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The Committee of Public Accounts published a report on Wednesday 27 April which, on the basis of evidence from the Department of Health, the Chief Executive of the NHS, and The King's Fund, examines the value for money risks and implications of the Health and Social Care Bill.

Speaking about the publication of the report, the Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, said:

"The Department of Health acknowledged the risks associated with this radical shake-up of the NHS. Whilst the reforms could complement the imperative of achieving £20 billion efficiency gains by 2014/15, the reorganisation might also distract those responsible for making the savings while safeguarding standards of patient care.  Furthermore, if the Department’s estimate of the one-off costs associated with reorganisation turns out to have been too low, it will make the challenge of achieving savings for reinvestment even tougher.

The health reforms are still at an early stage and key questions have yet to be addressed. It is vital that the Department creates robust accountability structures so that Parliament and the public can properly follow the taxpayers’ pound and hold those responsible to account.

We were also concerned that the Department has not yet developed a high quality risk management protocol for either the commissioning or providing bodies. The Department acknowledged that some health trusts and some GP practices had some way to go to achieve foundation trust status or become commissioning consortia. The Department must have effective systems in place to deal with failure so that whatever happens, the interests of both patients and taxpayers are protected.We intend to review regularly the progress of the reforms, especially with reference to the kind of issues signalled in today’s report.”

Background to the report

The Health and Social Care Bill, published on 19 January 2011, proposes a new model for the NHS focusing on patient outcomes. The proposals are intended to transform the NHS in England into a highly devolved, market-based model in which local commissioners and providers of health services are freed from central control, with an increased say for local authorities, patients and the public.

The two significant structural changes proposed in the Bill are the abolition of the current structure of commissioners of health services and the regional organisations that oversee them (Primary Care Trusts and Strategic Health Authorities), and the creation of the NHS Commissioning Board and GP commissioning consortia to make commissioning more clinically led. The Government also expects all health service provider trusts to become Foundation Trusts by 2014.

Findings

Speaking as the Committee published its 33rd Report of this Session, Margaret Hodge continued:

"The reform programme will need to be managed alongside the imperative, set in 2009, to secure challenging efficiency gains across the NHS of up to £20 billion by the end of the financial year 2014-15 and the requirement to reduce administrative costs in non front-line organisations by 33% over the same period. These savings are to be reinvested in the NHS to offset cost increases driven mainly by increasing demand.

The Department of Health is taking steps to integrate the efficiency plans with the transition to the new NHS model, but it acknowledges that the risks to delivering all of the planned savings have increased in the light of the planned reforms. In particular, the one-off costs and disruption of reorganisation at the same time as seeking £20 billion efficiency savings provides an additional challenge to the NHS. 

It was clear from the evidence we took that many critical issues have yet to be resolved. Most important, for instance, the Department has not yet got a framework to deal with failure in the system, be it on the provider side or the commissioning side."

Accountability

"Establishing strong, effective systems of governance and clear lines of assurance and accountability supported by robust flows of information will be key to ensuring that public money is safeguarded. There is a continuing need to provide accountability to Parliament and for information and assurance to be aligned with new funding channels. There is a natural tension between this and the decentralisation of key funding and spending decisions closer to the ‘front line’, which needs to be reconciled in a way which satisfies Parliament that every pound of taxpayers’ money can be followed and accounted for. The lines of accountability must be explicitly clear.

"Ultimate accountability for the performance of GP consortia, and for the money they spend, will rest with the new NHS Commissioning Board and its Chief Executive, Sir David Nicholson (currently the NHS Chief Executive). Consortia themselves have considerable room for manoeuvre in developing their internal structures, but can only function with the Board’s approval. The consortia also have a duty to consult their local communities when planning and commissioning services. They are accountable primarily to the NHS Commissioning Board for their performance."

Foundation Trusts

"The Government requires all hospitals to become Foundation Trusts by 2014 or cease to exist as independent entities. They will compete with non-NHS providers. Competition law puts the focus on protecting services rather than providers. This has serious implications for the less competitive NHS hospitals, particularly those with expensive PFI contracts. It is imperative that the Department puts in place clear and transparent policies for dealing with failure of commissioners or providers to ensure patients are protected and value for money is assured.

High quality risk management will be crucial if the change programme is to be delivered to time and budget and to realise its intended benefits, especially during the transition stage.

The cost implications of the programme to deliver the reforms are clearly set out. The Department estimates the initial cost of the reforms will be a total of £1.4 billion, mainly redundancy costs, to be offset by an estimated 33% (£1.7 billion) reduction in administrative spending by 2014-15. At this stage there is scope for these cost and savings estimates to change, for example, if GP consortia are reluctant to employ staff from existing NHS commissioning bodies."

Review of reform

Speaking further on the findings of the report, Margaret Hodge concluded:

"It is unusual for the Committee of Public Accounts to examine the progress of reforms at such an early stage, but given the scale of the changes and our ongoing interest in health spending, we thought it important to gain a greater insight into the accountability and value for money issues raised by the reform proposals.

We undertook our inquiry on the basis of a landscape review by the Controller and Auditor General and we took evidence from the Department and, at a second hearing, from four expert witnesses: Professor Chris Ham of the King’s Fund; Dr Clare Gerada, chair of the Royal College of General Practitioners; Dr Shane Gordon, a GP who is also chief executive of the North East Essex GP Commissioning Consortium, a ‘pathfinder’ GP consortium; and Jill Watts, chief executive of the private healthcare company Ramsay Health Care UK."

This report provides an overview of aspects of the reforms where Parliament requires clarification and draws out a number of risks associated with the transition to the new model that need to be managed. We intend to review the progress of the reforms at regular intervals and this report signals the sorts of issues we will want to examine in future."

Further information

• About Parliament: Select Committees
• Topics: Health Services and Medicine