30 October 2006

Dear Colleague,

There has been considerable comment in recent weeks about NHS jobs and certain aspects of the Government's NHS reform programme. I recognise that this is a period of change within the NHS. The reform programme is ambitious and challenging. I am writing to ensure you are fully aware of the facts.

First, the recent speculation over the level of job cuts within the NHS. Given the inaccuracy of some of the figures recently reported in the media, it is important you are aware of the true position. The latest evidence the Department has collected indicates that around 900 compulsory redundancies have been made in the NHS during the first half of this financial year. Less than one quarter of these redundancies concern clinical staff, the vast majority being made up of managers and administrative staff, these findings are based on robust returns submitted by Strategic Health Authorities (SHAs). Further details are enclosed as an Annex and full copies of the data will be placed in the Library.

These figures from the Sf-lAs are substantially lower than recent claims of 20,000 job cuts. Such unfounded claims are damaging to the morale of NHS staff and raise unnecessary anxiety amongst patients and the public. The NHS's staff are its most important asset and, where restructuring is taking place, both employers and staff side representatives are working very hard to minimise redundancies. Moreover, as we are now seeing across the NHS, there is a marked difference between early announcements of efficiency proposals to reduce posts and the actual number of people made redundant.

The NHS employs over 1.36 million staff and with an average annual turnover rate of around 10 per cent; that means over 130,000 staff are leaving and moving around the NHS each year. This level of natural staff movement will help NHS organisations to manage organisational change by reducing the required number of compulsory job losses.

These changes in the workforce have to be seen in the context of the historic period of workforce growth since 1997, through sustained investment by this Government.

We have funded more than 300,000 extra jobs in the NHS, including 85,000 extra nurses. This has improved access to care and driven down waiting times.

We are now reaching a position where there is a better match between the demand for and supply of staff. Of course, some staff will change roles as the NHS works to improve yet further the delivery of healthcare, with more care closer to home and delivered more productively and cost-effectively. We should not be apologetic about asking the NHS to offer better value for money to the taxpayer. Difficult decisions will sometimes need to be made but not to the detriment of patient care.

Helping staff find jobs

Ministers fully understand that for those staff who are involved in change this is a difficult time. To support both employers and staff during this period of change, Ministers and Unions are working with NHS Employers on a framework that will help displaced staff, and those newly qualified staff leaving training, to maximise the employment opportunities available. The framework sets out good practice to encourage Trust boards to minimise the need to declare staff “at risk” or redundant and gives examples of how this is being done.

As part of this framework, the online NHS Jobs service has been enhanced to provide a redeployment facility for staff who are at risk. Strategic Health Authorities (SHA5) will support and encourage cross-boundary partnerships that seek to maximise the opportunities available to displaced and newly qualified staff. NHS Trusts are encouraged to take new approaches to flexible working hours, including voluntary reductions, and to consider staff within the talent pool for vacant posts before resorting to wider recruitment.

Similar functionality is available within NHS Jobs to assist newly qualified healthcare professionals in securing their first job. SHAs will be able to work with local employers, universities and colleges to help new qualifiers identify local opportunities. Some SHAs may support more advance matching and placement facilities, working in partnership with their local education providers, NHS Trusts, independent sector providers and employers in social care.

NHS Employers is able to support these arrangements and provide guidance on their use. Leaders from the independent sector employers forum and the local government employers organisation (LGE) have committed to working in partnership with the NHS to provide opportunities for both newly qualified healthcare professionals and existing staff who are at risk.

You may also be aware of comments from the NHS Together Lobby regarding other aspects of the current NHS reform agenda. I welcome an open and informed debate on the reform programme and we have engaged with trade unions.

However, it does not help the debate if Members are misinformed about key aspects of the reforms. I will briefly address the main tenor of their arguments.

Independent Sector Treatment Centres

The NHS Together Campaign is wrong to suggest that the 21 Independent Sector Treatment Centres (ISTCs) currently in operation have been established at a cost of £5billion. Many wave 1 ISTC providers are in the early years of their contracts and, at the end of 2005-06 expenditure on the programme had reached £l36milIion. The total investment in wave 1 ISTCs is expected to be £1.6billion. Since the first ISTCs opened in October 2003, these innovative centres have performed nearly 80,000 elective procedures and provided over 38,000 diagnostic assessments. Centrally procured independent sector programmes, including ISTCs, have benefited well over 300,000 patients. Current utilisation of Independent Sector Treatment Centres is high, at 84 per cent of contracted value. Appropriate levels of referrals from sponsors, flexibility from providers and robust contract management are all required to maximise utilisation. The Department is working with sponsors and providers to maximise the value of the contracts over their full terms by working through case-mix changes and re-profiling to move activity to a later stage in a contracts' life. Where contracts have underutilised activity that cannot be redressed under such measures, the Department intends that time extensions to contracts should be negotiated in order that the full number of procedures paid for in the contract is utilised.

Turnaround Teams

Turnaround teams use experts from both inside and outside the NHS. It is important to view turnaround advisory costs in the context of the size of the in-year savings plans that have been developed. The evidence available to the Department shows that in-year total net savings as a percentage of income is forecast at 5 per cent. Most of these in-year savings will be recurrent whilst the costs (a small fraction of 1 per cent) may well be one off.

Private Finance Initiative

The comments NHS Together have made with respect of Private Finance Initiative (PFI) are also unfounded. There are indeed 58 hospital PFI schemes open, although the number under construction is 25, not 30. The annual payments made by NHS Trusts to their private sector partners are not just for the capital cost but cover financing charges, building maintenance and, in most cases, the ‘soft' facilities management services like cleaning, laundry and catering. Pure capital cost accounts for as little as a fifth of the overall total paid by the Trust. Any additional costs are to be expected, whether under PFI or using exchequer capital, because operating a modern estate costs the taxpayer more than old, run down facilities, irrespective of their funding source. The key is which option offers better value for money for the NHS and the taxpayer. There is no evidence to suggest that PFI schemes are driving Trusts into deficit. FF1 unitary payments are just one component of a Trust's expenditure and of the 174

PCTs and NHS Trusts showing a deficit on the latest figures (the 2005-06 provisional outturns), only 19 have an operational PFI scheme.

The National Audit Office (NAO) report PFI: Construction Performance, which examined PFI schemes across Government, found that FF1 consistently delivered projects on time and on budget, and with a much better record than previous conventionally funded public capital projects. Members should also be aware that when this Government came to power in 1997, 50 per cent of all NHS hospital buildings had been constructed before the NHS was established in 1948. As a result of PFI, and the rest of our capital investment programme, that figure has now fallen to 20 per cent.

National Programme for IT

Finally, figures quoted by the NHS Together lobby in relation to the cost of the National Programme for IT are wildly inflated. The NAO has recently confirmed that the programme is on budget, based on exemplary contracts, and will deliver major operational savings for the NE-IS. The NAD confirmed that the cost of the core contracts - £6.2billion - has not increased. We have never hidden the fact that some additional local implementation costs would have to borne locally alongside what the NE-IS is already spending on IT. Implementing the National Programme will in fact free up money locally by relieving clinicians of unnecessary and time-consuming administrative tasks, as well as improving patient safety and quality of service.

In terms of implementation delays, the Programme set ambitious and challenging targets to deliver systems and provide defined benefits. We believe it is better to take the time needed to get things right for patients and clinicians, than to deploy systems rapidly and get them wrong. The cost of delay is being met by suppliers, not the taxpayer.

I hope this clarifies for Members many of the misconceptions in the public arena at present.

Norman Warner

Annex

Compulsory redundancies within the National Health Service in England (April to September 2006)

Source:

Staff in post data from the information Centre workforce censuses

Redundancy data from Department of Health

Redundancy survey

Notes

1. Redundancies notified as at 30 September 2006 in the 2006/07 financial year—does not include NHS Foundation Trusts

* Redundancy information was not collected from special health authorities.