Liberating The NHS: Legislative Framework And Next Steps

PCT allocations for 2011-12 (look at all the red ink)

The 2011-12 NHS Operating Framework

David Nicholson's letter on the OF 2011-12

"Dear Colleague
EQUITY AND EXCELLENCE: LIBERATING THE NHS – MANAGING THE TRANSITION AND THE 2011/12 OPERATING FRAMEWORK
1) Introduction
I wrote to you on 10 September to set out the design rules for the transition to the new health and social care system set out in Equity and Excellence: Liberating the NHS. This letter provides an update in light of the publication of the government’s formal response to the White Paper consultation and the publication today of the 2011/12 NHS Operating Framework. It will reach you at a time when I know many services are facing up to the challenge of a particularly cold and difficult winter period. I want to thank you and your staff for your efforts to ensure the NHS continues to deliver for our patients at this time.

"Put simply, our role over the coming period is to create the conditions for the new system to succeed. That means continuing to drive up quality for our patients, maintaining control on finance and performance, focussing on planning and delivering the QIPP challenge, and building momentum for and implementing the reforms. It means pressing forward with delivery for today and change for tomorrow, rather than retreating or hesitating. So in this letter I want to focus particularly on:
• The vision for the new system, as set out in the White Paper response, which has been
refined and fleshed out following the consultation process;
• The “roadmap” for the transition process as a whole; and
• The priorities for 2011/12, the first full year of the transition, as set out in the NHS
Operating Framework.

2) The vision for the new system: refining the architecture in the White Paper response
and the Health and Social Care Bill
The White Paper response published today provides the next level of detail on the policy
framework the government set out in Equity and Excellence: Liberating the NHS in July. It shows how policy proposals have been developed in light of the consultation and engagement process, and it represents a comprehensive description of how the new system is intended to operate.

The vision, strategy and policy framework remain consistent with Equity and Excellence, but
there are also important developments. I want to highlight four areas where you have raised
issues of concern with me about the operation of the proposed new system, and which I think have been addressed in the White Paper response.

The QIPP challenge
The White Paper response makes clear that meeting the quality and productivity challenge
remains the most important priority for the NHS over the coming period. It sets out the role of the reforms in helping us to drive quality and productivity improvements, for example by giving more power and control to patients, through a comprehensive system of quality standards, by aligning the clinical and financial aspects of commissioning and by freeing providers to innovate and drive up standards. Delivering on the QIPP challenge and implementing the reforms are mutually reinforcing processes, not competing alternatives and the reforms will support the achievement of QIPP.

Values and purpose
Critically, the White Paper response stresses shared values and purpose in the proposed new
system. It makes clear that the NHS Constitution will remain at the heart of the new system. All organisations in the new architecture will have a legal duty to have regard to the Constitution, and the NHS Commissioning Board will be charged with raising awareness and promoting the Constitution. This is an important point of continuity with the current system and will be a valuable lever for supporting shared values and behaviours across the new system.

In addition, the central role of quality improvement as the guiding purpose of all parts of the new NHS will be enshrined in the new system through a legal duty for the Secretary of State and commissioners to carry out their functions with a view to securing continuous quality
improvement. The new economic regulator must also have regard to this duty. The duty will
cover the three domains of quality we have been working to – safety, effectiveness and patient
experience – and will support a system focused on improving outcomes for patients. This is
another important mechanism for providing consistency and unity of purpose.

Integrated Working
Nationally, the critical relationship between the NHS Commissioning Board and the new economic regulator is set out in more depth. The White Paper response makes clear that the important process for designated services will be led by commissioners, with the regulator
providing statutory guidance. It also clarifies that price-setting will be a joint process, with the Board and the regulator required to work closely together, and that in setting prices, the regulator will need to take account of the overall NHS financial envelope. I am also determined to ensure that these arrangements will extend to an effective tripartite working relationship with the CQC.

Locally on commissioning, the White Paper response confirms that Local Authorities will have
statutory Health and Well-being Boards. These will play a key role in integrating commissioning of NHS, public health and social care services more locally. These Boards will be required not only to jointly assess need, but also to contribute to a joint strategy for addressing local needs, which will influence NHS commissioning plans and create a powerful mechanism for driving integration locally. Importantly, however, it remains clear that local NHS commissioners will be formally accountable to the NHS Commissioning Board.

Managing risk
The way in which financial and performance risk will be managed in the new system is also
becoming clearer. The White Paper response sets out plans for the NHS Commissioning Board to establish risk-pooling arrangements with consortia, to issue guidance on financial risk management and to intervene where there is significant risk of financial failure. In addition, the Board and the economic regulator can establish contingency funds to manage financial risk respectively for commissioners and providers. We must ensure that the overall level of contingency in the system is not excessive, but these powers are nonetheless important in supporting a stable financial position for the NHS.

Further detail and clarification is also provided on the relationship between the NHS
Commissioning Board and GP-led consortia. There will be an initial consortia authorisation
process and a regime for the Board to intervene in the event of consortia failure or risk of failure.

The Board will hold consortia to account for improving outcomes through a new Commissioning Outcomes Framework, and for financial management through its accountability relationship with consortia Accountable Officers. Financial incentives will be provided through a new quality premium. The Board will support effective local commissioning through a national system of quality standards, commissioning guidance, standard and model contracts and tariff development. These levers provide the potential foundation for a strong and effective new commissioning system which is clinically led and held accountable for results, not processes.

These are examples of the many features of the new system set out in the White Paper
response. I would encourage you to read the response in full. These details demonstrate some of the ways in which the planned new architecture aligns with our values and our purpose and the ways in which the new system can be put into practice. The proposals remain subject to parliamentary approval and the Health and Social Care Bill will be introduced in the New Year.

Steps taken towards implementation in the meantime will be within the existing statutory
framework.

3) The roadmap for transition: Building the new system over the next four years
As many respondents to the White Paper consultations pointed out, our success in achieving the vision for a new system will be determined by the effectiveness of our arrangements for
implementation and transition. The transition is a highly complex process. We will need to make changes to many different parts of the system simultaneously, whilst maintaining a clear focus on delivering high quality and safe care for our patients. The 2011/12 Operating Framework and Chapter 7 of the White Paper response set out the key elements of our approach to transition, and below I want to set out the intended “road-map” for the health system over the coming years.

Our approach to the transition needs to balance a number of competing tensions: between
bringing early energy and momentum to the change, and creating an orderly process across the whole system; between maintaining a strong grip on finance and performance, and giving freedoms to emerging organisations to take their own decisions; and between allowing new organisations to shape their own capacity, and controlling the overall costs of change. As leaders, our job is to chart a path that balances these tensions.

(A) Characteristics of our approach to the transition
Importantly, the White Paper response clarifies that the transition as a whole will be staged over a four year period. So while many elements of the new system are already coming into place, there will be a significant period for testing and bedding in the new arrangements.

This will allow different parts of the system to move at different speeds, recognising inevitable differences across the country, and will allow us to learn from the experience of early adopters. Those early adopters are central to our efforts to gain early momentum for change, maximising the time we have to refine and improve the new arrangements. That is why we recently announced the first cohort of GP consortia pathfinders, which already cover a quarter of the population. It is why we will also be enabling local government to press ahead with testing of the new Health and Wellbeing Board arrangements. And it is why we are seeking to make early progress on delivering the Foundation Trust pipeline. The earlier we can start to model the new system on the ground, the more likely we are to succeed with the transition as a whole.

However, given the challenge we face it is not enough to allow this change process to be entirely organic. I have concluded that a number of key stakes in the ground need to be in place through the transition period. We will take steps to secure essential capacity and capability across the transition period, particularly through the formation of formal PCT clusters, the creation of a Provider Development Authority to support completion of the Foundation Trust pipeline, and a specially agreed pre-authorised Mutually Agreed Resignation (MAR) scheme to provide reassurance to business critical staff during the transition period. Ensuring we have the right capacity in the right place at the right time in this way will be crucial to stable and successful implementation of the reforms. As well as sustaining core capacity in the “old” system, we must ensure that emerging new organisations get the support that they need from an early stage. That is why the Operating Framework sets out an initial package of financial and capability support for emerging GP consortia.

Critically, we have taken steps to ensure that the transition process supports organisations in maintaining a focus on delivery in the short term and on meeting the quality and productivity challenge in the medium term. For example, pathfinder consortia must demonstrate active ownership of the local QIPP agenda, while the push to complete the Foundation Trust pipeline will ensure NHS Trusts have robust financial plans in place. The Operating Framework also sets out the need for a clear focus on delivery during 2011/12. We must ensure that the quality and safety of patient care are maintained or improved during the transition period and we have asked the National Quality Board to lead work in this critical area.

The following section sets out how this transition will play out, firstly for each of the four main elements of the reform agenda: commissioning, provision, local government and public health, and the revolution in information, empowerment and choice. Secondly, it describes some of the critical elements of support to the transition process.

(B) The “roadmap” over the next four years
Commissioning
The transition on the commissioning side represents a highly complex set of changes. At local level, we need to develop GP consortia quickly so they can take on new responsibility, whilst ensuring PCTs have the capacity to discharge their statutory functions up to April 2013. At national level, there will be a similar dynamic between the emerging NHS Commissioning Board and Strategic Health Authorities, which remain accountable up to April 2012. And there is a particular challenge in developing effective commissioning support for consortia, whilst ensuring we retain the best of our existing talent and capability.

While PCTs will have a critical role up to April 2013, we do not expect to maintain 151 fully
functional separate organisations up to that time, particularly if we want to offer capacity and
space to emerging GP consortia. Because of this, and because of the broader drive to reduce
running costs across the system, some regions of the NHS have already developed clusters of
PCTs. In order to secure the capacity and flexibility needed for the transition period, the
Operating Framework therefore sets out plans for a managed consolidation of PCT capacity to create such clusters across all regions of the NHS. Alongside this, staff will increasingly be made available to emerging consortia to support their development.

The broad role of clusters will be twofold. Firstly, clusters will oversee delivery during the transition and the close down of the old system. In so doing, they will ensure PCT statutory functions are delivered up to April 2013. Secondly, clusters will support emerging consortia, the development of commissioning support providers and the emergence of the new system. In so doing, they will provide the new NHS Commissioning Board with an initial local structure to enable it to work with consortia. In creating clusters, our aim is to maintain the strength of the commissioning system in light of the significant financial challenges ahead.

Clusters will have a single Executive Team and will be in place by June 2011 at the latest in a
form that is sustainable up to April 2013, and potentially beyond that date if the NHS Commissioning Board chooses. Where clusters are already in place, current geographical coverage will be maintained. More detail on the functions of clusters is set out in the Operating Framework and detail on governance arrangements and the process for forming clusters will be set out in January.

Clusters will identify staff whose future role will be to support commissioning. A number of these staff will be offered directly to consortia, but many will undertake commissioning support functions within the cluster. Clusters will enable staff to reshape and redefine their roles to create a comprehensive commissioning support offer for all constituent consortia. These units will offer to emerging consortia the additional commissioning support they need during the transition.

We will support staff working in these units to create social enterprises or joint ventures with
private sector or civil society organisations. Our aim is to support each of them to be able to
become a social enterprise, or a joint venture by April 2013. After this, the Board will be able to offer contracts to commissioning support organisations to ensure stability, but consortia will have the power to decide what support they want, and from whom. Transitional support arrangements from clusters need to be set up with that clearly in mind, with emerging consortia acting as customers.

So for the commissioning system as a whole, the transition period will run broadly as follows:
• For the remainder of 2010/11, PCTs and SHAs remain statutorily accountable. We will continue to encourage GP consortia pathfinders to emerge, building on the first cohort.
• In 2011/12, PCTs and SHAs will be statutorily accountable with more consortia pathfinders emerging and commissioning support units being developed. Our aim is to have full coverage of the population by prospective consortia by the end of 2011/12.
PCTs will form clusters during 2011/12 to consolidate capacity, with some PCT staff being made available to emerging consortia. The NHS Commissioning Board will be created in shadow form and will focus on building its own capacity, developing the infrastructure of the new commissioning system, and overseeing planning for 2012/13 at national level.
• In 2012/13, PCTs and the NHS Commissioning Board will be statutorily accountable bodies with SHA abolished on 31 March 2012. PCTs, through clusters, will be accountable to the NHS Commissioning Board. Authorisation of consortia by the Board will take place with all consortia to be fully or conditionally authorised by the end of 2012/13. The Board will take on its formal statutory functions from April 2012.
• In 2013/14 the new system will be fully established with GP consortia and the NHS
Commissioning Board statutorily accountable and receiving formal budgets. PCTs will be
abolished on 31 March 2013 and commissioning support units will move into social
enterprise and joint venture arrangements.

This is a complex transition path with arrangements changing year on year. We will need to take particular care to ensure effective handover arrangements between organisations, particularly on matters affecting quality and safety. The approach described aims to maximise critical capacity during the transition, whilst creating the conditions for the new commissioning system to develop quickly and effectively.

Provision
The changes to the provider sector are also profound and complex. We are moving towards an all Foundation Trust economy of public sector providers, increased numbers of social
enterprises, a level playing field between the public and independent sectors, and a new system of economic regulation. In making the transition we need to ensure the completion of the Foundation Trust pipeline, the gradual removal of controls on existing FTs and the staged introduction of the new regulatory regime:
• For the remainder of 2010/11 and in 2011/12, the Foundation Trust pipeline will continue
to be driven by SHAs, though we will increasingly seek national solutions to specific, common barriers to progress. Monitor will maintain its current compliance regime for existing and new FTs, while preparing for its new powers and functions as the economic regulator.
• In 2012/13 and 2013/14, a dedicated Provider Development Authority, created as a Special Health Authority by April 2012, will oversee completion of the FT pipeline, taking over this role from SHAs. The bulk of Monitor’s controls over existing Foundation Trusts will be removed, though Monitor will be able to retain its control over new FTs and a subset of existing FTs for a maximum period of two years. The new system of economic regulation will be gradually introduced over this period, beginning with the introduction of the new licensing regime from April 2012 and price-setting from 2013/14 onwards.
• By April 2014, the FT pipeline will be completed and the Provider Development Authority
will wind down. Monitor’s current controls will only apply to recently authorised FTs and
will be phased out altogether by 2016 at the latest. The key aspects of the new economic
regulation system will be in place and Monitor will focus almost exclusively on its new
functions.
The structural and statutory changes set out above are important to creating the new provider
landscape, but the system will take considerably longer to fully bed in and mature. As well as
developing the legal and technical aspects of the new framework, we will work with the NHS to
test key elements of the system, to promote understanding and appropriate behaviours, and to
ensure the NHS is prepared for the radically different provider system of the future.
Local government and public health
Alongside these changes to the NHS infrastructure, Local Councils will be developing new Health
and Wellbeing Boards to integrate local commissioning across the NHS, social care and public
health, we will also be developing the new Public Health Service at national and local level:
• For the remainder of 2010/11 and in 2011/12, we will support the development of a
network of early implementers to test Health and Wellbeing Boards at local level. We aim
to have shadow arrangements in place in most Local Authority areas by the end of
2011/12. During 2011/12, Public Health England will be set up in shadow form in order to
prepare for its new national role.
• In 2012/13, a comprehensive system of shadow Health and Wellbeing Boards will be in
place across upper-tier Local Authorities. Public Health England will take on its full
responsibilities, including the functions of the Health Protection Agency and National
Treatment Agency.
• From April 2013, Health and Wellbeing Boards will assume their statutory powers and
duties in full. Local Authorities will receive their ring-fenced public health budgets for the
first time, just as GP consortia will receive their first NHS commissioning budgets.

Changes to Local Authority scrutiny powers will also come into effect from this date.

In developing the new arrangements, it is critical that NHS and Local Authority partners work
closely together from the outset to improve integration, in anticipation of the new statutory
arrangements. It is equally important that the creation of a dedicated public health service does not dilute the vital role that the NHS plays, and should continue to play, in improving public health.

A revolution in patient information, empowerment and choice
We must also ensure that our transition planning does not lose sight of the main thrust of the proposals to create a truly patient-led and customer focused NHS. Consultations on extending choice and improving information for patients remain open, and I would encourage you all to participate in these important discussions. Chapter 2 of the White Paper response confirms our plans for the creation of HealthWatch arrangements at local and national level to ensure the views of patients, carers and the public are represented. Choice will be extended to new areas of the health system and patients will be given access to and control over significant parts of their health records. In addition, Any Willing Provider will be extended to community services during 2011/12.

But these technical changes, while necessary, are not sufficient. Realising the vision of “no decision about me without me” will require a significant culture shift at every level of the system. In planning the transition, we must ensure that our work on commissioner and provider development focuses as clearly on achieving the ‘Revolution for Patients’ as it does on the mechanics and hardware of reform.

To this end, I have launched a programme to support this change in order to:
• Deliver the significant technical changes to the system outlined above;
• Work, in particular with external partners, to make ever greater amounts of good information about outcomes and experience available in simpler and more targeted ways to patients and communities;
• Identify and pilot areas where we intend to ask commissioners to raise the offer on choice, in particular on the treatment choices available rather than simply on location.

We are considering maternity, cancer and supported decision making in elective care as potential early objectives.

Workforce planning, education and training
Liberating the NHS signalled a new approach to workforce planning, education and training
which aims to give employers more control over planning and developing their workforce
alongside greater professional ownership of the quality of education and training. A consultation on how to put these principles into action will be launched very shortly. I encourage you all to engage with this very important debate. The consultation will include proposals for managing the transition to a new system, and the wind down of the current SHA role.

Informatics
Informatics is critical in bridging the spaces between the component parts of the new system.

Using information and technology effectively will also make a major contribution to the efficiency of the overall system, individual organisations and the individuals working in them. In keeping with the White Paper the single, authoritative source of the information standards for the NHS will be the NHS Commissioning Board. Delivering an information revolution will require strong leadership and direction throughout the system supported by skilled and dynamic informatics staff. It is important that our plans carefully consider how to retain and develop staff with these scarce skills.

Locally, many Informatics services will be too large for single consortia or smaller providers to support alone and I expect that organisations will work together to create shared services. Other informatics functions will continue to be provided nationally including managing and supporting existing national IT contracts, such as Choose and Book and the Summary Care Record, and services such as GP payments and cancer screening. We will provide more detail on how these functions will be delivered by the end of January.

Communications
During this period of major organisational change, we must not let up on the importance of
effective communication and engagement with public, patients and staff. And with a commitment to empowering patients through an information revolution, we must maintain an ability to make such information available to the public in clear and effective ways. As a result, the NHS Operations Board has asked SHA Directors of Communications to work with their systems to develop shared services arrangements for communication and engagement for PCTs and SHAs.

I expect these arrangements to be put in place over the coming months, taking account of the development of PCT clusters.

(C) Critical elements of support to the Transition Programme
The role of outcomes
The structural changes set out above do not represent an end in themselves, but a means of
achieving the over-arching goals set out in Liberating the NHS: improvements to the clinical
outcomes the health service achieves, a patient-centred service, and more freedom and autonomy for front-line professionals. We will shortly be publishing the first NHS Outcomes
Framework, a really significant development in shifting the way we think about and measure
success in the NHS. The new framework will set out the key measures we will be tracking over the next few years and will form part of the first mandate for the NHS Commissioning Board from April 2012. The new Outcomes Framework provides an opportunity to engage with clinicians and other staff about what needs to be done to improve outcomes, to start a conversation about purpose rather than structure. I will be engaging with staff across the health and social care system on this issue in the New Year and I would encourage leaders across the system to do the same.

Maintaining quality and safety
Throughout the transition, quality must remain at the heart of all that we do. Performance and quality can be affected during periods of organisational change. Importantly, the Care Quality Commission will be a point of stability during the transition, helping to ensure minimum standards of quality and safety are maintained.

To strengthen arrangements further, I have asked the National Quality Board, to advise on what changes are needed in order to ensure we have the optimal ability to prevent, detect and respond to quality failings within the NHS. There will be two phases to the review: Phase 1 will consider how best to maintain quality and safety during the transition, with a view to providing guidance early in 2011. Phase 2 will consider how the early warning system might work once the new architecture for the NHS is in place, and will provide ongoing policy advice.

In the meantime, you and your teams need to remain focused on maintaining and improving
quality and safety for patients at the same time as taking forward the implementation of the
White Paper. In particular, you should ensure that you have plans in place to ensure quality and safety are maintained through this period of change. We must also ensure that soft and hard organisational memory is not lost as people leave the service. That means a due diligence process to ensure that there are formal handovers and legacy documents for any successors.

And we must actively assess the quality impact of planned changes to workforce or services, and assuring ourselves that changes are being managed appropriately. The purpose of the reforms is to produce a system more focused on quality and able to deliver better outcomes for patients.

During the period of transition we should exercise greater vigilance and take active steps to
ensure that the system is resilient for quality and safety.

Human Resources strategy
The breadth and depth of the changes described above will of course have consequence for
people working in all parts of the current system. The HR changes we need to make are complex as we attempt to maintain capacity in key parts of the current system while giving new players the support they need to develop quickly. I know you will do all you can to ensure that people are treated with dignity and respect.

An update on the HR strategy is attached to this letter. Our role at national level will be to create broad pathways for people in affected organisations to move into the new system where they wish to; it is not possible or desirable to micro-manage all of the HR consequences of the change from the centre.

As I have said before, there will be broadly three categories of staff in organisations directly
affected by the changes: those who wish to leave immediately, those who are willing to stay for the transition period only, and those who wish to be part of the future of system. For staff in the first category, a MAR scheme has already been made available. For those in the second category, the HR update attached to this letter sets out plans to support retention of business-critical staff through a separate pre-authorised MAR scheme and by using existing contractual flexibilities.

For those who wish to be part of the future system, the HR strategy will provide opportunities for PCT staff in three broad areas: roles in the new PCT clusters, roles in emerging consortia, and by creating opportunities to develop new commissioning support organisations.

Opportunities for SHA staff will include being part of the NHS Commissioning Board, the Provider Development Authority, the economic regulator and the new structures for education and training. Staff in PCTs and SHAs may also of course wish to seek opportunities in the provider sector.

Running costs and locations
Across the transition period, we will be required to reduce significantly the overall running costs of the health system. Running costs are currently around £5.1 billion and will be reduced to £3.7 billion by the end of the Spending Review period. This is critical to creating a more streamlined and cost-effective system and the level of reduction is in line with our previous commitments to reducing NHS management costs. The Operating Framework sets out more detail on indicative running costs for the new system, including the expectation is that GP consortia will have an allowance for running costs that could be up to a maximum of £25 - £35 per head of population by 2014/15.

At national level, the current running costs of the functions that will transfer to the NHS
Commissioning Board is around £600 million per year. The running costs of the Board will be at least a third lower than this; further work in 2011/12 will determine the precise amount, which we expect to reduce over time. The costs of the new economic regulator are expected to be around £50-£70 million per year. The NHS Commissioning Board will have its main office in Leeds with a small London base, and representation at sub-national level in a range of locations to be decided.

The location of the new economic regulator is still to be finalised. It will have a London base, but as it expands to take on additional functions it is likely to require a further location
outside London.

The above “road-map” sets out the key features of a highly complex and challenging process of change. The scale of the challenge speaks for itself. A summary timetable is attached to this letter to set out the key dates in full.

4) Laying strong foundations: The 2011/12 Operating Framework
With such a challenging transition period ahead, it is vital that we hit the ground running. The 2011/12 Operating Framework and PCT allocations are published today. 2011/12 will be a critical year in laying the foundations for the new system. That means balancing three priorities: the need to maintain and improve the quality of services, building on our success to date; the need to retain financial control and meet the quality and productivity challenge; and the need to make progress on the transition to the new arrangements. The Operating Framework sets out how we will achieve this by keeping a grip on delivery for today, whilst creating the new system for tomorrow.
Keeping a grip on today
2011/12 is the first year of the new Spending Review period and today’s allocations to PCTs
confirm the strong financial settlement for the NHS, particularly compared with our parts of the
public sector. In headline terms, average growth in recurrent allocations for PCTs is 2.2%.
Minimum growth is 2.0%. The settlement, particularly when considered in the broader economic context, represents a real vote of confidence in the NHS and a recognition of the financial pressures we face as a result of rising demand, changing demography, and the emergence of new technologies. It is nevertheless a very challenging settlement in historical terms, which is why we must remain focused on delivery of the £20bn efficiency savings for re-investment in improving quality across the Spending Review period. Making a strong start in 2011/12 will be critical to our success in achieving the quality and productivity challenge.

To this end, the Operating Framework sets out how we will maintain tight financial control during 2011/12. PCTs will continue to be required to invest 2% of their budgets non-recurrently in order to create financial flexibility and headroom to support change. The marginal rate of tariff payment for emergency admissions above baseline thresholds will be maintained, incentivising commissioners and providers to work together in an area that is critical to delivering local QIPP plans. And the national tariff efficiency requirement will be set at 4% in order to drive the necessary efficiencies in the provider sector.

These measures will no doubt create real challenges in some parts of the system, but they are critical to ensuring we maintain a strong financial position to get the new system on the right footing from the outset. We will continue to support commissioners and providers to make quality and productivity improvements, as we have done through the recent publication of the NHS Atlas of Variation and the review of Back Office Efficiency and Management Optimisation. The Operating Framework sets out a refinement to our estimate of the scale of the QIPP challenge at national level, resulting from the strong financial settlement and early action on pay restraint. Our revised assessment is that the NHS will need to make up to £20bn of efficiency savings by 2014/15, rather than £15-£20bn by 2013/14 as originally envisaged.

Strategic Health Authorities will continue to play a key role during 2011/12 and will remain
accountable both for delivery of high quality care within available resources, and for making
progress on the transition to the new system across their region.

Building the new system for tomorrow
As well as maintaining a strong grip on the system during 2011/12, we need to make progress on laying the foundations for the new health and social care system. So the Operating Framework sets out the following important measures for 2011/12:
• We will focus increasingly on improving the outcomes we achieve. The new measures of
quality for ambulance and Accident and Emergency services to be published shortly will
focus on measures which link to outcomes. Meanwhile, the publication of the first NHS
Outcomes Framework will help us to understand during 2011/12 the outcome
improvements for which the NHS will be held to account in future.
• We will provide support for the emerging organisations in the new system. That is why
GP consortia will be given £2 per head of population to support their development, along
with access to finance, commissioning and governance expertise. Measures like this are
critical to ensuring we set up the new system to succeed.
• We will create clearer incentives to drive integration between health and social care
services. That is why we have given PCTs responsibility for securing post-discharge
support, with hospitals responsible for any readmissions within 30 days of discharge. It is
why PCT recurrent allocations now include funding of £150m for re-ablement and PCTs
will receive separate allocations totalling £648m in 2011/12 to support health and social
care integration, bringing total growth in PCT revenue funding to 3%.
• We will continue to develop the quality framework in anticipation of the new role of the
NHS Commissioning Board in driving quality improvement across the system. NICE will
begin work on 31 new Quality Standards next year to add to the 15 already completed or
in development. Meanwhile Quality Accounts will be extended to cover community
services for the first time and the CQUIN scheme will continue be worth up to 1.5% of
tariff with reduction of venous thromboembolism as the national priority area.
• We will further develop the payment and contracting systems to pave the way for a more
transparent system with a clear separation between commissioning and provision. The
number of best practice tariffs will be expanded in 2011/12, while new currencies will be
introduced for services such as adult and neonatal intensive care, smoking cessation and
podiatry. Contracts will be revised to pave the way for the introduction of choice of Any
Willing Provider. And new contracts will be introduced for community providers which
have integrated with acute or mental health providers.

Undoubtedly, the most significant challenge we face in 2011/12 is to maintain a grip on current performance and QIPP delivery, whilst simultaneously preparing and beginning to put in place the future system. We must ensure both of these areas are prioritised and the Operating Framework, along with the integrated approach to prioritisation and performance assessment which underpins it, aims to support you in doing that.

5) Conclusions
The change agenda set out above is perhaps the most significant and complex that the NHS has faced. It will be undertaken in a highly challenging financial context, and at a time when staff and leaders across the NHS face personal and professional uncertainty about their futures. And it must delivered while maintaining a strong grip on current performance, particularly during the challenging winter period. I do not underestimate the scale of the challenge, nor the commitment I am asking each of you to make.

Nevertheless, the vision for the new system is clear and builds in many areas on previous
reforms, giving us a clear understanding of the task ahead of us. I have set out here the broad direction of travel and some of the things we are doing to try to support you in meeting the challenge. But success will ultimately be determined locally by the ability of commissioners and providers, of managers and clinicians, to bring the new system into being while continuing to deliver high quality care for our patients. Our recent track record is strong, so we should have real confidence in our ability to deliver. 2011/12 is a critical year for the NHS and I know I can rely on your continuing commitment and dedication as we take on the challenge.

Yours sincerely,

Sir David Nicholson, KCB CBE

Lansley at the health select committee
One word, nine letters. Querulous.

The tone was neatly set by the language chosen by the chair Stephen Dorrell MP to describe the committee's response to DH's failure to provide the text of the 2011-12 OF and White Paper consultation response "formally expressing our disappointment that we have not had chance to consider the documents you have published this morning ... I understand there was contact between DH and committee staff designed to try and facilitate the committee to have access to them overnight to read them and question you on them, and I think it is regrettable that wasn’t possible".

In parliamentary etiquette, 'disappointment' and 'regrettable' are strong meat to a secretary of state of one's own party.

SoS Lansley's response was wonderful: he told them "there are limitations of how far in advance the documents are ready to be circulated … more regrettable in my view describe them today and them published at some later point. Committee published Report On Public Expenditure on QIPP plans and their credibility before those plans had been published by the DH, so I hope that all the evidence will be available to the committee before you have to publish your report on this occasion".

Good stuff!

Key excerpts:

Health secretary Andrew Lansley: “Allocations to PCTs are: £2.6 billion cash increase over 2010-11 allocations; average 3% cash increase available. Individual PCTs’ annual increases vary: minimum of 2.5% maximum of 4.9%”.

Health Secretary Andrew Lansley: "We can assign staff to the consortia to help them establish themselves"

Health Secretary Andrew Lansley: “GP consortia's mandatory annual constitution publication will have to specify their running costs”.

Health Secretary Andrew Lansley: “Sir David Nicholson will not have been referring to the £25-35 / head figure for GP commissioning consortia from 2013-14 at the NHS Alliance conference”.

David Colin-Thome: "At the moment, I think we separate commissioning and provision far too much".

Key points from PM's Questions
Mr Miliband: “The Health Select Committee has warned that inflation could mean the Government failing to make real-terms increases in NHS funding. This means that the Government's commitment to a real terms increase in health funding will not be met. Can you now confirm that you are set to break the promise made in the Coalition Agreement which said 'we will guarantee that health spending increases in real terms in each year of the Parliament'?"

Mr Cameron: "We are not breaking that promise. We want to see NHS spending increase by more than inflation every year. We have increased the NHS budget by £10 billion in this Parliament. I am confident that we will fulfil our goal of real-terms increases every year in the NHS. On this side of the House we want real terms increases in health spending to make sure that we improve the health of our nation. The Party opposite is committed to cutting the NHS."

Mr Miliband: “Let me move on to another broken promise … to end top-down NHS reorganisations. That is exactly what they are forcing on the health service. Fewer than one in four doctors think it will improve patient services. Independent experts say it will cost £3 billion. After six months is there an old truth being confirmed: when it comes to the NHS you can't trust the Tories?"

Mr Cameron: "We are not reorganising the bureaucracy of the NHS, we are cutting and abolishing the bureaucracy of the NHS. Because we are making a 45% saving in the bureaucracy of the NHS that is going to save £1.9 billion. Because we are increasing the spending of the NHS that money will be going in to hospitals and beds and nurses and doctors. All of those things would be cut if it was up to the party opposite because they don't have a commitment to maintaining NHS spending."