Northern Ireland Assembly Flax Flower Logo



Appleby Review

17 January 2008

Members present for all or part of the proceedings:

Mrs Iris Robinson (Chairperson)
Mrs Michelle O’Neill (Deputy Chairperson)
Mr Thomas Buchanan
Rev Dr Robert Coulter
Dr Kieran Deeny
Mr Alex Easton
Mr Tommy Gallagher
Mrs Carmel Hanna
Mr John McCallister
Ms Sue Ramsey


Professor John Appleby ) King’s Fund

The Chairperson (Mrs I Robinson):

We have an evidence session with Professor John Appleby. I refer Members to tab 3 and tab 8 in the papers, where there is a very helpful summary provided by Professor Appleby, a paper from the Northern Ireland Assembly Research and Library Service, and a very thick copy of the Appleby Report. I extend a warm welcome to Professor Appleby, who is the chief economist with the King’s Fund in London; we are very grateful to you for taking time to meet the Committee.

The independent review into health and social care services in Northern Ireland that you carried out in 2005 was crucial for the Health Service here, and I know that you have kept in touch with the Department of Health, Social Services and Public Safety since then. It is valuable for the Committee to hear from you directly on the key issues of concern in your report and your views on how the Department has acted on its recommendations. I invite you to make a short presentation, which will be followed by questions from members. I know that you have to leave at 4.15 pm to get a plane back home to England.

Professor John Appleby (King’s Fund):

I apologise for that, and thank you for inviting me. I will talk about what I was asked to do in the original review and, based on the note that I gave you, what our findings were. There are some updated figures, but I apologise because I have not had time, or access, to update some of the performance measures; however, I can say something about them. If it is ok, I will spend about five or 10 minutes doing that.

There were three main aspects of the terms of reference that I was given by Ministers in late 2004. We started work just before Christmas 2004, and the report was published in August 2005, so we spent just over six months on the work. I had the support of one economist from the Department of Finance and Personnel to do the work. We had a short time to cover a great deal of ground.

The first thing we were asked to do was decide what resources the Northern Ireland health and social care system would require in future. That was a reflection of the terms of reference that Sir Derek Wanless was given by the Chancellor of the Exchequer in 2001 when he was asked to do a similar review for the whole of the UK. His terms of reference were to establish how much money the health and social care system needed across the UK until 2022-23.

The second aspect to the terms of reference was to look at performance and value for money — crudely put it was "bang per buck." We had to look at what the Northern Ireland health and social care system was producing for the money that it was receiving. One aspect of that, which was put to me by Ministers at the time, was the major concern about waiting times in Northern Ireland. Therefore a sizeable chunk of the report was devoted to waiting times.

Having looked at those two aspects, the final one was to look at the performance management system and ask how the system tried to get the most effective health and social care possible.

The three main aspects of the review were to consider the incentives, the sanctions, and the effectiveness of the systems of accountability and performance management arrangements.

During the review we tested out eight or nine different funding models. We took Derek Wanless’s suggestion for future funding for the whole of the UK as our starting point; therefore we considered what Northern Ireland’s fair share of the cake should be, given that increased money was recommended for health and social care.

Derek Wanless’s report laid out three different scenarios for the future, which were dependent on various factors on the demand and supply sides in health. One scenario, which was called the fully engaged model, assumed that the public would engage in their health much more proactively and that their health-seeking behaviour would be more positive. That model envisaged that trends in obesity and smoking would start to go the right, not the wrong, way. On the supply side, assumptions were made about how efficient the Health Service and social care services would be in future. Many assumptions were built into Derek Wanless’s recommendations, which concluded that a great deal of extra money should go into health and social care in future. The Wanless report concluded that spending should rise from about 7% of UK GDP to 10·5%, 11% or even 12%. Over a 20-year period, that would put spending on health on a par with countries such as Germany and France.

On the basis of Wanless’s recommendations for funding, we considered what Northern Ireland’s fair share would be. We tested several models, including models for allocation systems used in Northern Ireland to distribute the global health budget to boards. We used models from England, where a global health budget is divided among primary care trusts, using population, deprivation and health factors. In testing those models, we concluded that there many possible futures for health spending in Northern Ireland. We had a long discussion with the Department of Health, Social Services and Public Safety and the Department of Finance and Personnel about that. The models produced a range of predictions of the relative needs gap between England and Northern Ireland, from plus 4% to about plus 16·5% per capita health and social care funding. The broad conclusion was that Northern Ireland needed more money per head than England for many reasons, including deprivation, ill health and higher costs.

The review team had to assess which of those projections was the correct one, but there was no way of answering that without further information. We interviewed more than 100 people from some 40 different organisations, including political parties, the Health Service, social care services, hospitals, GPs and others. We concluded that money should grow in Northern Ireland and that a reasonable relative gap between England and Northern Ireland would be about 7%.

I have included a graph that shows the historical trend in health and social care spending in Northern Ireland since 1986-87. A dotted line shows a projection of how much spending there would have been if that trend had continued. Other lines on the graph show projected spending based on the various models that we considered; they show that health spending under those models would be considerably higher than if the historical trend had been taken forward. There is a difference between the models, resulting in a predicted spending on health, ranging from £6·5 billion to £6 billion by 2022. That difference depends on which factors are taken into account when determining need. Empirically, there is not enough evidence to make a definitive call, but we made a judgement call and felt that a needs gap of about 7% was a reasonable assumption.

Table 1 illustrates the projected spending figures that were considered in order to trace a reasonable financial-growth path for health and social care in Northern Ireland.

That covers our work on funding.

I have produced a summary note of the main review, which includes updated information. Given discussions about the health and social care budget for the next three years, I have included a graph indicating historic funding and the review’s recommended funding until 2022, based on a 7% needs gap. It also includes a dotted line indicating the draft Budget proposal, which is for an average annual cash increase of 3·8% for health and social care over the next three years. If inflation is assumed to be 2·7% a year, that equates to a real-terms spending increase of just over 1% a year over the next three years. The National Health Service block grant is planned to grow by 3·6% each year, which means that the draft Budget proposals will, at least, result in health receiving a slightly increased share of that block grant. Nevertheless, there is a gap between the draft Budget proposals and the review’s recommendations.

A similar gap has opened up in England. Sir Derek Wanless’s proposals for real-terms spending increases in England over the next three years were of the order of 4·5% a year. In fact, the real-terms growth for health spending in England is about 3% a year.

On the subject of the use of resources and performance, I wish to pick up on waiting times, which, in the past couple of years in Northern Ireland, have been a real success story. Frankly, when we first reviewed waiting times, they were appalling compared to those in England.

Since 1998-98, a great deal of effort had been focused on waiting times in England. If one could point to one health policy in England that has driven most of the changes, it has been the relentless focus on reducing waiting times. Surveys at the time showed that, when asked about the major problems with the Health Service, the public felt that waiting too long to get into hospital, see a GP or be seen in an accident and emergency department were at the top of the list of concerns.

In Northern Ireland, waiting times were considerably worse than those in England, Scotland and Wales; however, the updated figures show that there has been a dramatic change. Long waits for outpatients have come down, and, in just a year, the number of people on outpatient lists has fallen by 44%. Inpatients used to wait for more than two, three or even four years to get into hospital, which was completely unacceptable. According to official figures, no one waits for more than a year; that substantial achievement was brought about without significant increases in resources or by diverting resources from elsewhere or being put directly into the Health Service. Improvements have been achieved by tackling the systems that lead to the build up of waiting lists: dealing with bottlenecks, managing lists, reviewing whether people on lists still require operations and so on, which are basic practices that all health systems must undertake. Waiting-time reductions have been successfully pursued, and, with tough targets and sanctions similar to those implemented in England, I expect them to come down even further.

On value for money — or to put it more crudely "the bangs per buck"— there is no single index or statistic that summarises the issue of value for money, and all health services suffer from that problem. There is a difficulty in defining what we mean by "value for money" in healthcare, and not just in healthcare but in many industries and in both the private and public sector. An increasing amount of work is going on in Northern Ireland, England, Scotland and Wales and internationally on how to measure productivity and efficiency.

The review collected what I will freely admit are relatively crude measures of productivity and efficiency to compare what was put into the service with what comes out; it was something like an engineer’s view of the efficiency of an engine. I have listed the many measures that we considered. For example, what activity per member of health staff do we get in the system? In 2005, we found almost 20% lower output per staff than the UK average —that is nearly a fifth.

Although many of those figures were checked with the Department of Health when we produced them and we took its comments on board and made changes where appropriate — they are still, in a sense, disputed figures — some of them are so large that even plus or minus 50% either way there is still quite a difference.

We also looked at hospital activity — inpatients, outpatients and attendances at accident and emergency — and how much of it per pound health was generating. Once again we found it about 10% lower than the UK average. We looked at hospital activity per bed and found that that was around 26% lower than in England.

The indicators might have been relatively crude, but they all seemed to point the same way: the Northern Ireland health and social care system was not operating at its most efficient. There were examples from the rest of the UK from other countries and even from hospitals in Northern Ireland that seemed to be getting more out of the system. Our conclusion was that there were fewer outputs per pound, per staff, or by any other measurement, than would be expected given the funding levels in Northern Ireland.

An earlier graph showed that Northern Ireland’s funding per head of population has been between 10% and 15% higher than England for a considerable time and remains at about 10% higher, although the figures can be disputed. Scotland spends even more than that, so Northern Ireland is on a par with Wales in spending per head.

Our conclusion on productivity and efficiency was that there seemed to be considerable scope for improvement to get more out of the money that was being put into the system.

Finally, I will say something about the performance-management system. England has been something of a test bed for the past 10 years in what is known as quasi-market purchases and providers: a group of state organisations is given money and told to buy the best care that they can. That has not necessarily proved itself, although, internationally, a form of market mechanism is becoming the system of choice. It is not privatisation but a separation of two functions; one is purchasing and the other is providing. It introduces slightly sharper incentives for hospitals and other providers of health and social care to look harder at their resources and services.

We did not recommend that for Northern Ireland, because we recognised that it was a different case. However, we did recommend that there should be some experimentation to introduce other incentives for hospitals. For example, England operates a tariff system with a fixed price per operation — a hospital will get paid the same amount for a hip operation whether it is done in Newcastle or London.

If the hospital cannot increase its income by raising its prices, there is an onus on it to examine its costs. That, in turn, introduces an incentive to examine how to provide an efficient service. We did not recommend that that system be plonked down wholesale in Northern Ireland, but that the incentives that such systems embody —how to set hospital budgets, for example — be considered.

Our broad conclusions were that the current performance management system was not working well. Trusts and chief executives were not being sufficiently held to account for their performance. After all, hospitals spend taxpayers’ money, and, as taxpayers and patients deserve to see their money being spent in the best possible way, we recommended various changes. That, in a nutshell, is our report.

We made about 25 recommendations, ranging from the fairly detailed to the generic and more general, almost all of which required more work. To its credit, the Department of Health, Social Services and Public Safety has adopted many of those recommendations. Since the report was published in 2005, I have acted as an ad hoc reviewer of its work on behalf of the Department of Finance and Personnel and have seen some of the papers that the Health Department has produced.

The Chairperson:

Thank you very much, Professor Appleby. Members are keen to ask questions, but I will start by asking you about productivity and efficiencies. You concentrate quite heavily on the fact that the Department is not performing well, despite the considerable amount of money spent per head of population. Given that the number of administrators in Northern Ireland has increased by 36% in the past decade, is that not to be expected? Are we building an empire of personnel that falls short of being efficient?

What are your views on the impact of the welcome reduction in the number of trusts and the delay in proceeding with the other reforms, including the proposed amalgamation of the boards into a single authority?

Professor Appleby:

When I was asked to carry out the review, the review of public administration (RPA) had also begun, and there was some question about what areas the two reviews were to cover. Quite a few of the changes, particularly some of the major organisational changes to health and social care, resulted from the review of public administration.

From memory, I did not recommend that the number of trusts be reduced. My concern was more that, whatever the organisational structure — however many the tiers of management it comprised, and so forth — a much greater focus was required on the incentives needed in the system. Therefore I tried to focus on that.

The figures revealed an inordinate number of administrative staff compared to the health and social care systems in the rest of the UK. The Health Department disputed the figures to an extent, and there were also comparability problems. When comparing health and social care services in Northern Ireland with those in England, it is not always easy to access exactly comparative figures. Broadly speaking, however, there seemed to be an excessive number of administrative staff in Northern Ireland.

There is some difficulty about which staff should be counted as administrators and which as managers, and I propose that a separation be made between the two functions. The general view in the UK is that its health and social care systems are probably undermanaged but have perhaps too many administrators.

There is an issue about what is meant by management. Nevertheless, the figures are high and the Department of Health, Social Services and Public Safety could not justify them to us. I am not clear what has happened with regard to staffing since 2005.

The Chairperson:

I think that there has been an increase. However, we are concerned that a very good recommendation to bring the four boards under one authority was a means of creating efficiencies that were much needed in the structure of healthcare provision, but we will not get into a debate on that subject.

Mr Easton:

I have been waiting to see Professor Appleby for a long time, so it is good to meet him. He did not seem to think that we have been under-resourced, although he said that we might be a little stretched. He also noted that our use of resources was part of the problem. What simple measures can we use to improve our productivity? We spend more than England, yet our productivity is lower. Where is money being wasted and how can the gap be narrowed?

Our waiting times have gone down, but Professor Appleby did not realise that more than £6 million had been pumped in for outpatients. Should we not be looking at how to deal with the problem of clinics and waiting times — and not just by pumping even more money in, but by trying and deal with the 13,000 clinics that were cancelled in Northern Ireland last year? Should we not sort out the route to take, rather than pump in extra money that could go to other front-line services?

Professor Appleby:

I was not aware of the extra resources that had been used to improve waiting times, although I knew that more money had been spent. I am most familiar with health systems in England where a great deal of extra money is spent on waiting times; however, money is never enough. We can go back decades in the Health Service across the UK and find initiatives that put money into the service and waiting times came down for a time and then went up again, followed by the argument of whether more money should be invested to bring the waiting times down again. The waiting times keep going up and down, although the trend is often upwards.

I know about the work that has been done on the management of waiting lists, and a great deal of effort has gone in to the flow of patients through the system. It is not just a matter of resources; it is about doing things differently. To an extent, there has been a cultural change, and I have noticed that in England. Waiting times are important, and not just for hospital managers: consultants are also concerned about waiting times. People do not like waiting; they feel that they should not have to wait.

I do not have access to all the resource implications on waiting times and the on

initiative that has been pursued in Northern Ireland, but £6 million may prove to have been quite a bargain — considering the reductions in the waiting times. I will be disappointed if the extra money was the only reason for the reductions in waiting times, which would mean that it will not be sustainable.

A great deal of work has gone in on the management side, and I bet that the waiting times will come down further and stay down. However, simply making more money available is not the answer.

Mr Easton:

Would addressing the cancelled clinics help with the situation?

Professor Appleby:

Yes. Mr Easton referred to the productivity gap. From the measures that I listed, unit costs — the cost of performing an operation, of seeing someone in outpatients, or of seeing someone in accident and emergency — are all higher here than in England, and some are considerably higher. We did not have the resources to drill down even further. One of our recommendations was that there should be a programme of continuous work by the Department of Health.

One of their key functions should be to do that drilling down; to look in detail and find out what elements comprise that high unit cost. It could be said, broadly, that length of stay in hospital is quite a good indicator of what is driving higher costs per patient, and that that looks relatively high when compared to some other countries, although there is variation in the system itself. One way in which all health systems have improved productivity is by reducing the length of time people spend in hospital. Quite often, people want to spend the minimum amount of time in hospital: hospitals can be dangerous places; they are full of sick people, and one wants to get out as soon as one is better. We highlighted that kind of thing. However, we did not have the resources to get down to the nitty-gritty.

I looked at the Department of Health, Social Services and Public Safety website last week and was pleased to see a button entitled ‘Productivity Measurement’. I thought that that was good, and that there would be information about ongoing work. I clicked on it; but there is virtually nothing there: it refers —

The Chairperson:

That might say a lot.

Professor Appleby:

It refers the viewer to the Office of National Statistics’ work on productivity measures.

Ms S Ramsey:

There is a waiting list.

Professor Appleby:

It seems to me that this is an opportunity for the Department of Health, Social Services and Public Health to carry out that sort of work. We said to the Department that one of its functions should be to look at individual hospitals.

Dr Deeny:

Thank you, John, for coming across to speak to the Committee. We have all been looking forward to this meeting. As a GP and as a member of the Committee, I have been looking forward to it especially. I will ask three brief questions.

I will not ask too much about the review of public administration, but it has apparently changed the way in which healthcare is being provided here — as opposed to its being commissioned. From reading the review, it seems that the thinking is that the change will not improve monitoring or generate performance improvements. In recent months, I have been worried about that.

You have also drawn a distinction between administrators and managers: that was worthwhile. However, I wonder whether there will be more administrators even though there are fewer trusts.

Secondly, I want to ask about performance and performance review. I agree with you. I am a GP and, as you know, we are under great pressure to open surgeries at the weekends and do more. In order that people can be seen and dealt with quickly, large parts of hospitals and equipment such as MRI scanners should not sit idle at nights and at weekends. Most of us work out of hours and at different times; shops are open 24 hours per day; yet scanners sit idle at weekends.

Things have changed. There is teleneurology, for example, which is advantageous for patients with neurological problems. Not long ago, it took 18 months for a person to see a consultant and another 18 months to have an MRI scan. That was ludicrous for a developed country. Are changes taking place in the Health Service in England? One can incentivise people by paying them a bit extra, as happens with GPs — we are paid a bit extra for working out of hours.

With respect to the review, I am interested in the peer review of working papers 2 and 3 by Matt Sutton, which was produced on 8 January. I understand the figures in the peer review, but Mr Sutton draws a comparison with England. He says that the indices for Northern Ireland, compared to England were 1∙9 for acute geriatric and maternity services and 1∙55 for mental health services.

The Committee is very interested in mental health. Those figures suggest that there is an underfunding and that we need 55% more money for mental health in Northern Ireland, and that is something we have been trying to push for. The Committee spoke with the most senior consultant on mental health in Northern Ireland who told us how much money he would need to get the whole thing underway. It appears to me that, financially, mental health provision has been severely neglected in Northern Ireland.

Professor Appleby:

I will start with that point. There are two things going on here. Matt Sutton was referring to the figure of 1·55 as an indicator of need. When we examined our funding models, we looked at elements such as acute, geriatric and mental health services. The figure for mental health looked very different to the others, and we were uncertain about it. Frankly, I found it hard to believe that it was so different from England. As Dr Deeny pointed out, we are looking at a 55% greater need for spending on mental-health in Northern Ireland in comparison with England.

The question is: how is that figure derived? The allocation formulas used in England and Northern Ireland contain a special mental-health needs index, which comprises various elements that have been derived from surveys and statistical work. The figure of 1·55 is very sensitive to one or two factors, particularly the take-up of disability living allowance. Fractional changes in take-up will result in big changes to the apparent needs indicator. I am not saying that the figure of 1·55 is wrong, necessarily, but I am slightly worried that the needs gap is very sensitive to one measure of mental-health need, which is disability living allowance. I am worried about that in statistical terms. I am not denying that once the numbers are plugged in, that figure is the result, but mental health is a major element of healthcare spending. In England, it forms the biggest chunk of the whole health budget — about 12% — and always has done. Northern Ireland’s spending on mental health is also close to that figure. We expressed those concerns in our report.

As regards the more intensive use of capital; it is outrageous that large, expensive pieces of equipment such as MRI scanners are not used more intensively. They should be flogged to death, if you will excuse the phrase. There are examples in England. The question is: how do we change the culture of the system to encourage it to use its capital more intensively so that we can get the best value out of the machinery that we can. Traditionally, Ministers have ruled by diktat: they have told the Health Service what to do, or they have set a target. That can work, up to a point. The change in thinking, not just in England, but internationally, is around building incentives for hospital administrators to think, automatically, about how to use equipment more intensively for the benefit of patients. It is about getting them to think that they and their patients are losing out. It is not about sending letters down the line; it is about how to pay hospitals for the work that they do.

As a GP, Dr Deeny, you will be well aware of how you are paid. There are plenty of incentives and mechanisms available. You may not feel that not all of them are the correct ones, or that they do not always encourage you to do the right things. Perhaps we should consider new payment systems for hospitals.

In our report, we expressed the view that the review of public administration’s recommendations on health resembled a ‘Back to the Future’ exercise in which all-encompassing management systems gave out budgets and told people to get on with it. We found it very hard to find any recommendations in the RPA on incentives, accountability and performance mechanisms which we felt could have real bite and could encourage people to do the right things. I am not saying that doctors, nurses and managers, or anyone working in health and social care, are doing the wrong things. However, from experience, the system sometimes gets in the way of what people want to do, and does not help them to do the right things. Therefore, we were critical of the RPA recommendations.

Mr Buchanan:

I thank Professor Appleby for coming along today. Throughout the report, he has stated that the reason for the deficiencies and weaknesses in our Health Service has been the actual use of resources rather than the amount of resources available. Recommendation 11 of the report suggests that we should seek to engage more coherently with the private sector. How can we do that, and what opportunities can that sector offer in Northern Ireland? Are there any good reasons why our hospital throughput and lengths of stays should be less efficient than those in GB?

Professor Appleby:

As regards resources versus productivity, we were not saying that Northern Ireland did not need more money. The graph that I included in the report uses 2002 prices; so there are quite considerable increases, along the lines that Derek Wanless suggested, for the whole of the UK. We are not saying that funding should be a flat line into the future or that it should only relate to productivity increases.

We wanted to be at pains to point out — as did Derek Wanless in his first report, although it tended to get forgotten about because he was making recommendations to put huge amounts of extra resources into the health system — that more money is not the only answer: it is about how resources are used. The opportunity costs of waste are not only cuts, or money-saving; they are also that people die or are in pain when they need not be.

The health system does not operate in a market; therefore market disciplines such as going out of business, taking risks, or losing one’s job do not apply to the Health Service. That does not mean to say that there should not be some pressures and incentives in the system for higher productivity. We are trying to make that point rather than the point that increases in productivity are a substitute for increases in resources.

As regards the private sector, our recommendation was reasonably straightforward. We were not arguing, necessarily, for a big policy change nor stating that more care should be provided by the private sector. We simply wanted the Department of Health, Social Services and Public Safety to be clearer about its strategy concerning its relationship with the private sector. Going back to 1948, the NHS has always used the private healthcare sector; it has bought care on behalf of NHS patients in an ad hoc manner. Three questions we thought was worth asking were: what is the strategy in Northern Ireland; should there be a strategy to buy more services; and to what extent should the private sector come under the quality control remit that the NHS is under? We were asking the Department of Health, Social Services and Public Safety to be clear about its strategy in relation to the private healthcare sector.

As regards the final point, which was about measures of productivity such as length of stay in hospital, how many patients go through the system per bed, and so on; I cannot quite remember what you were asking.

Mr Buchanan:

Are there any good reasons why our hospital throughput and lengths of stay should be less efficient than those across the water?

Professor Appleby:

We did not get into detail about that. I could reel off a list of potential reasons, but I could not tell you which ones were the most important. Consultants determine how long patients stay in hospital, and use their experience to make such judgements. There may be problems with discharge arrangements; there may be nowhere to discharge a patient to. We found that at any one time there was an entire Northern Ireland district general hospital being occupied by people who could not get out of hospital. They should have been at home or in a care home, et cetera; but for various reasons the arrangements were not in place. Arranging discharge on admission had not been done properly; there were hiccups in the system, and so on. Those can be reasons for increasing lengths of stay.

As regards throughput, it could be that there are no incentives to push people through the system: perhaps there is no pressure to do that. There are plenty of reasons. We did not have time to drill down to find out the information. One general recommendation that we made to the Department of Health, Social Services and Public Safety was that a key function that it should be performing is the analytical function. Data and analysis should be published, and the Department should have a programme of work to examine those sorts of issues.

On that subject, accident and emergency attendances at Northern Ireland’s hospitals were very high compared to those in England. I cannot remember the exact figure, but it was about 30% higher. Everyone that we spoke to said that they did not really know why that was the case: the Department had done no work on the matter. However, the figures were freely available; we did not have to dig them up; we got them fairly readily from England, Scotland, Wales and Northern Ireland. It is difficult to believe that there is some sort of epidemiological difference in the Northern Ireland population that would lead to such a big difference in attendances, and it is a prime example of an area in which more work could be done to discover the issues. Maybe the figures should be 30% higher; maybe not. However, we ought to know what caused that difference, and it is a matter of digging down through the data to discover the reasons.

Mr McCallister:

You are very welcome Professor Appleby. Would you elaborate on some of the work that you have been doing with the Department of Finance and Personnel? How successful and ambitious have efficiency savings been, and how ambitious is the 3% target for the next spending cycle?

You seem to accept that our need is significantly higher than that in other parts of the country. How should we target resources to reduce that need? Given the difference between the recommended spend in your proposals and the figures in the draft Budget — if we are getting 1·2% over the next three years, compared to 3·7% in England — how will we close the gap? Can we do it by efficiency savings alone?

I was interested to read terms in your report such as "fully engaged" and people being "very proactive"; would those mechanisms together be enough to close the gap? I realise that that is probably a long-term strategy and not a quick fix, but I am interested in what you think about that. My colleagues have spoken about the market. The internal market in the NHS was created by the Tories, and the Labour Party took it on under a slightly different name. Does the market, or more private-sector buy-in, have potential for Northern Ireland? We are keen to get the best result. Everybody is geared up to make efficiency savings. The target is £343 million, or £344 million, over the next three years, which is a considerable sum.

Professor Appleby:

You asked about the work that I have been doing since we finished the report in 2005. As I said at the beginning, the report made approximately 20 recommendations, many of which, inevitably, said that more work must be done. The Department of Health, Social Services and Public Safety set up various working groups to work on the recommendations, and the draft papers that they produced were circulated to the Department of Finance and Personnel. The Department of Finance and Personnel asked me to look at those papers, on an ad-hoc basis, and comment on the work that was being done. That is what I have been doing since 2006. I have a mountain of paper on my desk, and I send comments back to the Department of Finance and Personnel and to the Department of Health, Social Services and Public Safety, which responds to me.

Mr McCallister:

Has good progress been made on those 25 recommendations?

Professor Appleby:

We have had our disagreements. Two things strike me. First, I have tried to make it clear that items such as productivity require more than just a one-off exercise. The Department should not just examine productivity and say that Northern Ireland is slightly less productive than England or Wales and is going to do such and such about it — and think that it has dealt with the issue.

I would be disappointed if that were the view of the Department, because productivity is an ongoing issue. The search for increased productivity is never-ending, because systems and public expectations change, and new medicines and inventions come along. The system is dynamic, and there are always new ways of doing things, so the issue must be constantly reviewed.

Mr McCallister:

The aim of any business is to become more efficient.

Professor Appleby:

Exactly. There will also be growing public pressure. This statistic is not perhaps valid, but if one considers how much money Northern Ireland spends as a percentage of its GDP, then the amount of Northern Ireland’s "wealth" that is going into healthcare is very high. In fact, it is on a par with Germany. Therefore, there are issues about populations, and how well people think that their money is being spent. More and more money is being spent on healthcare, and, as developing countries get wealthier, they devote more of their wealth towards health.

Mr McCallister:

Our GDP is slightly lower than that of Germany.

Professor Appleby:

I could have used the GDP of north-east England as an example. My point is that there are special issues and that we spend more on health than in the UK.

There is a real increase in funding in the draft Budget: it may not be what the Department of Health, Social Services and Public Safety wants, or what people say they would like, but there are macroeconomic issues involved too. Increasingly, people will be saying that up to 20% of GDP — one fifth of the entire wealth of the UK — could easily be spent on healthcare over the next 20 years. They will think that that is a lot of money and they will wonder what they are getting for it. Therefore, there will be growing pressure on health services to demonstrate that they are spending money as efficiently and effectively as possible. One issue coming to the fore in England is that it will not be good enough to say that we are underfunded and that we do not spend as much as Germany or France. In fact, England now spends almost as much as France on healthcare, so that argument is beginning to lose its bite. Therefore, other arguments will have to be considered. If we want more money to go into public services then we will have to demonstrate why that is so in a more rigorous way than by simply saying that a particular country gets more money than us.

As to whether a 3% efficiency gain is ambitious enough; I know of hospitals in London that are aiming for efficiency gains of up to 14% in a year. They have set themselves those targets, because they think that they can achieve them. It is not about cutting services — it is about doing things differently and in a more radical way. There are always complaints when an organisation is asked to make efficiency gains. My hope is that the Minister or the Department of Health, Social Services and Public Safety will not issue orders that the Health Service must make a 3% efficiency gain this year and next year. The system almost automatically seeks out better ways of doing things, and when that happens, things begin to change radically.

One thing that came out of the Gerry Robinson programmes on fixing the NHS, and from my experience in England, is that when surgeons, GPs, nurses and managers on the shop floor think about how things could be done differently, greater changes occur. Handing down a figure from on high oppresses everyone and points the finger of blame back up the line, accusing those on high of not knowing the staff or acknowledging their uniqueness. Therefore, the question is about how the system develops more automatic incentives to do the best that it can with the resources that it has been given. That idea informed some of our recommendations on how hospitals are paid for their work, how budgets are set, and how people are held to account in the system. It is not simply about setting targets; it is about the carrots and sticks that can be used to accompany those targets, rather than simply giving out a figure and wondering whether people can achieve it.

The Department will say that any figure will be difficult to achieve. However, it would say that; historically that is what Departments always say when another Department gives them a figure to achieve. If I were in that position, I would say the same. To achieve gains in productivity and become more efficient, a slightly different way of thinking is required.

Mr McCallister talked about the gap between the allocation in the draft Budget and our recommendation. It is important to point out that the funding recommendation that we made includes some big assumptions about health and social care being much more efficient in the future. If that is not going to be the case, even more money will be required to meet needs. The gap will be bigger.

There will also be problems if the population does not properly engage with its health, and if the Health Service does not invest properly in public-health measures. We do not quite have an epidemic of obesity, but future projections of obesity across the UK are horrifying. There are also issues, including smoking, that affect how health services are used.

The funding figures outlined in my report are, in a sense, predicated on vast improvements being made in the public’s health. If such improvements do not materialise, that gap will be even bigger. Derek Wanless also made the point that full public engagement in improving health will be the cheapest option for the future. However, as I have said, if those improvements do not occur, even more will have to be spent just to stand still.

Ms Ní Chuilín:

Some of the questions that John McCallister asked and the answers given have addressed some of my concerns. We have a situation — I am sure that it is the same in England and elsewhere — in which people wait an inordinate length of time for an appointment with a consultant. That is simply for an initial appointment; they have to wait longer for any follow-up treatment. However, if someone pays privately, they get an appointment with a consultant during NHS time and at an NHS site. That creates more inequalities.

Inequalities do not feature a lot in the Appleby Report. Professor Appleby worked on a presumption that the issues that he addressed will either stand still or move forward. If they do not move forward, then he is right; a lot more money will be required. However, not much about inequalities in healthcare funding has been mentioned. That is the gap that concerns me.

Productivity and efficiency savings have been talked about. The point that we need to be more creative and use our time and money differently has been well made. When people hear about efficiency savings, they automatically think about cutbacks. However, it is not always about cutbacks. Efficiency savings can made by using scanners at the weekends so that people get access to them and are not in pain. It is about quality of life. Therefore, I agree with what has been said regarding efficiency savings.

There are also gaps in that not enough people who work in the Health Service have been asked for their opinions. We also have a situation — during a time of cutbacks — in which chief executives in one structure are being retired and paid massive bonuses and are then being brought back into another structure and are receiving profit bonuses. That is going on while money for front-line workers is being cut. Therefore, those gaps are increasing and will continue to increase if that practice continues.

Is the claim realistic that £400 million can be saved by a 10% increase in productivity? What else can be done in order to ensure that increasing productivity and making efficiency savings can coexist rather than be seen as being oppositional?

I know that I have raised a lot of issues, but we are not going to see you for a while so I am just going to keep you here all night. [Laughter.]

Professor Appleby:

The word "productivity" is maybe unhelpful; economists can be jargon ridden. The word "productivity" is pejorative, and the connotations are, as has been said, that it refers to cutbacks rather than to different practices.

As an economist, I am so used to words such as "productivity" that they just come out of my mouth. However, to me increased productivity means —

Ms Ní Chuilín:

Does it mean that more people will be treated?

Professor Appleby:

Exactly: it means that more people will be treated, or that the same amount of people will be treated but will receive a better quality of care, and, in my book, that is an improvement in productivity. The trouble is that the quality of healthcare is barely measured. However, an improvement in the quality of services relative to the input of labour, capital or money is an improvement in productivity. Perhaps, therefore, there are different ways to think about productivity.

I was about to say that some of my best friends are doctors and nurses — and they are. What I mean by that is that when we speak to them about whether they want to do the best for their patients — rather than about productivity — of course they do. They have a professional ethic. It is a matter of our being on the same side as them to a certain extent. I accept that there can be a problem with some of the terminology that we use.

We did not specifically examine inequality, which leaves a gap in our report. However, given our terms of reference, there was only so much that we could do. I can say only that all the assumptions that Derek Wanless made about closing the inequality gap between, for example, the life expectancies of the richest and poorest, are built into our funding recommendations. If the inequality gaps in the levels of obesity, life expectancy, and so forth are not tackled, the implication is that more money will have to be spent on healthcare. The inequalities exist, but they are buried in the assumptions.

We have never cracked the problem of shorter waiting times for private healthcare. It goes back to the foundation of the NHS and how the contract that was offered to consultants dealt with NHS and private work. The new contracts attempted to provide consultants with what was perceived to be sufficient money to prevent their feeling the urge to do private work. The British Medical Association (BMA) opposed an attempt to impose tougher limits on the amount of private work that consultants could do, the limits were watered down considerably, and the issue rumbles on.

The best solution is for the NHS to ensure that waiting times are no longer an issue in the Health Service. All the research shows that, in the past, people have gone private because they felt that they would have to wait too long for NHS treatment. In England, the current waiting times for many operations are so short that patients are asking to wait a bit longer, because they do not want to go into hospital at such short notice. I see no reason why the same waiting times cannot be achieved in Northern Ireland.

Mr Gallagher:

Thank you for your presentation. Your report raises the issues of workforce management and the matching of supply to demand.

Last year, the cost of training a physiotherapist for three years was about £35,000, but only one in three was able to find employment in the Health Service. I want to hear your views on that example of the wasteful mismatch of supply to demand. Conversely, occupational therapists are either not employed in some areas or there are not enough to go around. Elderly people, who need their expertise, are in desperate straits because that service is not available to them, particularly in the west.

Do you feel that the Department is dithering over commissioning? One day, local commissioning groups are to be set up, and the next day they are not. Do you think that we should set up local commissioning groups? Would the involvement of professionals in the commissioning of services locally be a good way forward?

Another issue arose in a comment that you made to Kieran, and I have great respect for his profession. He mentioned GPs out-of-hours work. Where I live, half the people who talk about accessing that out-of-hours service will say that they went to A&E instead. You mentioned that A&E departments are overloaded, and that is one of the reasons why. The medical profession is a very hardworking profession, and we all rely on those who work in it, but the way in which the out-of-hours service is run here cost the Department £22 million last year, and that figure seems to have risen in recent years. Is that how the service works everywhere? Do you think that there is a better way of running it?

The Minister of Health, Social Services and Public Safety made a statement about the North/South Ministerial Council during the week, and it seems to be involved in a great deal of activity — much more so that would have been reported in Council meetings years ago, at the time of the previous Assembly. Are there any aspects of that work that you feel could be developed to create a more efficient service for us here, and, perhaps for those people on the other side of the border, too?

Professor Appleby:

The workforce issue is difficult, not just in Northern Ireland, but throughout the UK as a whole. I did a degree in economics, but I certainly did not think that I would be guaranteed a job by the state on completion of my degree. I recognise that my position, like the position of a lot of other people who have a university degree, is different from that of doctors and nurses — who also now do degrees. However, an issue arises here. For example, if we look abroad to many other countries, there is no attempt to plan, from the top down, the supply of medical school places and then attempt to match those places accurately with the potential demand for doctors in the health system five or seven years later.

In Germany, you can study medicine at university, or train as physiotherapist or an occupational therapist, but, like everyone else who studies for other sorts of degrees, you take your chances on the labour market. Germany has too many doctors for its system, and quite a few of them work in England because that is where they can get a job. Therefore, there is an argument that market forces should apply — just as is the case with other training that is paid for by the state.

On the other hand, there is an argument that health professionals are in a slightly different position because their main job opportunities are also funded by the state, so perhaps there should be an attempt to match supply and demand. I suspect that the service will move away from that. It will be seen as too difficult a task to try to decide on all the different types of health and social care staff that the service will need and then try to match that figure with the flow of 18-year-olds and 19-year-olds into training colleges and medical and nursing schools, and so on. The state is not good at doing that kind of planning. In fact, there might be a move towards a more free market, in a sense, just as is the case with employment for economists, architects, lawyers and many other people who receive training that is paid for by the state.

My view is that we should ultimately move towards that kind of system. The experience of other countries that operate such a system has not been the collapse of their health service or a shortage of staff. That may be a way around that issue.

The new contracts for GPs were born out of a need to provide out-of-hours services, and that applies across the UK. In England, primary care trusts then have to pick up the responsibility and the funding for providing out-of-hours services. Many GP practices across the UK offer extended hours and out-of-hours services, which they can do if they want. I understand that they are funded by the respective funding organisations — for example, the primary care trust or a health board.

With regard to whether the cost of doing that has increased — £22 million was mentioned; I was not aware of that figure— and whether it is a good deal, the experience in England has shown that the cost of providing out-of-hours services has increased vastly. GPs, and I am talking about a small sample taken from amongst my friends, are quite pleased at not having to do so much out-of-hours work, and I do not blame them. We may have been underpaying for that kind of service, and we are now seeing the true cost of providing it.

The evidence on commissioning, and the purchaser/provider separation, seems to be that, not just in England, but in other countries where they are also trying to operate that system, there are benefits from giving one group the money but no services, and then the responsibility to buy care from another group, who have no money but have all the services. It does, to an extent, sharpen up efficiency and productivity incentives and make people more aware that if money is spent on one thing it cannot be spent on something else. The evidence is not overwhelming that it is the best system, but it is certainly better than the system that we had before. The internal-market idea was introduced in the 1990s in England, and then new Labour came to power and said that that was not the way to do things. However, its policy journey has taken it to the point where it thinks that it is a good idea after all. In England, and probably in other countries, it is here to stay.

The issue that is now having to be addressed in England is how to get the purchasers — the primary care trusts, the people with the money — to really do their job on behalf of their populations, and demand better care, better value for money, more effective care from hospitals and other providers of healthcare.

Hospitals are powerful organisations, and they are very iconic in the community. If people on the streets of London were asked to name their primary care trust they would not know, but if they were asked the name of the local hospital they will know that. Purchasers, or commissioners, seem to be slightly shadowy organisations.

We did a survey of GPs and had a very good response and a very angry response — not with us for doing the survey, but regarding some of the questions that we asked about services that were being delivered to their patients, or delivered to them on behalf of their patients in terms of waiting times, access, and so on. There was also a feeling that they were out of the loop, and they wanted to be more firmly in there. We recommended that there should be much more experimentation with getting GPs involved in decisions about what care is bought — not necessarily GP fundholding, which we had some time ago. You cannot knock such an important part of the clinical community out of the big decisions about what services are provided and how they are provided. It is really shooting yourself in the foot.

GPs are such an important group. It is not just about primary-care services but about secondary-care services as well and how they link together. They are such a crucial group, and they felt very disgruntled in 2005 when the survey was done. Therefore it seems to be worth trying to get them much more actively involved, not just in boring planning decisions, but in what services patients receive and what decisions are taken.. If it does not work, it does not work. However, it is worth trying.

The Chairperson:

Thank you for your comprehensive response.

Mrs Hanna:

The most worrying aspect is that of lower productivity. That, when combined with higher attendance at A&E, higher levels of obesity, alcohol abuse and smoking, takes up a lot of the Health Service’s budget. Salaries also take up so much of that budget, particularly as a result of the GP contracts and consultants pay.

Before we interact with a patient, we have to square the circle of the budget at a time when the public has a much higher expectation of the healthcare system. We have newer, more effective drugs. People live longer and perhaps need more healthcare. Certainly, we have been led to believe that the number of diagnosable mental-ill-health conditions is much higher in Northern Ireland than elsewhere. Obviously, they are not as easy to identify or treat as physical ailments. You are probably aware of the Bamford Review’s recommendations. It is will be difficult to square those recommendations with the Health Service’s budget, even if we make efficiency savings, which I totally accept that we must do.

You spoke about the television series, ‘Can Gerry Robinson Fix the NHS?’, and about more involvement by health professionals in thinking through budgeting and management. He also talked a lot about that. It does make sense to involve health professionals in those discussions, rather than leaving them, off in a tower somewhere, just to do their work. There should be a carrot-and-stick approach, including tariffs and perhaps just a bit more competition. In your written report you mentioned that in some hospitals in particular here productivity seemed to be lower than in others. Perhaps, we need to start looking at, and getting a little bit tougher with, ourselves, but still square that circle.

I got the impression from your written presentation that our having an amalgamation of health and social care was almost a mixed blessing. We have now our community and treatment centres where there is more team-working between the health professionals. How can we maximise that?

Professor Appleby:

One of the first issues that you raised was, in a way, about rationing. That is another economist’s word that, for me, does not have any pejorative meaning, although I know that, for others, it has. Any system, whether it is a free-market healthcare system or a tax-funded healthcare system, as we have here, has to find a way of making demand equal supply or vice versa. In a sense, the market has to clear in some way. Private markets do that by setting a price and, if you want a product and can afford it, you buy it. If you cannot afford it, but still want it, you cannot buy it. The price moves up and down to equate demand and supply.

If you reject that price mechanism — which we rightly do in healthcare because we believe that it is an unfair way of distributing healthcare resources — you are still left with the problem of demand and supply. That does not go away. You have to find other ways of ensuring that the right people get the right service at the right time. However, we only have so much money. There is a finite budget, whether that is £2·5 billion, £4·5 billion, £6·5 billion, 50% of GDP or whatever.

It seems to me — and it is the historical experience of the UK, and internationally — that we could almost spend anything that we wish on healthcare and still end up with an example, at the margin, of someone who is denied healthcare because there are not enough resources in the system. Therefore, in a way, we will never get there. We have to tackle, in the health system, the problem of how we deny things to people. We do not really talk about that problem enough. Clinicians make decisions about rationing all the time. They delay treatments slightly, and they will find a clinical reason for doing so. Perhaps they know that the bed is not available yet. The waiting list is a classic rationing device. We find ways of dealing with the rationing issue. They are not always satisfactory, but that is what is open to us, and we have to find a way of doing it.

I, and many of my health-economist colleagues, would advocate a much more open debate with the public about what is fair and what is not fair. The rationing issue is always with us, and we have to find the fairest process to ensure that those in greatest need get access first to healthcare.

One of the issues that struck me during the review in 2005 was that there seemed to be quite a strong feeling on the social care side that there was not an enormous advantage in having the system funded together. People talk about an integrated health and social care system, but it is more than simply funding the system under one budget that creates real integration. It means getting down to the ground about how people work with each other. If they are in different institutions, how they are paid for is neither here nor there.

Social-care staff complained that they felt that when push came to shove as regards funding, they lost out and that health was the winner. Some argued for a separate budget for social care, as is the case in England. We said that that was worth looking at, although I was not completely convinced. I am not sure that funding is the issue, whether it is together or apart. The issue relates to what happens on the ground; the systems that are place; how people work together; the consumption of health and social care — for example, how people get from hospital to a care home where they will be consuming social care and not medical care; and what the transitions are like. How the system is funded does not seem to be the issue; it is how the system is managed properly.

Mrs Hanna:

I said earlier that there is now community treatment in care centres where all the professionals are under one roof. The idea is for better teamwork. If someone goes to a GP and needs to see a podiatrist or another professional, that person can just go down the corridor. That is what is happing in Belfast — be it north, south, east or west. I do not know whether Professor Appleby thinks that that is a good idea.

Professor Appleby:

That is a good idea, and the root of some of those ideas can be traced back decades to the original concept of health centres. In London at the moment we are all debating polyclinics, which is the new name. The idea is to get more GPs into those small hospitals — as they could be called, but they are called polyclinics — where there are diagnostic services, consultant specialists coming out of secondary care into those places, and so on. To my mind, it looks very similar to arguments that were around in the 1930s and 1940s about health centres and bringing services together. There are examples in the UK where that has happened. Patients like them, but the extent to which they are cost effective is debateable. There could be an issue with very expensive professionals having to travel rather than see people. It is trade-off with access for patients to some of those services.

The Chairperson:

Carmel, you have got all your answers.

Professor Appleby, we have finished just one minute before you are due to leave. On behalf of the Committee, I thank you for taking the time to come across for just one session and turning on your heels and going back. It was extremely kind of you. You have given us a lot of food for thought.

We have not mentioned the work being done in conjunction with pharmacists to try to direct people with non-threatening problems away from A&E. A lot of work could be done to encourage pharmacists, who are keen to do more and provide more services in the pharmacy set-up. However, those are arguments for the days ahead, when we examine how we improve the service provision for our electorate.

Thank you, Professor Appleby. I wish you a safe journey back to England and hope to see you again.

Professor Appleby:

Thank you for inviting me.