NHS Administration: Cost (Hansard, 25 November 1993)

§ The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege)
My Lords, in the six years between 1985 and 1991, the total NHS revenue expenditure rose by 26 per cent. in real terms while the costs of headquarters administration rose by 23 per cent. in real terms.

§ The Countess of Mar
My Lords, does the noble Baroness accept that according to NHS sources, while the salaries of doctors, nurses and midwives and drug costs rose by about 20 per cent. in that period, family health service authority administrative costs rose by 80 per cent.? Can the Minister explain why hospital administration costs rose by a magnificent 1,700 per cent.?

§ Baroness Cumberlege
My Lords, what is relevant is the proportion of staff who provide direct care to patients. That has increased from 60 per cent. in 1981 to 65 per cent. now. Clearly, as the NHS budget increases, so does the number of managers, administrators and clerical staff because there is a bigger budget to administer. We are treating more patients today than ever before and have brought down waiting times. A great deal of that has been accomplished by better management.

§ Lord Strabolgi
My Lords, are the Government aware that there is a great deal of extravagance in the administrative costs? For example, is it necessary for one of those new-style managers to fly to America in Concorde? Is it necessary for the wife of another to have a car for her own use, although she does not work in the hospital? If all that is true, should not those matters receive the Government's attention?

§ Baroness Cumberlege
My Lords, where there is waste and where trusts are being profligate, clearly the Government have an interest and will take action. I have done some work with the CBI today and the level of salaries of general managers in the health service in no way compares with those commanded in industry and commerce. They are much, much lower.

§ Lord Skelmersdale
My Lords, is not the National Health Service a service industry? Therefore, should it not be managed like a service industry? If management costs are running at a rate of 2 per cent., is not the country getting a very good rate of return on management in the National Health Service, especially when I understand that it compares, internationally, with over 3 per cent?

§ Baroness Cumberlege
My Lords, my noble friend is absolutely correct. Whenever the Audit Commission has commented, it has urged the health service to invest in management because clearly, with its enormous volume of work and complex organisation, it needs good management. In fact, 2 per cent. is a very modest figure.

§ Lord Merlyn-Rees
My Lords, do not those statistics show that the recent criticism by the Secretary of State for Wales of the Secretary of State for Health was right and that the Secretary of State for Health was wrong?

§ Baroness Cumberlege
My Lords, the position in Wales is totally different from that in England. There is a difference between bureaucracy and management. My right honourable friend the Secretary of State for Health is anxious to reduce bureaucracy. That is why she has announced that we intend to reduce the number of regions from 14 to eight and that, subject to legislation, we shall abolish them altogether by April 1996. We shall reduce the number of health authorities, through mergers, from 192 to 108 by April 1994. We also intend to streamline the management executive and shall set and keep to tough limits on total staff budgets for headquarters staff.

§ Baroness Jay of Paddington
My Lords, is it possible for the Minister to develop a little the point that she made in reply to the noble Countess, Lady Mar, about the increase in headquarters' costs? What concerns many of us is the cost of management in the area health authorities and in the management of trusts. I believe that it has been established that the number of such managers has grown by over a quarter during the past year. Although the Minister mentioned the Audit Commission, is it not the case that its chief executive recently said—and I heard him say it myself—that there were serious questions to be asked about whether value for money was being given in the health service reorganisation in terms of those bureaucratic, managerial developments?

§ Baroness Cumberlege
Yes, my Lords. My right honourable friend has responded to that in reducing headquarters' staff at regions, districts and in the management executive. However, as regards the increase in staff—and I make no bones about it—we 347 have chosen to invest in better management in the National Health Service. I believe that that is bringing returns. However, in relation to the question about numbers of administrative and clerical staff both in hospitals and the community, a quarter of those staff are directly supporting clinicians. That is something that we welcome; we want to see more ward clerks, medical records staff and medical secretaries because we know that they take the burden of administration off doctors and nurses. As for the others, as I said, we welcome them in that they are there to support more patient care, shorter waiting times and better management.

Lord Wallace of Coslany
My Lords, can the Minister advise the House how much is paid per annum to executive and non-executive directors of trust hospitals? In the old management days, we were only given a certain amount for expenses and the administration costs were very small.

§ Baroness Cumberlege
My Lords, I cannot give a definitive answer to that question. It is up to trusts to decide how they will run their organisations. They choose how much to pay their executives, but clearly they have to work within their overall budget allocations. Increasingly, it will be up to trusts to obtain the work from purchasing authorities by winning contracts. We would like to leave as much flexibility to local management as possible.

§ Lord McIntosh of Haringey
My Lords, my noble friend's question was not about the expenditure on executives but about the members of trusts. Is that not under the control of government? Further, cannot the Minister give an answer to that question?

§ Baroness Cumberlege
My Lords, they are non-executive members. Of course, there is a pay level: it is £5,000 for each non-executive member on a trust.

§ Lord Mellish
My Lords, it certainly seems as though we have a lot of Red Indians and not enough cowboys. In order to put the matter into perspective, would it not help if we had some idea of the present number of doctors and nurses as opposed to the number a few years ago?

§ Baroness Cumberlege
My Lords, year-on-year we increase the number of doctors and nurses in the National Health Service. In fact, their rates have considerably increased. If the noble Lord particularly wants those figures, I should be very happy to give them to him. However, I do not think that the situation will continue indefinitely. What we are seeing in the NHS is greater productivity. I think it unlikely that we shall see year-on-year more increases in front-line staff as we get more day cases and other different procedures being introduced which do not need that level of staff working such hours.

§ Lord Ennals
My Lords, is the Minister really saying that, since the introduction of the new reforms, there has not been a very substantial increase in the number of management staff? Is she not aware that the doctors, nurses and other organisations within the health 348 service, apart from the general public, know that there has been a massive increase in accountants, managers and business folk? Why does the Minister suggest that, somehow or other, that is not so?

§ Baroness Cumberlege
My Lords, I have given the increases in numbers. Indeed, I accept that there are increases. Some of the increases are due to the way in which we are redefining staff. That is especially true of nursing staff, many of whom are still involved in clinical work but have been redesignated as managers. That also applies to student nurses under their new training scheme; they used to be counted as nurses, but now they are counted as students. Therefore, they are no longer in that particular band. However, I do want to be very bullish about this: we need better management in the National Health Service and we are prepared to invest in it.

§ Baroness Jay of Paddington
My Lords, surely the Minister can briefly acknowledge the simple comparative statistic that whereas there have been 30,000 more managers and administrators since 1989, there have been 20,000 fewer nurses?

§ Baroness Cumberlege
No, my Lords; that is not true. I tried to explain that much of it is to do with redesignation of nurses. In fact, it is because they have now gone into a different band, with many of them being reclassified as managers.

§ The Countess of Mar
My Lords, although we all acknowledge the fact that we need better management, does the Minister agree that better management does not necessarily correlate with more management?

§ Baroness Cumberlege
My Lords, we always seek the highest calibre of staff in all walks of the National Health Service.