Oral evidence: UnitingCare Partnership Contract, HC 633

Oral evidence, 14 September 2016.

Witness

Simon Stevens.

Chair

Welcome to the Public Accounts Committee on Wednesday 14 September 2016. We have two sessions today. We will come to our main session in a moment, on the UnitingCare Partnership and what happened in Cambridgeshire, but I wanted to use the opportunity, while Simon Stevens, head of NHS England, is here, to ask him about the accounts that were laid before Parliament on 21 July. I think yours came later that evening, on Parliament’s last day, so this is our first chance to talk to you about those accounts. You may have seen that we asked Chris Wormald about that last week, and we gave you notice of this for today. Mr Stevens, you have sat in front of us eight times this year—it might even be nine. You have promised that all the issues that we have looked at—mental health issues, specialist commissioning, what is happening with the provider deficits—will be solved by the £10 billion of funding that you have got to 2020. You shake your head; well, that it is going to make a major contribution to it, and the five-year plan on the transformation of the NHS will contribute as well. But the accounts show that you are on a very sticky wicket, don’t they?

Simon Stevens

Yes, they do show that we have a huge challenge in front of us, and I think that would be consistent with everything I have said to this Committee. As it happens, NHS England in 2015-16 was able to generate a £599 million underspend to contribute to pressures elsewhere in the NHS and the Department of Health group, but let there be no doubt that this is an incredibly financially challenging period for the national health service.

Chair

So you have less money, but you still have to deliver all the things that you have to deliver, and the expansions. We have talked, for instance, about specialised services; there is a growing demand there. There is a clear Government commitment on mental health parity, which I think we discussed the last time we saw you. You have less with which to deliver. I will quote the Comptroller and Auditor General, and you can tell me if you agree with him. He says: “the NHS faces an unprecedented financial challenge which requires long term strategic measures to address.” He goes on to say that, when he looks at elements of NHS England’s performance report and the Five Year Forward View, there are three challenges, which you would acknowledge and have identified, including the funding and efficiency gap, and says: “if the NHS fails to match reasonable funding levels with wide-ranging and sometimes controversial system efficiencies, the result will be some combination of worse services, fewer staff, deficits, and restrictions on new treatments.” Do you agree with that?

Simon Stevens

Were you quoting Sir Amyas or me there?

Chair

I was quoting Sir Amyas.

Simon Stevens

Because I agree with that entirely. I wasn’t sure whether that was one of my quotes.

Chair

You can agree with the Comptroller and Auditor General; I am sure he will be delighted. Then we have NHS Providers coming out again this week, saying that they have not got enough money to do their job. You have previously talked about social care, which I think is a bit of a “get out of jail free” card, frankly, because you are relying on that to help with some of the pressures on the NHS budget. You say there are challenges. In all of this, do you think you can deliver what you have to deliver under the mandate with the money that you have?

Simon Stevens

Well, it would be helpful if we could, for the avoidance of all doubt, clarify what we requested and what we have got.

Chair

You are anticipating my questions.

Simon Stevens

As it happens, we have set this out carefully for the Health Committee as well, in something called the recap briefing, which is available on its website. It details all the funding settlement for the NHS. At the time the Five Year Forward View was drawn up, we set out a set of ambitions for the NHS. In terms of the spending review settlement that we achieved, that was for five years beginning this year, 2016-17, up to 2020-21. We got, broadly speaking, what we asked for this year, 2016-17: a kick-start to the funding for the NHS. On that back of that, that will enable us to absorb nearly £1 billion of extra pension costs, cut provider deficits by more than two thirds, as compared with last year, and get going on the agenda for mental health, primary care and other services. So that is year 1. For year 5, the Forward View said that we estimated that the NHS funding requirement, net of efficiencies, would be somewhere between £8 billion and £21 billion. The spending review settlement that we obtained was within that range—at the lower end, but within that range. That is year 1 and year 5. We did not get what we originally asked for years 2, 3 and 4—namely, 2017-18, 2018-19 and 2019-20. Whereas it is right that at the end of the five years, the annual funding for the NHS will be within the range that was set in the Forward View, in the intermediate years we have a bigger hill to climb than was first envisaged. That is why it is so important that we take measures to drive efficiency and get control of cost this year, to put us in the best position going into next year and the year after.

Chair

I won’t rehearse what you know and what we know of all the measures taken to make the books balance, but given what has happened in the accounts, you have set yourself a very stiff task with NHS improvement and transformation to change systems to deliver these efficiencies in a year. Is that really possible?

Simon Stevens

In a year?

Chair

Not all of them in a year, but you need to do a lot in this next year to ensure you don’t have the same shenanigans over the accounts as happened with the ones that were laid before us on 21 July.

Simon Stevens

I don’t think “shenanigans” is a term that would be recognised. Given that these are unqualified accounts for NHS England, I don’t think the Comptroller and Auditor General would use the term shenanigans, either. The fact is that, yes, the financial performance of the NHS this year will obviously have a big impact on how we go into next year and the year after. Let’s be clear: there are going to be significant challenges, choices and controversies on the back of it. The question you began with was on our ability to fund the mental health improvements and specialised services in other areas, and we will obviously do so in accordance with the funding available. We have set out in incredible detail what the year-by-year growth in mental health services will be on the back of the fact that the cash available to the NHS is going up from £100 billion last year to £119 billion in 2020-21. This is not the land of milk and honey, but it does provide us with some opportunities.

Chair

Ministers have said repeatedly that they have given the NHS what it has asked for. You have just told us very clearly—and I think most of us knew—that you did ask for more. Do you disagree with Ministers?

Simon Stevens

As I say, it is correct to say that for 2020-21, which was the year that the Five Year Forward view talked about—the annual funding increase that the NHS would require—the funding settlement that was available is within that zone. But in the years up until then, we have got a lot of work in hand because we did not get what we originally asked for.

Stephen Phillips

You say that you asked for between £8 billion and £21 billion. That is quite a large range. When you were in negotiations with the Government during the spending review, what did you say they would get for £8 billion and what did you say would happen if they managed to find £21 billion? Let us clarify the base as well. You managed to get £10 billion. Is that right?

Simon Stevens

Yes, I think the Government would record it as £10 billion. The Health Committee recorded it a little differently—

Stephen Phillips

You asked for between £8 billion and £21 billion. It is a massive range. What is the difference between a health service in 2020 with an extra £8 billion and one with an extra £21 billion?

Simon Stevens

Well, it is a pretty substantial difference in terms of the expansion of services and the improvements that the public would see, but the reality too is that the three scenarios in the Forward View were contingent on the different efficiencies that the health service was able to deliver. Notwithstanding your point, Chair, about social care, we did say that the three dependencies here were a well performing social care system that kept up with rising social care need; continued availability of preventive health services, including local government; and enough capital to lever in the changes.

Stephen Phillips

Let me suggest this to you, Mr Stevens. You have already said that the health service is facing, in your words, an incredibly financially challenging period.

Simon Stevens

Yes.

Stephen Phillips

£10 billion is not enough to stand still by the end of this Parliament, is it?

Simon Stevens

Yes, it is enough to stand still, and do more than stand still. By comparison with the historical rates of growth available to the national health service, obviously this is an unprecedentedly extended and deep period of slowdown in funding growth in the NHS, particularly in the middle of the SR period.

Chair

In the decisions you have had to make, have you ever sought a ministerial direction as a result of funding challenges?

Simon Stevens

No, because the mandate that the Government set for the NHS is framed to take account of the resources that are available. That has been the case for this year. In reality, of course, there is a discussion and a negotiation. The asks that are being made are to some extent calibrated to the funding available. That is a legitimate choice for elected Governments to make. Of course, the NHS would want to set out its stall and we would use funding well, but there are other calls on public resources, and it is not the NHS that makes those choices but Governments.

Chair

You acknowledge, as one could say, the bleeding obvious: you have to cut your cloth according to the money that you have got. Yet you have been in front of us eight or nine times so far this year. We have looked at specialised commissioning. Let us take that as an example. That is 14% of your budget.

Simon Stevens

On specialised commissioning, we have budgeted a 7% increase this year, a 5% increase next year, 4.8% the year after and 4.5% the year after that. That is within the funding envelope that we have with SR.

Chair

Fine. That’s the money. But the need, the demand, is going up faster than the increase that you have just projected.

Simon Stevens

There are always choices to make at the margin. If there were more, we could do more, but it is not unreasonable for us, as you said in your Report on specialised commissioning, to make sure we are driving maximum value out of the £15 billion we are currently spending. Could we do more with another £500 million in specialised commissioning? Of course we could, but that is £500 million that is juxtaposed with other calls on the public purse. Ultimately, those are decisions for the Government to make.

Chair

Isn’t the danger, though, that you are firefighting at one end rather than coming up with a transformation plan that stops and prevents issues in the first place? But maybe I’m going a bit too far on that one. Perhaps I should not have posed it in quite that way. We will move on to Karin Smyth and then I will come back to Mr Phillips.

Karin Smyth

I think we know that the end of this year is quite important. You have repeated that, without capital investment, the social care problems and the problem of prevention will not be dealt with, but the Comptroller’s statement says that the Committee is concerned that the Department does not have a coherent plan to get through this problem. Chris Wormald last week was very clear that the pressure is on the money, that the Department comes in under the line and that through the mandate there is a plan for the STPs. Are you confident that the STPs will be delivered within the timeline, in order to help you deliver that plan?

Simon Stevens

I cannot answer that question in the abstract, because people have not finished drawing up their proposals for these STPs, and they won’t have done until the end of October. We can certainly say that people are grabbing the bull by the horns. They understand that we have to think in the round about the funding available in different parts of the health service and, indeed, the social care system in each part of the country. As to what that implies about the pace of change and the ability to drive some of those local efficiencies, that is what people are working on right now. When you think about the so-called £22 billion of efficiency to deal with the gap between rising demand and available funding in 2020, of that, we estimate that about £15 billion—£14.9 billion, to be precise—will be delivered through local change processes and efficiencies, and the rest will be done through national programmes. Precisely what that £14.9 billion-worth looks like in each part of the country is the exam question that people are working on right now.

Chair

On the figures, when you wrote to the Health Committee in May this year, you set out that £7 billion would be delivered nationally and £15 billion would be sourced locally. You just said £14 billion—I want to be clear.

Simon Stevens

It is £14.9 billion locally—£15 billion, rounded up.

Karin Smyth

To go back to your words, it’s not in the abstract, because the vehicle to deliver that is the STPs. So they’re not in the abstract, because if they don’t deliver realistically within the timescale that has been set out, they do not deliver. Is that right?

Simon Stevens

I think that’s a syllogism.

Karin Smyth

Does that mean they are not going to deliver?

Simon Stevens

Well, I think your question was, “If they don’t deliver, they’re not going to deliver,” to which the answer is, “They won’t have delivered.”

Karin Smyth

They will not deliver the savings required that you are talking about delivering for years 2, 3 and 4 of the five year Forward View.

Simon Stevens

What we are going to see from these is that there are some changes people can make pretty quickly, and there are some that are going to take much longer. One of the unknowns at this point is what capital investment we need in order to bring about some of these service changes and investments, including beefing up primary care and out-of-hospital services. There will be a process where we will see what people are telling us they would need in order to make some of these efficiencies. We will then have to compare that with the level of capital and infrastructure investment we have, rank that in some way and see what it leaves us. I do not expect that, come the end of October, we will have peace in our time in every part of the country for every year, and everything’s tickety-boo. I do not think that at all.

Karin Smyth

But will we have it by the end of March?

Simon Stevens

For 2017-18, 2018-19, which is where I think you’re leading us to—

Karin Smyth

I am going to years 2, 3 and 4, because you have been very clear elsewhere that year 1 is okay and year 2 looks more promising, but years 2, 3 and 4 are the problem.

Simon Stevens

Yes. That is why we are bringing forward the funding and contracting around 4 next year and the year after and, indeed, will be issuing our planning guidance for every part of the health service next week on that. We normally issue that on Christmas eve. We are asking people to make these choices about divvying up the money in each local area as best as they are able by Christmas, rather than what usually happens in the annual cycle, as you know, which is theoretically the end of March but often spills over into May or June. That is going to force people to focus on these difficult choices and say, “What is it going to take for us to make this work in our area?”

Karin Smyth

So we will be very knowledgeable by November.

Simon Stevens

Yes.

Karin Smyth

We had a discussion last week about the raid on capital done by the Department of Health in order to bring their accounts within the expenditure limit. We asked in this Committee last week whether they were concerned about the disincentives in the system and the continuing development of the estate in terms of the raiding on capital. I don’t have the evidence in front of me, but my memory is that they were not particularly concerned about that. Your plans depend on capital coming forward, so are you concerned about the raid that has been made on capital?

Simon Stevens

I think the Department of Health said when they were here last week that for last year, part of what they were able to do is use the fact that some projects were running slow and that there was under-use of the capex, and convert that into revenue. But certainly if that were to continue year by year, it is going to be a substantial problem. I think there will be more of that in the current year, and less of it the year after, but the truth is we are very capital-constrained—to a greater extent than we hoped when we began this process.

Karin Smyth

It is also true that the providers, to save some of their money, have individually in the provider sector raided some of that capital, which would then be outside the scope of the STPs to use going forward. Is that right?

Simon Stevens

Yes. For last year, I think it was in the order of £1 billion to £1.2 billion of capital to revenue transfer. I think it is going to be a little less this year but it will be in that sort of zone, then tapering in subsequent years. We’ve got a lot of latent need for infrastructure investment.

Karin Smyth

My final question is, if the STPs don’t start to deliver those sorts of savings, which we will see quite quickly, what is plan B?

Simon Stevens

Put it this way: next year is our year of growth in the NHS. It is just not growth at the historical rate and will be relative to what the unmitigated demand is likely to be. On the ’17-18 and ’18-19 position, we will see what people say they need to do within the next several months when they bring that forward, for the reasons I have given. On the profile of what those savings will look like, it will differ in different parts of the country depending on the size of the service redesign that people envisage is necessary.

Stephen Phillips

Now answer the question, Mr Stevens.

Simon Stevens

Rephrase it for me in a way that makes it sufficiently—

Stephen Phillips

If the STPs don’t work, what is plan B?

Simon Stevens

Well, plan B will be dependent on what it is that isn’t working.

Stephen Phillips

Let’s say they deliver £7 billion-worth of savings rather than £14.9 billion-worth of savings by the end of this Parliament. You will be £7.9 billion short. What is plan B?

Simon Stevens

Under those circumstances, if the NHS is required to live within the limits that have been set, obviously we will be able to expand treatments at a slower rate than we want to and we will see other offsets in the availability or quality of care.

Stephen Phillips

If they don’t work, there will inevitably be cuts in NHS services, will there not?

Simon Stevens

The health service will still be bigger at the end of this period than it is now, treating more patients and doing more things.

Chair

You say this every time. We know that.

Simon Stevens

But it’s true.

Chair

Yes, it’s true, but there is also demand and the job is to treat the population and the demands they have.

Simon Stevens

Yes, I’m being very frank about that. I am not in any way sugar coating that.

Sir Amyas Morse

I just want to come back to the question of capital budgets. I was listening closely to what you were saying about years 2, 3 and 4. You were making the point that there is a difference between your numbers and perhaps the numbers we are hearing from Ministers, because of transfer between capital and revenue. Presumably it would be helpful to be clear in your mind and to have a clear expression of what the level of capital expenditure actually needs to be across the system in order to move things forward, rather than thinking that this is an open door between the two. That really is quite unhelpful in some ways as a principle, I suggest.

Simon Stevens

It is precisely as you say, Sir Amyas. That’s exactly what we need to do, and that is why parts of the country are now looking at what they need to do to redesign care to generate efficiency and what their capital needs will be, and we will have that within the next six weeks or so. On the back of that we will be able to rank what we can do with the money available.

Sir Amyas Morse

As I listen to you, and bearing in mind some of the public statements by the hospital associations on the level of distress they are expressing on their ability to operate within their budget, you sound like it is all under control and moving forward. Are they overstating their case?

Simon Stevens

I think you are putting words into my mouth. I don’t think I’ve said any of those things about—

Chair

You tell us then.

Simon Stevens

If Jim Mackey was sitting here—who is, as you know, the chief executive of the hospitals’ regulator—he would say that, actually, the provider trust sector delivered its Q1 financial goals for the first time in five years. I think he would argue that hospitals are on track to cut their deficits by more than two thirds this year. None of that is denying that there are substantial pressures but, if that forecast is right, the provider sector will end this year in a much stronger financial position than it did last year.

Chair

What is “much stronger”? There were so many of them in deficit that it wouldn’t take much to be stronger than last year.

Simon Stevens

When you do the bottom-up analysis, which they have done for individual hospitals in the £580 million mark, and they are trying to go further than that, anything in that range compares with the £2.45 billion deficit last year, so that would represent a substantial improvement.

Chair

Time and again we see hospitals set their staffing to fit the budget and then, during the year there are highly predictable pressures. They then need to provide more staff so they go to agencies. We are not talking about the rate of agency pay but about the volume of vacancies they carry, which we hear all around our constituencies and from colleagues from around the House. It sounds to me as though you are being very optimistic and you are going to stick to that—that they are going to be in a much better financial position by the end of the year.

Simon Stevens

That is what NHS Improvement are saying, based on the data available to them, and I have no reason to think that they are wrong. But equally—let’s be clear—in order for hospitals to be able to deliver that performance, they are going to have to make some tough and difficult choices and, in some cases, service changes. That goes with the territory of cutting their cloth according to the funding that will have been made available to them. This is not a straightforward exercise, and I think NHS Providers were right to draw attention to the fact that there will be controversy along the way.

Chair

You just talked again about potential service cuts—

Simon Stevens

Changes.

Chair

A man who doesn’t like to use the word cuts. They are reductions in the services available to patients—I would say cuts, and you would say changes. What will push you to go back to the Treasury and ask for more money? How far do you have to go before you have to go and ask for more money?

Simon Stevens

The programme of change that will be happening across the national health service will be clear for everybody to see. It does not require anybody particularly to go back. In fairness, despite the fact that we are probably the cheapest high-quality healthcare system in the world, we still—

Chair

We can go through the adverts, but this will just take longer.

Simon Stevens

Nevertheless, we still have efficiency opportunities in front of us. We have rehearsed these in the past. We have significant inefficiencies in procurement. We have variable quality of care. We have underused assets—

Chair

Which we have covered in several Reports this year.

Simon Stevens

What the national health service has to do is actually get going, in a serious way, on all of that, so that nobody can turn around and say that we’re not doing our part.

Chair

Okay, but you must acknowledge that the sustainability and transformation plans and other reorganisations are sapping a lot of energy from a system that is also going to be trying to transform.

Simon Stevens

No, I don’t think the STPs are sapping energy; I think they are creating energy. People are, in all honesty, now sitting round having pretty profound, open conversations about how services could be better—recognising that yes, some of this is driven out of financial necessity, but even if it were not for that, the truth is that a lot of how the health service has historically provided care is now no longer the way in which care should be provided. There is a pretty wide consensus about the need to redesign around patients with long-term conditions, to join up primary and hospital services, to get the health and social care piece working better and to be more assertive on prevention. That is the consensus, almost regardless of the economic envelope.

Chair

I will make one comment before I pass to Richard Bacon. You mentioned social care. The sustainability and transformation plans have 44 geographical footprints that bear no relation particularly to anything. My own area is boroughs that do not necessarily connect. You have that going on, but it does not take account of the pilot work going on in devolution with some local authorities, for instance, so you could end up with a transformation plan that has no regard to the social care—

Simon Stevens

I’m not sure that’s quite right. If you take Greater Manchester, which is the single biggest act of devolution and decentralisation—that is one of the 44 footprints. The truth is that these are not the be-all and end-all. They are just a set of spaces where the right people can come together and have conversations. It is not a new administrative layer. It is not a reorganisation. It is a space where local health and government leaders have said they need to solve a problem. So we will also need to solve a problem at borough level, at county level and at regional level—all that is true.

Chair

There are so many questions about the governance and role of these, which are not really the remit of this Committee, but our sister Committee is watching what we are doing, and we are working with it.

Mr Bacon

Last week, Mr Stevens, when we were looking at the accounts, the NAO was kind enough to provide data on a constituency-by-constituency basis. In the financial year before the last complete one, South Norfolk clinical commissioning group, which is one of five CCGs in my area, was given £248 million and spent £250 million. Then, in the last complete financial year, according to the figures, it was given £268 million—a significant increase—and spent £269 million. We all understand that people are living longer. In 2004, this country had 60 million people; it now has 65.5 million. We all understand there are more people. We all understand that drugs cost more—all of that. But when I look at health expenditure, which I have been doing for 15 years, I have come to the conclusion that there is no amount of money that would be enough. In the first five months of last year, prior to the election, you were saying—this was widely supported by all the political parties—that we need £8 billion extra for the national health service. I must have blinked, because somehow this £8 billion morphed into £10 billion as the standard number that people were talking about.

Simon Stevens

That is only because the Government have chosen to add in a year prior to incremental planning. There is an apples and pears issue there.

Mr Bacon

I know. You said we have rehearsed these themes in the past and indeed we have. We looked at delayed discharges recently, and we looked at the subject in 2003—13 years ago. All the same old issues came up. It became apparent that Northumbria NHS Trust, which runs adult social services in Northumbria, has zero delayed discharges and had 51 visits in the year from people trying to find out how to do it better. One of the three acute hospitals in Norfolk alone has 80 every night at £303 each, which is about £8 million a year. Times that by however many acute hospitals we have got, and the figure is probably high hundreds of millions or low billions. You talked about capital. You can buy a perfectly good, functioning IT system for a big acute hospital and run it for five to 10 years for £15 million to £23 million. In Addenbrooke’s they spent £200 million, and it crashed the hospital and caused it to go into special measures. You have had money hosed at you for 50 years, and I am not convinced that you collectively—I mean “you” second person plural—are good at spending it. I am really not. We have rehearsed these themes in the past until we are blue in the face, and yet we still see money being spent at a rate of knots as if it is going out of fashion. I know you are trying to juggle a whole series of very difficult things. However, when I write, for example, to you and to Ministers saying that the Royal Devon and Exeter is about to make the same mistake that Addenbrooke’s made by buying an American system called Epic, which we know does not work and crashed the hospital, they say, “It is nothing to do with us. It is down to them.” Don’t you think you have got to do rather more to impress the public and Parliament that you have really got a grip of this?

Simon Stevens

I think both these things are true at the same time. I have quite explicitly not come here today, or on any previous occasion, and said that the NHS is making maximum use of every pound at our disposal and there are no further opportunities for efficiency. Far from it—that is absolutely not the case we are making. Indeed, the proposition that we are currently seeking to deliver has a ratio of about £2 of efficiency for every £1 of extra funding. I think that is pretty darn impressive if we get anywhere near delivering it, but it is not inconsistent with the proposition that we also spend a relatively modest amount in this country on publicly funded health services compared with many others. I personally think The Economist editorial got it right this week when it said that over time as a country we probably, one way or another, want to spend more on healthcare, but the NHS has got to change in the process. I think both of those can be true at the same time.

Mr Bacon

Unfortunately on that point, although it is in your favour, it was F. Scott Fitzgerald who said that the ability to retain two opposing thoughts in one head at the same time and still retain the ability to function is the sign of first-class intelligence—

Chair

That’s the best you’re going to get, isn’t it? Now, a question—

Mr Bacon

But why is it that everybody, including magazines of the quality of The Economist, is so obsessed with input measures? Why do we talk about input measures as if somehow some mythical benchmark of what they are doing in Norway, Bolivia or Sweden is what we ought to be aiming at? Really what we ought to be obsessing about is five-year cancer survival rates, not the pounds, shillings and pence involved in achieving those.

Simon Stevens

We are obsessing about cancer survival rates, and that is why it is so good that the cancer survival rates increased from 59% to 69% over the last 15 years.

Mr Bacon

I meant cancer survival rates as a proxy of output measures generally.

Simon Stevens

Sure, so with our cancer improvement plan for the next five years, the ultimate test will be: do we save 30,000 more lives? It won’t be: do we have this many clicks of the turnstile or this number of diagnostic tests? However, in order to get that, we have got to get early diagnosis, which means we need faster testing, in particular for colorectal cancer and lung cancer, and we need to upgrade our radiotherapy machines, which I am hopeful that we can do quite soon. There is a relationship between the care on offer and the outcomes you get, but we have clearly framed our cancer improvement plan in terms of outcomes.

Karin Smyth

Can I take us back to the accounts? Our erstwhile colleague Mr Mowat has appeared in the Department of Health and—

Chair

They wanted him on the inside, rather than the outside.

Karin Smyth

They did. He has mysteriously found £170 million for community pharmacy, as I understand it. Where has he found that money from?

Simon Stevens

When you say he has found £170 million—

Karin Smyth

There is a reprieve or a delay for community pharmacy cuts that were in the forward budgets for next year. They have now been delayed and community pharmacy, we read, has been saved.

Simon Stevens

I certainly hope that last statement is true, but the costs of that delay are a further budget pressure on NHS England this year, which I am having to manage.

Karin Smyth

How is that notified to you from the Department of Health?

Simon Stevens

Obviously, these are decisions for Government. We have a conversation about our ability to manage in these circumstances, and a decision is taken.

Karin Smyth

So would that be another raid on NHS England by the Department of Health?

Simon Stevens

No, I don’t think that would be the right way of saying it.

Karin Smyth

But it was not a negotiated point with you for these—

Simon Stevens

No, I think that is trying to put daylight where none may exist. There are some legitimate considerations here about how to deal with the fact that community pharmacy is hugely valuable in this country, but we also have a situation where we are spending something like £2.8 billion in order to dole out £8 billion-worth of medicines. There are efficiencies to be made in every part of our cost structure, including that.

Karin Smyth

But it just doesn’t give confidence, does it, that, as I alluded to earlier, there is this plan? To be fair to everybody—I made this point to the permanent secretary last week—there are real problems and real pressures. But this movement in year on people is not helpful, is it, and it does not give us confidence that there is an overall plan that people are sticking to? That is a statement rather than a question.

Stephen Phillips

Do you agree with it?

Simon Stevens

Well, you have chosen one particular example, but in any given year there are ins and outs. But let’s be clear: yes, in order to deliver against the funding that we have, we are going to have to be resolute on some often quite controversial decisions.

Chair

You are a frequent flyer with this Committee. It would be very helpful if you could set out to us in a letter exactly what your responsibilities are, which picks up Ms Smyth’s point about announcements made by Ministers and then you having to adjust your plans to fit the announcements sometimes. There are all sorts of other pressures.

Simon Stevens

Our responsibilities, and my responsibilities as your accounting officer, are set out very clearly in the governance statement of our annual report, on page 81 and subsequently, in inordinate detail, so I would refer you to that.

Chair

That is absolutely fine. When Chris Wormald, the permanent secretary at the Department of Health, was in front of us last week, he said: “We expect NHS budgets to remain challenging.” He talked about the financial reset that you are doing. He said: “it is a tough plan. It is a difficult plan, and it is a challenge for all NHS commissioners and providers to meet.” It sounds like he is saying it is down to you to deliver this tough, difficult—these words are all in one sentence, I stress—plan, so do you think your neck is on the line?

Simon Stevens

I don’t think that is what Chris said, but the piece you have quoted from him is clearly right: it is incredibly challenging and it is going to be a team effort. There are some things that the Department of Health is going to have to do—

Chair

I have quoted him, so what I have said is right, to be clear.

Simon Stevens

What you put in quotations I agree with, but your editorialising subsequently that therefore—

Chair

I am asking you: do you think your neck is on the line if you do not deliver this?

Simon Stevens

I think all of us want to deliver this, because ultimately it is about trying to improve care for patients across the national health service and to do the best we can with the resources we have. That is why we are all doing the roles we have chosen to do, but is it a—

Chair

But the hole is getting bigger. Is it an impossible task, Mr Stevens, to do this with the money that you have?

Simon Stevens

It is an extremely challenging task. At some level, we are all volunteers, as it were—

Chair

I think everyone has agreed the word “challenging”.

Simon Stevens

It is difficult; of course it’s difficult. Anybody who thinks it isn’t does not know what they are facing, but—

Stephen Phillips

“Extremely challenging” seems to me to come very close to being, “We hope we can achieve it, but at the end of the day it may be impossible.”

Simon Stevens

We are going to move heaven and earth to do the best we can—

Stephen Phillips

Mr Stevens, I think you would do yourself a lot of favours if you would just agree with me. No one is suggesting that you are not moving heaven and earth and no one is suggesting that it is not extremely challenging, but I think that the descriptions that you and the permanent secretary are giving to the task mean that, with luck—with a fair wind—maybe we can do it, but equally, and perhaps even more likely, we might not be able to. I think you agree with that and you would do yourself some favours if you indicated that to the Committee now.

Simon Stevens

Well, it is going to take enormous effort on the part of many, many people right across the national health service. I have been absolutely clear about this and I think it is consistent with what you have just said, Mr Phillips. In the 28 years since I started working in the NHS, this is clearly—by far and away—the most challenging extended period for the NHS.

Chair

And you are in charge—lucky you. We will now hear from Mr Foster and then Ms Phillipson.

Kevin Foster

It was interesting to hear, Mr Stevens, the comment a few moments ago about how these plans can energise discussion at local level. I think it is safe to say that since April, when part of the plans for Devon were unveiled in my area, that has certainly energised debate. But the other half wasn’t; that was leaked last week. How do you see the balance between delivering your national goals and objectives and, at a local level, ensuring these energising debates are not just, bluntly, foregone conclusions?

Simon Stevens

There are two things to say about that. First, it will be very important that there is full engagement with communities, with staff and with patients about the proposals that are developed through this process. Where necessary, as a result of major service change, there will need to be formal public consultation, with all the legal protections that go with that. We will publish directions to the NHS next week making that crystal clear. However, it also seems not unreasonable that before you do that, you have developed a set of potentially viable proposals with which to discuss and engage, rather than flying kites on proposals that may not actually make any sense. So that is the circle that people are trying to square. In many cases, things that are described as being fresh out of the STP process have been in the works and people have been talking about it for a very long time, so they are further along. In other cases, there is more discussion required.

Kevin Foster

Obviously, it is all very interesting. Full engagement can be summed up as a few meetings and a questionnaire at one extreme. In terms of STPs being delivered, who takes the ultimate oversight in terms of ensuring that they actually deliver the very challenging goals you keep talking about and that, in your own words, you are resolute in delivering? Whose responsibility is that? Is that yours or that of the local areas?

Simon Stevens

The statutory accountabilities are not changed through this process. Individual boards and organisations, increasingly working together rather than at odds with each other, will have that responsibility in each part of the country but, in order to give them their best chance of success, obviously NHS England and NHS Improvement want to work with them to ensure that these are robust and implementable plans.

Bridget Phillipson

You said that you will make this work in terms of the financial settlement, but at what point will you go back to the Treasury if it does not work? If, having moved heaven and earth, it is still not possible, at what point will you go back to the Treasury and say, “This can’t be done”?

Simon Stevens

A month before the 2015 spending review settlement, not only unusually but probably uniquely for somebody doing my job—none of my predecessors had done it—I went public and said I did not feel that the SR was on track to get us going on the journey that we wanted. So I will go back as and when circumstances require but, by and large, I think the task in front of us right now is to try and formulate sensible plans and to get going with the efficiencies that, as Mr Bacon pointed out, the NHS still has available to us. There may be subsequent decisions that would be for the Government, not for the NHS, but we will cross that bridge when we get to it.

Bridget Phillipson

There will be a question of either additional funding or reductions in services at some point.

Simon Stevens

Or other ways of driving efficiency that have not previously been undertaken.

Chair

Mr Stevens, you keep talking about efficiencies when you come here. We are the Public Accounts Committee, so we love efficiencies, but there is a point at which efficiencies come at too high a cost to patient care. The line between efficiencies and cuts in services is often quite a fine one. I don’t think I need to repeat Ms Phillipson’s question. When will the point come? You have used up political capital once going and asking—

Simon Stevens

I understand why you are posing the question, but you will also understand that it is not a question in the abstract I can answer.

Chair

You say you have done it once. You didn’t actually say you would be prepared to do it again.

Simon Stevens

I don’t think it helps to go around making threats. The point is that—

Chair

Not threats. You run—is it bigger than the Chinese army?—one of the largest employers and biggest health services in the world, and the most important to us anyway. It is your job to make sure that you can deliver to the mandate, and it is your job to call out Ministers if you do not think that is going to be possible, bearing in mind all your professional knowledge and all the information you have at your fingertips. Will you be prepared to call on Ministers and tell them you cannot deliver to the mandate if you do not have enough money to do that?

Simon Stevens

Ultimately, of course. As I say, I have done that in the past, but let us be clear. We have got a frontloaded funded settlement for this year. There are many moving parts between now and 2020. There are many moving parts between now and 2020. I do not think viewing this purely through the lens of 2020 is necessarily the right way into this conversation.

Chair

I don’t think we’re doing that, Mr Stevens.

Simon Stevens

The reality is that since 23 June, there have been many moving parts across the economy, the public sector and many other things, so it would be quite unreasonable to expect all of these things to be resolved here and now. Let’s see how we go. I think I have been remarkably frank with you here this afternoon about the issues in front of us for next year, the year after and the year after that, and I do not think I have anything further to add.

Chair

Okay. I’m going to see whether Caroline Flint can winkle one more response out of you.

Caroline Flint

I’ll try my best, Chair. Just referring back to Ms Smyth’s question about interventions by Ministers—that was in relation to a delay in the cut to community pharmacies; we have yet to see whether that actually happens—how often do you get interventions on specific issues by Ministers outside the planning process?

Simon Stevens

Very infrequently.

Caroline Flint

You have been here since April 2014. Can you give us an idea of how many times that has happened? It is just over two years.

Simon Stevens

I think this is a team effort, where people are all trying to achieve the same results. It implies almost that it is some kind of arm-wrestle, and the truth is it isn’t.

Caroline Flint

No, no. I am just interested, because you are in charge of the overall planning of a huge sum of money, and we all agree it is really tough. When you get to a settled view, how often you get interventions from Ministers, who maybe put pressure on from elsewhere, is probably quite important to the stability of how everyone is planning for the future and all the challenges you have. Let’s just say in the past 12 months: how often have you had specific interventions by Ministers outside of the planning process?

Simon Stevens

As I say, I have worked in and around the national health service on and off for 28 years. I would say the ability of the national health service to get on with the job that we have been tasked with doing, without those kinds of processes, is greater now than it has been at any time in my recollection.

Chair

I will bring in the Comptroller and Auditor General for a final word, but I just remind the Committee—I am sure you do not need reminding, Mr Stevens—of the Department of Health announcement in November last year about the £10 billion that you have. I will just list some of the things—this is not even a complete list—that it said that would allow the NHS to offer: “5.5 million more outpatient appointments,” which is an input, as Mr Bacon has rightly highlighted; “deliver a truly 7-day health service”; “5,000 extra doctors…in general practice”; “£4.8 billion in capital funding in every year of the Spending Review”. There is a long list of promises set out for you already, spending that money, yet the demand is going up. My simple question to you is: isn’t the hole just getting bigger, and isn’t your position going to be untenable soon?

Simon Stevens

We could talk about any one of those, because it is really not very meaningful to have the conversation in the abstract. You talk about the £4.8 billion of capital. We have talked about that—the capital/revenue issues. You refer to the outpatient increases. Yes, I think we will see that, but at the same time, we want to redesign the way outpatients works, because a lot of patients are referred by their GP for a consultant review. Actually, in the best parts of the country, including places like Tower Hamlets, the GP consultation and the outpatient specialist advice are all integrated into the same encounter, often in real time. You talk about the 5,000 extra doctors in general practice we want. We need that as part of the—

Chair

You may be saved by the bell. Just finish your sentence.

Simon Stevens

For all these things, we are going to have to phase them according to the availability of the extra funding, and for some of them, that is going to be back-ended towards 2020, because that is when the pick-up in the funding occurs.

Chair

Labour Members are abstaining in this vote. Perhaps I should not declare that publicly, but it is too late. Are other members of the Committee content for us to continue while you rush off, vote and come back? Mr Stevens, I will give the Comptroller and Auditor General a final opportunity to emphasise his concerns.

Sir Amyas Morse

I will just touch on some of Chris Wormald’s words, since you have obviously studied the hearing. I felt we had a pretty good understanding of where we need to go in terms of not being in a position of having to find as many ad hoc ways of getting the budget into balance at the end of next year as we seem to have this year, and I think the Committee was satisfied with that. He did say that that would be improved because of a reset in the budgetary posture. Can I just understand what you take that to mean? What is the nature of the reset, exactly?

Simon Stevens

I take that to mean the contents of this document that we published on 21 July.

Sir Amyas Morse

No more than that. That is fine.

Simon Stevens

If we can do this, that would be quite sufficient.

Sir Amyas Morse

So if you carry that through, we will not be in a position at the end of next year where you are having to scrape round looking for adjustments to make to stay within the spending limits.

Simon Stevens

There will not be the same pressures as there were last year.

Sir Amyas Morse

There will be pressures, of course, but yes, okay. Thank you very much.

Chair

Thank you for your patience. We did not expect the session to go on quite so long, but as you will appreciate, all members of this Committee—in fact, all Members of this House—have real concerns. We recognise that you have a big challenge running a very important service in this country. We wish you well in it—it may not have come across in our questioning—but we will be holding you to account for it, of course. We will now pause, as we have to rearrange chairs or something to do with the cameras. Examination of witnesses

Witnesses

Simon Stevens, Stephen Hay, Tracy Dowling, Roland Sinker and Aidan Thomas.

Chair

Welcome to our panel for our main session this afternoon. We have a number of witnesses relating to the National Audit Office’s investigation into the UnitingCare Partnership contract. Our witnesses from my left to right are Tracy Dowling, the chief officer and the accountable officer for Cambridgeshire and Peterborough CCG; Simon Stevens, the chief executive of NHS England and a regular visitor to our Committee; Stephen Hay, who is the executive director of regulation and the deputy chief executive of NHS Improvement; Aidan Thomas, who is the chief executive of Cambridgeshire and Peterborough NHS Foundation Trust; and Roland Sinker, on the far left, who is also from Cambridge University Hospitals NHS Foundation Trust. That is Addenbrooke’s. I know Addenbrooke’s; the new title confused me, Mr Sinker. Our hashtag for anyone who is following this on Twitter—possibly lots of people in Cambridgeshire—is #unitingcare. This is an extraordinary Report—well, not such an extraordinary Report, but a sad story of £16 million spent on a project that lasted for eight months. It was intended to deliver benefits for patients and a joined-up service, but it actually delivered no obvious benefits for patients. It seems to us that the taxpayer and patients lost. What we want to probe today is what on earth happened that got it to this stage and allowed it to continue when clearly there were really big warning signs that things were not going to work. Is anything salvageable from this so that patients in Cambridgeshire can get any benefit from the taxpayer money that has been poured into it?

Karin Smyth

Welcome, everybody. Ms Dowling, why did the CCG decide to contract this commissioning to a third party?

Tracy Dowling

The CCG and previously the primary care trust had been trying to innovate and change models of care, particularly for older people. They were not able to get those pathway changes to really embed and happen in practice to improve the management of frail older people and people with long-term conditions and have an impact on reducing the demand on acute hospital admissions. They felt that, by commissioning an organisation with responsibility for the total budget for those older people, that organisation would find ways of integrating pathways of care and working differently with providers to get those outcomes. It was very much an outcomes-based rather than input-based specification of care. It was also a long-term contract. Recently we have been contracting on an annual basis with providers. This was putting out to the market a five-year contract with an optional two-year extension, to give providers the time to transform services and make those changes.

Karin Smyth

But commissioning is your role, so why is that someone else’s role and not yours?

Tracy Dowling

What the clinical commissioning group was seeking to do through that third-party organisation was for that organisation to bring about the transformation of service delivery.

Karin Smyth

So why can’t you do that as a CCG?

Tracy Dowling

I think we can, and I think that is what we are doing now.

Karin Smyth

So is the lesson, then, that you are fit for purpose to do that commissioning role? Is that the lesson?

Tracy Dowling

I am relatively new in post in developing the organisation to be fit for purpose to do that transformation.

Karin Smyth

My question is: you decided to outsource that commissioning role to a third party to integrate, because the CCG felt it could not do that role. Do you now think the CCG can fulfil that role?

Tracy Dowling

Yes, I do think the CCG can do that role.

Karin Smyth

What is the difference?

Tracy Dowling

The difference is accepting, first of all, that that is our responsibility. I think there is a difference in the way in which our relationships have developed with the providers, because actually we have been through a very difficult time together and I think we have come out of that much stronger. We collectively own the issues and challenges in our system, and I think we are collectively owning that we need to find those solutions, implement them together and collectively manage the risk in our system, rather than seeking to transfer that risk back and forth across the commissioner-provider divide.

Karin Smyth

Forgive me—I do not know the geography well enough to answer this question, but are you the lead organisation for the STPs?

Tracy Dowling

Yes, and I am the lead executive for the sustainability and transformation plan.

Karin Smyth

May I ask—sorry, it’s a three-way go now, isn’t it? To Ms Dowling, Mr Thomas and Mr Sinker: do you accept that the money that was available to fund the transformation—the £10 million—was inadequate?

Tracy Dowling

I think the cost of transforming services was more than that £10 million. The CCG did not have a view that that was the only funding that the accountable provider would be putting into transforming services, and I think that is one of the areas where there was a difference of opinion between the commissioner and the UnitingCare Partnership.

Karin Smyth

Does anybody else want to comment?

Aidan Thomas

The transformation moneys that were agreed were in addition to resources that trusts like mine already had. We already had services on the ground and, for example, we had things like programme management support because we had done lots of other major changes prior to that. I think at the time we were not of the view between us—between the CCG and UnitingCare—that the transformation moneys were inadequate.

Karin Smyth

You weren’t? You thought it was adequate?

Aidan Thomas

Yes. Sorry for the double negative.

Karin Smyth

So you thought it would be adequate.

Aidan Thomas

We thought at the time they were adequate, and we had in fact done—I have to say that by the time UnitingCare shut down, the transformation that had started was going to plan. I think in retrospect we did not see that necessarily as a major issue.

Chair

It is very warm in here. We don’t want to get started on the “air conditioning or no air conditioning” argument, but you are very welcome to take your jackets off if you are warm, and if you need more water please flag it to one the team.

Aidan Thomas

Thank you.

Chair

Mr Sinker?

Roland Sinker

Two observations from the Addenbrooke’s and Rosie point of view. First, given that we didn’t have absolute clarity around the full costs of the services being provided between the CCG and the providers at the time of signing, everybody had a slightly different view as to how much money was available and therefore whether the £10 million was sufficient for transformation. If the core costs had been better understood, we would have a clearer view as to whether the £10 million was adequate. My second observation would be that as we plan together going forward, we are very much thinking about open book accounting between us, and that we really have to understand the costs of services. We have to understand in detail what our patients need and how we can cut the cloth accordingly to get the right service. A big part of that will be some element of double running between hospitals and community services and some real investment in transformation. That is very much what the three of us are planning for at the moment in the STP, the transformation programme that we have signed up to.

Karin Smyth

Ms Dowling, given that you are the commissioner and both trusts were in deficit, it should not really have come as a surprise, should it, that that funding was inadequate? As we have heard, the trust might not have had full sight of the whole picture, but you would have had full sight of the whole picture.

Tracy Dowling

I think that the CCG didn’t have a sufficiently adequate understanding of the costs of service provision from Cambridge Community Services. The CCG did think that the budget it was spending on those services was covering the costs. I think that the work that was done through the diligence after the contract was signed has demonstrated that that was actually not the case and so there was an unknown cost, post-transaction, that was a surprise.

Karin Smyth

What does post-transaction mean? Post the date of the signing of the contract with UnitingCare?

Tracy Dowling

Yes.

Karin Smyth

Okay. But running up to that, in the two or three years before that, you would have had oversight of all your providers’ costs and a knowledge of the level of deficits that they were carrying. You would have had those conversations, so it still shouldn’t have been a surprise.

Tracy Dowling

Cambridge Community Services were not running with a deficit and neither were CPFT—they had resolved their deficit. At the stage of doing the procurement, I don’t think Addenbrooke’s was as large and as clear as it then became shortly after the contract signature.

Roland Sinker

That’s right.

Karin Smyth

Do you think that is a failure of the oversight process locally, that it became clear afterwards?

Tracy Dowling

I think an improvement in the oversight process since then is that we are much more openly being open book and sharing—

Karin Smyth

So that’s a yes to that particular question. I think we will come back to oversight generally in a short while. Thank you. We agree that the model itself and the coming together and everyone talking to each other and working together co-operatively for the system is, lo and behold, a good thing. It seems that patients thought that that was good. Which part of that do you feel that patients felt was a good thing?

Tracy Dowling

Patients really endorsed the model of care and there was a tremendous amount of stakeholder engagement in designing the model of care that went out in the specification. There has been a lot of concern since the contract collapsed from our patients and our public that we are going to lose that and our commitment is that we won’t. Since then, we have held a number of events with patients, the public and their representatives, to hear about the parts of the model that they particularly want us to keep. We have been very open about the elements that we have got in place and the elements that we can’t afford to put in place yet. Our sustainability and transformation plan still intends to put the same model of care in place. A huge effort went into designing that, with patients and the public, and the evidence behind that is that it is a really good model of care that is outcomes-based. It is the one thing that we definitely need to keep from this.

Chair

Ms Dowling, pain was gone through to set up this contract as a new organisation to run the services, but it seems like you have just worked out between yourselves that you are going to do it anyway. Are you not tendering this? Is that not a requirement?

Tracy Dowling

No, we’re not and I don’t believe that that is a requirement.

Chair

But you tendered it the first time. Why did you need to go through all of this pain setting up a new vehicle and all the rest of it?

Tracy Dowling

The decision to tender it the first time was about changing provider and having some competitive dialogue with different providers about how they would provide this model of care and deliver these outcomes. The winning proposal from UnitingCare, from CPFT and Addenbrooke’s Hospital as the two main NHS hosts, was the best quality bid and the staff did transfer—

Chair

We will get into the fact that it didn’t stack up financially.

Tracy Dowling

The short answer is that we don’t need to, to retain that.

Chair

You don’t need to. That makes us wonder why you did it in the first place.

Karin Smyth

So, you don’t need to go to a third-party provider.

Tracy Dowling

And we don’t need to retender the services.

Karin Smyth

The individual services?

Tracy Dowling

Yes.

Stephen Phillips

I know you weren’t in charge at the time—you were in the CCG but you weren’t chief executive—but it does lead to the question, why did you go forth? Why did the CCG form the view that this was the appropriate way forward?

Tracy Dowling

I wasn’t in the CCG at the time that it took that decision. I think the CCG took that decision at the time because it had not been successful previously in the primary care trust at getting the changes of service model and service delivery that it had wanted to through separate and bilateral contractual negotiations with different providers. The CCG’s view was that to commission a service from an organisation with that responsibility to integrate across the different providers would get that change, because they would be contractually obliged to deliver that change.

Karin Smyth

Doesn’t that tell us that the CCG was trying to outsource some of the difficult decisions that would come about as a result of trying to integrate those services within a very challenging financial envelope?

Tracy Dowling

Yes. I think the CCG felt that a different organisation would be able to bring about that change in a way that the PCT had not been able to do previously.

Karin Smyth

So, did they in fact outsource difficult decisions?

Tracy Dowling

They outsourced the responsibility for transforming care pathways and change, which can be difficult to achieve.

Karin Smyth

Would you accept that CCGs cannot outsource difficult decisions; that they ultimately have to take them themselves?

Tracy Dowling

Yes, I do accept that because I think that is the commissioner’s responsibility—to be responsible for the delivery of all of those NHS services for their population and the outcomes, therefore, for that population.

Karin Smyth

So, when it comes to the STPs—you have explained that you have learned those lessons and that is what you are trying to do—the responsibility for that decision-making process will fall to you.

Tracy Dowling

So that will fall to me as the lead of our health and care executive, which is our six-chief-executive governing body for our Sustainability and Transformation plan.

Karin Smyth

But, of course, in governance terms that does not fall to you, does it? Because you can’t force all the other people within the footprint to be part of that decision.

Tracy Dowling

I think we have not to use force but be driven by what gets the right outcomes for patients and what gets the best use of all of our resources—both financial and staff resources. That is what is driving us: to find different ways to deliver services that deliver those better outcomes than those we have been able to deliver to date.

Karin Smyth

Thank you. Mr Stevens, it is a good example of people perhaps trying to come together, isn’t it? What lessons do you think have been learned nationally from what has happened here, with the way that the CCG has commissioned this project?

Simon Stevens

I think there are seven lessons. In order to get into that, it is worth being clear about my reading of what people were trying to do across Cambridgeshire and Peterborough when they did this. They were trying to do four things in good faith. First, they were trying to integrate different services, which is not just about passing the buck as to who is making the difficult decisions or who is doing the commissioning. They were saying, “We have got Cambridge community health trust, these other organisations, ambulances, GP surgeries and all the rest of it. It is a bit of a hotch-potch and we want to try to bring this together to create a more person-centred care for some very vulnerable people across Cambridgeshire.” That is why this service model is so popular. Secondly, they were trying to provide multi-year certainty. They were trying to say, “Instead of the annual arm wrestle around short-term contracts, we are going to set out what five years’ worth of funding would look like, to give people the ability to reshape services within that.” Thirdly, they were saying, “We are not going to pay for clicks at the turnstile. We also want to link some of the funding to improved outcomes.” That picks up Mr Bacon’s earlier point. Fourthly, they were saying, “In the process, we want to drive some real efficiencies.” The business plan that set out to do that envisaged £178 million of efficiencies by 2020. Even if it were a third or two thirds of that, it is still worth having. Those were four good reasons why this group of people got into this process but it did not work. So here are the seven lessons and what we are doing about them.

Chair

Please answer the question.

Simon Stevens

First, you have got to get the service designed right at the outset. I think it is apparent reading this that some of the service design questions were being iterated as the procurement process was going through. Secondly, you have got to get transparency from legacy providers. As I read the NAO Report, part of the problem was that the data from the previous community health provider—Cambridgeshire Community Trust—were not available to the new folks and therefore they did not know what the costs of service genuinely were. That is why we need open book. Thirdly, we have got to increase the commercial nous where these kind of arrangements are embarked on. There are some pretty basic things here around parent company guarantees which, if they had been insisted on, would I believe, based on what the NAO found, have forced the conversation about whether this level of risk transfer was viable. The same would be true for the VAT issue—that should not have been still in play after the contract started.

Karin Smyth

So, would you still see this sort of third-party model as being a good way forward?

Simon Stevens

I don’t think it is a third-party model; it is a combination model. It was two NHS trusts doing it together instead of a hotch-potch of different providers each with different, separate contracts. So I do not think that was an ignoble ambition for what was trying to be done in Cambridgeshire.

Karin Smyth

That was not quite my question. What you were starting to stay was that the way of contracting, with the overhead parent company type of model, has got inherent problems. I have read this to say that that is absolutely not the way to go forward, but I think you are saying it is still viable.

Simon Stevens

It is only a viable way forward if you force the issue on things like parent company guarantees, in that—Stephen will come in later on—that would then drive the hard conversations about, “Have you guys really thought through what this looks like in three, four or five years’ time?”

Karin Smyth

Because they cannot do it by themselves?

Simon Stevens

There are other ways of achieving the same result: alliance contracting. I think what the CCG, as I understand it, was trying to do was not be the piggy in the middle for all the different service providers, so it was arbitrating between them. It was saying, “Guys, you’ve got to come together and figure this out yourselves,” which, in this case, because they did not get these commercial basics right and other things I am going through, it backfired. But that does not mean that intrinsically it always would. Those are the first three of the seven. I think the fourth is that we have got to have complete clarity about the role of external advisers. It is pretty clear that at best the different strands of advice were not brought together into a coherent whole and the leadership of the decision-making bodies did not register perhaps what should have registered from some of that advice. In the case of one of the three external advisers, having looked at what they had been up to, NHS England has taken the decision that they should be disbanded: the Strategic Projects Team. Fifthly, I think it is clear that if this is going to work, you cannot change your mind halfway through the procurement process about the terms that you are engaged on. That happens all too often. It is then unfair to the level playing field that was established early on. Sixthly, do not go live until you have got your issues sorted. And, seventhly, NHS England and NHS Improvement together have got to do a better job rather than it being regulated down the organisational silo. That is a rather long answer, but I have alluded to this very carefully. Those, it seems to me, are the seven habits of highly effective service redesign that we have got to get right if this kind of thing is not going to be repeated.

Chair

Mr Stevens has been reading his management books.

Simon Stevens

Airport fiction.

Karin Smyth

It is not just about service redesign, is it, though? It is about the model chosen to deliver it. My first question to Ms Dowling was about whether the CCG has essentially abdicated or outsourced its responsibility as a commissioner and you seem to be saying that using this model, with the parent company taking that decision, suggests that the commissioner is not really fit for the task it has been set. Would you agree?

Simon Stevens

No. I think what they did instead was make a commissioning decision as to five years’ worth of outcomes and value that they wanted with a redesigned service underneath that. For all the reasons we have just gone through—those seven reasons—it did not work, and that cannot be repeated and has to change across the NHS.

Karin Smyth

But they are not piggy in the middle as you said earlier, because they are not providing; they are commissioning. That is their job: to get other people together to provide the service within the specification. You can say that the specification was ill-defined and so on—people will come back in on that—but essentially what is the point in having a commissioner if they outsource that to someone else who is not a thing accountable directly to the public and cannot, for example, be here in front of us today?

Simon Stevens

No—I think it is perfectly legitimate to decide where the division of labour should sit between different parts of the provider structure. I will give you this example, to make it very tangible: in about a third of the country I think acute hospitals are also running their community services. We call that integration; we do not call that an abdication of the CCG’s responsibilities to buy things separately.

Chair

No, but sorry, Mr Stevens, to pick up on Ms Smyth’s particularly pertinent point about governance, if there is a problem with community services and a hospital in my area, on those issues I can go to the chief executive of the hospital. There is a board and a chair. What about answering Ms Smyth’s question about why Uniting Care partnerships is not a thing that is sitting in front of us today, directly responsible? Who is responsible now?

Simon Stevens

There were two NHS trusts involved in this thing, so we know who they are and their chief executives are here today, and there was a CCG, and the CCG is here. So it is not a very complicated picture. It is the three organisations that are doing this.

Chair

So where did the buck stop? If it had continued and there had been an issue—let’s say an MP gets a bit of casework about something in the Uniting Care partnership—who would they go to? Where is the accountability?

Simon Stevens

There are three statutory boards. In the event that these kinds of structures, which will be by exception—there are some downsides to them. Nevertheless, if we are going to have these kinds of things, we need to ensure that NHS Improvement is clear about the extent to which they are regulated as the combined vehicle, rather than the two statutory bodies that form it, and that the CQC is clear what the quality oversight looks like. In some parts of the country, for better or worse, private providers are doing this so it is not just statutory boards.

Chair

But when it comes to the oversight—Ms Smyth was very clear in her point—who is in charge? If Uniting Care Partnership was here now, who would we be challenging about this?

Simon Stevens

It would be the same three people that you have in front of you here: Roland and Aidan, who are the two providers; and Tracy, who is the Clinical Commissioning Group holding the contract and accountable for how they are doing.

Chair

So, exactly. It is three organisations.

Simon Stevens

So they are here.

Chris Evans

Mr Stevens, Monitor has had 34 outstanding issues in negotiations on the contract. It was not signed off until the day it was signed. I am looking at paragraph 1.8 of the Report, which says that Cambridge and Peterborough NHS Foundation Trust wanted to win the contract because they feared that a “reduction in its income might reduce its viability as a foundation trust in future.” Was that a consideration even though there were 34 individual problems with the contract, which was yet to be negotiated?

Simon Stevens

Aidan Thomas, the chief executive of the trust, will obviously respond to that.

Chris Evans

But I want to know why the contract was signed when there were still 34 problems, which was a large amount.

Simon Stevens

I think it is clear that it should not have been.

Chair

Okay, but on the point about the budget—Aidan Thomas.

Aidan Thomas

From our trust’s perspective, the point about the continuation of the trust—particularly the viability of the other services that we ran, because we are a mental health provider for adults and children as well as providing community children’s services in parts of the patch—was important. In our view, it was important that we did our best to win the contract. That is reflected in the NAO’s Report. On your question about how many outstanding issues there were when we signed the contract, it was a concern for everybody on the provider side. I am sure that it was a concern for the CCG too. There was pressure in the system at the time to get the thing going and get the whole thing running. That was partly because there was a need for the economy to deal with its financial problems—if this contract had been allowed to work, it should have dealt with some of that—and because there had been a long period of uncertainty for more than 1,200 staff. There was pressure to get it done. I think we would all agree with Simon Stevens that, in retrospect, it would have been much better to have got those things sorted before the contract was signed.

Chair

To state the bleeding obvious.

Karin Smyth

I am heartened to hear Ms Dowling say that the commissioner would now lead this and take that responsibility. I am slightly disheartened to hear that the model of having this third party is still preferred. I do not see, given the lessons we have learned, why you would need to set up a complicated vehicle to deliver the programme.

Tracy Dowling

Sorry, may I clarify? The model we are retaining is the clinical model of service delivery. We have no intention to continue to have a third party.

Karin Smyth

I know, but Mr Stevens’s point is about problems with the third-party parent, getting the governance checked and checking whether you pay VAT. Whereas, actually, the lesson of this is: why complicate it by setting up a different vehicle?

Tracy Dowling

We are simplifying it in our system.

Karin Smyth

Okay, but I guess that, across the country, Mr Stevens, we will see different models.

Simon Stevens

Here’s the answer: if this scope was a bit wider—if it included GP services and ambulance services, which it might well have done, and possibly some social care—and if you are saying that you can only have a single statutory body doing it, the implication is that you either have to nationalise general practice left, right and centre or you cannot have ambulance trusts and so on. There may need to be ways of bringing separate organisations together in a shared endeavour. I think, for the reasons we have set out, that this kind of approach with an SPV is likely to be exceptional rather than the rule, but if it were ever to be applied, we would need to make sure that the seven safeguards I discussed are fully met.

Chair

Tracy Dowling, we know now that the budget was unrealistic. We have heard from Simon Stevens that certain data was not available. So how did you go about testing the £752 million budget to check that it was viable in the contract that was being discussed?

Tracy Dowling

I think that the CCG looked at its existing spend. It looked at what different models of care in other parts of the country could deliver in terms of efficiency and gain. I also think that it looked at what its future budget would be and the pressures on the budget, and it was seeking that that efficiency would deliver some of the financial gain that will be needed in our system over the next five years.

Chair

So which came first: the budget pressure or the service model? If you have a budget and you are trying to get efficiencies, it is tempting to set the efficiencies to meet the gap in the budget. Is that what happened in reality?

Tracy Dowling

I think the two came at the same time.

Chair

You say “I think.” Let’s just be clear. You have been chief executive of the CCG for, what, the last 12 months?

Tracy Dowling

Since May this year.

Chair

But you worked for the CCG before.

Tracy Dowling

I worked for the CCG from January of the previous year, which was after the contract was signed.

Chair

Okay, but where were you working before that?

Tracy Dowling

Before that I was with NHS England.

Chair

In Cambridgeshire?

Tracy Dowling

In East Anglia, covering Cambridgeshire.

Chair

So you have had oversight. You have been aware of all the negotiations of this contract.

Tracy Dowling

Yes. When the CCG was first formed, one of the strongest requirements from general practice, leading commissioning, was to sort out the provision of care for older people. That is because of an ageing population, and the ageing population is growing—the same as is seen nationally. Also, the rate of hospital admission and readmission was crippling in terms of the financial position and was crippling hospitals in terms of being able to deliver the standards of access and care, particularly for that client group. I think it was a primary clinical priority for GPs coming into commissioning.

Chair

But it is an expensive clinical issue.

Tracy Dowling

Yes, a very expensive clinical issue. In the forward planning that it was doing at that time, the CCG was absolutely clear, both managerially and clinically, that getting a fundamental shift and change in the delivery of care for older people and for people with long-term conditions was so fundamental to ever getting the CCG and the outcomes for patients to be where they should be.

Chair

Did you never, at any point, contemplate—you are providing co-ordinated care—having people with greater knowledge, having access to certain services in people’s homes or having interactions with patients? There might actually be more demand out there than was apparent from the acute hospital end.

Tracy Dowling

I don’t know if that was considered at the time.

Chair

Would it not have been sensible? If you were there now, would you think that would be a sensible thing to consider?

Tracy Dowling

Yes, I think so. I think that some of the evidence around improving the management of long-term conditions is that, in the short term—the first two years—you often see demand increase because you are finding cases that have not been managed.

Chair

Okay, but you had this expectation—all three of you were involved—that there would be a 10% cost reduction in efficiencies across the course of the contract. Why did you believe that that was possible if you had such poor data on which to analyse the contract?

Tracy Dowling

In retrospect, I think that that may well have been a flawed expectation.

Chair

It clearly was. “It may well have been” is very generous. It was, and it is clearly the case that in the overall—

Simon Stevens

With respect, we don’t know because the thing got canned after just a few months. It was for five years.

Chair

Okay, fair point. We will allow the “may,” but 10% was a very neat number. We are a bit nervous about neat numbers on this Committee because it seems like it is retrofitted to the budget curve that you’ve got. Aidan Thomas, you said earlier that “it was very important that we did our best to win the contract” in response to Ms Smyth’s question about your budget deficit. But didn’t this £752 million help you to meet your budget deficit? Was that the reason for the figure that was being put forward to run the UnitingCare Partnership for clinical services?

Aidan Thomas

We put forward what we thought was an appropriate bid. We were trying to win the contract and that was an appropriate bid. There were lots of caveats because there were, as you know from the NAO Report, a lot of things we didn’t have enough information on.

Chair

May I say, Tracy Dowling, it was cheaper than other bids—quite a lot. There was a challenge back, but then you just accepted the figures.

Tracy Dowling

Yes, there was a challenge back from the CCG to the provider about the price and being clear about all assumptions on what had to be provided for that sum. UnitingCare clarified that it could provide the services for that sum.

Chair

So, Mr Thomas, before you answer the other point, and Mr Sinker too, did you assume that you would get more money if necessary and if there was a problem?

Aidan Thomas

As we have heard, there was a significant number of things in the contract where the information wasn’t clear and where we had either specific agreements or conditions precedent in the contract that meant we were expecting to negotiate or have clarity over those.

Chair

With respect, you went into a contract with a figure and an efficiency target and both of you expected, after the contract was signed, to negotiate over price issues during the lifetime of the contract.

Aidan Thomas

Yes.

Chair

Mr Sinker.

Roland Sinker

Yes.