NHS: Reorganisation

Earl Howe Excerpts

Thursday 24th March 2011 Lords Chamber

[Baroness Williams of Crosby]

To ask Her Majesty’s Government what is their latest estimate of the cost of the reorganisation of the National Health Service and what proportion of that is due to redundancy and early retirement.

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)]

My Lords, the Government published an impact assessment alongside the Health and Social Care Bill. This estimated the costs of the transition at £1.4 billion. Just over £1 billion was estimated to be as a result of redundancy. The £1 billion has not been split into redundancy and early retirement as these decisions will be made at a local level. The proposed reforms will save £1.7 billion per year from 2014-15 onwards.

[Baroness Williams of Crosby]

I thank my noble friend for that Answer, but I am aware that the National Audit Office, on the basis of its own surveys, has indicated a considerably higher figure. In an important article written by the professor of medical health at the Manchester Business School, the estimates are between £2 billion and £3 billion. Could my noble friend tell us the cost of the redundancies that have arisen from PCTs being brought to an end and people moving into the new consortia, and whether that figure is part of the figure that he has given to the House?

[Earl Howe]

My Lords, I would do best to refer my noble friend to the impact assessment, which provides a detailed breakdown of the figures that I have just given. I acknowledge that we have had to make assumptions in drawing up the impact assessment. Those can be challenged, and I am aware of the figures that my noble friend has referred to. But I do not believe that changing the figures—and they are bound to change in the nature of the exercise—will make a significant difference to the overall cost. The assumptions made in the modelling are based on the best available evidence that we have at the moment.

[Baroness Thornton]

Among many others, the Conservative MP Sarah Wollaston recently argued in the Daily Telegraph:

“I cannot see that it makes sense to foot the bill for redundancies for the entire middle layer of NHS management only to be re-employing many of them within a couple of years”.

As the Minister has said, the Government’s assessment of the redundancies varies between 600 and 1,200. Can I tempt the Minister to give us his best guess of how many of those redundant managers will be re-employed within the NHS within two years? Indeed, does the Minister think that this is an acceptable use of taxpayers’ money?

[Earl Howe]

We expect that about 60 per cent of management and administrative staff currently employed in PCTs and strategic health authorities will transfer to the new GP consortia or the NHS commissioning board. Those are straight transfers. As for those who leave the service, we have included claw-back arrangements in the redundancy scheme so that, if any employee returns to work for the NHS in England within six months, they will be required to repay any unexpired element of their compensation.

[Lord Walton of Detchant]

Does the Minister accept that many members of the administrative staff of the NHS are acting as if the Bill were already in law? For instance, staff in the PCTs are melting away. It is crucially important that those who will be required to help to administer the GP consortia should be kept on. Equally, now that the Government accept that the NHS commissioning board will require some regional infrastructure to commission highly specialised services, what action are the Government taking to ensure that the experienced and dedicated staff involved in the regional strategic authorities who carry out those commissioning tasks will be kept on?

[Earl Howe]

I am very grateful for the noble Lord’s question, because it gives me the opportunity to pay tribute to the skill and dedication of our managers and administrators in PCTs and strategic health authorities, whose skills we will most certainly need once the modernisation plans have been completed. We are clear that those who are able to provide these skills and can give us continuity into the new system are people we want to keep. We are encouraging them to stay and hope that they will. We are encouraging also the pathfinder consortia to engage with the PCTs to enable that to happen.

[Baroness Jolly]

My Lords—

[Baroness Gardner of Parkes]

Following the question from the noble Baroness, Lady Thornton, could I ask my noble friend more about this transfer? Does he recall that, in previous reorganisations of the health service, large numbers of people claimed redundancy payments and then got very favourable jobs afterwards? Does he not think that the six months that he mentioned as the claw-back period is probably not enough at a time when the health service is very stretched? Also, will he consider what the noble Lord, Lord Walton, said about reorganising some of those posts now to avoid that situation?

[Earl Howe]

My Lords, we are beginning to reorganise the system. Under current rules, we are enabled to do so. I understand my noble friend’s particular point about the claw-back arrangements but there is perhaps a countervailing argument over what is fair and unfair in redundancy arrangements. In that sense, one cannot push the issue too far. Having said that, we are on track with the retirement scheme. We are seeing a deliberate and carefully managed process of reducing staff numbers at primary care trust level, leading up to the clustering of primary care trusts, which I am sure my noble friend knows about.

[Lord Patel]

My Lords, can the Minister say—

--- Later in debate ---

[Lord Patel]

Can the Minister say whether the Government have made any assessment of the transaction costs of the reform?

[Earl Howe]

I can tell the noble Lord, as I did before this Question began, that the transaction costs are not in my brief. However, we are in a different world now from the one we were in 10 or 15 years ago. We have a payment-by-results system which is well established. It is important to understand that the modernisation programme is not about competitive tendering, because it will streamline the whole process whereby providers to the health service will be enabled to offer their services to patients. It is not dependent on competitive tendering and the transaction costs should reflect that beneficially.