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Health Authorities (Membership and Procedure) Amendment Regulations 2011

I am grateful to the noble Baroness for tabling this debate on the Health Authorities (Membership and Procedure) Amendment Regulations, and I welcome the opportunity to respond. As she pointed out, we will gather in Committee several more times this week to review the impact of a number of pieces of legislation introduced by the Government and challenged by the noble Baroness. I believe that the combination of these statutory instruments provide security to hard-working NHS staff to maintain the continuity and quality of services that patients need at a time of considerable pressure. We cannot forget that the NHS has been challenged to make up to £20 billion in savings over the next three and a half years, which will be reinvested back into front-line patient care. Alongside this, we are seeking to move to a more autonomous and locally accountable patient-centred NHS, focused on improving outcomes for patients. That is the background although—in reply to the points made by the noble Baroness at the beginning of her speech—I make it clear that this order has nothing directly to do with the establishment of the two special health authorities, the NHS Commissioning Board Authority and the Health Research Authority, as special health authorities. We will debate both tomorrow. The effect of the Health Authorities (Membership and Procedure) Amendment Regulations 2011 is to allow the clustering of strategic health authorities and to provide greater flexibility among the non-executive and executive community to take up other board level posts in the health sector during the transition period. The 10 strategic health authorities have been clustered into four: NHS North of England, comprising North East, Yorkshire and the Humber and North West; NHS Midlands and East, East Midlands, East of England and West Midlands; NHS South of England, South West, South Central and South East Coast; and NHS London, which will simply encompass the existing strategic health authority. That does not change the current structure of the NHS. There are still 10 strategic health authorities with the same boundaries which exist as legal statutory bodies. We have just simplified the governance of the strategic health authorities in order to sustain structural stability and reduce management costs. To do that, the Government are using powers that exist in legislation previously scrutinised by your Lordships' House. The correct procedures were followed in making appointments to the new clusters which complied with both the Commissioner for Public Appointments’ code of practice and employment law, as appropriate. The posts are time-limited and will be disestablished when strategic health authorities are abolished—if the Bill goes through the House and becomes law—on 31 March 2013. Each cluster board now comprises a chair, up to eight non-executive directors, four executive directors with voting rights and up to five other non-voting executive directors who lead and scrutinise the decisions of each of the constituent SHAs within the cluster. Clustering SHAs, as we have already done with PCTs, supports the delivery of the £20 billion NHS efficiency savings through significantly reducing the cost of NHS administration—a commitment of both this and the previous Government. The creation of SHA clusters is a step towards that. PCT and SHA management costs increased by more than £1 billion since 2002-03, a rise of more than 120 per cent. It would not be possible to make savings on the scale required while retaining the administrative superstructure of PCTs and SHAs. In addition to the pressing needs that I have outlined, the Government have a responsibility to ensure that the transition to the new system of working in the NHS—subject to the passage of the Bill—supports the integrity of the health service, as well as continuity of accountability and minimised disruption to those working hard to deliver and maintain high-quality services on the front line. In the current system, SHAs have a key role to play in ensuring the quality and safety of services, in driving performance and delivery, including safeguarding the cash limit and in responding to the QIPP challenge. SHA managers have done a commendable job in delivering that agenda. That is in part why the Government's response to the Future Forum report extends the life of SHAs to the end of March 2013. Until then, SHAs will retain their statutory responsibilities and remain accountable for delivery and transition. Given the context of major change, with new leadership starting to take up roles in the system, it is critical that strong SHA leadership teams continue in place to provide the right focus on delivery and ensure effective accountability. Clustering provides resilience and alignment for the future. Already, a number of senior posts in SHAs are either not filled or are being covered through interim arrangements. That is not sustainable for a 17-month period, and the position is likely to deteriorate further over time. The risk posed by SHA atrophy is therefore too great, and clustering for greater collective resilience over the next 17 months is an essential response. Sir David Nicholson has announced that the initial sub-national arrangements of the NHS Commissioning Board will mirror the geographical footprint of the SHA clusters. To give the board a greater sense of having a stake in the future, there is a strong argument for moving early to future geographical footprints. The Government are moving swiftly with those arrangements, drawing on the lessons learnt from PCT clustering, which show that once a decision to cluster is made, it is better to implement the changes quickly. It is also important to embed these arrangements before winter to reduce the impact of the extra operational pressure that the health service is put under at this time. The noble Baroness asked a number of specific questions. First, she queried the provision allowing SHA chairs and non-executives to sit on the board of a special health authority. Schedule 2 to the Health Authorities (Membership and Procedure) Regulations 1996 lists those special health authorities of which chairmen and members of SHAs are not disqualified. In order to provide for greater flexibility among the non-executive community to take up other board level posts during the transition period in the health sector, the regulations have been amended to allow chairmen and members of SHAs to sit on any special health authority. Any individual conflicts of interest issues will be dealt with as they arise. The noble Baroness asked about the appointments process. The decision by the NHS management board to cluster the 10 SHAs into four resulted in the existing substantive postholders being potentially at risk of redundancy. During a restructuring exercise it is normal to establish a ring-fenced selection pool in order to conduct a limited competition exercise. All substantive SHA chief executives were invited to apply. Recruitment to the SHA cluster executive-director posts followed a limited competition exercise similar to the appointments exercise conducted for the cluster chief executives. As I said, during a restructuring exercise this ring-fenced selection pool idea comes into play. Again, all substantive SHA executive directors were invited to apply for those posts. Executive directors of SHAs fall within the remit of the same pay framework as SHA chief executives, the very senior managers—VSM—pay framework. Under the current VSM pay framework, the basic pay of each director is based on a percentage of their chief executive salary. Each of the SHA cluster roles represent a substantial increase in size, complexity and responsibility for each executive director. Therefore, no one will receive a pay increase for doing the same job. To the extent that I have not answered the noble Baroness’s questions I would be happy to follow up this debate in writing. She asked how many special health authorities will be established. I apologise for missing out an answer to that. One key change being introduced through the current Bill is to prevent special health authorities being established ad infinitum. Instead, they will be time limited. If there is a case for them existing permanently, they must become non-departmental public bodies, as we are doing for NICE, for example, and the information centre. The noble Baroness asked about conflicts of interest. I hope that I have partially covered that. Should there be a potential conflict of interest between members of SHA and special health authority boards in developing policy, that matter will be looked at as and when the situation arises. She asked whether appointments would be open to public scrutiny and whether pay would be made public. Appointments must comply with the Commissioner for Public Appointments’ code of practice. The Appointments Commission, to which the Secretary of State delegates SHA appointments, asked the commissioner to make these appointments, and that the appointments should be approved. All the remuneration arrangements are in the public domain. This is, in short, about increasing flexibility as we move through the transition. The noble Baroness asked about the regional offices of the NHS Commissioning Board. I believe that I have covered the point about the regional arms of the NHS Commissioning Board. However it chooses to organise itself, those will all be part of the same organisation. They will not be separate authorities, as SHAs are at the moment. I think that that covers the majority of the noble Baroness’s questions. I hope that noble Lords are reassured about the sense of these arrangements, which are important in providing resilience to the NHS, in providing assurance to those who are working hard to maintain and deliver healthcare to those who need it and in reducing administrative costs. However, I look forward to any further questions that noble Lords may choose to ask me.