Hansard

First of all, thank you to everyone who helped me with this work behind the scenes—especially to Nicola Hudson from the Parliament’s financial scrutiny unit, who gave me considerable help.The context is that there has been on-going concern from this committee and from predecessor committees about the level of scrutiny we can get to with the national draft budget that we see, in terms of how we can scrutinise things at the health board level—the £8 billion or £9 billion out of the £11 billion allocation—and how we can tell what the health boards are doing with that money.Two years ago, the predecessor committee agreed that a survey should go out to Scottish health boards. The current survey is really a repeat of that survey, with some added questions that are relevant to the current committee’s discussions. The details of how the survey was carried out are covered in the paper. Suitable caveats are given, which we will come to as we go through the paper.The first question, on page 2 of the paper, is about earmarked funding. When the Government earmarks funding before it hands it down to local boards, it directs where the spending will go. There are quite legitimate reasons for earmarked funding—the aim of the question was to find out the extent to which it was happening and how it was changing over time.The key finding is that about 12 per cent of NHS revenue allocation is earmarked for particular purposes. If anything, earmarked funding is falling slightly over time as things move from being earmarked to the mainstream of allocation. Personally, I was quite surprised by that. If I had been asked to guess what proportion of the allocation was earmarked, I probably would have gone for about half that figure. We tried to keep the survey brief in order not to impose big burdens on health boards in terms of filling it in, so we did not ask what exactly boards meant by earmarked allocations. We can ask boards to define that before we hear oral evidence from them. To summarise, 12 per cent of the allocation—or around £1 out of every £8—is allocated to Scottish health boards for an earmarked purpose and that percentage is falling slightly over time.The second part of question 1 was about the level of non-recurring funding. Of course, there can be legitimate reasons for handing out money on a non-recurring basis, but members might recall that in the middle of the previous decade Audit Scotland found that some boards seemed to be relying on non-recurring funding to keep going. Therefore we were looking for danger indicators, as it were. Are boards getting hooked on non-recurring funding? The table on page 4 indicates that NHS Dumfries and Galloway seems to have quite a high level of non-recurring funding, as do NHS Lanarkshire and NHS Fife.We did not ask specifically what the funding was for. NHS Fife helpfully supplied the information that the funding was intended to help the board while it had a major capital scheme on the go. The committee might think that that is quite legitimate; it would be nice to know why other health boards had a high level of non-recurring funding, because we do not want boards to depend on such funding to achieve financial balance from year to year.Question 2 was about the balance between spend on acute services, primary care and community services and other services—the heading “other” was poorly defined, and boards did not interpret it in the same way. I did not present the information by board, because the results in the category “other” went from 1 per cent in some boards to 30 per cent in others, which implies that boards interpreted the question in different ways. The broad picture seems to show a balance of about 48 per cent of spending on acute care, 45 per cent on primary and community care and about 7 per cent on other services.A key issue for the committee will be to monitor the balance and look for signs of change. We probably would not expect big changes year on year, but we might hope for progress in the shift to primary and community care over five years. I guess that question 2 was an attempt to put down a marker—it might or might not have worked. We can perhaps talk about that after my presentation.Question 3 was a key question about inflationary pressures and where boards see cost pressures coming from. Boards were asked about their planning assumptions on pay increases, increases in the cost of supplies—a big element is energy costs—general practitioner prescribing and hospital prescribing. We can see that the assumed pay increases are relatively modest. Some boards seem to have included the incremental change year on year as people become more senior and move up the pay scale; others might not have included that—again, that flags up that boards might have interpreted the question in different ways. There are therefore all sorts of issues to do with comparability, but the responses give us a broad-brush picture.Another thing for the committee to bear in mind is that given the proportion of the NHS budget that goes on pay compared with the proportion that goes on prescribing, a 1 per cent increase in pay is roughly equivalent in cash terms to a 5 per cent increase in prescribing. Although the big numbers are on the right-hand side of the table on page 6, they are percentages and do not necessarily mean that that is where the cash is going. However, from my conversations with people in health boards, I think that prescribing is the most volatile and unpredictable issue, which causes boards the most concern year on year. I know that the committee has been considering petitions on access to specialist medicines, which I guess is relevant in that regard.Question 3 was about where cost pressures are coming from; question 4 looked at the other side of the equation and asked how boards are planning to make savings. We asked what levels of savings boards will make, under what headings. Members will correct me if I am wrong in saying that the Scottish Government has not issued a national target for savings at health board level in 2012-13 and boards have been left to a greater extent to make local decisions.The table on pages 7 and 8, on planned savings, shows some diversity. The highest figure is from NHS Shetland, which is targeting 6.6 per cent of its revenue allocation for savings; the lowest is from NHS Grampian, at 1.7 per cent. There is a big variation there, but most boards are planning savings in the range of 2.5 to 3 per cent, which is a fairly standard picture and is in line with the situation during the past couple of years. Boards appear to have achieved their savings—they are always concerned that they will not do so, but somehow or other they always manage.In general, this presentation focuses on the territorial boards, because they control the majority of the budget, but we must not forget the special health boards. The table on pages 7 and 8 includes the special health boards, which generally have higher savings targets than the territorial boards have—the exception is NHS Education for Scotland, which is the biggest of the specials and pulls the average down a little. That is just a snapshot of what is going on. As far as we know, there is comparability on that question, so you are free to run your eye down the columns in the table and look at the differences. In the oral evidence sessions, we could ask whether the targets are achievable and whether the savings are recurring savings or one-off savings.The second part of the question asked health boards to name their three main areas of savings. We used the tactic of asking about the three main areas because, two years ago, some boards provided us with whole Excel spreadsheets with 200 savings schemes in them; that was interesting but also hard to digest, so we asked for the headline savings.The boards had a variety of things to say. I have tried to group the responses as sensibly as I can under four headings. Prescribing was mentioned by almost all the boards, so those issues were easy to group. I tried to group a bunch of things that seemed to relate to front-line services and were described using terms such as redesign, clinical services and clinical productivity. Another group of issues seemed to be about support services and included things such as laboratories, administration and management.There was an issue for smaller boards—especially rural boards—about money following the patient. Members will be aware that when a patient from one health board goes to another health board for treatment, the board for the area in which the patient is resident is billed for that care, so if smaller boards can keep their patients in their local hospitals, they do not have to pay the bills that boards with teaching hospitals will send them.Roughly speaking, all the boards seem to have something under most of the headings. When there is a blank in the table, it should not be assumed that that board is doing nothing under that heading. I remind the committee that we asked boards to name only their three main areas of savings. I would be very surprised if, for example, NHS Tayside, NHS Highland and NHS Borders were doing nothing on prescribing; they just did not mention it in their top three areas.We must therefore be a little bit careful about how we interpret the information. However, bearing that in mind, about 40 per cent of the savings seem to come through prescribing, about 40 per cent seem to come from support services and about 20 per cent seem to be about the redesign of front-line services to achieve efficiencies. That is a broad-brush picture, but it is the sort of thing that the survey was meant to look at. There are issues about how we ensure that quality is maintained while the savings are made.Question 5 asked about what we call service developments—ideas for new services, new staffing and so on—and whether those were being funded to any extent this year. The first part of the question asked for three examples of things that were funded by health boards. A wide variety of things is listed in the table. A strong theme among the boards in the north of Scotland is the regional secure unit—the forensic psychiatry service. Other than that, the examples that are given relate mainly to acute services or to medicines. There is very little about health promotion or primary care. Although some examples relate to those areas, they are mainly about acute services and medicines.We also asked the corollary, about things that the boards regarded as priorities that were not funded. The responses included an equally wide range of services. Five boards said that there was nothing that they regarded as a priority that they could not fund, which might raise an issue about what they term a priority. It is interesting that, although we are into the fourth or fifth year of a financial crunch, some boards still feel that they can fund everything that they regard as a priority.Some boards perhaps entered into the spirit of the question slightly more than others. NHS Lothian and NHS Lanarkshire both gave interesting answers. They listed some fairly important services that they could not afford to fund. None of the services was in areas that might really worry us such as cancer or heart disease, but I imagine that they are all important to certain patient groups.Question 6 picked up on preventative programmes, which the committee discussed in autumn last year, and on what potential there is for longer-term savings when those are funded. I remember that the committee took oral evidence on a variety of health promotion programmes.We asked the boards what they were funding, but we did not present that evidence in the paper because a rich variety of programmes was funded. The more interesting question for the committee’s purpose was whether the financial planning included savings that would stem from the preventative programmes. All the boards agreed that there was the potential to make savings, but none stated that it included in its financial planning cash-releasing efficiency savings from preventative services, which was quite interesting. They gave various reasons for that, the first of which was the time horizon involved, especially with health-promotion-type preventative spending, from which it might take decades for savings to accrue. Boards made the point that financial planning in the NHS is usually a three to five-year exercise, and 30-year to 40-year savings might be involved. As the paper says, the second reason that was given was that it is“Difficult to obtain evidence for cost savings because they are in the long-term”.The third reason was to do with uncertainty“about the method for determining long-term savings”,and the fourth, catch-all reason was that“Prudence requires not including savings in the financial plan.”12:15 I reproduced in full quite a good quote from NHS Lanarkshire, which is to do with the fragile nature of savings in the view of NHS managers, especially when they can easily be swamped by other pressures in a service in the medium to long term. All that can be said at the end is, “We are under financial pressure, but things could have been worse if we had not made preventative service investments several years before.” That was interesting, and it perhaps had more resonance with me than the timeframe issues that boards talked about.Members will know that the use of the change fund could also be described as preventative, and we do not have timeframe issues there. If services for older people are invested in now, we should really see pay-offs in two to three years, but boards said that they do not include those savings either. I suspect that the true reason for that is to do with what boards see as the fragile nature of those savings. With another trend coming in the opposite direction, they can simply be swamped by an increase in demand from another area of the service. To put things differently, a built bed is a filled bed. If a bed in a hospital is lying empty, a doctor will find somebody else who is in need to put into it.Two boards—NHS Orkney and NHS Shetland, which, as we all know, are smaller boards—said that they were planning to estimate financial savings in the future. It will be interesting to see whether that comes to pass.That is probably enough on that matter.Question 7 was the central question of what boards saw as the main risks in their financial plans. I think that those factors are fairly stable over time—I remember them from two years ago. Prescribing costs are seen as a factor, mainly because of their volatility, I suspect. There are formularies or approved lists of medicines, but there is also a lot of scope for doctors to make prescribing decisions. Guidelines can be produced, and quite a lot of volatility is involved.As the paper says,“almost all boards stated that the achievement of their efficiency savings plan was a risk”because the plans are getting very big and complicated, and more medium to high-risk areas have to be taken in to try to make the savings happen. NHS Lanarkshire made the point that there was no reserve, so if the savings plan does not work, it will be looking at a deficit.Several boards mentioned capital issues, including capital cuts, and volatile demand, referral patterns and a variety of board-specific factors were mentioned. It is interesting that pay is not regarded as an issue. It seems to be not as volatile, and boards possibly feel better able to keep control of it.The committee may wish to question boards on how they go about mitigating those risks and what they are doing to try to bring prescribing costs back into a more controlled situation.Questions 8 and 9, which were both a different type of question, were to do with issues around change funds and resource transfer. They were essentially about things developing. We talked about that last autumn and thought that things would have moved on by the spring. Sure enough, boards are starting to make their allocations. Essentially, information about that was asked for, and it is tabulated. The headings in the table did not quite work, but there is enough for members to be able to see roughly what is going on.The information in the table is about the change fund for older people and how it is being allocated. The central part of the table shows the contributions from local authorities and the right-hand part shows transfers from the change fund to the third sector. We can see that there are some quite big variations in the contributions from local authorities. I am not clear whether some transfers are still to be agreed. There are also some big variations in the transfers from the change fund to the third sector, at least in proportion terms. Those are obvious areas in which the committee might wish to ask witnesses for more detail, to get behind the figures.Question 9 was about resource transfer. One of the witnesses suggested that we ask about that, and it seemed a good point as the committee had not asked about it before. It turns out that the amount that is being resource transferred from health services to local government is more than three times the amount in the change fund. The possible issues there include the extent to which the money is ring fenced for particular patients, because this was originally brought in when people were being resettled from long-stay hospitals into the community; to what extent it is still providing services for those particular patients; and to what extent it can start to be seen as an extension of the change fund, assuming that the committee believes that the change fund represents the right way in which to go forward. We do not have answers to those things, but at least we have some magnitudes to talk about. Finding out that the amount is three times the size of the change fund was new information, at least for me.Going back to the change fund and thinking about the way in which it is being spent, I note that there is a real emphasis on preventative spending. If we can judge anything from the headings under which money is being spent, little of it is going directly into or supporting hospital-type care, so it seems to be following the spirit of the change fund. It is notable that, in marked contrast to the service development things that we looked at earlier, where a lot of the money is going into hospitals, the change fund seems to be going into keeping people out of hospitals. That is an interesting contrast.I am nearly there. Question 10 was about another of the committee’s interests from the inquiries that it held in the autumn—the switching of services from ring-fenced funding to mainstream revenue funding, and whether things ever made it or whether they were lost. The wording of the question did not quite work; some boards appeared to believe that we were asking about switching earmarked national funding streams to the local level, which is not quite what we were interested in. A few boards managed to work out what we were asking about, and I think that NHS Borders came closest to the spirit of the question with its answer about its healthy living network, which was a pilot but is now being switched across. The board described the monitoring that it plans to keep in place to ensure that the network continues to do the job that it was intended to do.The range of answers to question 10 was a little disappointing, but there are interesting questions about whether such work is going to pan out, how much it will cost and so on.Question 11 was about provision for equalities groups and the monitoring of outcomes. I do not claim to have any special expertise in that area. As a white man with no obvious disability etc, I feel underqualified to talk about it. All that I would note is the wide variety of answers that came back from the boards and the considerable variation between them, which members might wish to inquire into.I remind members that we have an oral evidence session reserved on—I believe—1 May. There are no definite plans for how to arrange that. The previous committee arranged the session into two halves and had two panels of boards, although I think that there was some overlap between them. Members might wish to arrange the meeting in that way and have a panel of urban boards first and a panel of rural boards second, or they might wish to have territorial boards on the first panel and special boards on the second. I have said little today about the special boards as the survey was not really designed for them.A third possibility is to have a selection of boards in the first half of the meeting and the Scottish Government health directorate in the second half, so that the committee can ask the people who are overseeing the financial monitoring of the system some of the broader questions that are coming out. That is for discussion, as are the lines of questioning. I hand back to the convener.