, of community-based services. He stressed that the new health structures mean that there is more clinical leadership, local engagement and so forth, all of which is a familiar argument from all sides of the House. There is a danger, isn’t there, in that approach, which is that it makes it all sound like a kind of local cottage industry, that integration is something that can be carried out between local agents without causing any major difficulties in the acute sector and in the structure of the care that is provided. One of the things that is regularly said is that you will not deliver proper high-quality community-based services unless you can release resources from other parts of the system to enable you to properly fund the service you are seeking to deliver. It is not as easy as just getting local groups to work more cleverly together because they have a better computer.

Mr Hunt: No, it isn’t, but I think the incentives are much stronger now to make that integration happen in a way that is more than a local cottage industry, if I can draw on the words you used. Effectively, by better integrating care, GPs are able to keep people out of the acute sector, and if they go into the acute sector, those GPs will see the costs fall on their own commissioning budget which they now control. What you have is CCG leaders who are, as I mentioned earlier, often practising GPs, who are actively thinking about how they can integrate care better, particularly to avoid unplanned admissions to hospitals. That incentive is one of the key drivers. That is really what I wanted to say.

Q310 Chair: I want to come back to incentives, if I may. Focusing, for a second, on where the obstacles are to integration, I talked about it when I was doing your job and my predecessors did when I was in short pants. People have been talking about it for a very long time. The obstacles remain considerable, don’t they? Where do you see the obstacles and how are you going to address the obstacles to the delivery of more integrated, preventative front-end care?

Mr Hunt: I am rather terrified by these analogies because I am wondering if, one day, I might have the privilege of being Chair of the Health Committee quizzing a future Secretary of State on integration. My eyes are slightly glazing over at the prospect. In the new structures there are some changes that will help. We will all see if that is enough. I think the changes that will help are, first of all, that before, the person trying to champion integration might have been the chief executive of a PCT, who would have been operating over a much larger geographical area and also as an NHS manager, not as a clinician. We are going to find that integration happens more quickly now because it will be driven by GPs operating in relatively small areas, who will know the individuals they need to talk to. Because they have budgets out of which they are trying to get the most bang for their buck that they possibly can, they will really try hard to deliver those integrated care pathways. I think the prospects are better, but I do not pretend that it will completely solve the entire problem. I am sure there will be parts of the country that do it better than others.

Una O’Brien: Chairman, I do not know if it would help the Committee to see, or if you have had an opportunity to see, the Department’s published evaluation on the 16 integrated care projects we sponsored for two years. We published it back in the spring. It is interesting because the projects are all quite different from each other, although, of the 16, six particularly focused on the elderly at risk. They are in different parts of the country. What was interesting about the projects is that they very much focused on what the Secretary of State has been referring to, which is horizontal integration between primary care and community care. One of the things that was revealed by the evaluation is that the staff were much more positive about what they thought they had achieved than the patients, and the patients did not experience the effectiveness of that change to the extent that we had expected. We have some more research and understanding to do there about how we involve patients, carers and families in properly understanding what integrated care means, because there is a risk that a professional definition of it is not necessarily what people feel and experience.

To link to Mr Tredinnick’s question, which was, "Is the Department serious about this and are we putting some effort into it?", the fact that we ran the pilots, that we have produced the evaluation and we have now set up an integration policy unit within the Department shows that we are very serious about supporting this. It is interesting, as you go further into the journey of doing it, that the evidence is not necessarily what you would expect.

Let me add one further example, which I thought was quite interesting. I was on a visit to Leicester a few weeks ago with Sir Bob Kerslake, who runs the Communities and Local Government Department. We were at a GP’s surgery. In particular, we were looking at the interface between social care and health. We met some health and social care co-ordinators who do this work. We said, "What is the thing that needs to be sorted out?" It wasn’t structures or money, because they could pool the budgets. They said one thing that, perhaps, we all have not paid enough attention to-the flow of information between social work departments and general practice. They had actually created a work-around, a safe space, where only a handful of them could look at the information from both sides. Their view was that if we addressed some of the barriers there, which is a system issue that Bob Kerslake and I brought back to our respective Departments, we could make some rapid progress.

To sum up, this is quite a complex area. We need to better understand what actually makes a difference for patients and the public. Getting new insights on what the barriers are and then being able to face them down individually will be a strong way to make progress on this agenda.

Q311 Chair: Valerie wants to come in. I think it would be helpful to the Committee if we could have a clearer view of the Department’s evolving thinking on this. You have spent two years reorganising management structures. How is the Department going to carry forward and make real the words that it uses about integration of the different bits of the health service but are, in truth, of a health and care system, bearing in mind Mike Farrar’s point about a care system with a medical adjunct rather than a medical system with a care adjunct? The Secretary of State said that he was sympathetic to it, and I think many others would be too.

Una O’Brien: Absolutely. There is one step. We set out quite a lot of our thinking in the Care and Support White Paper, which was back in the summer. The next step we have committed to is to publish in the spring a framework of more detailed thinking on the different models for integrating care. Even at the level of getting horizontal integration of health and care, there are a number of challenges, without prejudice to a whole other set of questions, which are very interesting, such as the degree to which acute and mental health services are now reaching out into the community to form new pathways and new offers of integration to commissioners. Everywhere I go in the country on visits, in discussions with people in local government-Health and Wellbeing Boards will be key to driving this-and meeting clinicians in communities, this is the subject that they want to talk about. There is a lot of energy for it.

Q312 Valerie Vaz: What is the view from Torbay and how they are fitting in with the CCGs?

Una O’Brien: Torbay-I think Shaun can help me-is a care trust.

Shaun Gallagher: It has been a care trust; yes.

Una O’Brien: If you track the history of Torbay, it has taken them a number of years to get to where they are. What they have done is employ social workers inside the care trust. This is the essence of their success. Then they managed the means-tested elements of social care in a very professional and creditable way alongside an NHS service free at the point of use. It is a huge success and it works for them. It took a lot of effort and a number of years to build it up.

Q313 Valerie Vaz: We have done a visit. How is it going to fit in with the new architecture, because I hear it is not doing terribly well with the new CCG?

Una O’Brien: I do not know the circumstances in that particular locality, so forgive me if I am not able to comment.

Shaun Gallagher: I can pick that up. The experience from Torbay has often been cited as an exemplar for good integrated working. It is absolutely true that it has been and it was formulated as a care trust. The interesting thing about care trusts is that, in a sense, it was a previous effort to find a structural integrated solution to the issue. The learning that we have taken from all of the time that we have looked at this, as the Secretary of State said earlier, is that a single approach is not the answer to how integration should work best at local level. The benefits of the Torbay integrated working remain. They have reformulated the way in which their structures work at local level and their partnerships are still strong, and I think they would say that. We can certainly give further information to the Committee about the work that we will be taking forward. The two key things are, as has already been said, that we have to make sure that this is not talking about integration of structures, mergers of organisations and all those sorts of things, which can be distracting. This is about integration as experienced by the person who needs support in their health and care. It is how you bring organisations together in what may be a variety of different ways to do that. That has to be the definition.

The second point is that this will still be a local activity. The Health and Wellbeing Boards and the other duties and structures that flow from the Act will support that. There is a requirement now for joint health and wellbeing strategies and they require all the health and care partners and Healthwatch to play into them. It will be a local job, and I think we are seeing that happen already. We need to look at what the barriers and incentives may be at national and system level and at what we can do. That can be our contribution to the system to ensure that it happens. That is the work Una referred to that will lead to a publication by the spring.

It will definitely include two things. One will be: what is the right kind of outcome measure that can be used to define success in integrated care? It needs to be an outcome measure that is about the experience of the person. This was a recommendation that was made to us by the Future Forum. We are doing work on how we can build that into the outcomes frameworks across all the three areas. The other is flow of information, as Una said. One simple step on that would be to move much more quickly towards local authorities using the NHS number as the identifier for patients. That is something we have been pushing for a while but we need to take further steps. There are information-governance questions as well as how sharing of patient information can be made easier.

Q314 Dr Wollaston: Torbay is in my patch. It does show that shared records made such a difference, and with very close partnership working and reducing unnecessary admissions, it has been very successful. Interestingly, I met the mayor of Torbay and the teams recently, and they say that because their budgets are under such pressure they feel it is going to be increasingly difficult for them to maintain some of those structures. I wonder whether you have been down to Torbay recently to discuss the particular challenges they face, so that they can be supported through continuing that.

Shaun Gallagher: I have not been to Torbay recently to talk to them about that. I guess that a lot of the conversation we have had so far this afternoon is about how people need to respond to the financial challenges that we will all face. I think one of the things that this Committee would say is that closer integration is part of the answer, rather than that the financial challenge should mean they stop doing it.

Q315 Dr Wollaston: Sure. Do you see that holding records online so that everybody can access them, with the patient’s consent of course, will make this simpler across the whole country rather than just having a piecemeal approach?

Mr Hunt: Can I answer that because it is absolutely vital? I would like that to be one of the big messages that people take away from the mandate statement that I made this morning. We have got to unbury that project and do it in a different way, but it is absolutely essential that we do it and that we do it in a way that maintains the trust of the public. That is not a simple or straightforward thing to do, but it is incredibly important. A lot of the public concern over integration is this sense that they are being shuffled from one part of the system to another without the system really knowing anything about them. A good digital record that could follow you anywhere in the system that anyone you chose to allow could see about you is an absolute no brainer. It is not easy to get there. Lots of work has to be done, but we have to go down this path. The NHS has an opportunity to be a world leader in making it happen.

Q316 Dr Wollaston: Do you envisage patients being able to choose across the country which system they use, if you go to a cloud system, or do you think that it would have to be the same system within each area and that would be decided by a particular area?

Mr Hunt: Our thinking is very much developing on this point, so I would not like to say that we have come to a firm conclusion. At the moment, the most likely way we will do it is to base people’s records around what their GPs currently hold about them and, first of all, work out how to make that a more complete record, so that it is a complete record of what happens to them in the acute sector and what happens to them in the social care sector, and then work out how to make that portable and then make it possible to take it to different GPs. What you will need are different systems that are actually compatible, and that is something that IT people believe is entirely possible.

Chair: Valerie has another question and then I will bring it back to money.

Q317 Valerie Vaz: My question is partly to do with money. I was on the Public Accounts Committee looking at the draft legislation on the public audit. You will know that the Audit Commission is being abolished. There is nothing from the Department of Health on what structures you are putting in place. I wondered when that is going to happen and why it did not come before the Committee.

Mr Hunt: That is one for my trusty finance director.

Valerie Vaz: He was there.

Richard Douglas: It is 19 November. It is going through cross-government clearance at the moment.

Q318 Valerie Vaz: It is for the Secretary of State. It is not your problem, Mr Douglas.

Richard Douglas: I think it is, actually.

Q319 Valerie Vaz: I wondered why the Department was late with that.

Mr Hunt: I am afraid I don’t know the answer to that but I will happily write to you.

Valerie Vaz: Thank you.

Q320 Chair: Can I bring it back to the hard numbers? It seems to me that the Department and the Government are getting themselves into a direction of travel from which it is very hard to see how they can reverse out. By the end of this spending period a billion pounds of the NHS budget is going to be social care spend, and nobody seriously believes that that is going to come out of social care and come back into the health service. The whole purpose of the integration trend that we have just been discussing is to rebalance resources into the community. As you know, Secretary of State, this Committee has canvassed the idea of single budgets, not as a perfect solution and not in exactly the same way in every locality. Do you accept that there is a sense in which the Department is already operating a single budget, because you operate an NHS budget, part of which is allocated to social spending and is never going to be recovered by the health service? Indeed, there is a question mark as to whether it is properly scored as health spending at all.

Mr Hunt: I accept that we are moving much closer to thinking about health and social care holistically, and it is right that we do. What we are really doing, I think, is taking a responsible attitude to the challenges in the adult social care sector because of the cuts that they are facing. I am proud to say-I can say this because it pre-dates me-that we are not taking the attitude that we are going to wash our hands of it because it is another sector’s problems but we are actually thinking about the individuals involved.

The only thing I would say, where there are grounds for optimism within the concern that you may be expressing about the additional burdens on the NHS budget, is that this integration that we are talking about has huge potential for financial savings as well. One of the tragedies of the lack of integration is how incredibly inefficient it is. One of the things that we are doing a lot of detailed work on at the moment is to try and identify what savings are available, whether savings are available and so on.

Q321 Chair: Please don’t misunderstand me. I am not querying the extent to which the cash is being allocated towards social care. Indeed, I suspect, as the years go by, that unless there is a change of view within the local government world, the pressure will be for more NHS spending to be allocated in that way. In truth, you are planning them as single systems. The problem is that when you get to the local area, you have a commissioner for primary care, a separate commissioner for secondary care and a separate commissioner for social care. If you are planning them as a single system, which is, in truth, what they are, do we not urgently need to get to the point where the people who are responsible for the local process you describe are running one process and not three?

Mr Hunt: That is exactly what we want to happen.

Una O’Brien: The bulk of the money for social care still goes down through the local authority settlement. Although we, exactly as the Secretary of State has described, have sought both nationally and locally to behave responsibly with patients and patients’ families in mind, through the economic pressures to design systems to help people to handle those pressures, there isn’t any suggestion that I am aware of that we are looking at the fundamental tearing-up of the original settlement that those responsibilities sit with local government. Indeed, you would need very significant legislation to change that.

Q322 Chair: The effect of constituting Health and Wellbeing Boards with a role in the health service is to re-import local government into NHS planning.

Una O’Brien: Precisely. Looking at it not from a national position but from a local position, the degree to which localities make use of that opportunity to come together is yet to be seen. The framework of joint strategic needs assessment, Health and Wellbeing Boards, and joint strategy could be potentially hugely powerful, not only in relation to joining up health and social care and joint commissioning-a lot of freedoms and flexibilities are there-but, even more interestingly perhaps, in relation to some of the issues to do with housing, recreation and support for people to stay well, which local authorities have not necessarily always come at in the past from a health-minded perspective. Many of you will know what is happening in your own Health and Wellbeing Boards already, but it is interesting to see how integrated an approach they are taking to these questions. We will have to see what progress they make and whether it makes a difference on the ground.

Q323 Chair: We had an interesting speculation from Sir David Nicholson this morning about the concept of prime contractor applied to this world and whether that could be linked, in some cases at least, to the role of the Health and Wellbeing Board.

Shaun Gallagher: Could I make a couple of points on this? In response to the point that you made, Chair, I would think, as Una was saying, that the local level is further down that road than the national level. There will always be a separate local government settlement. Indeed, there is local council tax financing and so on. It is not a merged budget by any means at this point. At local level there is the potential, under the legislation that is now in place, for people to go as far as they feel able to through local agreement. Indeed, some of the work around community budget whole-area pilots is looking at that sort of situation.

If I could pick up on one point that you made about the nature of health spending, all the NHS spending to support social care is transferred at local level using specific powers under the NHS legislation requiring that it is spending on social care to support health; it is only under that power that they are able to make that transfer. Indeed, those powers have always been there and there have been transfers that have operated over the years at different levels. The legal requirement is that that is the nature of the support that goes into social care.

Q324 Chair: I accept the clarification of the legal base. It is the first time that a Chancellor has stood at a Dispatch Box and announced that it was the plan that NHS budgets should be used by a quantified amount for social care to support health spending.

Mr Hunt: Or health outcomes.

Chair: Are there any other questions? Thank you very much.

Prepared 19th November 2012