Attention deficit

Niall Dickson
Publication:  Public Finance
Reference:  Public Finance, 31 March 2006

'£1bn in the red!' 'Thousands of NHS staff to be axed!' These are just a couple of the numerous headlines this week that sum up the mounting pressure on the health service at the moment.

But, as we reach the end of the financial year, there could be even more stories of deficits, wards being closed and staff being cut. Basically the unwelcome headline has returned – with a vengeance.

The former prime minister Harold Macmillan once referred to the pressure of 'events, dear boy, events'. Well, we have had more than our share of events already in 2006.

The sudden departure of Sir Nigel Crisp as NHS chief executive and permanent secretary of the Department of Health, larger-than-expected deficits around the country, a spate of redundancy announcements and the disastrous withdrawal of the payments by results tariff after the discovery that the calculations were wrong, all point to a degree of chaos and confusion at the top.

For some, the uncertainty and wasted effort that caused the withdrawal of the tariff at this late stage was the last straw, and would certainly have made it more difficult to plan for financial recovery.

Crisp's early retirement might have been inevitable, given this turbulence but it came at an unfortunate time. This is the moment when the NHS needs strong leadership and a clear sense of direction. He was right to accept his share of the responsibility for the financial woes, as he was to take credit for much that had been achieved during his reign.

It would be refreshing were ministers able to do the same, since it was they (or rather their predecessors) who demanded large increases in staff numbers, and who signed off expensive pay deals covering every member of NHS staff - deals that have not yet delivered commensurate increases in productivity.

Our own analysis shows that, over the past year, 50 per cent of the cash increase to hospital and community services was swallowed up by increased pay, most of it from the implementation of the new contracts. While staff deserve fair remuneration, it never made sense to embark on such a whole-scale upheaval in terms and conditions in one go.

The shocking bit of all this is that the level of deficits seems to have surprised everyone at the centre, which suggests either poor monitoring or poor communication. It is said that a recent McKinsey review of the department was highly critical, but even in these days of freedom of information we shall be lucky to see the detail.

There remains the question of how the NHS and health in general should be led in England. The decision to split the jobs of permanent secretary and chief executive for the time being may indicate the way ministers are thinking. There was certainly merit in the argument that combining the roles created one of the most demanding, not to say impossible, posts in the civil service.

However, if separation is based on the simple idea that it is possible to split policy from implementation, that is naive. Anyone with any doubt about this should recall the sacking of the director general of the prison service, Derek Lewis, in the 1980s over what the home secretary claimed were operational issues. Lewis was adamant these could all be traced to ministerial decisions.

It is worth remembering too that the last time we had a 'chief executive only' appointment, the incumbent, Sir Alan Langlands, spent most of his time on the ministerial fourth floor of Richmond House, not at Quarry House, the NHS HQ in Leeds.

There are strong arguments for keeping one post. But, given the current direction of the NHS, another option would be to have two senior posts but with one – the permanent secretary – acting as first among equals. There would need to be a clear and distinct brief for each post and an understanding that both had a legitimate contribution to policy.

At the next level down, the current plan to have a director of commissioning and a director of provision seem sensible, although ultimately – if the government is serious about allowing providers to run their own affairs – only the commissioning role should survive. Perhaps in time it could metamorphose into the chief executive post. It has always been a nonsense that you can run the health service from Whitehall, and in the new order it will seem more nonsensical than ever.

As the new financial year looms, the first priority for any new leader must be to ensure the system is financially robust and is better able to provide effective answers to the public's perennial question 'Where has our money gone?'