Department of Health Accounts inquiry

The Department’s focus on health spending at a national level fails to take into account regional variations in funding and the impact this has on patient care. In 2017–18, 101 of the 234 NHS Providers (NHS Trust and Foundation Trusts) were in deficit at the end of the financial year and NHS Providers reported a total deficit of £991 million. This deficit was largely offset by a surplus of £970 million within NHS England’s (NHSE’s) finances. NHSE achieved this surplus despite 75 of the 207 Clinical Commissioning Groups (CCGs) reporting an overspend, totalling £0.2 billion. At present the Department focuses on ensuring the whole NHS is in balance, but there is significant regional variation in the finances of individual organisations which we are concerned could pose a risk to patient care in areas with large deficits. The Department told us that it plans to address the regional imbalance in the finances of the NHS to ensure that all NHS Providers and CCGs balance their finances or achieve a surplus, but that it would be at least two to three years before this could be achieved and there is no certainty that this will be achieved.

Recommendation: The Department should, by 31 January 2019, write to the Committee to outline its assessment of the impact regional funding variations have on patient care.

The Department’s lack of a clear plan for recruiting staff after Brexit risks exacerbating existing staff shortages in the health and social care workforce. At the end of June 2018 there were 108,000 vacant posts in the NHS, which represents approximately 10% of the 1.1 million whole time equivalent staff employed by NHS Providers in England. The Department currently considers vacancy rates within the NHS at a national level. This hides underlying disparities in specific specialisms and local areas and does not allow them to fully understand the impact of staff shortages. We are concerned that existing shortages of staff could worsen depending on the UK’s immigration policy following Brexit. We are not reassured by the Department’s assertion that it has not seen a large exodus of staff since the referendum and that the number of people from the EU working in the NHS has increased. The Department told us it is committed to expanding the British workforce in the NHS both by training more staff and continuing to ensure that the NHS is somewhere that people want to come to work. It told us that it is working with the Home Office to ensure that the future immigration policy takes into account the need to recruit more permanent staff for the NHS.

Recommendation: The Department should, by 31 January 2019, write to the Committee to outline how it will address the workforce issues affecting specific specialisms and geographical regions.

Recommendation: The Department should, as soon as the Home Office’s immigration white paper has been published, write to the Committee setting out how it will respond to any changes in immigration policy arising from Brexit.

The Department has failed to assess the risk Brexit poses to the supply of medical equipment, risking patient care. The NHS procures 56% of medical consumables, such as gloves, dressings and syringes from, or via, the European Union. The Department aims to build up a six-week stockpile of these goods, along 6 Department of Health and Social Care accounts with medicines, to mitigate potential supply issues during the weeks immediately following 29 March 2019. It told us that potential disruption to the supply of large medical equipment, such as X-ray machines, was not on its radar. The Department similarly told us that it had not communicated with NHS Providers to establish the impact this potential disruption could have on patient care. The Department informed us that it had however, at the start of October, issued advice to NHS Trusts to perform a review of contracts held with the aim of identifying the potential consequences of Brexit. The Department was unable to tell us what level of risk this poses to NHS Providers, services or patient care and has since written to us confirming that it is not putting specific contingency measures in place in relating to the stockpiling of equipment.

Recommendation: The Department should write to the Committee by 31 January 2019 with details of its assessment of the impact of Brexit on the supply of medical equipment and, where necessary, what contingencies it has put in place.

We are concerned that the Department’s decision to fund pay awards through the National Tariff risks the funding not being distributed to the intended NHS Providers. For 2018–19, the Department has decided to fund the Agenda for Change pay award, covering NHS staff on standard terms and conditions, using one off payments separate to the National Tariff as this had already been agreed. However, the Department did not provide any detail as to how it had allocated the one-off payments to ensure they were only made to cover Agenda for Change employees rather than private healthcare providers or those not on standard NHS pay terms. The Department told us that it plans for the 2019–20 pay award to be incorporated into the National Tariff. The National Tariff includes adjustments to account for the cost of operating in different geographical locations. We are therefore concerned that some NHS Providers in affluent areas will receive a disproportionately higher share of funding even though there is a national pay system in place for NHS staff. Funding through the tariff will also increase payments made to private healthcare providers, whose employees are not on Agenda for Change terms. We are similarly concerned that NHS Providers using wholly-owned subsidiaries, who employ non-clinical staff outside of the Agenda for Change terms, could also benefit disproportionally when pay awards are funded through the tariff.

Recommendation: The Department should, by 31 January 2019, write to the Committee to explain how funding for the pay award has been allocated.

The recently launched consultation on the NHS’ regulation of wholly-owned subsidiaries and pause of existing proposals is welcome but must address concerns about the use of these companies. We have previously raised concerns about the NHS’ use of wholly-owned subsidiaries and that trusts were increasingly looking to form subsidiary companies, partly to remove NHS contractual terms and conditions from any new non-clinical staff and thus make savings from lower salaries and pension contributions. We also raised concerns that these subsidiaries may benefit from reduced tax liabilities. The Department and NHS Improvement previously told us that it had not been tracking these arrangements, and neither the Department nor NHS Improvement appeared aware of this trend. NHS Improvement Department of Health and Social Care accounts 7 committed to us that it would review its regulatory oversight of these subsidiaries and we will be interested in the results of the recently launched consultation on regulating the use of these bodies.

Recommendation: The Department should update the Committee on the timeline for and outcome of NHS I’s consultation on the oversight and use of wholly-owned subsidiaries by the NHS.

We are concerned that the Department’s preparations for winter, and the decision to allocate additional winter funding solely to social care services, may not be sufficient to meet demand. The Department has a record of implementing annual short-term fixes to deal with the additional demand placed on NHS services during the winter, for example cancelling elective procedures in January 2018. The Department told us that it plans to reduce the need to make cancelations at short notice this winter by scheduling fewer elective procedures. Despite this, it would not provide a guarantee to us that a blanket postponement would not occur again. The Department has provided an additional £240 million of social care funding to local authorities to help reduce delayed transfers of care and increase the availability of hospital beds during the winter. However, if this amount were divided equally between local authorities this would only be equivalent to £1.6 million per authority, despite them suffering significantly larger funding cuts. In addition, the Department told us that it does not plan to seek any assurances that the £240 million has been spent as intended, putting accountability for taxpayers’ money at risk.

Recommendation: The Department should put in place long term solutions for winter through the integration of health and social care. This should be achieved by the time of its Government’s costed 10-year social care plan, due in April 2019.

The Department’s current estimate of fraud within the NHS isn’t yet robust enough to enable it to target specific areas to prevent loss. The Department created the NHS Counter Fraud Authority (NHS CFA), which is responsible for identifying, investigating and preventing fraud within the NHS and the wider health service, on 1 November 2017. NHS CFA subsequently published its 2018 Strategic Intelligence Assessment (SIA) which estimated that the level of fraud within the NHS was £1.29 billion during 2016–17. The Department explained that elements of the estimate are based on dated and non-specific information. It confirmed, however, that the estimate nonetheless provides a starting point for estimating fraud to help identify areas where targeted intervention would be beneficial. As part of its work to combat patient prescription charge fraud the Department issued 1 million Penalty Charge Notices (PCNs) in 2017–18. However, these notices are often overturned on appeal as large numbers are issued as a result of patient administrative error as opposed to patient ineligibility to receive free prescriptions.

Recommendation: The Department should, by January 2019, provide the Committee with details of how it will improve its ability to target interventions at specific areas and better prevent loss. The Department must ensure that it distinguishes between what is fraud and what is error.

The Department’s inability to accurately forecast its exposure to clinical negligence costs in advance of the end of the financial year resulted in a £14.8 8 Department of Health and Social Care accounts billion underspend. The Department gained approval from Parliament to increase its Annually Managed Expenditure (AME) budget by £13.6 billion from £14.7 billion to £27.9 billion in February 2018. This budget relates almost entirely to the amount the Department may pay out in the future when setting clinical negligence cases and could not be spent on the day to day running of the NHS. However, in its 2017– 18 accounts, the Department reported that it had underspent this budget by £14.8 billion, more than 50% of the money available. The Department’s estimate of how much these cases might cost relies on an assessment by actuaries that is performed at the end of the financial year. While we recognise that it is difficult to reliably estimate it earlier, we are nonetheless concerned that the extent of the Department’s underestimate suggests it is unaware of its exposure to clinical negligence cases when setting its budget. The Department told us it had taken a cautious and prudent approach to avoid it exceeding the amount agreed by Parliament, but stated that it was not happy with this level of underspend.

Recommendation: The Department should create a more accurate forecast of its exposure to future clinical negligence costs. The Committee expects this to be in place in time for the supplementary estimate to avoid a similar underspend against the Department’s budget in 2018–19. Department of Health and Social Care accounts 9 1 National Health Service finances

In September 2018, the Government announced that the Department has provided an additional £240 million of social care funding to local authorities to help reduce delayed transfers of care and increase the availability of hospital beds during winter. However, if this amount were divided equally between local authorities in England this would only be equivalent to £1.6 million per authority, despite them facing significantly larger funding cuts.30 We examined the pressures on local authority funding in May 2018. We found that after seven years of government funding reductions totalling nearly 50% and rising demand for services, local authorities are under real strain putting key services under enormous pressure.31 The Department told us that no additional funding is going directly to NHS Providers to manage winter pressures. It also told us that it does not plan to seek any specific assurances that the £240 million given to local authorities has been spent as intended increasing their capacity to deliver social care services during the winter rather than plug existing gaps in funding.32

When we examined the interface between health and adult social care in July 2018, we found that the government still lacks an effective overall strategy or plan to achieve its long-held aim to integrate health and social care. We recognise that the renaming of the Department to the Department of Health and Social Care in January 2018 was a sign of intent to integrate health and social care provision, but with local authorities squeezed financially progress in achieving this integration has been limited. However, without progress, people are at risk of not getting the joined-up, co-ordinated care they need, 25 British Medical Association (PDH0001) 26 Q1 27 NHS review of winter 2017–18, NHS Improvement, 7 September 2018, p 15 28 Q132 29 British Medical Association (PDH0001) 30 Qq119–120 31 Committee of Public Accounts, Fiftieth Report of Session 2017–19, Financial Sustainability of Local Authorities, HC 970, p 3 32 Qq117, 121 Department of Health and Social Care accounts 15 which could lead to poorer outcomes. The Department has set out a high-level vision for what integrated health and social care should look like, secured additional NHS funding and committed to a 10-year plan for the NHS.33 33 Committee of Public Accounts, Sixty-Third Report of Session 2017–19, Interface between health and adult social care, HC 1376, pp 3, 5 16 Department of Health and Social Care accounts 3 Impact of Exiting the European Union

The Department has established an EU Exit Programme which aims to deliver a smooth and orderly exit from the European Union so that the delivery of healthcare to UK citizens is maintained and that the health and social care system continues to focus on improving outcomes and achieving efficiencies.34 In evidence to the Exiting the European Union Committee in October 2018, the Department confirmed that the three main issues it faces as a result of Brexit are; securing the supply of medicines, workforce capacity and reciprocal healthcare arrangements.35 The NHS workforce

At the end of June 2018 there were 108,000 vacant posts in the NHS, which represents approximately 10% of the 1.1 million whole time equivalent staff employed by NHS Providers in England.36 We asked what impact the vacancy level was having on the Department’s use of temporary staff. The Department assured us that its use of expensive agency staff had continued to decline as it works towards having vacancies covered by more cost-effective bank staff. Despite this, we were concerned by the increased use of bank staff as it often results in the Department asking the same NHS employees to do more work, which is unsustainable. We also asked the Department about the differing vacancy rates in particular specialisms and regions. The Department told us that it currently considers vacancy rates within the NHS at a national level, but that it was planning to review geographical areas and specialisms to identify where the impact of vacancies may be greater. We were concerned that this might not be sufficient given that the issues in geographical areas are long-standing and the time needed to ensure an adequate pipeline for some specialisms.37

The Department told us that it would prefer to fill posts with more permanent staff rather than using flexible staffing models, and that where it did need flexibility, for these posts to be covered by bank staff rather than agency staff. The Department told us that its long-term plan would include a workforce strategy to try to address these issues. It recognised that this would need to include training (and retraining) more staff, introducing different routes into the health profession and addressing some of the reasons why people leave the NHS, while ensuring those members of staff who want to work flexibly are still able to.38

We asked the Department how much more difficult it was to manage the NHS workforce and staff vacancies in the light of uncertainty over staffing that arises from Brexit. There are currently over 155,000 staff from EU27 countries making an important and valued contribution to the health and care system. The Department stated in its Annual Report and Accounts that securing their position has been made a priority in negotiations on exiting the European Union.39 The Department told us that it had not seen 34 Department of Health and Social Care Annual Report and Accounts 2017–18, 12 July 2018, pp 12–13 35 Exiting the European Union Committee, Oral evidence: The progress of the UK’s negotiations on EU withdrawal, HC 372, 17 October 2018, Q 28, 48 36 NHS Improvement, Performance of the NHS provider sector for the quarter ended 30 June 2018, 11 September 2018, 2.5 NHS Provider Vacancies 37 Qq67–68, 73–75 38 Q68 39 Department of Health and Social Care Annual Report and Accounts 2017–18, 12 July 2018, p 25, para 104 Department of Health and Social Care accounts 17 a large exodus of staff since the EU referendum and that the number of people from the EU employed by the NHS had gone up. The Department recognised that in the number of nurses registered with the Nursing and Midwifery Council had fallen substantially since the referendum.40 It told us, however, that this was as a result of the new language test implemented at the same time as the referendum and that it had seen the same results when the language test had been changed for doctors. The Department asserted that the risk to the NHS in relation to staff from overseas going forward is more about the future immigration policy than about Brexit specifically as it expects to continue to have more staff from non-EU countries than from EU-countries. It told us that it was in close discussions with the Home Office about its forthcoming immigration White Paper and the impact this may have on various medical workforces.41

The Department told us that it wanted the NHS to continue to be somewhere that staff from overseas wanted to work, but that it was also committed to expanding the British workforce so that it was not so reliant on overseas staff. In March 2018, the Secretary of State announced 1,000 new undergraduate medical school places, including places at five brand new medical schools, in addition to the 500 new places already allocated to existing schools.42 Since our evidence session, the Department has written to us outlining the current schemes to recruit nurses post Brexit. These include a 25% increase in the number of nurse training places available during 2018 (equivalent to 5,170 extra places) as well as incentives worth £10,000 to postgraduate students to take up nursing in certain disciplines (learning and stability, mental health and district) once they finish university.43 Procurement of medicines, consumables and equipment

We asked the Department what capital investment or other spending had been required so far in advance of the UK’s exit from the European Union, and what potential costs might arise in the event of a no deal. The Department told the only money that it had spent so far had been on the supply of non-medicine supplies, the specific cost of which was commercially confidential but was in the region of tens of millions. The Department told us that it was currently building up a six-week stockpile of medical consumables, such as gloves, syringes and dressings. It told us that the NHS currently procures around 56 per cent of its medical consumables, either from or through the EU. The Department is aiming to build up a six-week stockpile of these goods, along with medicines, to mitigate potential supply issues during the weeks immediately following 29 March 2019.44

We asked whether the Department intended to stockpile any bigger items of medical equipment, for example X-ray machines. The Department confirmed that the purchase of such items was not on its radar. The Department was unable to answer further questions on the level of risk any disruption to the supply of such big ticket medical equipment posed to NHS Providers, services or patient care.45 The Department told us that they had written to NHS Trusts on 12 October 2018 requesting that they review the contracts for goods and services they hold to consider the Brexit consequences associated with each, with high impact areas to be reported back to the Department by 30 November 2018. However, 40 Qq69–70 41 Qq70–72 42 Q72; Department of Health and Social Care Annual Report and Accounts 2017–18, 12 July 2018, p 25, para 105 43 Letter from Sir Chris Wormald, Permanent Secretary, Department of Health and Social Care, 30 October 2018 44 Qq 37–39, 41 45 Qq46–47 18 Department of Health and Social Care accounts this communication did not specifically cover the supply of medical equipment. The Department has since written to us confirming that it is not putting specific contingency measures in place in relating to the stockpiling of equipment.46 46 Q43; Letter from Sir Chris Wormald, Permanent Secretary, Department of Health and Social Care, 30 October 2018 Department of Health and Social Care accounts 19