Oral evidence: Planning for the Better Care Fund, HC 807
Oral evidence, 1 December 2014.
Witnesses
Carolyn Downs, Chief Executive, Local Government Association; Helen Edwards, Director General for Localism, Department for Communities and Local Government (DCLG); Sir Bob Kerslake, Permanent Secretary, DCLG; Una O'Brien, Permanent Secretary, Department of Health; Andrew Ridley, Better Care Fund Programme Director; Jon Rouse, Director General, Social Care, Local Government and Care Partnerships, Department of Health; and Simon Stevens, Chief Executive, NHS England, gave evidence
Chair
Welcome. You may like this room, but I don’t; you’re too far away, so please speak up. The reason why we had to come here is that there are seven of you. Every time I tried to knock somebody off the panel, I was told they were absolutely central to this hearing. I will start with a sentence answer from each of you about what you are accountable for today in relation to this hearing, starting with Andrew Ridley.
Andrew Ridley
I am the programme director for the Better Care Fund, and I have been accountable for running it since 7 July this year.
Chair
I hear you have already been promoted out of it.
Andrew Ridley
I also started a new job for NHS England today.
Chair
So how many months have you been in this absolutely crucial job?
Andrew Ridley
Five months, but I am continuing the BCF role as well as taking on additional responsibilities.
Chair
So it is so important that it can become a subsidiary responsibility to your other responsibilities? We hate that here; I have got to say that to you, Mr Stevens. If there is a new £3.8 billion programme, to have a senior responsible officer for four months—five months?
Andrew Ridley
Five.
Mr Bacon
What is your new job?
Andrew Ridley
I am regional director for the south of England.
Mr Bacon
How many people live in the south of England within your region?
Andrew Ridley
About 13.5 million.
Mr Bacon
So you have a job where you are responsible for the NHS England function for 13.5 million people in the south of England. That is the job; that is what being regional director means, does it?
Andrew Ridley
It does.
Mr Bacon
Okay. So you were going to be doing your other job—your now part-time job of Better Care Fund programme director—as well?
Andrew Ridley
Yes. There are three things. I have appointed a deputy to support me in the Better Care Fund role and a deputy in the region. Presumably we will hear something about it this afternoon, but it is our intention to increasingly mainstream the Better Care Fund into—
Chair
Who is going to be the SRO for the Better Care Fund, you or your deputy?
Andrew Ridley
The SRO is actually Barbara Hakin.
Chair
Who is she?
Simon Stevens
The SRO is Barbara Hakin, who was appointed the SRO of NHS England on the same date that I hired Andrew Ridley to do this; 7 July was when Barbara took over. Barbara continues as the SRO of this programme. We offered for Barbara to be here today, but I guess it was decided that an eighth seat was probably not feasible.
Chair
Well, I don’t understand. It is not very satisfactory.
Mr Bacon
Isn’t she the deputy chief executive as well?
Simon Stevens
She is the director of commissioning operations, so she is one of my national directors. So the accountability goes from me, Barbara, Andrew. And so you have got the sandwich, if you like—
Mr Bacon
To Andrew’s deputy, because he is now doing the south of England.
Simon Stevens
Andrew will have ongoing responsibilities here, but I obviously have overall responsibility in NHS England. Barbara is the SRO since 7 July, and that will continue.
Mr Bacon
Clear as mud.
Stephen Phillips
We just don’t have the SRO here, for a hearing on the Better Care Fund. It seems extraordinary.
Carolyn Downs
I am Carolyn Downs and I’m chief executive of the Local Government Association. Our role in relation to the Better Care Fund has been that I sit on the advisory board, with colleagues here. We have put two full members of staff into the taskforce to help—
Chair
What is your accountability here? Sorry—I just want a really quick sentence on why you are accountable. Why are you before us?
Carolyn Downs
We have staffed and indeed supported the whole assurance process from the local government perspective.
Mr Bacon
Did you say two quarter-members of staff?
Carolyn Downs
We have put two members of staff into the taskforce.
Mr Bacon
I may have misheard you—forgive me. I thought I heard you say two quarter-members of staff.
Carolyn Downs
No, no. Sorry—
Mr Bacon
So, there are two full-timers? Okay. Thank you.
Helen Edwards
I am the director general for localism at the Department for Communities and Local Government, and I am the joint chair of the Better Care Fund programme board. The SRO, Barbara Hakin, and the programme director, Andrew Ridley, report into that board.
Sir Bob Kerslake
Yes. I am permanent secretary at DCLG and therefore accounting officer for the Department, which, with the Department of Health, is responsible for overseeing the policy and the overall implementation of the Better Care Fund.
Una O'Brien
I am Una O’Brien. I am the permanent secretary and the accounting officer at the Department of Health, and I have the mirror image of Bob’s responsibility and I am overall responsible for everything that is done with and through the Department of Health.
Simon Stevens
I am Simon Stephens, chief executive of NHS England. Since the bulk of the Better Care Fund revenues are flowing through the NHS England budget, I am the accounting officer for the £3.46 billion that will flow through CCG allocations from 1 April.
Chair
So what are you accounting officer for, Una, on that?
Una O'Brien
The way it works, as set out in my accounting officer system statement, is that the Department of Health is the initial receiver of all the funds that are granted through Parliament, and then—in relation to all of NHS England’s responsibilities—we set out a mandate for the money that we hand over. But because, self-evidently, the scale of the responsibility is that each of our a or b chief executives becomes an accounting officer for the utilisation of those funds.
Chair
So if this goes wrong, who do we hold to account out of you two?
Simon Stevens
You will no doubt have us both back.
Mr Bacon
Who is the accounting officer for the rest of the £3.8 billion? That is Sir Bob at DCLG, is it?
Una O'Brien
Yes.
Mr Bacon
And the other £340 million?
Sir Bob Kerslake
The difference between the £3.46 billion and the £3.8 billion[1] is money that is routed directly into local government, and therefore it is part of my accounting officer responsibilities.
Chair
Finally, Jon Rouse.
Jon Rouse
I am director general of social care, local government and care partnerships at the Department of Health, and I am the other co-chair of the programme board with Helen, which therefore joins up DCLG and DOH.
Chair
How do you fit in with the other person? We were told she should be here, but she isn’t here. And she is the number two to—how do you fit in?
Jon Rouse
So, Barbara Hakin works for NHS England, and she is the SRO. Barbara, as SRO, reports into the programme board, which is co-chaired between myself and Helen Edwards.
Chair
All right. Is everybody clear around the table?
Mr Bacon
What could possibly go wrong?
Chair
Can I ask another question? I don’t know who will choose to answer it: who signs the cheques on this?
Simon Stevens
I sign the cheques for £3.46 billion.
Sir Bob Kerslake
Obviously, the balance comes through DCLG, so that’s for me.
Chair
At Barking and Dagenham level, who signs the cheques?
Simon Stevens
Principally the CCG, and the CCG through its normal line of accountability to NHS England has to account for the use of the money that has been earmarked from its allocation for 2015-16. In doing that, it obviously works closely with Barking and Havering council through the health and wellbeing board that agrees the use of the funds.
Chair
Is this money ring-fenced?
Simon Stevens
Yes.
Chair
So they have to use it on the plan that is approved by Ministers.
Simon Stevens
That is correct, but they can add more to it which, interestingly of course, many parts of the country have chosen to do, such that the pooled amount will be £5.3 billion, £1.5 billion more than the minimum that Ministers expected.
Chair
My next question is clearing the deck a bit. I don’t know whether Simon or Una will take it, but there are probably two matters arising from the £2 billion that was announced over the weekend. First, can you explain where the £700 million from within the NHS budget is coming from? Secondly, what is the impact of the £2 billion? It is one-year money isn’t it? It is only for 2015-16 and I am worried about that.
Simon Stevens
No, it will be recurring, and built into the NHS baseline.
Chair
So it is into the base.
Simon Stevens
Yes.
Chair
Good, £2 billion is into the base, or £1.3 billion.
Simon Stevens
Well, I can give you the breakdown, but I don’t want to pre-empt the Secretary of State who I believe will make an oral statement in half an hour or 25 minutes on this very point.
Chair
Okay. Secondly, will any of the money be used to further the Better Care Fund initiative?
Simon Stevens
No. The Better Care Funds are separate from this and the announcements by the Chancellor do not affect what we are talking about to you here today.
Chair
Okay, so out of the £2 billion, £1.3 billion additional is added into the base. Where is the £700 million coming from?
Simon Stevens
I think Una will take that, but I just want to say that from the point of view of the NHS in England it will be £1.95 billion of extra funding available through the NHS England mandate for 2015-16 over and above what we already had available to us.
Chair
Of which £700 million comes from the Department of Health.
Simon Stevens
But that is additional to the funds that are available to the NHS through the resources that will be routed to the NHS front line. In terms of how that will be used, as the Secretary of State will set out, we will use about £1.5 billion for front-line health services, £200 million to support health economies in transition on the back of the five-year forward view and then another £250 million, which will be repeated for each of the next four years, to boost investment in GP services, and out-of-hospital infrastructure, again to relieve some of the pressure on hospitals and to expand the supply of our primary care and some of the models we were talking about in the forward view.
Chair
That distribution will be up for grabs in 2016-17 presumably.
Simon Stevens
For the £250 million for the primary care piece? We are getting £250 million for each of the next four years, so we have £1 billion that we can plan against over the next four years specifically for primary care, infrastructure, community services, out of hospital—
Chair
So this is capital.
Simon Stevens
It will be flexibly deployed between revenue and capital. That is the understanding we have.
Chair
Okay, but that’s your decision. Of the, in effect, £2 billion, £250 million will be to create some GP infrastructure.
Simon Stevens
GP and primary care more widely and community health services, but there is clearly a backlog of requests from GPs, rightly, for premises and infrastructure improvement to allow them to take on more and they will have the first call on this resource.
Chair
And the other £1.75 billion—this is slightly peripheral to our hearing.
Simon Stevens
The other £1.7 billion. It is £250 million for that, and of the £1.7 billion, £1.5 billion will go to support front-line health services through CCG allocations and specialised commissioning and we will make decisions on exactly what that allocation looks like later this month. The £200 million on top of the £1.5 million will be used particularly for challenged health economies and challenged geographies around the health service where they can see they need support to change their service configurations to get on the new path of sustainability that we set out in the five-year forward view.
Chair
And that is recurring for four years.
Simon Stevens
Obviously, everything is subject to decisions that the next Government make for the 2016-17 spending review, but that is not a one-time increase; that is an assumption that is in the baseline.
Chair
And the £700 million?
Una O'Brien
The £700 million is made up of a number of programmes, including some that come to a natural end in 2014-15. In addition: back-office savings, contingency funding that is no longer needed, and spreading the delivery of some infrastructure programmes over a longer time frame. It also includes running cost reductions on national arm’s length bodies. These savings have been found without impacting on existing front-line NHS services, so the funding does provide a genuine additional boost to the NHS.
John Pugh
You cannot build contingency funding into the base budget.
Una O'Brien
The initial planning for 2015-16—
John Pugh
It is all going to the base budget, and some of it is made up of the big element of contingency funding that you found from somewhere for this year. It is not in the base budget, is it?
Una O'Brien
All I can tell you is that we have looked at the figures for 2015-16 and scrutinised them thoroughly. Again, over the last few weeks, we have been able to identify up to £700 million of additional savings.
Chair
How much of that is underspend?
Una O'Brien
I cannot give a detailed breakdown, but I would be happy to write to you about it once we are able to.
Chair
Why can you not give it to us?
Una O'Brien
I have not got the detailed breakdown of the £700 million with me.
Chair
You must know vaguely in your head how much of that is really what John is getting at, which is underspend, rather than a real saving that can then be redistributed into NHS England’s baseline.
Una O'Brien
As I say, I am happy to write to you with those further details.
Chair
I hate things coming after the hearing. I love to see things out in the public domain. That is really what I would like.
Una O'Brien
All this will come into the public domain in the coming days. The Secretary of State is making a statement this afternoon, and the Chancellor is making the autumn statement on Wednesday.
Chair
I know. Is it because he is making a statement that you feel constrained and not able to say it?
Una O'Brien
I am happy to write to the Committee with more details, as I have said. I do not have that level of detail with me.
Chair
Maybe somebody sitting behind you—there are a load of people behind you—can get those details so that I can ask the question again at the end of the session. I cannot believe they are that difficult to identify. Does the Treasury know them?
Marius Gallaher
No.
Chair
I will ask that question again at the end of the session. Right, let us move on to the £1 billion. Sir Bob and Una, when you were in charge of this, was the £1 billion saving an expectation or a requirement?
Sir Bob Kerslake
What we were always clear about was the expectation that there would be significant benefit from the funds that would flow both to the NHS and to local government, and that would happen in 2015-16 and in subsequent years. So we always expected significant benefit. It was not, as has been recorded in the Report, a formal outcome of the spending round process. So what we did do was to build into the guidance an expectation that savings would be identified through either the national conditions or the metrics, and that is what happened through the process.
Chair
Do you agree, Una, that it was an expectation, not a requirement?
Una O'Brien
I do. I think there was always an understanding that there would be a combination of savings and investment that would arise. I have just gone back and checked the original guidance that was put out, and I would agree with what Bob has just said.
Chair
Carolyn Downs, you were around at that time. Was it an expectation or a requirement?
Carolyn Downs
It was an expectation, as has been stated by the two permanent secretaries.
Chair
So when, Mr Stevens, did it become a requirement?
Simon Stevens
Shortly after I arrived.
Mr Bacon
I bet it did.
Austin Mitchell
Since it was a planning assumption, why were the local authorities not told?
Simon Stevens
The local authorities were told.
Austin Mitchell
When were they told? All the plans were taken back and revised to bring forward the £1 billion saving. It was a planning assumption in the original thing, so why were they not told right at the start?
Simon Stevens
I think the guidance went out on 25 July. That is the date that you are referring to, Mr Mitchell.
Chair
No, we are not. You approved them in April. Your second guidance went out—
Simon Stevens
The guidance on the £1 billion, and the expectations around emergency provisions, was 25 July.
Mr Burrowes
I am trying to understand what is the difference between an expectation and the guidance.
Simon Stevens
Well, I think it is the difference between an expectation and a requirement.
Mr Burrowes
So can expectations just be ignored?
Simon Stevens
No. Look, as someone who came into this fresh, I think a perfectly good process has been undergone, which was to ask local areas, “What is it you want to do? What is it you can produce with this, which everybody sees as strategically the right direction of travel?” There is bound to be more pooling of health and social care funding, given that, from the point of view of individual patients and individual users of social care, in many respects it is increasingly a distinction without a difference. So the judgment was made at the time, I think correctly, to allow local areas to come up with their plans to show what they might produce. They did that. However, what it also showed was that the degree of cashable savings, if you like, that would then be available to offset the £1.9 billion implied budget transfer from CCGs was not as high as might have been expected when those expectations were tested for reality. So on the basis of that, I think a good decision was made to firm up the expectations of £1 billion of value being realised to offset what would otherwise have been a very substantial gap opening up in the finances of the National Health Service from next April.
Mr Burrowes
Before you got there, was anyone else responsible at all for delivering the assumed savings? Anyone else at the table? We have heard who is responsible for signing the difference cheques. Who is responsible for cashing in the savings?
Jon Rouse
First of all, there was a general assumption that this would make savings right from the outset.
Chair
Where you there? You have probably just arrived, have you? How long have you been at it?
Jon Rouse
I was there, yes. I arrived in—
Chair
You were there. So you signed off on the things that said it was going to save whatever it was: £350 million. You signed off on that, did you?
Jon Rouse
Can I step back just for a moment? So if we go back to the time of the SR, there was no requirement around a particular figure in terms of savings. Chair: But there was an expectation.
Jon Rouse
First of all, there was a general ambition that there would be savings and that was reflected through the metrics and the conditions. Now, clearly, as DH and NHS England—thinking ahead to April 2015—we started to think about what would this potentially provide us in terms of value to the NHS. But we were looking at many aspects of our planning for 2015-16 at that time; we were still 18 months out. But what we had not done at that time was firmed up on any figure that it would have been right to make a requirement in terms of the planning process.
Chair
I’m really sorry. I’m getting really cross down this end. What the report tells me is, when those plans first came in—actually, correct me if I’m wrong—local areas estimated the fund benefits would total just over £700 million. The expectation was £700 million, signed off by everybody at the table, except for Simon Stevens.
Ashley McDougall
On the expectation, what we have and what the report says is that at the time of the SR—that is, summer 2013—the Department of Health and NHS England had a shared planning assumption that there would be £1 billion of savings at that time.
Chair
Right. But when the plans came in—
Ashley McDougall
When the plans came in, there were two elements. The plans promised £731 million and NHS England, as requested by Mr Stevens, tested the plans and found that they were going to give £55 million of cashable savings.
Chair
No, no. Before the £55 million. So when they assessed them and signed them off in whenever it was—April—
Jon Rouse
They were not signed off.
Ashley McDougall
Health and Wellbeing Boards signed off their plans for submission, and that was £731 million—what they expected the plans would save.
Chair
When the first set of plans came in, there was a process that took place. Yes? They were examined by Carolyn Downs, Bob Kerslake or Helen Edwards and you, Mr Rouse, because you say you were around. You three guys were responsible. At that time, before Simon Stevens arrived, you expected a saving of—and before Andrew Ridley was anywhere near it—
Carolyn Downs
There was no specific figure that we were working to for savings. There was an expectation that the Better Care Fund would deliver savings and other benefits to the NHS, and that was the basis on which we were working.
Stephen Phillips
Hold on. It goes further than that. The expectation, as you all agree, was that it would make a saving of £1 billion.
Carolyn Downs
No, it was not £1 billion. We were never party to that; that’s why the guidance sent out in December did not include the requirement to achieve £1 billion worth of savings. My understanding of the plans when they were received in February was that the savings that were identified ranged between £350 million and £750 million. That was the assessment that we had undertaken. NHS England then undertook a separate assessment that came to the £55 million figure.
Q52Stephen Phillips
I am very confused. I want to know who at that end of that table, at what stage, expected a saving of £1 billion to be generated by the Better Care Fund.
Jon Rouse
From a DOH and NHS England perspective, we had discussions at the time of the SR about what we thought the potential might be. That began to firm up through the autumn, in terms of what we might reasonably expect—not in terms of savings per se, but a combination of savings plus investment in the NHS.
Stephen Phillips
So the underlying planning assumption on the part of the Department of Health, which was communicated to the Treasury, was that the establishment of the Better Care Fund would result in savings of approximately £1 billion to the NHS budget—yes or no?
Jon Rouse
We did not communicate to the Treasury in those terms, as you have described them. There was no fixed, formal planning assumption at that time.
Stephen Phillips
How was this £1 billion modelled by DH and NHS England?
Jon Rouse
It was based on reference to the best evidence that was available from previous attempts at integration programmes, plus a working estimate of what we believe local areas might choose to invest in the NHS from the £3.8 billion, but both of those were estimates, which is why it would not have been sensible at that time to turn that into some sort of fixed figure or requirement, nor would we have known on what basis—particularly if it was a savings requirement—to allocate that to individual areas, given that they were all starting from different places.
Stephen Phillips
My question was how it was modelled. The answer you have just given tends to indicate that it was a guess based on past experience.
Jon Rouse
It was an estimate.
Mr Burrowes
As far as the Treasury is concerned, was that just an estimate that could easily be ignored?
Marius Gallaher
Yes, that’s absolutely right. It is reflected in the fact that there was no mention, as I understand it, of the £1 billion savings in the settlement letter of the SR. If there had been an agreement on such savings, I would be quite confident that the number would have featured in the settlement letter, because Treasury officials like to get numbers like that into settlement letters if they think they are sufficiently robust.
Mr Burrowes
What amount of savings was the Treasury counting on at the time of the spending round? Was it content with a stab being taken at an estimate?
Marius Gallaher
No, we were looking for significant savings, but I do not think that my colleagues had a quantified target. If they had had one, it would probably have featured in the settlement letter.
Chair
Why did it become a requirement halfway through the process, Mr Stevens? Everybody around you said, “Well, it might save a bit of money. We don’t really care. It is a sort of aspiration, I would put it, rather than even an expectation.” Suddenly, you jump in and it becomes a requirement.
Mr Burrowes
Ambition is what we heard.
Chair
It turned from an ambition to a requirement. Why?
Una O'Brien
Before Simon answers—
Mr Bacon
Why are you answering the question? I heard the Chair say “Mr Stevens”.
Una O'Brien
I am happy to come in after Simon—either way.
Mr Bacon
Even though you are a long way away, we can see you whispering to each other. The Chair definitely said Mr Stevens—I am close enough to the Chair to hear what she is saying.
Simon Stevens
The question is why the £1 billion became a requirement from spring. The answer is because there was the legitimate bottom-up exercise of asking people around the country, “What is it you think you’re going to be able to produce in the way of first-year savings?”, and when that set of plans was stress-tested, as we have spoken about a moment or two ago, that number was rather a low number. So, in effect, what we are saying is that if you really thought it was £55 million or thereabouts of savings, we would have been taking out just under £1.9 billion of purchasing power from CCG baselines for next April, which, as the NAO rightly pointed out, is equivalent to about 4% of acute hospitals’ cost structures, on top of the efficiency requirement already being made to the national health service.
Chair
Yes, that was the policy, Mr Stevens. You changed the policy. Why?
Simon Stevens
It is not for me to change policy. I just came at it with fresh eyes, and listening to what people say—
Mr Bacon
Why did it take you to spot that there was a £1 billion hole that no one else had spotted?
Simon Stevens
I am sure everyone had. It was not a question of me doing it; it was simply a question of the fact that we were still a year out at that point.
Mr Burrowes
So when you say stress test, was there no stress test before you arrived?
Simon Stevens
Yes, of course, that stress test was going on through the autumn and through the spring. I benefited from the results of that stress test at just the time that I happened to take up post and therefore, with colleagues, was able to reflect on the results of that stress test and bring that to the attention of Ministers.
Chair
Can you literally just give us an answer on this? I will bring Ashley in, and we will come back to the purpose and I will bring Carolyn Downs in, but why did you change to make that an absolutely essential requirement of the way this money was used? Was it because it was one of the ways of dealing with the deficit? If you tell me that straight, we at least have a straight answer. I think everything else is waffle. Was it just to deal with the deficit?
Simon Stevens
It wasn’t dealing with it; it was to prevent creating a further gap, so actually a very pragmatic solution was arrived at. That of course does not suit everybody, and no doubt there are legitimate and huge pressures in local government due to social care, so the concerns of local government are entirely understood. Equally, hospitals were saying—legitimately, too—that, given that patients were still going to be turning up requiring services, a £1.9 billion cost takeout from their baselines from next April, which in effect is what it would have been, was going to be extremely challenging as well.
Chair
I have allowed you a long answer. The truth is that it is there to help NHS England’s finances.
Simon Stevens
Well, a pragmatic decision was made that £1 billion of the £1.9 billion, which is not new money, would continue to be available either to reduce emergency admissions or to support spending on out of hospital services in the NHS, and £900 million of the £1.9 billion would be available particularly for local authorities to support the pressures in social care. Now, of course, that in a way under-tells the story, because the reality is that we are getting far more than the sum of our parts here. We have £5.3 billion pooled, and it is the synergies that are going to create the value.
Austin Mitchell
There was a planning assumption, or perhaps just wishful thinking, that was formulated by the health side of the equation for a combination of services between health and social services. That is admirable in principle, but it was known at the time that this was formulated—the £1 billion in savings—that social services were under considerable pressure and in considerable financial difficulties. I want to know this—perhaps Carolyn Downs from the Local Government Association can tell us. Your press release on the National Audit Office Report says: “The failure to set out the £1 billion savings target to councils…has made carrying out these plans more difficult and left many councils with significantly less time to implement the changes before the April 2015 deadline.” Were the councils told? What did the councils do? How were you told to make the savings?
Chair
Austin, I will bring that in, because that is the next phase of this sitting, but let us just bottom this issue out. I promise that I will move back to it, but first, Stephen and then Ashley.
Stephen Phillips
I do not really care who answers this, but does it really come down to this? There was an ambition at the beginning that the Better Care Fund would result in significant savings, which were estimated to be about £1 billion. The plans that came into NHS England were assessed and seen to deliver a much lower saving of as little as £55 million. As a result, there was naturally going to be a deficit position as regards the saving that was expected. You therefore had to do something, and what you did was push back the date by which it was going to be brought in. Is that right, Mr Stevens?
Simon Stevens
No. The date was always going to be April 2015, so that has not changed.
Chair
Can I just go to Helen Edwards? Why did you shake your head when Stephen Phillips was speaking?
Helen Edwards
It was always clear that there were expected to be significant financial savings, but the £1 billion figure, as we have heard from the Treasury, was never part of the formal SR settlement. We planned and designed the fund on the back of the settlement, as you would, because that is the formal position to set up the fund.
Stephen Phillips
That doesn’t explain why what was anticipated to be a significant saving subsequently was not delivering something that was not in the settlement and, therefore, why Mr Stevens took the decisions that he did.
Sir Bob Kerslake
There were two issues at the time that needed to be addressed. One was the question of how much saving or benefit was going to come from the fund. The second was how confident we were about the actions delivering the level of savings. That is why we went back round the loop again—
Stephen Phillips
Which of those led you to go back round the loop again?
Sir Bob Kerslake
Both, in fact, were important. The first one—
Stephen Phillips
No, answer the question, Sir Bob. You can either say both or say one or the other.
Sir Bob Kerslake
I think I said both, actually.
Stephen Phillips
No, you said both were important. I want to know the causative question.
Sir Bob Kerslake
Let me be more precise, then. Both were factors in going back.
Chair
Let me go to Ashley.
Ashley McDougall
To clarify, the true stress-testing of the money that was coming out of the plans, because there was no target against which to stress-test, was £731 million. Paragraph 11 says that the assessment “did not include achieving £1 billion” of savings. So up until April, no one was looking to see whether the funds were going to achieve £1 billion.
Mr Burrowes
But Simon Stevens said that you beat the stress tests prior to him arriving.
Simon Stevens
Yes, that’s right, and they were looking at what the savings would be. Whether you set a figure of £1 billion or whatever, nevertheless they got to the answer that it was £55 million versus £730 million-odd.
Chair
Why did you not identify £55 million before Mr Stevens arrived?
Simon Stevens
Well, that was the process that was going on and the good work that was being done. The plans were due in from late autumn through to the spring.
Chair
I do not think that you were doing the work. You started the work when you came. I do not think that—
Simon Stevens
No, I benefited from the work that had been going on.
Carolyn Downs
The work was being undertaken; the plans were being assessed; the level of savings were being looked at—what they were put in at—and it was the analytics of NHS England which came out with £55 million being the figure that it felt was cashable savings as opposed to wider benefits to the NHS.
Sir Bob Kerslake
I think the key point is not that we did not expect there to be savings, but that the plans did not demonstrate adequately how the actions would deliver the savings.
Chair
When did you arrive, Mr Stevens?
Simon Stevens
1 April.
Chair
It tells me here that 90% of the plans were ready to be approved in April, so they were already there.
Jon Rouse
Can I help on this? The plans were due in, from memory, on 4 April, so three days after Simon arrived. That was the time to do the deep stress test. There had been a very early version of the plans submitted in February, but at that stage they did not contain sufficient data to do a full stress test. Secondly, just to build on the point that Sir Bob made, which was crucial, this was not just about the level of savings identified—
Chair
I am sorry to stop you, Mr Rouse, but if you look at page 18, para 1.18, it says, “In April 2014…they”—I assume that is a mixture of LGA, DCLG and you, without Mr Ridley and his five months in the job—“determined that 90% of the plans—136 of 151 plans—were ready for sign off”. So it was not that you started the work to assess them in April 2014; you were ready to sign them off.
Jon Rouse
Can we just be clear about who was ready to sign them off? That figure relates to the work that the regional assurance teams had done: that was the local area directs of NHS England and the local authority chief executives who were doing a representative role within their regions. What had not been completed at that stage was the national assurance and the national moderation, which was the point at which Simon came in and we undertook the national stress-testing.
Chair
So your NHS area teams are completely different from you.
Simon Stevens
No, no. We are a unitary organisation, united in purpose.
Chair
They signed them off, but you dissociated yourself from them.
Simon Stevens
No. They were engaged in an exercise to look at—
Chair
They signed them off.
Mr Bacon
It actually says very clearly, Mr Stevens, in paragraph 2.5 that they were engaged in a different exercise. It says, “The goals of the scheme, it now appeared—
Simon Stevens
Sorry, which paragraph?
Mr Bacon
Page 23, paragraph 2.5: “NHS England told us that this was because the local teams were not asked by the departments to review plans against a £1 billion expectation since no formal target existed. The goals of the scheme, it now appeared, had not been those that local planners were working towards.” That includes the NHS England area teams.
Simon Stevens
Yes, I think that is exactly consistent with the chronology that we have described.
Mr Bacon
So they were actually working on something different from what it turned out was required in the end.
Simon Stevens
What they were doing was looking at the plans that the local authorities and the local health service had produced to give a sense of what sort of savings they thought they could manage within the parameters of the Better Care Fund. That was a piece of data that this exercise revealed.
Sir Amyas Morse
Can I ask a question, just thinking about the situation that you found yourself with, Mr Stevens, as an incoming chief executive? I am thinking about what incoming chief executives in the private sector do. They have a very good look around at what unresolved and unquantified risks might be about to land on their plate. I rather suspect that is just what you did. You had a jolly good look round and said, “This sounds very fuzzy. Let’s insist on getting it clarified, so that we don’t find it landing on our head without having any idea where the savings might come from in future.” You took a strong stand and insisted on getting that done. I offer that up as a possible translation for what you might have done, because that is what most chief executives with your business experience would probably have thought about. They would have done an inventory when they walked in, had a very good look around at what they were taking ownership of and tried to bottom out the risks. No?
Simon Stevens
I was pushing at an open door.
Sir Amyas Morse
Is that yes? Are you saying yes?
Simon Stevens
I certainly did exactly what you describe, in terms of taking a hard look at the financial position of the NHS both this year and next and found a strong degree of alignment across Whitehall, between Ministers, about the importance of getting that right. So, when this conversation was had with Ministers, a very good pragmatic judgment was reached.
Sir Amyas Morse
Excellent. Thank you.
Chris Heaton-Harris
I am not confused; I can understand how it has happened, but there seems to be a disconnect between what you were trying to achieve and the information that you were gathering or being given at the top. Last week, we had the pleasure of Sir Bob before us and we talked briefly about the Better Care Fund. I will quote Sir Bob directly: “That is why we put a huge amount of effort in the last spending round”—a time, I think, slightly before you arrived, Mr Stevens—“into the work we did with the Department of Health on creating the Better Care Fund. We could see that unless you could find ways of transforming the way service was delivered, it was going to become challenging for those authorities.” It is about joint departmental working. I have got a horrible feeling that, if you don’t give a target written in blood to Government Departments, there tends to be a bit of faffing around and you get to £55 million when it is stress-tested. This is to you, Sir Bob. You know how much how much pressure your councils that operate are under financially. Una, you know exactly how much the CCGs and your primary care budgets are under stress. Merging two together, or part of two together, was surely going to cause extra problems, wasn’t it? I can understand the policy and why it was going to happen, but you were never going to achieve a £1 billion-worth of savings. So that is why it ended up at £55 million, isn’t it?
Sir Bob Kerslake
I will make a few points on this. The first is that the savings were one part of the conversation on the Better Care Fund, not the only one that happened. There were some really important national conditions that were being put in place here. For example, one of the key conditions was the protection of social care services as part of the deal. Similarly, there were a whole set of tests of success that were put in place as well. Those were the things that were really very important to make sure that the plans covered, as well the issue of savings. It wasn’t just a question of the savings figure; it was, crucially, a question of whether the partnerships were working effectively and delivering the national conditions, particularly protection of care. That is the way to look at it. They were not fuzzy—
Chris Heaton-Harris
I really do understand that bit, and I think it’s going to be an exciting success when we go forward. However, if it was delivering only £55 million of savings, was that an issue?
Sir Bob Kerslake
No, I think it’s really important to say that what the analysis, the stress-testing, showed was that essentially the quality of the plans was such that it didn’t give you confidence about the saving against the action. That wasn’t to say that the action would not save the money, and in fact when we did the more thorough, more robust exercise, through Andrew’s leadership, we came out with a saving of £532 million, which is pretty much in the middle of the range that Carolyn talked about. Our issue at the centre was that we did not have plans of sufficient confidence to be sure what the saving was. I think it was perfectly sensible to go out and improve the quality of the plans at that point.
Chris Heaton-Harris
So the quality of the plans in delivering adult social care was good enough, but the quality of the financial structure of the plan and any perceived savings was not strong enough.
Sir Bob Kerslake
It is exactly that. We had very good partnership on the whole. We had very good proposals, many of which have stayed in the final plans; they haven’t changed. The thing that was not as strong as it needed to be in those plans was the link between the actions and the outcomes. The evidence of the connection between those two just wasn’t strong enough in the plans. That is why we went round the loop again, and we also dealt with the issue, as Simon has said, about the quantified benefits for the NHS.
Chair
Can we go to Carolyn Downs? The purpose has shifted. Figure 3 gives us the original conditions and purposes of the fund: “Plans jointly agreed… Protect existing social care services. Seven-day working in health and social care. Better data sharing… An accountable professional… Agree the impact”. Then you have your PIs underneath. That was the purpose; the purpose now is to save £1 billion, isn’t it?
Carolyn Downs
That was the change. Once the £1 billion was brought in as a requirement, that really pushed the focus towards the performance indicators and particularly the reduction in emergency admissions. With that being a primary requirement, I have to say, from the local government perspective, we very, very strongly pushed as well the protection of adult social care. So those two performance indicators became the primary requirements, as opposed to the wider conditions that were originally conceived.
Chair
I’m right in saying, aren’t I—I am depending on the ADASS survey—that, till 2014, we had a 12% reduction in social care and that the 2014-15 budgets give us another 2%, so there has been a 14% reduction in social care?
Carolyn Downs
Absolutely.
Chair
With demand going up.
Carolyn Downs
With demand increasing at the same level, we would say, as the NHS demand.
Chair
And a further 10% cut in local authority budgets for ’15 and ’16 will lead to a further cut in social care budgets. Is that right?
Carolyn Downs
Unless councils themselves choose to protect those budgets, but ordinarily, yes.
Chair
And it is right—is it not?—that 90% of councils now offer care only for substantial and critical needs.
Carolyn Downs
That is absolutely correct.
Chair
Do you accept Age UK’s analysis that 870,000 people between the ages of 65 and 90 have unmet needs, which include struggling to take medication, struggling to bathe, struggling to eat on their own, struggling to get dressed, struggling to go to the loo and struggling to get out of bed?
Carolyn Downs
We would agree with that, yes.
Chair
I just said to Richard that if I were a local authority leader and money had been taken away to support the health service and reduce A and E admissions, I would walk away. What would keep me there? I would walk away, because all the risk is—
Chris Heaton-Harris
Particularly in the context of Northamptonshire, because—
Chair
We had this discussion before.
Chris Heaton-Harris
Not in relation to the money. Northamptonshire’s plan has not been signed off by the Department for almost exactly that reason, I think.
Jon Rouse
Can I help on this?
Chair
Can I get an answer from the local government perspective? I’d walk away and say, “Get on with it. I’m not playing this game. This isn’t a fair sharing of resources, burdens and risks.”
Carolyn Downs
That was definitely a discussion that took place in local government—about whether, in terms of the eventual prize and the principle we all signed up to and very strongly agree with, the conditions were changing to an extent that one would wish to walk away. However, every area but one has put in their plans. Sir Bob and Simon Stevens were involved in the discussions, and what was critically important to us were the words saying that if the savings could not be made, the spend should be through NHS-commissioned services, and that includes those services that are undertaken through a section 75 agreement—that is integrated services. If that wording had not been agreed, local government might have walked away. However, we didn’t; in fact, we have worked with colleagues in government non-stop to try to make sure that local areas can bring forward plans. That is particularly because we so strongly support the principle of the Better Care Fund, and of health and social care integration.
Chair
But social care is going to be cut. What I was reading out to you was the cuts to date. Looking forward to 2015-16, when the Government are committed to a 10% further cut in local government grant, what are you going to be able to deliver? That is why, if I were a local authority leader, I would think, “God, signing up means all the risk is coming my way. I don’t have any of the money, because it’s been taken back into the NHS to deal with their crisis. What am I signing up to?”
Simon Stevens
Social care is getting £2.1 billion of the £5.3 billion in the Better Care Fund, and the NHS will be making a net transfer, viewed in very narrow terms, which is not the right way of thinking about it. But, of the £1.9 billion, £900 million is shifting from NHS spending to be local authority-directed under the health and wellbeing boards. So, yes, it is a pragmatic response to a set of dual pressures on both sides of the fence, but to say that local authorities have been cut—it is just that they have not gained as much as would otherwise have been the case, in order to offset the pressures on the other side of the ledger.
Chair
Have you removed the double counting? We had this argument yonks ago, Sir Bob—I can’t remember when we looked at it—when you counted spending as local authority spending and they counted it as NHS spending. What have you done now on local authority spending?
Sir Bob Kerslake
I think you are referring to the spending calculations, and, obviously, that question will come up when we come to the financial settlement later in the year.
Chair
You will cut it. It was always unfair that it appeared in both budgets. It came out of last year’s financial settlement that the money appeared as an NHS expenditure and a local authority income—it appeared twice in the same round. Now that they have taken £1 billion back, and you have £1 billion less, I would expect that to be reflected in a more honest, open and transparent way.
Simon Stevens
It’s not quite like that, because there is the £900 million and the £253 million or thereabouts under the pay for performance arrangement that is available to support the work of local authorities. Even that is actually £1.25 billion—
Chair
We’ll come to whether that will ever be realised or whether that is another thing that needs stress-testing.
Sir Bob Kerslake
Can I just come back to this question about local government losing £1 billion, because it is not actually as you have described it? I think either Andrew or Jon organised a survey of local government to find out the consequence of the revised plans and the revised approach.
Jon Rouse
I have the figures here. Because we were concerned, we changed the scheme. What is the impact on local government? We surveyed every local authority, and they all responded—this was in September. In terms of impact on budgets, 74% said there would be no change, 8% said there would be an increase—second time round—and 19% said there would be a decrease.
Chair
Which budget were you looking at—the 2015-16 budget?
Jon Rouse
This is a projection for the 2015-16 budget.
Chair
They haven’t set their 2015 budget. My authority is just in the middle of doing the rounds, so you don’t know. They are just arguing about what to put in their 2015-16 budget.
Sir Bob Kerslake
The question you asked was: did the change that was made in July result in local government losing money? I think our survey shows pretty compellingly that, for the vast bulk of local authorities, it didn’t.
Chair
I do not know what other colleagues’ authorities are doing, but mine is literally in the middle of its budget—I am talking to them about it now—so the idea that this won’t have an impact on what it spends is nonsense. It might not impact on 2014-15, but—
John Pugh
Are you saying, Sir Bob, that, in terms of discharging statutory services—adult social care—when a chief executive looks at their current budget, they are looking, in general, at more money, rather than less money than they had previously?
Sir Bob Kerslake
No. There are two different questions here. There is the wider question of local government finance, which we covered last week—
John Pugh
Yes, and it is related.
Sir Bob Kerslake
And there is the related but separate question of what was the consequence of the changes we made around the Better Care Fund in terms of its impact on local authorities. I am dealing with the second question, not the first. I fully accept—
John Pugh
Okay, I understand. That is a rather more modest claim. The way I see it is that from the local authority’s point of view, they have to put forward schemes that engineer some savings across the piece, and they have to develop integrated services, often of a novel and new kind. I think that the bottom line is that they must, during the process, show that they are not reducing existing social services. Am I right in thinking that?
Sir Bob Kerslake
They have to commit to protect the services.
John Pugh
They have to commit to the services, but not necessarily to the level of funding.
Sir Bob Kerslake
That is right.
John Pugh
Has anyone worked out whether those three parameters can actually be met, especially in those local authorities such as the metropolitan boroughs that have principal social services responsibilities and face a declining budget? That links to what we did last week.
Sir Bob Kerslake
There is no doubt, as Carolyn has said, that these are very tough times for local government, but in signing off the better care plans—this was in the original version as well as the revised one—the local authorities, which are signatories to the plans, have to indicate that they will maintain the overall level of service, albeit while making efficiency savings.
John Pugh
And you are confident, having looked at them, that they can do that.
Sir Bob Kerslake
That was tested through the process.
Jon Rouse
This is obviously really important, because there is a group of authorities that either have not been approved, or have been conditioned for the very reason that NHS England does not judge that they have met the condition to protect social care services. They now have to undergo remedial action or provide extra information to demonstrate to us that that condition is met.
John Pugh
Against the background of local authority cuts, the temptation must be to take the extra money and then devise a scheme that enables them to backfill statutory services and support them.
Sir Bob Kerslake
They cannot do that. One of the questions that the Chair asked—quite reasonably, given the changes—was, “Why are people not walking away?” As I said last week, the answer is simply that transforming how the services work to drive efficiencies and improve the quality of care is one of the only games in town for the future, so a lot is at stake here.
Chair
But you have approved only six.
Jon Rouse
There are 91 with support and 49 with conditions. Five have not yet been approved.
Chair
Yes, but you have approved only six; all the others have a risk that the money you promised them will not come to them because they will be cutting adult services. Is that not right, Carolyn Downs?
Carolyn Downs
No, I don’t think it is right. Effectively, the areas with support—six have been fully approved, as you say—do not have concerns around adult social care. I think there are 21 that have a condition attached to them and have serious concerns, and 14 need to show that they are going to meet the national condition to protect social care. There are then, of course, the five that are not yet approved.
Austin Mitchell
For a change, North East Lincolnshire has had a bit more experience in this, because we were a Care Trust Plus and began the integration of the two services earlier. I wonder whether it poses a risk for local authorities generally—not including North East Lincolnshire, of course—in the sense that all the strains fall on the local authority because social care is in some difficulties given the financial stringency. The benefits, in so far as payments for performance are linked only to emergency admissions, go to the health service. Is that not a problem?
Carolyn Downs
No, because we have insisted on the protection of social care. As I say, there are only 14 plans at the moment where the protection of social care is an outstanding issue. Local areas are working, through NHS England and local government colleagues, and specific support has been put into those areas. There is now a team of better care advisers working with local areas and health and wellbeing boards with the means to get those 14 plans with concerns—indeed all plans—through the process, hopefully before Christmas.
Austin Mitchell
What makes the health service sure that you can achieve a fall in emergency admissions—I think that 3.5% was mentioned in the Report—when the general trend is up, and remorselessly up?
Simon Stevens
It is. So the question is, to what extent should we, having looked at the individual plans, which vary—3.07% is an average, with some thinking that they can do more than that and some less. Obviously there is a process that Andrew and Carolyn’s team, with support from local government, have been going through to take a look at those, but the beauty of the pay for performance scheme that has been arrived at for the £1 billion value that is going to continue to support what would otherwise have been health service spending is that, if the 3.07% turns out to be 2.5% or 4%, in one sense it does not really matter for the stability of the local health service. If it is lower, there is a payment stream there to support the extra emergencies that will still be going into hospital. If it is more, that is more savings that local government can use through the health and wellbeing boards, jointly, to boost community services. The beauty of the pay for performance scheme is that we do not have to second guess, to the extent that would otherwise have been the case, the degree of ambition that local councils and the local NHS are themselves coming up with.
Chair
So how much of the £1 billion can be spent on the acute trusts keeping up the A and E?
Simon Stevens
The £253 million is the net efficiency offset from the emergency admissions reductions that Mr Mitchell was talking about—the 3.07%—and then £747 million, as Carolyn said, is available to be commissioned by CCGs in out-of-hospital services, including joint—
Chair
Sorry, can you just answer the question? How much of the £1 billion that has been taken back could be spent shoring up A and E departments in acute trusts?
Simon Stevens
The £250 million is the piece of it that is supposed to be saved from emergency admissions going down. If emergency admissions do not go down, that £250 million, or some share of it, is available to pay for those emergency admissions.
Chair
So £250 million could be used to shore up A and E departments.
Simon Stevens
Not shore up. To coin a phrase, the money would follow the patient.
Stephen Phillips
Is that £253 million available only to the extent that emergency admissions are not reducing?
Simon Stevens
No, it is part of the fund that will then be available through health and wellbeing boards for the jointly commissioned wider services. The £253 million gets spent only with emergency admissions if that is what actually transpires—if the plans do not crystallise in the way that local people want.
Chair
Let us go back to the original purpose, Mr Stevens. The purpose was not to use this fund of £3.8 billion or whatever in any way to shore up—in my terms; to follow the patient, in your terms—A and E departments.
Simon Stevens
Well, you say that, but the reality is that this is not new money. The incremental £1.9 billion is being—
Chair
I agree. No one is contending that it is new money.
Simon Stevens
It is being taken out of health service budgets supporting current volumes of patient treatment, so I think that a very pragmatic judgment has been made to recognise the pressures in social care and to ensure that for the part of it that is going to continue to sustain NHS services next year, some piece of it will ensure that if CCGs are still having to pay for emergency admissions, the money is there to do that.
Chair
Will you give us an assurance? You are just trying to hide behind words. In my view, the £250 million and the A and E stats—well, will you tell me what the A and E stats for the first two quarters of this year were? Were they up or down?
Simon Stevens
As I think you are aware, they are up.
Chair
They are up. Have you stress-tested these figures? Do you think that they can get their 3% or whatever?
Simon Stevens
Yes. The baseline for comparison will be what actually happened this year, so if this year has gone up, then that will be the baseline against which we will be judging—
Chair
You have stress-tested that, and you are confident that they can do it, are you?
Simon Stevens
The 3.017% in aggregate is the number that is there now. We collectively will use the period between now and March, through the finalisation of the NHS planning process, in the round, to look at that. Then, frankly, because there is no point sugar-coating it, we will have a nuanced judgment to make as to where, in a particular place, they think that they can do better than—
Chair
Tell me, where are the financial incentives? I am sitting in an NHS trust; it is money that is newly available to me.
Simon Stevens
No, it is actually not.
Chair
It is.
Simon Stevens
No, it is money that I am getting this year for these very same emergency patients who are showing up. The only interesting question is how many of them will or will not show up next year, so it is not new money at all.