31/05/12 – NHS CBA board meeting – Part 3 – Finance

31/05/12 – NHS CBA board meeting – Part 3 – Finance


bjbj Can we turn to the update on the running
cost position, and I believe that a paper has been uploaded to the website this morning
to amend a page that was previously there because of some technology errors. Do you
want to introduce that? Paul Baumann: Indeed, so Board members have got that; if members
of the public need it, it s on the front row over there, so apologies for a slight technical
glitch. Update on End State Running Cost Position of the NHS Commissioning Board 2013-14 and
2014-15 Paul Baumann Director of Finance Background This is really just for the Board to note
formally today some changes to the running cost estimates. The details of this were sent
out to Board members at the beginning of May and you will have had a chance to look through
all of the details of those changes, but perhaps a reminder of the background to this paper
before covering the changes. Running costs One of the key parameters that we have to
live within is the running cost limit for the Commissioning Board. This was brought
in, obviously, as part of the government s wider intent to reduce administrative costs
in the public sector and the Commissioning Board took the lion s share of the reduction
in health running costs in order to free up as much as possible the capacity for CCGs
to have the running costs that they need. So, we absorbed in our original plans a 50%
reduction compared to the original resources that these particular functions consumed.
Obviously, that is why we now have a need to construct a very lean way of operating
across the national, regional and local area matrix. Finalising structures s worth also
pointing out that within the best part of 500 million resources that we will have, the
National Support Centre is less than a quarter of the total resources that we have got. The
bulk of that money is going into resources much closer to the CCGs and the operational
part of the system in the regional offices and in particular, in the area offices. So,
as the paper points out, we are still in the process of finalising all of our structures
and you ve heard a little bit about that in the earlier part of the meeting finalising
the structures which we are going to operate with and therefore this is an update rather
than the final story. Running cost position So, if you turn to the table that you have
in front of you, since February we have recognised a number of technical adjustments and we have
also assumed a variety of additional functions into the Commissioning Board, which together
amounts to around about 120 million of additional cost pressure. Now, we ve been able to cover
the bulk of this by releasing some of the contingency that we took at the start of this
journey, prudently as it turned out, for precisely this sort of issue, and secondly by reducing
the allocation of discretionary, non-pay costs that we had in the original budget. The remaining
amount, amounting to 35 million, has been provided in the form of additional resource,
effectively, or limit from the Department of Health, predominantly to recognise the
much more technical aspects of the changes I have just been talking about. Areas of further
development So, the detail of this is set out in the more comprehensive document on
the website and which has been sent out, but obviously Bill and I will be happy to deal
with any specific issues which Board members have today that they want to talk about. We
will keep you posted, obviously, as this story develops. There are two main areas of further
development, which are pointed out in the note. Firstly, the detailed design of national,
regional and local structures will, we hope, confirm both the final shape of the organisation
and equally importantly for this purpose at least, confirm that the running costs estimates
that we ve put together are ones which will deliver us the quality of performance and
service that we need. And secondly, as the paper says, there are a number of elements
of our budget where the precise definition of how running costs will be defined is still
a matter of clarification and clearly, we will work on that with some urgency because
we need to get a degree of certainty about that. Again, I will update the Board as and
when there are any further developments on that. So, that s really what I wanted to say
about the paper, unless there are any questions or observations. Ed Smith: Thank you, Paul.
Are there any questions for Paul on the paper? David Nicholson: I would just reinforce the
point that Paul made at the beginning, and it kind of links to what I think Jo and Bill
were saying about this being a new kind of organisation. It s the first time in history
that the NHS has had a single organisation responsible for all of these things and not
only do we want to recognise that and get value out of it, we also want to make sure
that it operates in a different way. If you think about it, we start off by the point
is if you think about all the functions we currently are going to get, and how they are
done now, it is going to cost half as much, and that is a big change in itself. And also,
this thing about having a relatively small national support centre to help support and
enable the NHS, but most people being distributed. The other two things I would say about that:
even in the national support centre, the kind of heart of the national support centre is
the work around the domains in the outcome framework, so clinicians in particular being
involved in all of that at the centre support and right the way through the system, you
can see doctors, nurses, other health professionals being engaged in that, which I think hopefully
will create something not only smaller or leaner, but also in terms of the way it functions,
a very different way of functioning. Ed Smith: Thank you. Ciaran? Ciaran Devane: Can I ask
a question on flexibility? It s impossible to get it perfectly right, first time out,
so if we find there s a pinch point here but actually we are doing quite okay over here,
what degree of freedom is within the pot? Paul Baumann: I guess there are two types
of freedom, one of which is: it s for us to determine if we want to change the balance
of where we invest as we go forward, so that freedom is absolutely there and I know there
are hinge points that are emerging that we will have to deal with and we will take those
forward as we need to do so. Secondly, we have still got a contingency. I am not minded
to give up the contingency at this stage of the struggle, because we ve still got a fair
few months before we go into final go-live, but we have a contingency. We ve got a substantial
amount of flexibility around the discretionary spend, so I think I can reassure you we ve
got enough flexibility for the moment. Ed Smith: Bill? Bill McCarthy: First, that point
I think as Paul sets out, the internal flexibility is really important. We need to retain it.
I think also an external discipline is going to be important over the coming months. There
are still discussions with different bits of the current system who would quite like
us to take on additional bits of jobs or roles that they have started, which aren t currently
ours. I think the only circumstances now in which we could take anything else on would
be if it fitted with what we are about, our values, but also if it s backed by the right
resource, and that will be a set of discussions we will have to keep having, I think, Paul.
Ed Smith: Thank you. The Board is asked to note progress on this. I think it s fair to
say that it s good to see that the increasing granularity of analysis and the shifting around
of costs is now beginning to bed down and actually really take Bill s point that we
have to be very careful about taking on additional tasks without associated funding, and I think
all of us as non executives are very strongly encouraged by the disposition of the cost
towards the local areas rather than having significant cost in the centre. So, with that,
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