Back to the Scottish Parliament Audit Committee Report
Archive Home

Business Bulletin 1999-2011

Minutes of Proceedings 1999-2011

Journal of Parliamentary Proceedings Sessions 1 & 2

Committees Sessions 1, 2 & 3

Annual reports

SP Paper 366

  AU/S2/05/R5

5th Report, 2005 (Session 2)

Overview of the Financial Performance of the NHS in Scotland 2003/04

CONTENTS

REMIT AND MEMBERSHIP

THE REPORT

ANNEXE A – EXTRACTS FROM THE MINUTES
Extract from the Minutes – 24th Meeting 2004 (Session 2)
Extract from the Minutes – 1st Meeting 2005 (Session 2)
Extract from the Minutes – 2nd Meeting 2005 (Session 2)
Extract from the Minutes – 3rd Meeting 2005 (Session 2)
Extract from the Minutes – 4th Meeting 2005 (Session 2)
Extract from the Minutes – 10th Meeting 2005 (Session 2)

ANNEXE B – ORAL EVIDENCE AND ASSOCIATED WRITTEN EVIDENCE

2nd Meeting 2005 (Session 2), 25 January 2005
Dr Kevin Woods, Head of Scottish Executive Health Department and Chief Executive of the NHS in Scotland
Dr Peter Collings, Head of Performance Management and Finance, Scottish Executive
Mrs Jill Alexander, Head of Analytical Services Division, Scottish Executive
Mr Mike Palmer, Assistant Director, Workforce and Policy Division, Scottish Executive

SUPPLEMENTARY WRITTEN EVIDENCE

Letter from the Clerk to Dr Kevin Woods, Head of Scottish Executive Health Department and Chief Executive of the NHS in Scotland
Letter from Dr Kevin Woods, Head of Scottish Executive Health Department and Chief Executive of the NHS in Scotland to the Clerk


ANNEXE C – OTHER WRITTEN EVIDENCE

Letter from the Convener to Ian Gordon
Submission form the Scottish Executive Health Department

Remit and membership

Remit:

1. The remit of the Audit Committee is to consider and report on-

(a) any accounts laid before the Parliament;

(b) any report laid before or made to the Parliament by the Auditor General for Scotland; and

(c) any other document laid before the Parliament concerning financial control, accounting and auditing in relation to public expenditure.

2. No member of the Scottish Executive or junior Scottish Minister may be a member of the Committee and no member who represents a political party which is represented in the Scottish Executive may be convener of the Committee.

(Standing Orders of the Scottish Parliament, Rule 6.7)

Membership:

Mr Brian Monteith (Convener)
Susan Deacon
Robin Harper
Margaret Jamieson
George Lyon
Mrs Mary Mulligan
Mr Andrew Welsh (Deputy Convener)

Committee Clerking Team:

Clerk to the Committee
Shelagh McKinlay

Senior Assistant Clerk
David McLaren

Assistant Clerk
Clare O'Neill

Overview of the Financial Performance of the NHS in Scotland 2003/04

The Committee reports to the Parliament as follows—

INTRODUCTION

1. This report sets out the Committee’s findings in relation to the Auditor General for Scotland’s report entitled “Overview of the Financial Performance of the NHS in Scotland 2003-04”.

Evidence

2. Over Session 2 of the Parliament the Committee has devoted considerable time to considering issues affecting the NHS in Scotland. During this period the Committee has held ten evidence sessions on AGS reports concerning health matters. The subjects examined have included GP prescribing, the management of medical equipment, community care issues, the financial difficulties facing NHS Argyll and Clyde as well as consideration of the NHS Overview Reports published by the AGS - including the financial performance overview report for 2003/04 which is the primary subject of this report. It is in the nature of Overview Reports that they will touch on issues which the Committee may have examined in other inquiries. Where appropriate therefore the Committee has drawn on evidence from previous inquiries and other AGS reports to inform its consideration in this inquiry.

3. The Committee held one oral evidence session specifically examining the Financial Overview Report for 2003/04 on 25 January. The following witnesses gave evidence to the inquiry:

4. Dr Kevin Woods, Head of Scottish Executive Health Department (SEHD) and Chief Executive of the NHS in Scotland, Dr Peter Collings, Head of Performance Management and Finance, Mrs Jill Alexander, Head of Analytical Services Division, and Mr Mike Palmer, Assistant Director Workforce and Policy Division, Scottish Executive.

5. Written evidence received by the Committee can be found at Annexe B.

Findings and Recommendations

6. The Committee’s main findings and recommendations are set out at Appendix A.

SUMMARY

7. In its last Overview report on the NHS in Scotland1 the Committee asked the Department to respond to a number of questions which it felt had not been properly answered in the course of its inquiry. The Department was asked to spell out; the precise benefits of pay modernisation, how they would be realised and how value for money would be demonstrated; how information systems would be improved; how NHS Boards would be supported to redesign services for benefit of patients; and what incentives were in the system to reward good performance at Board level. The Committee is disappointed that this most recent inquiry has found that the Department is still not able to provide satisfactory answers to these important questions.

8. The findings on the implementation of the pay modernisation agenda are typical of the Committee’s wider concerns. The Committee found that:

  • The costs of pay modernisation were not adequately modelled;
  • The benefits to patients of pay modernisation remain unclear ;
  • It is not clear how its impact will be evaluated; and
  • The contracts do not properly reflect Scotland’s needs.

This issue is so important because pay modernisation costs represent almost 60 per cent of the total uplift for NHS Boards in 2005/06 (prescribing costs and increased staff numbers each account for 14 per cent of the total uplift.)

9. In addition, the Committee concluded that the Department does not have a clear strategy for improving performance and driving large scale reform in the service in Scotland. The Committee is also deeply concerned about the slow pace of improvements to the quality of information.

10. The Committee’s focus in this inquiry has been to examine whether the significant increased funding for the NHS in Scotland is delivering improvements and providing value for money. Unfortunately, on current evidence, it is difficult to avoid the conclusion that some key service areas may cost more and deliver less.

11. As stated in its last Overview Report, the Committee recognises that the NHS works well in many areas. It also appreciates the complexity of the task facing the Department and NHS Boards.

12. However, successive Audit Committee inquiries have found that the Department has failed to secure real improvements on core issues such as improving the quality of information and spreading good practice. This has to change.

13. Improving cost and activity information; clearly defining the benefits to be gained from extra investment; measuring whether these benefits have been achieved; effectively supporting NHS Boards to improve services through redesign – the Department must deliver on these objectives and soon. Without this it will not be possible to deliver real improvements to patient services on the significant scale envisaged.

FINANCIAL PERFORMANCE

Background

14. Spending on the NHS in Scotland has increased significantly in recent years and is set to increase yet further – from £7.7 billion in 2003/04 to £9.3 billion (in real terms) by 2007/08.2 NHS spending accounts for around one third of the Executive’s total managed expenditure. The Committee’s examination of the Auditor General for Scotland’s NHS Overview reports is therefore a very important opportunity to scrutinise the value for money provided by the NHS in Scotland.

15. The Committee notes that the overall deficit for 2003/04 of £14.2 million for NHS Boards is a small percentage (0.2%) of NHS Boards total Revenue Resource Limit (RRL) of £5.8 billion. In addition, 12 of the 15 NHS Boards in Scotland projected an in-year balanced position for 2004/05. The Committee welcomes the AGS report finding that systems of internal control are of a good standard in the NHS and that there were no qualifications to the “true and fair” auditors’ opinions.3

16. However, on closer examination, this top-level picture of a system in balance does not tell the whole story. The report in fact paints a picture of building financial pressures.4

Uplift and Demands on the Service

17. As the AGS report records, the NHS in Scotland has received significant increases in funding in recent years. However, the report also states that the service “is facing an unprecedented set of challenges over the coming years.”5

18. Issues which continue to place huge demands on the service include: the pay modernisation agenda; increases in pension and drug costs; a growing older population; the impact of technical advances and changing professional training requirements. These issues challenge the service in many ways – including financially.

19. Evidence from the Department confirmed that once again cost pressures will account for the large part of Boards’ uplift (£472m of the £551m total) - although it is important to recognise that the additional investment targeted at these areas should also lead to improved services in many instances.6

20. Because so much of the additional investment is committed to meeting cost pressures, less money is available for funding new and improved local services.It is crucial therefore that national initiatives such as pay modernisation deliver significant benefits for patients. Paragraphs 38-70 of this report deal specifically with pay modernisation which is the most significant of the cost pressures.

Drugs Costs

21. Prescribing in primary and secondary care will account for £66m of the total uplift of £551m in 2005/06. It is one of the most significant expenditure increases facing Boards after the introduction of Agenda for Change and the GMS Contract, including GP out-of-hours arrangements. The Department gave evidence on the rising cost of GP prescribing. 7 Dr Collings also stated that there was considerable potential for increases in the cost of hospital prescribing due to new and expensive drugs.(Col 986)

22. The Committee examined prescribing in general practice in its 3 rd report in 2004. 8That report acknowledged the progress which has been made but also made a number of recommendations which the Committee continues to believe are important. The Committee refers the Department to the recommendations in its 3 rd report 2004.

23. The Department must do more to ensure efficient and effective prescribing. In particular IT programmes to improve prescribing must deliver better services for patients more quickly. This work must encompass both hospital and GP prescribing.

FINANCIAL MANAGEMENT

24. In his report the AGS sets out the methods used by NHS Boards to achieve their financial targets. These include using non-recurring funding and identifying savings to stay in financial balance and eliminate any funding gaps. 9

25. The Committee wishes to emphasise that Boards must address the financial position in a holistic way, actively managing the whole budget and using it to best effect – rather than identifying potential deficits and devising ways to “plug” any funding gaps. Financial planning will only be robust if it is closely linked to service planning and redesign.

Savings Plans

26. The AGS report notes that the financial recovery plans of six NHS Boards are based on making savings and that in three cases these savings are substantial. 10The report also notes that NHS Boards find it difficult to make savings that result in reductions to the recurring cost base. Finally the report records that in previous years some NHS bodies have had difficulty in achieving their savings plans.11

27. NHS Boards’ savings plans must be:

  • realistic;
  • based, whenever possible, on achieving recurrent savings; and
  • seen as part of a wider sound financial management process.

Non recurring funding

28. The Committee has expressed concerns about the inappropriate use of non-recurring funds in previous reports. 12The AGS report records that the extent to which NHS Bodies relied on non-recurring funding to achieve financial balance remained a problem in 2003/04. 13

29. Using non-recurring funding can represent sound financial management – when it happens as part of a planned strategy to redesign and improve services or to get back into recurring balance.

30. But the evidence in the AGS report and from previous inquiries indicates that within NHS Scotland use of non-recurring funds is not limited to circumstances such as these. This is not a technical accounting issue. It can lead to very real problems for NHS Boards in delivering services. Over-reliance on non-recurring funding masks underlying financial difficulties and, as in the case of NHS Argyll and Clyde, can allow underlying deficits to rise to unmanageable proportions and divert resources from other areas.

31. There is evidence of a continuing over-reliance on non-recurring funding within some NHS Boards. In simple terms, some NHS Boards continue to live beyond their means year after year, using non-recurring funding to “balance the books” rather than bringing spending into line with their base budgets. This should not be allowed to continue.

32. Boards must ensure that they are not relying excessively on non-recurring funding to balance the books and the Department must monitor Boards’ performance in this area more rigorously to ensure that Boards are not at risk.

33. The Committee notes that the current format of NHS accounts does not disclose the use of non-recurring funding.14The Committee considers that this is not sufficiently transparent. The Committee recommends that in future NHS Boards’ accounts should disclose information on the use of non-recurring funding.

Quality of Financial Information and Costs

34. The AGS report notes that the Department and NHS Boards have different estimates of cost pressures facing the service. The report states “this raises concerns about the robustness of financial planning at both national and local levels.”15

35. In its report on the accounts of NHS Argyll and Clyde the Committee commented on the poor quality of financial information and in particular the inadequacy of information on costs.16

36. The Committee again recommends that the Department ensure that accurate cost information for NHS Scotland is provided and that the quality of financial information is improved.

37. The Committee further recommends that in responding to this report the Department set out how the quality of financial information is to be improved . The Committee expects this to address how good practice in financial and service management is to be shared.

PAY MODERNISATION

38. The implementation of pay modernisation is one of the single biggest changes to affect the NHS since its creation. The costs of introducing the new contracts are very significant. Pay modernisation costs for 2005-06 account for more than half of the total uplift to NHS Boards - £281m of £472m17.

Estimating Costs

39. The current estimated cost of implementing the pay modernisation agenda is significantly higher than originally estimated. In addition there have been a number of changes to the estimates. For example, costs associated with the General Medical Services (GMS) strand of pay modernisation have changed four times in the six months prior to evidence taking. On the basis of this evidence the Committee considers that the Department failed to model pay modernisation costs adequately.

40. Despite the uplifts in Board allocations, the increase in pay modernisation costs puts extra pressure on NHS Board budgets and these pressures are exacerbated when estimates keep changing. The fact that original cost estimates for pay modernisation were too low makes it more difficult for NHS Boards to keep within budget. Also, the cost of funding pay modernisation makes it more difficult for Boards to fund other new services18.

41. The Committee recommends that:

  • future cost estimates for the introduction of major initiatives be much more robust; and
  • Boards and the Department jointly agree individual estimating models for such new initiatives.

Realising Benefits

42. Witnesses emphasised that, while implementing pay modernisation did involve additional costs, it should bring significant benefits including more flexibility in relation to the roles played by different disciplines and professions. (Cols 974, 975)

43. However, while pay modernisation may provide “levers for change” (Col 974 and 975) the Department did not describe clearly how it would ensure that improved patient services would result, or how the impact of change would be measured.

44. The Committee is very concerned that the benefits to patients of pay modernisation remain unclear. It is also still not clear how the impact of pay modernisation will be evaluated19.

Meeting Scotland’s Needs

45. The Committee fully supports negotiating contracts for NHS Staff on a UK basis. Separate negotiations and contracts would not be in the best interests of the service in Scotland. However, negotiations at a UK level must take account of Scotland’s distinctive needs and circumstances.

46. NHS Scotland faces different challenges: - higher staffing levels; greater remoteness; distinctive population distribution; poor standards of health and high incidence of poverty in some urban areas; a smaller independent health care sector; and different working practices mean that the impact of pay modernisation is different in Scotland20.

47. The Committee is concerned that the new contracts being implemented under pay modernisation do not properly reflect Scotland’s needs and circumstances21.

Consultant Contract

Costs

48. The estimated costs for 2004/05 of the consultant contract have increased from a figure of £22m in August 200422 to £31m (Col 976) as confirmed by witnesses during the oral evidence session. The Department gave further evidence on how it had costed the consultant contract and Mr Palmer stated that “With hindsight we realise that the costing was low.” ( Col 978)

49. The estimating process for the consultant contract was not sufficiently comprehensive or accurate.

50. The Department was not able to separate out increases in consultant costs arising from higher numbers of staff, from increases resulting from pay modernisation. This demonstrates the poor quality of the information available.23 This is basic management information which should be readily to hand .

Benefits

51. The Department described the potential benefits of the contract, including the increase in contracted hours for direct patient contact from 21 to 30 hours a week. However, SEHD does not collect national information on this issue so it is not known how many consultants in Scotland already undertake 30 hours of clinical activity.24 (Cols 979 and 980) Mr Palmer also confirmed that there has been feedback from the service that consultant activity is reducing as a result of the contract since some consultants were previously working more hours than were formally recognised. ( Col 980)

52. The Committee entirely agrees that all NHS staff should be fully recognised for the work that they undertake – but the service also needs to ensure that recent investment will result in improvements to both patient outcomes and activity levels. The Committee considers that the Department does not have a clear strategy to ensure that these issues are reconciled.

53. This is an example of where working practice in Scotland, for instance the amount of direct patient contact undertaken by consultants, may not have been taken into account in agreeing key elements of the contract.

54. The Committee did not receive any evidence which convinced it that the consultant contract represents good value for money for the service in Scotland.

55. The Committee noted the agreement as part of the negotiations on the consultant contract that:

  • payments would be backdated to 2003/04, at a cost of £53m25, although the contract was not operable at that time; and
  • that although take up was high, consultants could opt out of the contracts. (Col 983)

56. The Committee looks forward to considering the AGS report on the consultant contract which is to be published in the Winter of 2005/06.

GMS Contract

Costs

57. The estimated costs of the GMS contract for 2004/05 have increased from a figure of £64m in August 2004 26 to £85m (Col 974) as set out in evidence to the Committee in February 2005. This figure could increase yet further since some elements such as the reward for GPs under the Qualities and Outcomes Framework have not yet been finalised. The Department must ensure that these significant costs are translated into improved services and that the impact of changes are measured.

Out of Hours Services

58. As stated in the Committee’s 8 th report27 Scotland’s greater remoteness and population distribution has implications for the implementation of the pay modernisation agenda. This is particularly evident in relation to GP out-of-hours services.

59. Larger numbers of staff per head of population are needed to provide out-of-hours services to a rural population. In addition, even in Scotland’s cities, a market for providing out-of-hours services has not developed –and there is even less prospect of non-NHS providers becoming involved in out-of-hours services in rural areas. Consequently, NHS Boards in Scotland must negotiate with the same GPs and other clinical staff to re-provide these services.28

60. In written evidence to the Committee the Department stated that, while initially the high level of GP input to out-of hours services would see costs increase, there was an “expectation” in many Board areas that out-of-hours services will develop a more multi-disciplinary team based approach over time.29However, the Department has provided no evidence of how it will ensure that this change in practice takes place, or how its impact will be evaluated.

Agenda for Change

Costs

61. Implementing Agenda for Change is the single biggest cost increase facing the service in 2005-06, accounting for around £190m of the total £472m estimated cost pressures. 30

62. The Department described a comprehensive estimating process for the cost of implementing Agenda for Change. However, the estimated range for 2004/05 has moved from £130-£160m to £150-£160m.

63. The Committee is concerned that the full costs for implementation in 05/06 are up to £40m higher than the estimates for 04/05 given to the Committee.

64. It is not clear whether negotiations to agree the key elements of Agenda for Change and subsequent funding allocations acknowledged the disproportionate impact on Scotland given its higher staffing levels. The Committee requests further information from the Department on this point.

Additional Funding

65. NHS Boards have received a total of £100m additional funding from the Department to meet the costs of pay modernisation. (Cols 977 and 978)

66. The largest single contribution came from unallocated funds totalling £41.2m. Resources were also released due to underspends in areas such as general dental and ophthalmic services (£24m) and savings in areas such as IT (£4m), Human Resources Initiatives (£2.5m) and e-pharmacy (£2.0m)31. Moving funding from areas which are genuinely underspending is sound financial management and to be welcomed. However, providing additional support to pay modernisation by reducing, stopping or delaying funding for other important initiatives is a matter of concern.

67. The fact that extra one-off payments have been necessary to fund pay modernisation may therefore have meant cancellation, delay or reduced funding for other important initiatives.

68. This is to be regretted not only because the direct patient benefits of these initiatives may have been reduced, but because many of these improvements would have enabled Boards to work more efficiently as well as more effectively.

Modernising Medical Careers

69. Dr Collings gave evidence on the future cost pressure of the reform of doctors’ training known as “Modernising Medical Careers” (Col 995). It is important that in planning for the introduction of this reform the Department learn the lessons from implementing pay modernisation.

70. Planning for the introduction of this initiative must begin in earnest now. In responding to this report the Department should provide further information on this issue including any cost estimates which have been produced.

PRODUCTIVITY

71. In previous inquiries the Committee has considered evidence about the decline in activity in some areas of the NHS in Scotland32. The decline in activity is particularly concerning given the high levels of investment in recent years and the record numbers of staff in the system.

72. One of the aims of pay modernisation is to encourage the NHS to deliver services in new and innovative ways which better meet the needs of patients33. In particular, the new contracts should enable NHS staff to take on different responsibilities. This increased flexibility should help the NHS to work more efficiently and effectively, treating more patients and improving service quality. In addition there has been heavy investment in increasing staff numbers.

73. However, the Committee is not yet persuaded that the possible benefits of pay modernisation will be realised. Also, according to the information available, the increase in staff has not yet brought about a significant improvement in activity. The Committee is therefore very concerned that on current evidence some key service areas may cost more and deliver less.

74. Poor quality management information which has not kept pace with developments in the service means that activity cannot be accurately measured. Without accurate information to the contrary, the perception that activity is declining will persist.

Incentives

75. The Department agreed that any perverse incentives in the system needed to be tackled and cited the quality and outcomes framework in the GMS contract as an example of an incentive to develop new models of care and activity. (Cols 989-990, 991) But there are still a number of ways in which poor performance by Boards leads to increased funding. Conversely there appears to be little in the way of reward for high performing Boards.

76. For example:

  • The service has a history of giving one-off allocations to Boards which are struggling to meet targets or stay within budget34;
  • Where Boards are not meeting waiting time and other performance targets additional resources may be made available;
  • The systems for transferring resources from one NHS Board to another rely largely on negotiation. This can be a disincentive for Boards to treat increasing numbers of patients from other areas, even if they have the capacity, since costs may not be fully reimbursed.

77. The Committee is concerned that perverse incentives are still in operation within NHS Scotland. The Committee recommends that the Department review the range of incentives in place.

DRIVING CHANGE

Drivers for change

78. The Department was asked what drivers and incentives were in place in the NHS in Scotland to push forward service redesign and reform. Members also questioned Dr Woods on how the pace and scale of reform in the NHS in Scotland could be accelerated. Dr Woods stated that performance management systems, along with an energetic approach to modernisation through the NHS modernisation agency, had been very important drivers for change in England. ( Col 989) He intended to reflect on whether the emphasis on in-year measurement of progress in England would be effective in Scotland, but emphasised that what was appropriate for England might not be in Scotland. ( Col 989) Dr Woods also referred to the work of the Centre for Change and Innovation and its role in spreading best practice. ( Col 988)

79. The Committee has addressed the issue of sharing and applying best practice in previous reports35. The Committee notes that NHS Quality Improvement Scotland and the Centre for Change and Innovation were established to improve performance in this area.

80. While these bodies have the potential to perform an important role in improving effective leadership and management across the service, it is still not clear to the Committee how they will drive change and improve performance.

81. Having considered evidence submitted in this and previous inquiries the Committee continues to be extremely concerned that the roll-out of successful initiatives and the sharing and application of best practice remains piecemeal.

82. Dr Woods’ comments on the need to make the performance management system more effective are welcome but do not go far enough. Given the increased investment in the service, the scale and pace of improvement in key areas is disappointing.

83. The Committee has noted the rate of improvement in the performance of some areas of the NHS in England. The Committee is not making a case for the same measures currently operating in England to be introduced in Scotland. However, Scotland needs its own distinctive and coherent strategy for improving performance within the NHS – the Committee considers that at the moment this is lacking.

84. The Department must set out a clear strategy for how the large scale reform envisaged in the service will be driven forward.

INFORMATION

Review of Data and Statistics

85. The Committee recognises that some good quality information is gathered in relation to some areas of activity within NHS Scotland. Yet, despite the plethora of information which is collected it is still not possible to gain a clear picture of the level of service provided for the significant expenditure on the NHS.

86. Further improvements in information are essential to:

  • support improved services to patients in areas such as prescribing;
  • ensure that current rather than outdated practice is accurately recorded;
  • Ensure that the benefits of increased investment are accurately monitored and reported; and
  • Ensure that performance is not being driven in the wrong direction by out-of-date information.

87. The Department set out in oral and written evidence the work being undertaken to review health and care statistics.36 ( Col 990 – 994) There are two major pieces of work ongoing: the Strategic Review of Health and Care Statistics which is now in its concluding stages and which should result in a report being produced in Spring 2005; and the ISD Data Development Project which was set up almost three years ago and which aims to address key information gaps.37

88. The Committee is deeply concerned about how long it will take for real improvements in information to be achieved under the timescale set out in the review. In addition, the objectives and remits of the two information review projects overlap and are confusing.

89. A clear strategic view on information development is required as a matter of urgency and improvements to the quality of information must be achieved sooner than currently planned. The Committee recommends that in responding to this report the Department set out how this is to be achieved.

E-Health

90. Witnesses from the Department confirmed that the central budget to support the e-health strategy would increase significantly to £100m in 2007-08. Dr Collings confirmed that an incremental approach was being taken, rather than a wholesale replacement of all major IT systems in NHS Scotland. ( Col 993)

91. The Committee welcomes this increased funding. However, the incremental approach which the Department has taken is failing to deliver the scale of change needed quickly enough.

Appendix A

KEY FINDINGS AND RECOMMENDATIONS

The Committee’s key findings and recommendations are set out below:

FINANCIAL PERFORMANCE

Background

The Committee welcomes the AGS report finding that systems of internal control are of a good standard in the NHS and that there were no qualifications to the “true and fair” auditors’ opinions. (Para 15)

However, on closer examination, this top-level picture of a system in balance does not tell the whole story. The report in fact paints a picture of building financial pressures. (Para 16)

Uplift and Demands on the Service

Because so much of the additional investment is committed to meeting cost pressures, less money is available for funding new and improved local services.It is crucial therefore that national initiatives such as pay modernisation deliver significant benefits for patients. (Para 20)

Drug Costs

The Committee refers the Department to the recommendations in its 3 rd report 2004. (Para 22)

The Department must do more to ensure efficient and effective prescribing. In particular IT programmes to improve prescribing must deliver better services for patients more quickly. This work must encompass both hospital and GP prescribing. (Para 23)

FINANCIAL MANAGEMENT

The Committee wishes to emphasise that Boards must address the financial position in a holistic way, actively managing the whole budget and using it to best effect – rather than identifying potential deficits and devising ways to “plug” any funding gaps . (Para 25)

Savings Plans

NHS Boards’ savings plans must be :

  • realistic;
  • based, whenever possible, on achieving recurrent savings; and
  • seen as part of a wider sound financial management process.
    (Para 27)

Non recurring funding

There is evidence of a continuing over-reliance on non-recurring funding within some NHS Boards. In simple terms, some NHS Boards continue to live beyond their means year after year, using non-recurring funding to “balance the books” rather than bringing spending into line with their base budgets. This should not be allowed to continue (Para 31)

Boards must ensure that they are not relying excessively on non-recurring funding to balance the books and the Department must monitor Boards’ performance in this area more rigorously to ensure that Boards are not at risk. (Para 32)

The Committee notes that the current format of NHS accounts does not disclose the use of non-recurring funding. The Committee considers that this is not sufficiently transparent. The Committee recommends that in future NHS Boards’ accounts should disclose information on the use of non-recurring funding. (Para 33)

Quality of Financial Information and Costs

The Committee again recommends that the Department ensure that accurate cost information for NHS Scotland is provided and that the quality of financial information is improved. (Para 36)

The Committee further recommends that in responding to this report the Department set out how the quality of financial information is to be improved . (Para 37)

PAY MODERNISATION

Estimating Costs

The Committee considers that the Department failed to model pay modernisation costs adequately. (Para 39)

The fact that original cost estimates for pay modernisation were too low makes it more difficult for NHS Boards to keep within budget. Also, the cost of funding pay modernisation makes it more difficult for Boards to fund other new services. (Para 40)

The Committee recommends that:

  • future cost estimates for the introduction of major initiatives be much more robust; and
  • Boards and the Department jointly agree the estimating model for such new initiatives. (Para 41)

Realising Benefits

The Committee is very concerned that the benefits to patients of pay modernisation remain unclear. It is also still not clear how the impact of pay modernisation will be evaluated. (Para 44)

Meeting Scotland’s Needs

The Committee is concerned that the new contracts being implemented under pay modernisation do not properly reflect Scotland’s needs and circumstances. (Para 47)

Consultant Contract

Costs

The estimating process for the consultant contract was not sufficiently comprehensive or accurate. (Para 49)

The Department was not able to separate out increases in consultant costs arising from higher numbers of staff, from increases resulting from pay modernisation. This demonstrates the poor quality of the information available. This is basic management information which should be readily to hand. (Para 50)

Benefits

The Committee entirely agrees that all NHS staff should be fully recognised for the work that they undertake – but the service also needs to ensure that recent investment will result in improvements to both patient outcomes and activity levels. The Committee considers that the Department does not have a clear strategy to ensure that these issues are reconciled. (Para 52)

The Committee did not receive any evidence which convinced it that the consultant contract represents good value for money for the service in Scotland (Para 54)

GMS Contract

Costs

The estimated costs of the GMS contract for 2004/05 have increased from a figure of £64m in August 2004 to £85m (Col 974) as set out in evidence to the Committee in February 2005. The Department must ensure that these significant costs are translated into improved services and that the impact of changes are measured. (Para 57)

GMS Contract – Out-of-hours Services

In written evidence to the Committee the Department stated that, while initially the high level of GP input to out-of hours services would see costs increase, there was an “expectation” in many Board areas that out-of-hours services will develop a more multi-disciplinary team based approach over time. However, the Department has provided no evidence of how it will ensure that this change in practice takes place, or how its impact will be evaluated.(Para 60)

Agenda for Change

The Committee is concerned that the full costs for implementation in 05/06 are up to £40m higher than the estimates for 04/05 originally given to the Committee. (Para 63)

It is not clear whether negotiations to agree the key elements of Agenda for Change and subsequent funding allocations acknowledged the disproportionate impact on Scotland given its higher staffing levels . The Committee requests further information from the Department on this point. (Para 64)

Additional Funding

The fact that extra one-off payments have been necessary to fund pay modernisation may therefore have meant cancellation, delay or reduced funding for other important initiatives. (Para 67)

This is to be regretted not only because the direct patient benefits of these initiatives may have been reduced, but because many of these improvements would have enabled Boards to work more efficiently as well as more effectively. (Para 68)

Modernising Medical Careers

It is important that in planning for the introduction of this reform that the Department learn the lessons of pay modernisation. (Para 69)

Planning for the introduction of this initiative must begin in earnest now. In responding to this report the Department should provide further information on this issue including any cost estimates which have been produced. (Para 70)

PRODUCTIVITY

The decline in activity is particularly concerning given the high levels of investment in recent years and the record numbers of staff in the system. (Para 71)

The Committee is therefore very concerned that on current evidence some key service areas may cost more and deliver less. (Para 73)

Poor quality management information which has not kept pace with developments in the service means that activity cannot be accurately measured. Without accurate information to the contrary the perception that performance is declining will persist. (Para 74)

Incentives

The Committee is concerned that perverse incentives are still in operation within NHS Scotland. The Committee recommends that the Department review the range of incentives in place. (Para 77)

DRIVING CHANGE

Drivers for Change

While these bodies have the potential to perform an important role in improving effective leadership and management across the service, it is still not clear to the Committee how they will drive change and improve performance. (Para 80)

Having considered evidence submitted in this and previous inquiries the Committee continues to be extremely concerned that the roll-out of successful initiatives and the sharing and application of best practice remains piecemeal. (Para 81)

Dr Woods’ comments on the need to make the performance management system more effective are welcome but do not go far enough. Given the increased investment in the service, the scale and pace of improvement in key areas is disappointing. (Para 82)

The Committee has noted the rate of improvement in the performance of some areas of the NHS in England. The Committee is not making a case for the same measures currently operating in England to be introduced in Scotland. However, Scotland needs its own distinctive and coherent strategy for improving performance within the NHS – the Committee considers that at the moment this is lacking. (Para 83)

The Department must set out a clear strategy for how the large scale reform envisaged in the service will be driven forward. (Para 84)

INFORMATION

Review of Data and Statistics

Despite the plethora of information which is collected it is still not possible to gain a clear picture of the level of service provided for the significant expenditure on the NHS. (Para 85)

The Committee is deeply concerned about how long it will take for real improvements in information to be achieved under the timescale set out in the review. In addition, the objectives and remits of the two information review projects overlap and are confusing. (Para 88)

A clear strategic view on information development is required as a matter of urgency and improvements to the quality of information must be achieved sooner than currently planned. The Committee recommends that in responding to this report the Department set out how this is to be achieved. (Para 89)

E-health

The Committee welcomes this increased funding. However, the incremental approach which the Department has taken is failing to deliver the scale of change needed quickly enough. (Para 91)

1 Audit Committee 8th Report 2004, “Overview of the National Health Service in Scotland 2002-03”, SP paper 197

2 AGS report “ Overview of the Financial Performance of the NHS in Scotland 2003/04, AGS/2004/12, page 3, para 2.

3 AGS report,AGS/2004/12, page 9, Key messages

4 AGS report, AGS/2004/12, page 4, para 8

5 AGS report, AGS/2004/12, page 3, para 2

6 Letter from Dr Kevin Woods, 16 February 2005, AU/S2/ 05/04/3, Annex C

7 Letter from Dr Kevin Woods, 16 February 2005, AU/S2/ 05/04/3, Annex C, Cols 985-987

8 Audit Committee, 3rd Report, 2004, “Supporting Prescribing in General Practice – A Progress Report”

9 AGS report, AGS/2004/12, page 3, para 6, page 16, Key messages

10 AGS report, AGS/2004/12, page 21, para 66

11 AGS report, AGS/2004/12, page 3, para 6, page 21, paras 66 and 67

12 Audit Committee, 4th Report 2002, Overview of the NHS in Scotland 2000/01 paras 13- 18, Audit Committee, 1 st Report 2001, Overview of the NHS in Scotland 1999/00, para 6, Audit Committee 1 st Report 2005, “The 2003/04 Accounts of NHS Argyll and Clyde”, page 2, para 9

13 AGS report, AGS/2004/12, page 19, para 60

14 AGS report, AGS/2004/12, page 14, para 54

15 AGS report, AGS/2004/12, page 3, para 7 and page 16, Key messages

16 Audit Committee, 1st Report 2005, The 2003/04 Accounts of NHS Argyll and Clyde, page 4, para 20, page 6, paras 35-37

17 Letter from Dr. Kevin Woods, 16 February 2005, AU/S2/05/04/3, Annex C

18 Audit Committee 8th report 2004, Overview of the National Health Service in Scotland 2002-03, paras 42 and 43

19 Audit Committee 8th Report paras 10, 13, 16, 17, 49

20 Audit Committee 8th Report, paras 34-36, 50-59, 82-87

21 Audit Committee 8th Report, paras 55-59

22 AGS report, AGS/2004/12, page 24, Exhibit 7

23 Letter from Dr Kevin Woods, 7 February 2005, AU/S2/05/04/1, pages 2 and 3

24 In a submission to the Committee’s inquiry into the 2203/04 Accounts of NHS Argyll and Clyde, Chief Executive of NHS Argyll and Clyde Neil Campbell confirmed that no full time consultants in NHS Argyll and Clyde are working less than 30 hours per week.

25 AGS report, “Overview of the Performance of the NHS in Scotland”, AGS/2004/04, page 16, para 81

26 AGS report, AGS/2004/4, page 17, Exhibit 6,

27 Audit Committee, 8th Report, page 9, paras 51 -54

28 Audit Committee 8th Report, page 9, paras 50-54

29 Letter from Dr Kevin Woods, 7 February 2005, AU/S205/04/1, para 24

30 Letter from Dr Kevin Woods, 16 February 2005, AU/S2/05/04/3, Annex C

31 Letter from Dr. Kevin Woods, 16 February 2005, AU/S2/05/04/3, Annex A

32 Audit Committee Meeting 16 March 2004, Cols 387, 412, 413, AGS Report, AGS/2004/4, page 25, Key messages

33 AGS report, Overview of the Performance of the NHS in Scotland, AGS/2004/4, page 16, para 77

34 Audit Committee 8th report, paras 15, 101, 103

35 Audit Committee 8th report, para 73, Audit Committee 3 rd report 2004, “Supporting Prescribing in General Practice – A Progress Report”, paras 23 and 24

36 Letter from Dr Kevin Woods 7 February 2005, AU/S2/05/04/1, Strategic Review of Health and Care Statistics

37 Letter from Dr Kevin Woods, 7 February 2005, AU/S2/05/04/1, Strategic Review of Health and Care Statistics