Y Pwyllgor Cyfrifon Cyhoeddus - Y Bumed Senedd
Public Accounts Committee - Fifth Senedd09/07/2018
Aelodau'r Pwyllgor a oedd yn bresennol
Committee Members in Attendance
|Lee Waters AC|
|Mohammad Asghar AC|
|Nick Ramsay AC||Cadeirydd y Pwyllgor|
|Vikki Howells AC|
Y rhai eraill a oedd yn bresennol
Others in Attendance
|Bob Chadwick||Cyfarwyddwr Cyllid Bwrdd Iechyd Lleol Prifysgol Caerdydd a’r Fro|
|Director of Finance, Cardiff and Vale University Local Health Board|
|Dave Thomas||Swyddfa Archwilio Cymru|
|Wales Audit Office|
|Huw Vaughan Thomas||Archwilydd Cyffredinol Cymru|
|Auditor General for Wales|
|Len Richards||Prif Weithredwr Bwrdd Iechyd Lleol Prifysgol Caerdydd a’r Fro|
|Chief Executive, Cardiff and Vale University Local Health Board|
|Lynne Hamilton||Cyfarwyddwr Cyllid Bwrdd Iechyd Lleol Prifysgol Abertawe Bro Morgannwg|
|Director of Finance, Abertawe Bro Morgannwg University Local Health Board|
|Mark Jeffs||Swyddfa Archwilio Cymru|
|Wales Audit Office|
|Sian Harrop-Griffiths||Cyfarwyddwr Strategaeth, Bwrdd Iechyd Lleol Prifysgol Abertawe Bro Morgannwg|
|Director of Strategy, Abertawe Bro Morgannwg University Local Health Board|
|Tracy Myhill||Prif Weithredwr Bwrdd Iechyd Lleol Prifysgol Abertawe Bro Morgannwg|
|Chief Executive, Abertawe Bro Morgannwg University Local Health Board|
Swyddogion y Senedd a oedd yn bresennol
Senedd Officials in Attendance
|Claire Griffiths||Dirprwy Glerc|
Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.
The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.
Dechreuodd y cyfarfod am 14:01.
The meeting began at 14:01.
I welcome Members to this afternoon's meeting of the Public Accounts Committee. As usual, headsets are available for translation and for sound amplification. Please switch off any mobile phones. In an emergency, follow directions from the ushers. We've received three apologies today, from Rhianon Passmore, Adam Price and also Neil Hamilton. Do any Members have declarations of interest they'd like to make? No. Okay.
Item 2—a couple of papers to note. First of all, the minutes from the meeting on 9 July. The minutes are noted. Secondly, Members have received a copy of the letter from Steve Ham, the chief executive of Velindre NHS Trust. That's dated 28 June. That's to assist with the evidence session on the NHS Wales Informatics Service held on 2 July. Happy to note that letter? Okay.
Moving on to the intra-Wales Cardiff-to-Anglesey air link, we've received a letter from the Welsh Government. This letter is from Andrew Slade following the evidence session on 4 June, providing the performance information in relation to the punctuality of the air service and the number of cancellations for technical reasons in comparison with the service under operators since 2014. There was a discrepancy with some of the figures—not just a small discrepancy. The figures that we received before from him simply didn't add up, so we've asked for further information and we have received—I think all Members have got—some updated figures. We didn't have time to incorporate them into the pack, but those replace some of the figures provided earlier. Are you happy to note that?
Just a comment related to that. The Welsh Government previously accepted a recommendation of yours that they should be publishing details of the per-passenger subsidy annually, and in response they said, 'Yes, we'll do it alongside the passenger numbers.' We haven't had that, but there has recently been an FOI that has been published, which seems to suggest that there's been a significant growth in the subsidy level for this service. When the Welsh Government gave written evidence for the session in June they didn't actually mention the fact that there'd been an increase of costs on this scale. They actually talked about the growth of numbers, but not the costs on it. I do think that we need to press the Welsh Government to honour its commitment to publish the details of the per-passenger subsidy.
Happy with that course of action? Yes.
I think a stiff tone would be appropriate.
Tone. Good. Okey-dokes, those are noted.
Item 3—the Welsh Government's initial funding of the Circuit of Wales project. The committee's report on the initial funding of CoW was published in May 2018. The committee made 13 recommendations. We received a response from the Welsh Government. All of them, on the face of it, have been accepted. This is getting back into the usual issue of when an acceptance is not an acceptance. We've got a Plenary debate on the report scheduled for Wednesday 11 July. Recommendation 3 on the face of it appears to have been accepted. This relates to the escrow account. However, when you look into it, they are accepting looking further into it, I think, rather than actually accepting our recommendation. Did you want to comment, Huw?
We highlighted the escrow deposit issue to Welsh Government officials in June last year, immediately following the Cabinet decision not to support the Circuit of Wales. I would have hoped, therefore, that the Welsh Government would immediately have taken the appropriate action to safeguard the £100,000 that was in the escrow account, but it looks on the face of it from their response to the recommendation that action started after the PAC made its recommendation. I hope I'm wrong, but I would have expected a bit more urgency.
Can I comment on a few other recommendations? As you said, 'accept' doesn't necessarily, it seems to me, mean full acceptance. I did think that the response on recommendation 1 was a bit grudging. Remember that one of the things that PAC was concerned about was that there was a degree of commercial naivety in dealing with the Circuit of Wales, accepting the statements and assurances that they gave without challenging the evidence. Essentially, what I would argue we need is that officials should be exercising professional judgment, including a degree of scepticism, not necessarily accepting at face value that which they are told. So, I would have liked to have seen recommendation 1 strengthened.
The other two that I think I'd want particularly to suggest that you go back on—. Recommendation 6: the Welsh Government says, 'We already have robust processes in place for dealing with concerns of this nature.' I think it would be rather useful to find out how many instances there have been in recent years in which officials have raised concerns, because that actually gives you an indication of how live those procedures are. And then on recommendation 13, where the suggestion is that, particularly given that there's still some prospect of reviving the Circuit of Wales project, the Welsh Government may be exploring or want to explore, if that happens, how debt can be converted into equity, I think we'd really want assurance that the Welsh Government understands the pecking order for actually being able to recover its money should things go wrong. Because one of the areas we were concerned about in the initial grant was that having given the Circuit of Wales a bank guarantee, in a sense, that was then cashed in without the ability to really recover that. So, it's a question of making sure you have sufficient security.
So, I think that the question about the degree of security that the Welsh Government is expecting to achieve on recommendation 13, and the numbers on recommendation 6, would be useful.
Any other comments? Lee.
Can I suggest that we write back to the Permanent Secretary about this issue of accepting recommendations? I wrote to her in my own right last week citing the medicines management report that we had, but more particularly the response to the young people and children committee's report on mental health, where there were a number of, I thought, pretty outrageous examples of accepting in principle, and the narrative showing that they were doing nothing of the kind. Given what we've just said about this report and ahead of her, I presume, appearing before us in the autumn, can you just reinforce our concerns that the assurances that she gave us last time aren't exactly being fulfilled as we would have hoped?
Yes. And we've got the debate this week, so we can ask the Government for clarification on the points you make. Okay. We're getting there.
Item 4—the implementation of the NHS Finance (Wales) Act 2014. This is our second evidence session. Can I welcome our witnesses to today's meeting? Would you like to give your name and positions for the Record of Proceedings?
Good afternoon. Tracy Myhill, chief executive of Abertawe Bro Morgannwg University Local Health Board.
Sian Harrop-Griffiths, director of strategy for ABMU.
Good afternoon. Lynne Hamilton, director of finance at ABMU.
Thanks. I'll kick off with the first question to you. Given the issues that the health board has previously faced, how would you describe the current state of health of Abertawe Bro Morgannwg in terms of finances and wider governance?
Thank you. In terms of finances—I'll start with finances—I think it would be fair to say that the health board is facing some challenging times. You will be aware that we've not met our financial duties over a number of years. So in 2016-17 we were £39 million adrift and in 2017-18 we were £32 million adrift, although we had a 17 per cent reduction in the deficit from one year to the next. So, some progress in the right direction, but, undoubtedly, we're still in a rather challenging position. We've got a plan this year that we hope will take us to £25 million overspend by the year end. That is challenging, and, of course, we are building up an underlying deficit as we go forward.
So, it is challenging. There's no quick fix to the scale of the challenge that we've got, although as the relatively new chief executive going into the health board, I have seen progress. I can see evidence of grip. I can see evidence of attempting to change the way that we look at our finances, to move from transaction and cost cutting to more transformational and system-wide strategic approaches. But we are not there yet. And generally, I guess I would say, in terms of the health board's health, that we're in a period of change. You know that we are in targeted intervention, so we have a number of performance challenges that the health board is attempting to address, and we've had quite a significant amount of turnover, particularly at senior leadership level. So, my job, as the new chief executive of the health board, is to build a strong, cohesive executive team that can take the organisation to greater and better places, and I genuinely believe the potential is there to get ABMU where it needs to be.
You've just said that you're pretty new in post. In your written evidence, you've highlighted problems with achieving the required pace of change. Other than what you've just said, are there any other—change of staffing, or whatever—reasons that are contributing to this slower pace of change than you would like to see?
I think some of this is about history and culture, particularly in terms of finances. So, if you look back in terms of what's happened in the health board over a number of years—. And I'm looking back having not been there, so I think you do need to take it within that context. It's very easy to come in and have a look and take an opinion, but in terms of my opinion looking back, I think, culturally, we've not always delivered on our financial performance, and even when the health board did, there were lots of non-recurring savings within that, or non-recurring allocations, so the cultural change that we need to put in place to deliver systematic change on time, to time, every time, is a challenge for us. So, I think we've got good people. I think we've got potential, as I've said, but I think there's quite a big challenge to improve our programme management, our project management, and get the organisation into a place where it delivers on its promises.
The auditor general's 2017 structured assessment highlighted that there was unplanned growth in service costs in 2016-17, which added to the financial deficit. Did this trend continue in 2017-18, and what is the health board doing to reduce the cost base?
I'll ask Lynne, my finance director, to comment in a bit more detail on this in a second, but just from my perspective, I think when you're talking about 2016-17, the organisation has been through a bit of a challenging journey—not just the targeted intervention that I've just referred to, but some challenges before then. Again, in my look back, I think investment in terms of staffing and other areas, to help deal with pressures, to help deal with improvement in performance, that did seem to be a bit of the approach, without being absolutely clear about what we were going to get for those investments. So, there were investments during that time that we've not been able to deliver the benefits from yet. But in terms of that continuing, what would you say to that, Lynne?
I would agree with Tracy that the organisation is under significant challenge and stress, both in service clinical delivery and performance, and finance. I'm not quite as new as Tracy, as you may know; I've been in the organisation for 13 months. So, like Tracy, I'm relatively new, but I think, in terms of the service growth that has driven some of the cost drivers, the organisation seems to me to have been responding to a series of clinical challenges and performance challenges that reach right back to the Andrews report and 'Trusted to Care'. My observation is that the organisation then sought to make—arguably very legitimate—investments to respond to those clinical quality requirements, but where it was less diligent was in driving efficiencies in other areas to ensure that it could afford to make those investments. The organisation, between April 2015 and April 2018, increased its whole-time equivalent headcount by 650, which is a considerable number of people—so, it's a cost driver. That's not necessarily an entirely bad thing, because a significant cohort of that 650 was healthcare support workers. So, that was a very conscious workforce device to provide the clinical care, but to do it at a reduced cost and to address the workforce challenges that we have around recruiting registered nurses.
So, my perspective, coming in, is that the health board have sought to address clinical requirements through investment, but, picking up your question to Tracy about wider governance, I think these two things go hand in glove, and my view is that there hasn't been, I would say until about nine months ago or a year ago, a sufficiently robust board governance framework where investments were determined in line with strategic priorities, and workforce and clinical priorities, and then managed by a senior leadership team and an executive team and a board that was very determinedly setting the right accountability framework to identify the right clinical deliverables and ultimately also financial deliverables from investments made.
Picking up on your question about 2017-18, a couple of examples where we have encountered particular cost growth, but we've sought to contain it, were primary care drugs and our staffing and workforce costs. Our staffing and workforce costs were cost driving—increasing—by £12.6 million, but we actually managed to contain in excess of £7 million of that through service redesign and also bearing down on variable pay. And our exposure to the increased costs in primary care drugs in 2017-18 was also hugely challenging. That cost was driving us up a cost driver of almost £5 million. Again, we managed to contain more than £2 million of that.
So, certainly in my experience of the health board, the grip and control and focus is getting better. We're not there yet, and I don't pretend any of its easy, but we can demonstrate that we are containing expenditure and that we are controlling the environment more robustly, and that takes us into the wider conversation about the changes that have been made in the board's governance over the year.
Lee Waters, did you have a supplementary?
Yes. In your letter to us, you said that the board's financial performance had been influenced by five factors. Three of them—population changes, inflation and cost growth, demand growth for services—are forces beyond your control, and two performance challenges and investment in priority areas are within your control.
Can you just give us a sense of how much of this was external forces that whoever is in charge would have really struggled with and how much of it was what you've just referred to: a lack of grip, control and focus?
In investment and decision making, my observation, which I think is borne out by the structured assessment and the Deloitte report, which I know you'll have seen, is that the organisation was responding to a particularly challenging environment and needed to make investments. Where I think we could have performed more effectively was to ensure that the investments made to address the performance challenges were managed in a tighter way and that there was a much more demonstrable link between the level of investment made and the expected performance improvement, and quicker intervention where the investments being made were perhaps not apparently and quickly generating the performance improvements that should have been made.
You mentioned the changes in staffing. To what extent have the gaps in senior executive and non-executive roles contributed to the problems that the organisation has faced?
I think it's significant. I think that, without a strong, cohesive executive team, it's very difficult to get traction and to make medium and longer term change. There have been significant gaps, as you will no doubt be aware. There are two out of 10 executives that were involved in the organisation three years ago. That's very difficult, and that's why that is absolutely one of my priorities—to fill the gaps in the executive team that we've got and to develop us as a strong team for the organisation.
And hopefully they'll stay.
And hopefully they will stay, yes, because we'll build that team and recruit the right people to enable us to take the organisation forward. We've invested—back to the investment question—a lot of money in our delivery units. We have six delivery units with very senior teams. What we haven't got is a very strong, cohesive executive centre to direct the work, to make sure that we are aligned as an organisation. This is absolutely fundamental in my eyes and, as I say, one of my significant priorities.
Okay. Lee, before I bring in Mohammad Asghar.
I appreciate your candour on this. Clearly, with only two of the 10 executives from two years ago still in place, it's impossible to get any accountability for that. In terms of your governance, this does beg the question of how your governance structures allowed this situation to continue for so long. How much change has there been in the governance structure?
So, there has been significant change in terms of governance. We have had board changes as well—non-officer member board changes. So, we now have a virtually new set of non-officer members. So, there has been lots of work to ensure that we've got the board filled. Again, there are three out of 12 independent members who are still with us, but we've recruited really good, solid independent members as our non-execs on the board. We've also reviewed the way that the board runs. We've reviewed the way our committee structure runs. We've got a performance and finance committee that was established last year, which is different to where we were before.
The governance structure had worked. We had a lot of change, but we didn't have—. All those posts weren't vacant. So, we had interim appointments, we had temporary appointments, we had some executives taking on broader responsibilities, some executives taking on rather large portfolios that you wouldn't see to be sustainable in the long term. So, the organisation did run, and progress was made, and patients were looked after, and improvements actually were made. But it's not a sustainable leadership situation to take the organisation to the next level. That's what I'm—
And there's been a lessons-learned exercise, has there, from the mistakes in governance made that allowed these performance issues to go unchallenged?
When you say 'performance issues', what do you mean? Do you mean the performance of individuals, or the performance of the organisation?
The organisation's performance. You've just given us a catalogue of failures at the organisation that you've inherited. Now, as I said, the executive accountability for that is very hard to carry out, but there have got to be lessons for the organisation. You've said this about the stability of leadership; I understand that. In terms of the way that you are governed and the management is held to account, surely there must be lessons as to how this was allowed to have happened in the first place. Have those lessons been taken into account?
There have been numerous reflections and reviews to actually do that. So, the WAO, the structured assessment and the external review from Deloitte that the organisation have had have given us lots of advice in terms of what we need to do, moving forward. We are making good progress on a lot of those recommendations in terms of stabilising the organisation and getting in a position to be able to perform, not just now but for the longer term.
But you're the one responsible for governance, obviously. How can you be sure that the governance lessons have been learned and taken on board?
Regular review, going forward, is obviously going to enable us to make sure we do learn those lessons. We are developing as well a board assurance framework right now. We have a governance improvement plan. Part of that is the board assurance framework. So, we are tightening up on all of the governance challenges that we have in terms of enabling us to be successful, as I said, moving forward.
Okay, thank you.
Sorry, you hadn't finished.
I was just going to say, obviously we are constantly under scrutiny through the targeted intervention arrangements. So, we are working with Welsh Government through that in terms of making sure that the organisation becomes as fit as it can, as quickly as it can. I don't want to give you the impression that it's all done and dusted and it's easy. There's no point in doing that, because it's not.
To be fair, that wasn't the impression I'd gathered.
I'm sure, I'm sure, but we're on the journey. We know what we've got to do, it's fairly clear. The good thing is it's doable, I think. The challenges we've got, the things we need to deliver are doable. I don't think any of it is impossible. The issue is going to be one of pace in terms of getting to where we need to be as quickly as we want to. But we know what we've got to do. We've got the plans; we've just got to do it.
Thank you very much. My question is directed to the chief executive. The Welsh Government provided Abertawe Bro Morgannwg with £7.4 million to meet targets for referral-to-treatment times, but it now has to pay back after failing to do so.FootnoteLink I have a couple of questions around this now. How will this impact on the targets you have to meet, and how will it affect services currently provided by the health board?
So, you are absolutely right—we have had to pay back £6.9 million, actually, to Welsh Government in terms of RTT clawback, because the organisation was not able to deliver the improvements that it had set out to do over the previous year.FootnoteLink What that basically meant to us was we would have been—it's obvious in some ways—less overspent than we were. We still improved on our position from the year before, but we would have improved it in an even better way. So, it's adding to our deficit moving forward, and that's something, at some stage, we will have to address. There are lessons we are learning from that in terms of lots of short-term solutions to referral-to-treatment times, starting our work perhaps too late, trying to do too much in the winter, and whether our demand and capacity models are actually in balance. So, there are lots of things that we are working on to prevent us being in that position in the future.
Put me right—unless I've heard it wrong—it was £7.4 million and you had to pay back £9 million, you said? FootnoteLink
It was £6.9 million. FootnoteLink
It was £6.9 million, sorry. FootnoteLink Okay. Why were you unable to use this funding to deliver the improved performance that the Welsh Government expected?
I think it's partly some of the examples that I've just given you. Again, I'm looking back and talking to people in the organisation, but what I'm hearing is that we started too late in terms of some of the planned care work that we needed to do. If you start too late in the year, you start trying to do lots of planned operations in the winter. We had a very challenging winter, and not only in terms of weather and temperature but in terms of the cold snap, the snow. Those things just didn't help and, therefore, we ran out of time. But there are also examples where we do not have, at the moment, sustainable models to deliver on some of our referral-to-treatment times, because of staffing or workforce challenges. So, whilst we have improved and we've got fewer people waiting over 36 weeks now than we did a year ago—and we've got improvements in 26 weeks, excellent performance in diagnostics and therapies, so there are some successes again there to build on—the organisation was never able to spend the money that it got because the plans weren't in place early enough to enable us to deliver.
So, you're saying then there was no forward planning by the leadership or something like that in this whole scenario?
I don't think it's as simple as that. There are lots of contributing factors as to why the RTT improvements weren't able to be made. Some of it absolutely is about planning, some of it is about not back-ending your activity and trying to do it earlier. The organisational turmoil and change undoubtedly would have been part of that. Outsourcing and short-term solutions—we were able to secure some, but not as much as we wanted. So, there were lots of things I think that contributed to that position.
Have some lessons been learned for the future?
Absolutely, absolutely. One of the key ones there is we have not—. As we went into the new financial year, we hit the ground running; we did not have any bounce back. A year ago, in the first month of the year, quite often, you lose some of your activity—500 cases, I think, we had, an increase in the first year. This year, I think it was between nought and 50. So, we've kept going; we've kept going early in the year. Our plans are much more either the beginning or middle-of-the-year ended, as opposed to the end of the year. So, there are lots of things we are trying do to ensure we get as much activity as we can before we do get into winter when, undoubtedly, there will be challenges.
Thank you. Given the rolling nature of the three-year break-even duty, does the NHS Finance (Wales) Act 2014 really address the problem of a short-term focus on a year-end financial target, which has been likened to landing a jumbo jet on a postage stamp?
As an organisation, of course, we're in a slightly different position. We've only got a one-year plan. Because of the situation that we're in, we don't have the benefits of a three-year integrated medium-term planning system. So, we are working year to year, until we get into a more sustainable position. But, I think, to be able to plan further than one year is absolutely what we need to do. To be able to deliver and deliver improvements and invest and take the money out and balance everything in one year is very, very challenging. It's the Boeing 747 on the postage stamp.
We are looking forward to getting to a place where we are back in that three-year planning cycle, so we can look further forward, even further forward than three years, in terms of our longer term organisational strategy. But the last year has been very much a focus on performance today and not looking three, five, 10 years ahead.
Okay, thank you.
Thanks, Oscar. Vikki Howells.
Thank you, Chair. The Welsh Government is currently reviewing the funding allocations made to health boards as a response to a recommendation made by this committee in 2013. Does your health board benefit or do you feel it's disadvantaged by the current funding formula?
Lynne, would you like to take that one?
Yes. The funding formula, as you know, has been in place since 2001. I think our health board would very much support a review of the funding formula. A lot changes in the best part of 20 years. I think we would probably suggest—. I think we are the second from the bottom in terms of social deprivation with the deprivation index for our population, so I think we would particularly welcome a review and would probably feel that the current funding formula is not necessarily to our best advantage.
Certainly in your written evidence, you refer to the risk of changes to baseline allocations destabilising health boards. What measures would help your health board to manage the transition if there were significant changes to the allocations?
If there were significant changes to the allocation, I think, at the start of the process, we would welcome being involved. I'm sure Welsh Government would expect to involve directors of finance and other professional peer groups across the system whilst it was formulating proposals. So, I think, early engagement would help. But, after decisions have been made, subject to what the new formula was, I would expect that there would best be some sort of transitional period for all health boards if there were adjustments to be made. Because, to put it bluntly, there are often winners and losers in these situations and an adjustment and transition period supports all health boards, whether they're winning or losing from that kind of adjustment. Because, basically, when it comes down to it it's population health and the quality of care, and that's why we would need a transitional period, as I'm sure other health boards would as well.
Thank you. And looking at a change which is more certain—that's the boundary change for the Bridgend population. That will, obviously, be a major change for the future financial and operational planning at the health board. What preparations have you undertaken for the transfer to date?
We'd already started scoping what would need to be done in the event that a decision was made, so we haven't only started since the announcement was made. Clearly, we haven't been able to implement anything or set up any formal programme arrangements, but we have been working across Cwm Taf and ABMU to look at all the potential scenarios; what are the work streams that we would need; what are the plans that we would need to develop. So, we were already trying to get a few steps ahead in the event that the decision would be made that the change would happen.
I think it's important to say that, from an ABMU point of view, we are supportive of the change. I think, in terms of enabling our organisation to become sustainable, working much more closely with Hywel Dda and the south-west Wales population, as opposed to trying to look east and west, I think there are benefits for us, and I think it will help us to get into a much better place as an organisation. However, as you rightly say, the next nine months or so is going to be really challenging because it is a big change: it's 27 per cent of our organisation.
So, we've already established a transition board with Cwm Taf; we've had our first meeting, which we had last week, I think; we've appointed a transition director and we are creating a team between both organisations to manage that transition. We've also, clearly, got a lot of work to do in our own organisation because we've really got to redesign our organisation. It'll be a completely different organisation post the change. So, we believe it's the right thing to do. We don't underestimate the scale of the change that we need to deliver whilst also focusing on all the other things we've talked about in the organisation, and that's why it's really important that we put additional support in to enable us not to be detracted from the rest of the work that we need to do, but make sure we do that well.
I think the other thing that's important to say is we've agreed with Cwm Taf a set of principles around how we will manage this change. Neutrality in terms of neutral impact for our staff, our patients, our population and our finances is really important. That's easier to say than it is to achieve, and we'll be working together over the next nine months, with the Welsh Government, to ensure that neither organisation is detrimentally affected as a consequence of the change.
Thank you. And what do you think will be the likely financial consequences of the Bridgend transfer for your health board?
Well, strictly speaking, on the basis of population allocation, which we were just talking about, 27 per cent of our funding allocation is attributable to the Bridgend population. So, the allocation procedure would have that 27 per cent directed to Cwm Taf to support the population. However, as Tracy has just said, we're working with Welsh Government to establish what that means in terms of the quality of care. We're working with Welsh Government and Cwm Taf colleagues to ensure that neither population is detrimentally affected in terms of the quality of care and that the performance of the health boards—both of the health boards—the clinical performance and the financial performance, and the financial position, isn't detrimentally affected by the financial change, but 27 per cent of our allocation is attributable to the Bridgend population.
Okay, Vikki? Lee Waters.
Thank you. One of the criticisms the auditor general made—the observations he made, overall, in his work—was the tendency of some health boards to take an across-the-board savings target and not look on a more granular level at different departments and where there was greatest potential to make savings. Our evidence last week from Cwm Taf showed that they take what they call a bottom-up approach where they bring their staff with them, through the whole year, looking for savings potential. The evidence we've had from previous years from your health board is that you take a top-down, universal, uniform percentage cost-reduction target. I see from your evidence that you've began to recognise this and put it right, but it's going to take time. Can you just tell us a little bit about your thinking and your progress in that regard?
So, you're right. I think, historically, a percentage CIP—cost improvement programme—applied whether you've got the opportunity to deliver it or not, or whether you could deliver more than it; it's been part of the approach. So, we are moving to make sure that when we set and agree reduction targets that we know there's a pretty good evidence base that they're deliverable.
So, benchmarking has been used to inform some of the plans we've got. We know that, in certain parts of our services, we may be over-bedded or there are better models that we could deliver. So, when we are then agreeing with our delivery units the changes, they're based on something as opposed to just a blanket percentage. What we've also established this year, as opposed to just delegating targets, are some cross-cutting programmes of work across the whole organisation. We might be six units, but we are one organisation, and our patients flow through our organisation irrespective of which parts of the organisation we manage. So, we've got programmes of service change and modernisation and workforce redesign that go across the whole organisation. Again, those are based on evidence or benchmarks from other organisations or benchmarking clubs that demonstrate to us that there's something to go at.
Again, it's part of the journey, I think. It's been interesting because there's a bit of a mix at the moment. There's still a bit of CIP and there's a bit of strategic change, and until we're totally confident that we can deliver through strategic change across the organisation in the majority of our approach, we'll still have to have a little bit of the cost improvement programme. But the aim is to get less of the targeted, 'You need to give us 2 per cent or 3 per cent' and have a much more mature debate about what's doable and working together to deliver what we know can be delivered as opposed to just an arbitrary target.
You mentioned at the beginning that cultural change is one of the biggest challenges that you face. The auditor general's structured assessment isn't particularly optimistic on what you're working with. There's one very telling section:
'Over the last five years, the Health Board has set ambitious savings targets but has not fully met any of its annual savings targets and has in most years, set targets greater than that it achieved in the previous year.'
So, given the situation you've inherited, how confident can you be that you've got the skills and capacity and mindset to get out of a culture where they've consistently done this the wrong way and move to this new way of working?
I don't think that's an overnight fix, but I think that if you look, even just in the last year—to be fair, I can't take much credit for this because I wasn't there—but even in the last year we've seen much more of a control on costs, we've seen delivery against the target that we set—over-delivery, actually, against the target that was set. So, there are some really good people in this health board. I don't want to give you the impression that there aren't. There are great people doing great things. I think that what we've not had is the wraparound to support them strategically to enable them to deliver. So, it is a big cultural change. There are capacity gaps, I think. There are some capability gaps. And in terms of how the organisation runs, how units work with one another, how units work with the centre—the whole operating model for the health board needs to be redesigned with people in it.
So, you don't change culture in a year, we know that, and it's a very big, complicated organisation. This is years in the making, but what I'm really keen to see is continuous improvement along that journey. But yes, there are gaps and there are challenges. I still think they're doable, just don't ask me to do them yesterday. I think there is something about prioritising and having a proper programme of work to get to where we need to be.
Sure, and our job is to scrutinise the organisation, isn't it? And it's very hard for us when you've just arrived, because you're able to say, 'Well, I can't do anything quickly about this', but it's the organisation that's being scrutinised here by the auditor general and the track record is not good, as you yourself have conceded.
I understand what you say and I accept at face value what you're arguing, but just in terms of the wiring of this—what you've got to work with and what you need to change to do it—I think we do need to press you a little bit on some of your plans.
So, one of the things that I think is particularly challenging is this lack of buy-in and ownership from budget holders, which the auditor identifies, because of this culture we've just described where it's just been rolled forward from one year to the next. Twenty per cent of the savings that have been found have been one-off short-term, non-recurrent savings. So, it's a job and a half you've got, isn't it, trying to get people at the operational level to move to a different way of working. Can you tell us a little bit more about this culture of savings—this isn't just unique to you; this is across the piece—towards the end of the financial year and what you're doing to avoid that in future?
So, as you've said, I think the history has been where we've had non-recurring allocations, perhaps, in the middle of the year. We've not delivered always on our cost-reduction targets, and that's become okay because the health board did deliver at the year end for many years. We've come unstuck in terms of that approach. So, the culture of no consequences necessarily, if savings aren't delivered, is one that we need to change. There are a number of things we've already done. From a personal point of view, as the new chief executive, we've got accountability agreements with our delivery units, so we're very clear on what we expect, what we expect to be delivered and when we expect that to be delivered. So, there's something about accountability in that. We've changed our performance management arrangements, so we have strengthened those. We've improved our transparency and visibility of money and the numbers, in terms of our board—our board committees. So, the information we've got, the scrutiny process, the performance management process, but also, there's something around development. So, we are investing in development as a board, as an executive team, and with our senior leaders in the organisation so we can learn together and develop together.
Can you tell us a bit more about the changes to performance management you've implemented and how they're different?
I mentioned earlier that we've introduced a performance and finance committee, as a sub-committee of the board. That's chaired by our vice-chairman. That is a fully established committee now and takes a very strong assurance and scrutiny role around performance and money. That is a very challenging committee, appropriately so. So, that's really good. In terms of that committee reporting, then, into the board, there's much more debate at the board in terms of where we are—
That's organisational performance management rather than individual performance management.
So, that's, I suppose, structurally governance-wise, and then there are performance management arrangements in terms of the finance director and the chief operating officer meeting monthly with our delivery units. We have an escalation process in place, so if we are concerned about certain parts of the organisation, we'll see them more often.
Right, okay. So, that's structural, but in terms of individual performance management, have you made some changes there?
So, in terms of individual performance management, I think, to be fair to our people, if we haven't got the structures and the systems in place, and the clarity of what's needed to be delivered, it's very hard to hold people to account. So, the next part of the work is to do that: to be very clear about what we expect from people, what support people need to enable them to deliver, and then we need to manage them to deliver. So, yes, part of this will be individual performance management, but I think it's our job also to make sure the organisational systems are in place, that the management is there for people, that the expectations are really clear, and only then can you hold people to account. When it's grey and murky, it's very difficult to hold people to account.
Do you have a timescale for that—setting out new performance management arrangements?
So, we've already set up new performance management arrangements with that our units over recent months—
Yes, with individuals, sorry.
My plan is that, by the autumn of this year, I will have developed an operating model that says exactly how this organisation is going to run, how we will do performance management for individuals, how we will do performance management for different areas of the organisation, how we will structure the organisation, how decisions will be made, and what accountability happens at what level. All of these things need to be really crystal-clear—how we will communicate. That's the operating model that I am developing at the moment. Part of that is about the executive team and the roles within the executive team. We've got vacancies, we are still recruiting, so I need to get my team in to enable them to inform that work. So, that's the sort of timescale I'm looking at, so that everybody's then clear how we do business in this organisation and how we move forward together.
You say in your written evidence that you're developing incentivisation to support savings delivery. How will that work in practice?
Well, I think it's quite soul destroying when you work very, very hard, you save money, you take money out of your service or your directorate, you improve your efficiency and it all goes into the central black hole. So, what we're trying to do, appreciating we have got a black hole and we know we need to fill it—so, we can't just say to our services and our clinicians, 'Any efficiencies you make and any cost reductions you make, you can have', because the organisation's not in that place. But if there's some way of working with our clinicians and our service leaders to be able to share some of that—so, if I'm able to make a significant improvement that is going to reduce my costs, and you're going to let me have 10 per cent of that saving to keep and reinvest in my service—those are the sorts of discussions that we're having.
Right, but you haven't bottomed that out quite yet, have you?
You haven't bottomed that out quite yet?
We are developing that at the moment, Lynne, aren't we?
Yes, we are looking at that as our methodology to build in to our 2019-20 financial plan and as an underpinning principle to our approach to medium-term financial planning. My view is that it's the only way that the whole organisation, particularly our clinical colleagues, who are obviously key players, if not the key player, in terms of staff—that people feel that they have got a stake in—
Sure. It's 10 per cent that we're looking at, is it?
Well, that's just an example—don't quote me on that.
Okay, well, that's what I'm asking. I'm asking to quote you specifically on what exactly your plans are. That's what I'm trying to get at.
Yes, but this is what we're developing.
Right. So, you haven't bottomed it out yet.
It could be 10 per cent, it might be five—I don't know.
Okay. And when you—?
The principle is that you'll get some of your price reduction back to enhance your—
I understand that. What's your timeline for having that agreed?
Well, we would like to have an element of that approach in our 2019-20 financial plan. If we were able to adopt that approach in the course of 2018-20 [correction: 2019-20], I think that would be regarded as an opportunity, but it's not built into our plan for 2018-19. If there were opportunities to arise through, perhaps, the work that our medical director is doing with colleagues on clinical variation, an example of where the incentivisation model may work is encouraging clinical colleagues to use different clinical consumables—perhaps use different prosthesis—where we may be able to get better procurement opportunities, but in that to ensure that the specialty was able to benefit from the financial advantages of a different—.
Okay. Can I just ask a final question? Your structured assessment refers to additional planning capacity being agreed with the Welsh Government as part of the targeted intervention support. Hasn't that now been confirmed?
We've had some—. I'll ask our director of strategy to come on in this as well, who's responsible for planning, but we have had some support, particularly around demand and capacity modelling, which was an area of gap that we identified. We've had some support in programme management, but we are looking and anticipating that we will get some further support, particularly around enabling us to develop our organisational strategy and our clinical service plan. So, some support, but we're looking for some more. I don't know if you want to—.
The only think I was going to add to that was, I think when the structured assessment was written last year, that was at the point that we were still working with Welsh Government about the additional planning capacity we might be able to have had to help us develop this year's plan. So, we had a small amount of external support to help us look at some of our value-based healthcare programmes. We already had some plans in place about looking at service transformation around, for example, respiratory disease, diabetes, frail older people, and what we asked, and the support that we had, looked at what we were doing and said, 'Actually, what you are doing is exactly the right thing.' Some of the business cases that we've been developing for some of the service change, which would enable to us to transform our services, which is where we know we need to go to get into a sustainable position, was the right thing to be doing. What we needed to do was to scale that up and go at greater pace, and some of the additional capacity that Tracy's just mentioned would help us to deliver that.
When do you expect to have that in place?
In terms of the additional support from Welsh Government, we are expecting some confirmation of that imminently.
For this financial year.
Right, okay. So, Welsh Government are taking their time, are they?
Well, to be fair, I didn't ask them for anything when I first arrived because I needed to make some sort of assessment. So, I came in February and took two or three months to try to absorb as much as I possibly could. It's going to take me a lot longer than that, clearly, to understand such a complex organisation, but to get a sense—. So, then I submitted, with the team, the sort of support that we thought that we would need. So, that was probably about May time.
Okay, thank you.
Thanks, Lee. Mohammad Asghar.
Thanks, Chair. In last week's evidence session, Cwm Taf explained that they had already £3 million in brokerage to help the Welsh NHS to remain within its budget for 2017-18, but had no plan to do so again this year. Furthermore, threats of special measures by the First Minister and Cabinet Secretary for health to those health boards who overspent their allocation haven't come to pass. Given that there is the practice of brokerage, what incentives are there for health boards such as your one, ABMU, to keep within their budgets and to plan for their savings?
In terms of brokerage, that doesn't apply to us at the moment, obviously, because of the situation that we're in. We are not in a position to support any other health boards, for example. We've got to sort our own health board out first. So, technically, that doesn't apply for us.
But the incentive for us to get to a position where we are sustainable financially, where we are living within our means, is significant. It's significant in terms of the space that we will have that we don't have now to transform and to improve our organisation. When you're in this position, you are under significant scrutiny, and rightly so—I totally understand that—but we spend a lot of time explaining what we're doing and being scrutinised through the targeted intervention process. I'm not saying that that's not right, but when we get to a position where we are sustainable, we will have more control, I hope, of our own destiny. The incentive is huge, reputationally, for our people, our staff, our population. The incentive to get there really is a great incentive. We are certainly not—. In our organisation, we don't take the view that it doesn't matter, it really does matter. We know it's hard, we know it's going to take time, but it really does matter and we'll be doing everything in our power to get into a stable position as quickly as we possibly can. I think there are huge benefits for us.
Thank you for being honest and straightforward. The auditor general's 2017 report on the National Health Service Finance (Wales) Act 2014 and his update letter describe a short-term annual pattern of savings, with most happening at the end of the financial year. Is this cycle one you recognise in your health board, and if so, what more could you do to take a longer term approach to planning and making savings?
Okay. Lynne, do you want to—?
Thank you. Thanks, Tracy. I think there has been a tendency in the health board to have savings plans that have been effectively pushed towards the back end of the year. That's a combination of a couple of factors. The first factor is when savings plans simply aren't identified at the start of the financial year, which is disappointing and it's a challenge. So, this year we need to meet a savings target of £21.2 million and we have 75 per cent of those savings identified, so we have a gap of 25 per cent that we still need to identify. So, depending on what we actually fill that gap with, it could well be that those things come at the back end of the year, simply because we don't know what they are at the moment.
The way that I would hope, over time, to address this is to take what I would call a more organisationally mature approach to budgeting and financial management that I think your colleague was referring to in his questioning about cost improvement programmes not necessarily being the best answer. The best thing we can do, as Tracy said, is to establish what our operating model is, know what our clinical plans are, know how we're going to run the organisation that we will have after the Bridgend changes, and plan for those services and the workforce that will be delivering care to our population, and then ensure that we have a financial plan to underpin that, rather than a financial plan that is essentially a CIP, vanilla, percentage-driven model, which means that we're challenging areas of the service that we should probably not be trying to take money out of, because we don't have that more mature approach.
We have made inroads into that this year in 2018-19 planning. We're not there yet. We don't have a full model that we want, but we have made inroads into it. We have had a more targeted approach to financial planning this year, based on benchmarks, as Tracy said earlier.
Did the health board consider previous savings performances when setting savings plans for 2018-19?
We considered a lot of things. We did consider the previous savings performance, but I don't think that was the primary consideration. The primary consideration when we were setting our savings targets and our financial plan for 2018-19 was reference to evidence and reference to benchmarks and references to data, so that we could work—well, Sian and I worked together so that we were developing a service plan and a financial plan that would go hand in glove and also examine the workforce that we need to actually serve the people going forward.
So, my focus wasn't really a retrospective focus on performance against previous savings plans. The focus was on what should we be doing and why should we be doing it, and gathering the evidence to do the right thing for our population.
Okay. Thank you. Your written evidence also mentioned that you're developing incentivisation to support service delivery. Can you describe how it will work in practice, or a practical way, rather?
We hope to build some incentivisation frame into our 2018-19 plan—sorry, our 2019-20 plan. That would be particularly around working with our clinical colleagues through particular specialties where we would have a financial model that would enable our clinical colleagues also to benefit from some of the cost down to reinvest within their services. We don't have it in place yet, but we're planning to have something of that nature in place for 2019-20 planning.
Thank you, Chair.
Okay. In the auditor general's structured assessment and in Abertawe Bro Morgannwg's written submission to the committee, it's clear that the health board recognises the need to transform health services to achieve financial sustainability. What action have you taken to realise this?
So, I guess what we've been talking about is a bit of a short-term approach to life, which we are now trying to move to much more of a transformational, longer-term strategic approach to how we do business. The last year has been quite operationally focused. What we're determined to do this year is to revisit our organisational strategy so that we have a clear blueprint about where the organisation is going. Obviously, the national plan, the long-term plan, is going to be—'A Healthier Wales' will inform that as well, so that we have an updated organisational structure, we're clear why we exist, we're clear what we're trying to deliver, we're clear on the way we want to take the organisation forward, and that will be supported by a clinical services plan. We did have a clinical services strategy, 'Changing for the Better'. That needs to be updated in light of where we are now. Every review tells us we need to get clear on our strategic direction. There's a lot of development work that's already been done—we're not starting from a blank piece of paper—but it is an opportunity to revisit that. By doing that, our three-year integrated medium-term plan will be based and developed on the basis of knowing where we're going, as will our annual plan. So, we're trying to get into a position of thinking future, but not forgetting the delivery of today.
You've done some work around pathway redesign. What has that involved, exactly?
So, there are a number of things we've done. So, we mentioned value-based healthcare as well earlier, which is a way of working for us, and not just us, other areas—Aneurin Bevan we're learning from and working with—where value drives our pathways. What we're very keen to do is to focus on pathways and programmes across the patient journey, not individual units and hospitals. Sian can give a couple of examples of some specifics on that, if that would be helpful, but that's the direction that we need to go: a lot more—everybody's saying this, no doubt, but a lot more out of hospital, a lot more in primary care, with prevention and population health at the centre of our considerations. We've probably been a little bit too hospital-centric, and, when you haven't got that strong, united corporate leadership, people just get on with what they're doing. It's our chance, our turn, now to raise our game.
Sian, did you want to contribute?
Yes. I've got a couple of examples. One specifically links to value-based healthcare and pathways and programmes; it might link a little bit to the incentivisation. So, we've done some work with our clinicians where we were looking at knee arthroscopies. We've managed to reduce the number of knee arthroscopies by 40 per cent since 2013-14, and we've used the money that was saved from that to re-invest it in an exercise and lifestyle programme—so, much more around prevention, upstream intervention. And that was clearly done or, really, led by the clinicians analysing the data and really looking at the quality of the data and the service that they provide, so that we could take some money and re-invest it in a different service.
Another area that we've been looking at is atrial fibrillation and stroke, where we've been working with Swansea University and the secure anonymised information linkage database and really maximising the opportunities that we have around reducing strokes, and we think that we can reduce the number of strokes, for example, every year within the area by between 60 and 90. So, we're developing some work around that.
We've also agreed new models of care for respiratory services so that they're much more primary care focused. And we're doing that by actually taking some money and funding it in the short term, or on a two-year basis, through corporate funds to be able to then release it from the units and actually using that to transform the model of care. We're in the process of going through a similar approach for our diabetes services, because our diabetes services at the moment are very secondary care focused. So, they're some of the areas that we're looking at.
We've really been looking at our frail older people's services, both older people's mental health services but physical health services as well. We've developed quite a few new services over the last few years around that, particularly around how we can integrate our community services with local authorities, so, through our Western Bay regional partnership, putting more acute clinical care in community-based settings, looking at how we can help people get out of hospital much more quickly. So, for example, Neath Port Talbot Hospital, where people may be discharged from Morriston Hospital or Bridgend and then go home to the Neath Port Talbot area—finding ways so that they can go directly home rather than going via another hospital stay, because we know that the longer and the more stays or the more moves people have in hospital, that makes a significant difference. We think that, at the moment, the analysis we've done shows that we've managed to establish the equivalent of between 90 and 100 beds in the community as alternative models of care.
Another area we're looking at is that we're piloting, along with Cwm Taf, a rapid diagnostic centre in Neath Port Talbot Hospital for early intervention and diagnosis of cancer patients, and we learnt from the Danish model a year or two ago. We've now got a conversion rate of 10 per cent for people that come and have an early diagnosis of cancer there, and that's the equivalent of the Danish model.
And the other bit that we're really moving on, which is going to take a bit longer to work through, but actually has got the opportunity to really transform services across south-west Wales, is the work that we're doing with Hywel Dda and Swansea University through the ARCH programme, which is A Regional Collaboration for Health, where we're looking at care pathways across the whole of south-west Wales. We've been doing a lot of work around cardiology and vascular services as well, and really starting to change the pathways. Clearly, all of that is clinically led, which is the way that we have to go in terms of service transformation.
You've covered a lot of bases and detail there. The 2017 structured assessment suggested that the health board's short-term approach to planning and strategy, due to a lack of overarching clinical strategy, has resulted in a number of pressures. You've touched on this already in previous answers, but what changes has the health board made to address this? So, lack of a—. Would you accept that there's currently a lack of a viable longer-term strategy with overarching long-term goals?
Yes. I think, as Tracy has said, we haven't had an organisational strategy. We've had a clinical services strategy, much of which has been implemented. Some of the significant structural and infrastructure changes that would have enabled us to take that forward we haven't taken forward, and that is an issue that we are looking at and addressing as we update our clinical services plan. But I think that, absolutely, that has been part of the reason why we haven't been able to develop a longer-term plan and focused on short-term savings.
Without that medium-term plan, are you concerned going forward that that's going to be a viable way in the future, or will you look to develop that longer-term strategy?
We've got a plan and a programme in place now to develop our organisational strategy, to update our clinical services plan over the coming months, to enable to get to a position where we can then develop a three-year plan. Whether we'll be in a position to have an IMTP-approvable plan—. Given all the challenges we've described next year, I suspect not. I don't know. It would be good to think so, but we've just got to watch and see how we get on over the next three to six months, to be frank. But we still need to be planning on that timescale rather than planning just for one year at a time. So, the work that Sian is leading now with the board to develop that organisational strategy and clinical services plan is going to be really, really helpful, and it will build on a lot—. As I said before, we're not starting with a blank piece of paper. We've got significant plans that we're developing through the ARCH programme that Sian referenced. We've got plans we're developing with the partnership, with Hywel Dda. So, it's bringing it all together and making it sing, and, at the moment, it's a little bit disparate. Would that be fair, Sian?
Yes. And I think what's really important, as Tracy said, is that we plan on a three-year basis. If that means at some point we need to determine that, for next year, for 2019-20, we seek to have a three-year IMTP approved, or we have a one-year plan approved, then that's a decision and a discussion that we would need to be having with the board and with Welsh Government. But the important thing is that we're planning on a three-year basis.
I think it's probably worth mentioning as well that we made a very deliberate decision as a board in the autumn of last year, given where we were in terms of our performance, our finances, but also turnover within the board, that for 2018-19, the year that we're in, we would only look at developing a very focused one-year plan, which was particularly focused on delivering performance against the priority areas that we are assessed against in terms of our targeted intervention. So, we did take a very deliberate and different approach for the 2018-19 plan, which we will not be taking for next year.
Lee, did you want to come in?
Yes, I'm just reflecting on everything we've heard. Clearly, you understand the challenges you face and have a plan to do it, but it does seem like you've inherited an awful mess here. And I just wonder—and I guess this is a question for the finance director, really—given the litany of issues around management failure, how it was felt justified to pay the previous chief executive £163,000 as a pay-off.
I don't think that's—[Inaudible.]
I'm not sure that Lynne can answer that.
Well, it's a question for the organisation. Clearly, you've all come in, you've done an analysis of what's wrong; you've given us, very candidly, a catalogue of errors, so there was clearly a problem of leadership here, which is very clear from your evidence. Given that there was problem with leadership, how did the organisation—? Clearly, you weren't in post, Ms Myhill, but your finance director presumably was—
You weren't in post. Is there anybody who can answer these questions? Was the director of strategy in post?
Could I just say—? Just in terms of the way that you've described that—what I've tried to describe to you is a series of significant challenges. I wouldn't describe it as a 'catalogue of errors' necessarily, but significant challenges that I have found when I've come into the organisation, and significant turnover at a senior level. So, there are lots of things that have contributed to the organisation being where it is at. And on the finances, particularly, that you mention, there are lots of things that have contributed to that. There are examples where savings have not been delivered. There are examples where short-term funding has been provided, or non-recurring savings have been delivered, which has stored up an issue—
You implied that there was a lack of grip, control and focus. That's a leadership issue. So, it's not unreasonable for the Public Accounts Committee to ask whether or not, in the judgments made by the board of the good use of public money, given that were significant failings of leadership, that kind of pay-off is justified.
I think what we need to say to that is that we weren't part of those discussions.
I know that doesn't help, but we weren't part of those decisions. Those decisions would have made by the board—no doubt, the remuneration committee of the board—in consultation with Welsh Government. I think we need to get an answer to that from our chair, or our board, or Welsh Government, because we'd be guessing.
Okay. So, have you asked your chair for the answer to that question?
Sorry, you just said you needed to get the answer to that from your chair.
No, what I'm saying is that we are not in a place, I don't think, to answer that question in terms of pay-offs to the previous chief executive. The chairman of the board, the remuneration committee of the board, whoever took that decision—. With respect to my chairman, who's not in the room, I think we need to—. If you want an answer to that question, I think it needs to be asked outside of this room, because I can't answer it, and neither can my colleagues.
Well, that's the difficulty of the situation we find ourselves in. It's very hard to hold anyone to account for these series of weaknesses.
Whether it's appropriate or not, my chairman has said he would be happy to come to the PAC—he's happy to be asked those questions.
Right. Well, perhaps he should have come with you.
—particularly on that specific one, because it's just not possible for us to answer that question—
I appreciate it's not possible for you to answer the question. I didn't appreciate Lynne Hamilton wasn't in post either. But you can see, from our point of view, given everything we've just heard, that that's not an unreasonable question to ask. Thank you.
Perhaps you can put that question to the chair, board, in their absence. It's not possible to ask questions of somebody who's not here, obviously, so if we can—
Maybe if it would help, we can take that question away and get a written note back.
My sympathy is with you in trying to pick up this mess. I'm not blaming you for it. I think it's a reasonable question for us to pose.
Do you want us to take that away to the organisation?
If you could, yes. We can follow that up in correspondence. I'm mindful of time and also that, I think, we've covered a fair bit of the same ground. So, Lee, would you like to go on to your resilience questions, which are quite important, before we close?
Yes. Thank you. I just want to move on to digital issues. You had a letter—you wrote a letter, rather, Miss Myhill, to the chief exec of Velindre, on 27 April, addressing serious concerns you have about the performance of NWIS. You then had a letter back from the director of NWIS, Andrew Griffiths, on 12 June, saying he was personally responsible for addressing this in a timely fashion. Given you wrote on 27 April and you had a reply on 12 June, do you consider that a timely response?
Well, I think, as you will know, this was due to the outages, wasn't it? There were two specific areas—January and March. Our board was concerned at that time, because we didn't have enough information at that time to understand exactly what had happened, and whether we were learning from it, and how we were moving forward. That's why I wrote, as the accountable officer of ABMU, to Steve as the accountable officer of Velindre. I understand that it wasn't Steve's place to respond to that letter, which is why Andrew Griffiths then did respond to me. I'm actually meeting Andrew this week to discuss the detail of his correspondence. So, the facts are the facts. I did write, as you rightly say, on 27 April, but I wrote to Steve.
Did you consider the response to your concerns timely, is my question.
May, June—five, six weeks. We would have wanted that a bit earlier. That was the formal letter. NWIS colleagues were in discussion with my medical director on this along the way. So, it wasn't that nothing happened during that time—conversations were happening—but the formal letter, as you said, came on the twelfth.
And you've had a formal response now from NWIS, have you, which you're satisfied with?
I've had a formal response, and I understand from that response more about what happened. I understand some of the learning from the investigation into that; I understand some of the improvements that are being put in place. One of the biggest issues for me at that time was not understanding exactly what had happened. So, it was about communication and making sure that we were kept in the loop. So, there are a number of things already that have changed as a consequence of that. When the systems are down, communicating sometimes gets caught in the system being down, doesn't it? So, there is now an emergency comms system that NWIS have put in place. We are happy with that, because it means we get much more timely communication when there are challenges, and there's a communication protocol that's being developed now with NHS Wales. So, getting the information was one of the concerns, and, obviously, we've got business continuity arrangements—they kick in, and they do support us when these things happen. It's manual; it's not electronic, obviously. It's not ideal, but there are business continuity processes that protect our patients.
On the comms, there was pushback from Steve Ham in a letter to you.
It was the comms and the timeliness—
Yes, can I just pursue a different question?
There was pushback from Steve Ham in a letter to you. And one of the points you've raised is about your comms team not being looped in so they could develop a plan to explain to people the impact of these systems outages. He came back to you and basically said, 'Well that was a health board responsibility.'
Well, I think, following that, and collective conversation across NHS Wales with NWIS, we have now collectively agreed that we will develop a comms protocol together.
We need to do it together, don't we? They know things we don't know, and we need to work together on it.
The fact that you wrote in the first place to Steve Ham rather than to the Welsh Government—does that speak of a governance confusion about who is responsible for accountability of NWIS?
Well, I went to Steve Ham because he's the accountable officer for Velindre, and they host NWIS. But I think we would all say that—and, I think, through the national plan work as well—we are looking at, and will be looking at, national executive arrangements, and I think, with NWIS, we do need more clarity about how that relationship works, whether NWIS will become part of the NHS executive as part of the plan, producing a clear line. I think that would be helpful.
But he seemed quite clear in his letter back to you, though, that it was perfectly clear who was responsible for the accountability of NWIS. It was the Welsh Government. It wasn't him; he was just a hosting arrangement. That clearly wasn't clear to you and your team.
It wasn't clear to me, but that might be me being relatively new—am I still allowed to say I'm relatively new? I wrote to him because I assumed it would be Velindre.
Right, well, you know, it's not an unreasonable assumption. I think it's a rather opaque system. You think that's in hand, so you don't believe that you can comment on that.
Well, I think that we've all agreed that we need to review, not just NWIS; there are other national infrastructure organisations that are part of the NHS. And I think that we would all welcome, collectively, clarity in terms of how some of those things work. So, I think there is need for a refresh, for sure. It's not all about NWIS; it's about us all working together.
Well, indeed not, because they're suggesting the responsibility was on you to submit a serious incident report, and despite the fact that you were asked three times for impact assessments, no response was received. Sorry, that's Cardiff and the Vale. My apologies. That was not you.
I was going to say that I don't recognise that.
I'm glad you realised that, Lee, in good time. [Laughter.]
Forgive me, yes. But you're right—there is a responsibility on the health board and not just on NWIS. Do you now have confidence in the data centres—the NWIS data centres?
I have a better explanation and understanding of what has happened. I understand the improvements that need to be made. I understand there is a plan of improvement. So, from that point of view, I feel more assured that actions are going to be taken. Some of them are not overnight actions; some of the equipment is seven years old. So, some of the plans are three months in the making, and some are six months in the making. So, I definitely feel more assured that there is a plan in place to reduce those risks, and we will work together, collectively, with NWIS, to ensure that those things are delivered. So, I feel better than I did, but, as I said, I'm meeting Andrew this week and we'll have more of a detailed conversation, and we need to work together—our assistant directors of information, ICT, with NWIS—to support them to make these improvements.
Do you feel that the—? So, NWIS are still investing in data centres rather than in a cloud-based approach. Do you feel that that's the right approach?
You're not asking the right person that question. I'm not trying to not answer your question, but I am not technically savvy enough to understand which is the best option. I think the cloud probably is, but I'm saying that as a layperson. So, you know—.
Okay, fair enough. Have there been any further instances of outages since the exchange of correspondence?
There have been. There was an outage on the weekend, which was the LIMS pathology system, which is the outage that we had before. Our business continuity process is well oiled and well established, and we were able to deal with that as planned, because we actually had planned to take the system down on the weekend for maintenance anyway, so everybody was geared up and we dealt with that. So, yes, that's why some of these improvements need to take place.
It's a happy coincidence you had the systems in place, assuming you were going to do a maintenance job anyway on the weekend.
Well, we were going to do a maintenance job in the afternoon, and we had an outage in the morning, at 08:30 in the morning.
And what were the practical implications of that?
But whether we were going to do it in the afternoon or not, the business continuity arrangements would have kicked in.
And what were the practical implications of that outage for patients?
Bearing in mind it's Monday and it happened on Saturday, the feedback I've had over the weekend at the moment is that the business continuity arrangements kicked in, they worked well, and there's no anticipation of any adverse consequences. We need to understand more. It's not a working day later yet, but, certainly, that's what I understand to be the position.
So, is that the fourth or the fifth outage this year? I lose count.
The fourth, I think, is it?
The fourth. Okay. So, the fact that everyone is now used to these things and has systems in place is hardly the point really, is it? What impact does it have on the morale of your team and your ability to recruit if you are running systems that are so unreliable?
I don't see any direct impact on our ability to recruit. That connection is never made. It's frustrating, obviously.
You don't think that a consultant coming down from an English hospital, for example—. He arrives in Morriston and finds that, four times this year, the systems have fallen. You don't think that's going to have an impact.
I don't think that would stop a consultant coming from England, to be honest.
It might influence whether they stay, though, if this keeps happening.
Well, that's why we need to work together across the system to improve the infrastructure, update the equipment where we need to, and get into a more stable place. I think it's more frustrating than anything. Clearly, there are—. It slows things down. It's not ideal.
Do you think that you as a health board have invested enough of your own resource in IT?
I don't think—. I mean, I think that, as a health board we are quite innovative and progressive in relation to our approach to ICT. Coming into the health board, I have been really impressed, actually, with the focus, with the investments in digitalisation, with the investments in digital communications for our staff. We have got a mobilisation project, for example, under way at the moment, which gives iPad access to our district nurses, community nurses, our staff. So, it's quite progressive. If you go into Morriston Hospital out-patients, it's all digitalised. I think there's been some real good, innovative progress in ABMU in the digital space. Do we invest enough? Probably not, in terms of industry norms. We are probably investing just under 1 per cent. We'd like to invest 3 per cent, but that's where we are. But, we've made some really good improvements, I think—clinically led improvements for our services and our patients.
Finally, in terms of the recommendations of the parliamentary review, do you think NHS Wales, corporately, is in a position to deliver the digital recommendations in there?
I think the digital recommendations are very exciting and fundamental and critical to our success. I think we do need to review how we do digital. I think that time has come, and I think that that has been recognised. So, there probably is a step up and maybe a change about how we do this. But, yes, I think we have to find the capacity, capability and approach to deliver on that.
So, those are the three things currently missing, are they?
I'm not saying they are missing. I just think that we probably do need a refreshed approach. Digitalisation is crucial to our success, isn't it?
It is. So, how is that reflected in your own forward planning?
Well, as I said, locally in the health board, I feel quite blessed, actually, in terms of the approach I see—the clinical engagement, the clinical leadership, the significant improvements that the health board has delivered. So, we are up for it, and I get that sense, and I can see progress being made. I think we now need to work collectively with the health service across Wales to enable us all to be in a position where we can derive the benefits from digitalisation as we move forward.
But you just said that you are only investing a third of what you'd like to be doing in digital.
Yes, but we are not alone in that, and we are making significant improvements with the investment that we are making. I think that if you look at industry standards, we would clearly want to be investing more. It's a balance, isn't it?
So, given everything we've just discussed today, do you have plans over the next 18 months to up that rate of investment?
Well, in terms of digital transformation, digital will be a critical part of our organisational strategy and our clinical services plan. So, we will be looking to see what—. We have a digital strategy, which is approved by a board—
Sorry to interrupt—
We need to consider that, going forward. I don't know at this moment, in terms of future plans. We haven't got that—
You're not saying that, at some point in the future, you're going to get to—. You're at 1 per cent at the moment—
We have not got a plan to get to 3 per cent.
To 3 per cent, no. You're just saying that, in an ideal world with unlimited funds—
I'd love it.
—3 per cent would tick all your boxes, but—
That's right, but I have no plan to move from just under one to three. I mean—
For clarification, that's a big jump.
So, there's a tendency for all the focus to be on NWIS, but clearly there's a culpability on health boards here too. This is what I'm getting at. So, given that you recognise the need to do this, and you say that your health board is among the leaders in this field, how are you going to support that with resources over the next 18 months?
I think that, as I said, it's going to be a critical part of our strategy going forward and we will continue to invest in digital—
At the current rate?
We need to find alternative ways as well. We need to be a bit more imaginative with how we fund some of our developments going forward. But it's a central part of our strategy.
But you don't have any plans to be more imaginative, you just recognise you must be.
I don't personally have those plans right now that I can share with you, but what I can say is that it is a fundamental part of our plan going forward. Did you want to—?
All I was going to say was that we could share some of the plans, because we have—
As Tracy said, we've got a really strong digital strategy. Our digital strategic outline programme was the first one developed in Wales and agreed by Welsh Government, and that's formed the basis for a lot of our service transformation. So, we can do that. What we need to be mindful of in terms of allocating our own internal resource is that we allocate digital funds through our discretionary capital programme that we have. It's about £13 to £14 million a year. We then need to balance that against medical equipment replacement, statutory maintenance of our estate and anything else that we want to use to support service change. So, clearly, we go through a really rigorous prioritisation process as we prioritise the discretionary capital programme. But, yes, we can give you further information on the digital plans.
And with that, we are completely out of time. But that was a positive note to end on. So, yes, if you could share with us some of your plans in that regard, that would be really helpful. And also, you mentioned earlier about taking some questions back to the chair; we can also put those questions in correspondence if that's helpful.
That's great. Thank you.
It was quite a marathon session, so thank you for being with us this afternoon—that's really helpful—Lynne Hamilton, Tracy Myhill and Sian Harrop-Griffiths.
Thank you very much.
And we'll send a transcript for you to check. We've got an eight-minute break.
Gohiriwyd y cyfarfod rhwng 15:32 a 15:44.
The meeting adjourned between 15:32 and 15:44.
I welcome Members back. I also welcome our witnesses. Thanks for being with us this afternoon as we continue our inquiry. You are our third evidence session. Would you like to give your name and position for the Record of Proceedings?
I'm Len Richards. I'm the chief executive of Cardiff and Vale.
I'm Bob Chadwick and I'm the finance director.
Good. Thanks. I've got the first question. Given the issues that the health board has faced, how would you describe the current state of the health of Cardiff and Vale in terms of finances and wider governance?
My sense of it, within Cardiff and Vale, is that we're in an improving position. We delivered on our cost improvement programmes last year. There was good ownership of the requirement to make savings at a service level, and that was owned by what we call clinical board directors, who are typically senior clinicians in the organisation. We had a control total of £30.9 million overspend. We actually came in at a position of £26.9 million, and whilst that's still a deficit position, and we recognise that within the organisation and as a board, it was an improvement on where we were forecasting we were going to get to, and I think it sort of reflected the level of ownership that there was within the organisation.
I guess just one other point to make as well: we started the year with an underlying deficit of around about £50 million. We improved that down to around about £45 million, which gave us a better starting point for this year. However, we recognise that we've got to do significantly better than that on our underlying deficit in the year that we're in going forward if we're going to meet a balanced position.
What is the projected outturn for the coming year?
The projected outturn for this year is £19.9 million.
It's £19.9 million. Okay. Mohammad Asghar.
Thank you very much, Chair. Good afternoon, gentlemen. Cardiff and Vale UHB has gone from a budget surplus in 2015-16, in three years, to an underlying deficit of £56 million. Why has it been unable to meet the Act's financial duties for the last three years?
If I can pick that up, my sense of it is that—I guess there are a few things at play within the current position for Cardiff and Vale. One is around delivery of cost improvements—delivery of schemes that release money in the system. I think there's been a heavy reliance on non-recurrent schemes, so things that will deliver in the year but that don't continue to deliver over the longer term. So, I think there's been a heavy reliance on non-recurrent schemes. There have also been investments that have been made on the basis that savings would be made as a result, and there are some examples where that hasn't been the case and therefore that's exacerbated the problem rather than helped to resolve the problem. So, in the opening comments when I said that I think we've improved the situation—that's why I was quite focused on the delivery of cost improvements, because I think that's the bedrock, really, of getting from a deficit position back down to a balance position; it's that we mobilise the organisation to actually make the savings that are required. Bob, do you want to come in?
Another important thing that we've done is that we now have got engagement with all our staff and our budget plans are integrated with workforce plans to support them. People are now managing risks as they arise without looking to address them with investment. Pressures that arise in the year—we look at different ways of addressing those without incurring money that we've not got. And that kind of commitment and that kind of culture change to living within our resources are now showing some really good benefits. As Len says, we did what we said we would do last year and we improved our underlying recurrent deficit. We are really ambitious to get our finances back where they need to be, so we are encouraging all our staff to work with us to move to a position where we can set a balanced budget and move to a place where we can acquire an approved integrated medium-term plan.
You mentioned in your written evidence the details of the cost pressures that Cardiff and Vale has faced during the year. There are three areas you mention: increased demand, inflationary growth and the cost of better performance. The thing is that inflation is virtually the same; I don't know why you said that there. Increased demand can be acceptable. Could you elaborate on this better performance—what performance you're doing, with the huge deficit that's there already?
One of the examples I would use—and it was an investment in service delivery a couple of years ago—is the implementation of an anaesthetic service that would make sure that patients were prepared well for surgery as a way of reducing the cancellations for surgery or cancellations to surgery on the day. So, that was a service that was an investment. It was invested in. The view was that there would be cost improvements that would take place through the year to be able to fund that service. My sense is, looking back at that, that the investments were well-placed, in that we have one of the lowest cancellation rates for surgery in Wales. The surgical service is a much more reliable service as a result of that. Having said that, the part whereby we were to make the efficiencies didn't happen, and didn't happen sufficiently quickly enough to therefore fund that service. So, it ended up being a cost-pressure in the system. So, that's just a very direct example of where a service improvement has exacerbated the financial position. I would argue it's a good service improvement because it has increased the reliability of the service that is provided, but it has exacerbated the financial situation.
Again, I come back to the reason at the beginning I said I think we've got good ownership of cost improvements, because that, as I said, is one of the bedrocks of financial sustainability. We've got good ownership of that. That wouldn't happen now is my view. We wouldn't make a decision to invest in a service unless we were very confident that we could actually recover the costs through a cost improvement programme, and we've got at least 12 to 18 months of confidence that when we set out to make those cost improvements we actually get them in place. But that's just one of those examples.
The area I'm very concerned about is the cancellation of operations in the hospitals due to the hospitals' problems or the patients' problems, because I know sometimes the equipment is not working or the file is not there, or so many other areas. Through my constituents, I've learned that, in dozens of areas, we get hospitals cancelling appointments—and by that I mean operations. So, that is unnecessary cost with probably—. It shouldn't be there—the patient being treated like that. I constantly get complaints about that. So, what have you done on those areas?
So, in terms of cancellations, as I've described, I think it is in a better place now than it was two or three years ago. The service that I've just been discussing is more around those bigger surgical operations where patients may require an ITU bed or an intensive care bed after surgery, so the anaesthetic service is set up to care for those patients and get those patients in place, and we've significantly reduced the amount of cancellations in that particular area. We do have to do more work to make sure that admission on the day of surgery occurs and that that admission is followed by, or follows a good pre-assessment clinic for patients, so that patients are optimised before they come in for surgery, so that we don't have to cancel as a result of coughs and colds and those sorts of things that make the patient a risk for an anaesthetic. Our reliability internally is something that we're constantly working on.
In your evidence you note that the population of your area has expanded at a faster rate than the rest of Wales, which is why costs have been driven up. Given that the Welsh Government has collated information on Cardiff's estimated population growth as far back as the Act's implementation, how has Cardiff and Vale UHB worked these into its medium and long-term financial planning to keep its costs affordable?
Thank you. So, we're working with the Welsh Government now around what is the impact of the population growth. I think we all agree that the population is growing, and that it's growing at a different rate to the rest of Wales, and that, as a capital city, it's actually growing quite significantly when compared to the other UK capital cities as well. So, we're working with the Welsh Government to understand what the impact of that growth is on health, and we'll be working over the course of the next few months to identify that, and that's part of our discussions with the Welsh Government through our targeted intervention meetings.
And my final question is, Chair: given the rolling nature of the three-year break-even duty, does the NHS Finance (Wales) Act really address the problem of a short-term focus on a year-end financial target, which has been likened to landing a jumbo jet on a postage stamp?
I think the three-year rolling duty is a good one, and it's a good one because it enables you, within the organisation, to actually plan and to understand the risks and how those risks may come to fruition over the course of those three years.
I think for us, particularly in Cardiff and Vale, where you're in a deficit position, in a sense it becomes immaterial, the three-year rolling programme, because what we've got to do is manage our finances more specifically on an annual basis to reduce that deficit position. So, the annual planning process that we are involved with, with Welsh Government, I think, is as a result of our current position, and until we can get to a break-even position, then, in a sense, that three-year rolling duty doesn't really help us. I'm not complaining about that, I think the position that we're in is one that we have to resolve, and once we get into a balanced position, and have an approvable IMTP that is approved for a three-year period of time, then I think that will give us the flexibilities that we need to move on and to manage the organisation better going forward. But until we can get into a balanced position, in a sense, our focus has got to be, what are we going to do in the year to improve our financial position going forward?
Thank you. Thank you, Chair.
Thank you, Chair. The Welsh Government is currently reviewing the funding allocations to health boards, partly in response to a recommendation made by this committee in 2013. But, focusing on the current funding formula, how do you feel that that fits with your health board? Is it something you benefit from, or do you feel disadvantaged by it?
We understand, as you say, the work that's being undertaken by Welsh Government, and we look forward to participating and receiving that work when it's undertaken. There's a sub-group of finance directors looking at some of the enabling works. We think that that may offer us some opportunities, particularly when we talk about a population that grows significantly each year. So, at this moment in time, we await the outcome of that work, and then, of course, we will play that into our financial planning. But it's something that we are part of and we are working with, but until we get the outcome of that piece of work, it wouldn't be appropriate for us to play that into our planning just yet.
And if the current funding formula were to continue, how do you feel about the status quo?
Well, if that's what the work said, and that's what the work found was the right way to go, then, of course, we'd have to live with that, and we'd have to set our stall out and our financial plan accordingly.
I think the only thing I would add to that is, it comes back to the answer that I gave on population growth, where we're heartened by the willingness of Welsh Government to work with us to understand the impact of the growth of the population—so, not the deprivation and all of those other indicators. I think the work that Bob's described will look at how the formula is made up.
What we would like to see, and we're working with Welsh Government on this, is that formula applied to our population as it grows, because for every new person in, there is a weight, or a burden, on the health service, whether it be in primary care, secondary care, or tertiary. So, on the status quo, in a sense, if the formula stayed the same but it reflected the population, I'd be less concerned. If the formula stayed the same and it was applied to a population that was apparent two or three years ago, then I'd be more concerned. So, I think that's the issue for us as we work with Welsh Government around this.
Thank you. You have a status of targeted intervention from the Welsh Government. What added value is that?
So, the way in which that plays out is that that's a monthly meeting that we have with Welsh Government, whereby we focus on the progress that we've made since the last month, and the progress against our financial planning, as well as our strategic plans as well. So, it's not taken in isolation, and it's an opportunity whereby we can engage with Welsh Government about issues, whether we need some support to tackle some issues. So, the population growth issue has been a part of those discussions, and as I said, there's a piece of work now being done as a result of that.
I think it's an added bit of scrutiny from Welsh Government to make sure that the organisation is doing what it said it was going to do. So, from that perspective, it adds some value. It's an accountability framework whereby my executive team and I are held to account in that. If we are delivering against our targets, going forward, or the things we've said we're going to do, then that's an easier meeting than if we're not delivering against those, and if we're not delivering, then we have to develop other plans to actually submit. So, I think it's a helpful point in the month at which we all get together to discuss the specific issues around Cardiff and Vale and what we're doing to resolve those things.
Isn't that something that your board should be doing in any case?
So, the board does it and we do that through our finance committee.
Not to the Welsh Government's satisfaction, clearly.
Well, it's hard to say anything other than, 'Yes, that's right', because we aren't in a balanced position. And, I think if we were in a balanced position, then we would be arguing quite strongly that we should come out of targeted intervention and into business as usual. The board do hold executives to account through the finance committee on a regular basis, whereby we get into probably a bit more detail, to be honest, on the ground, as to what's actually happening, and the board is well placed to go out in the organisation and to hear it from front-line clinicians as to the impact of some of the decisions that we need to make. So, I think there's room for both. I don't think it's one or the other, and—
It just would seem to be an implied criticism of your governance structures. The Welsh Government clearly don't have confidence that their scrutiny is sufficiently robust so they have to supplement it with their own.
As I said, I think, if we were in a balanced position, we'd be arguing quite strongly that we shouldn't be in targeted intervention and that we should be business as usual. I think just the fact that we are over-spending does open that particular perspective.
In terms of your savings strategies, you do seem to be, as you've already said, heavily reliant on one-off savings.
We have been, yes.
So, 50 per cent on that. Has that improved now?
So, what's that down to?
In terms of the year that we're in, we've set targets for our clinical boards to make a 3 per cent recurrent saving and a 1 per cent non-recurrent saving. So, that's a change in the balance towards recurrent.
What's that in proportions? What's that expressed in terms of proportions, because it's currently 50 per cent? What would that be?
So, three quarters—75 per cent of our savings will be recurrent and 25 per cent of them will be non-recurrent.
Right, okay. So, you're still looking for a quarter of your savings being one-offs.
And I think that's an important feature of any cost improvement programme—to have one-off savings. The reason for that is they do come along, they're there and they do help with the financial position.
But, with respect, you've been relying on that strategy for five years now, and it's becoming increasingly less effective. The amount of one-off savings you've been able to achieve has been declining, I think, hasn't it?
That is a deliberate intention—that we don't rely heavily on non-recurrent savings and that we actually go for recurrent savings. Because once we've established the recurrent savings, we can invest them recurrently, where we need to, and we can put them against our underlying recurrent deficit. The non-recurrent savings give us the flexibility for the things that come into the organisation—costs that arise as a one-off—so that they're there to meet those one-off costs and to meet any slippage that we might have in finding the recurrent savings. But the recurrent savings are key, because, yes, we can invest where we need to on a recurring basis, and then we can reduce our underlying recurrent deficit. So, we'll always have 0.5 per cent non-recurrent savings, because that is a useful way of having a contingency to pick up any slippage or anything that comes from left field. But the real prize is to make recurrent savings that can eat away at the underlying recurrent deficit.
Okay. Twenty five per cent does seem, still, quite a high figure. Your other strategy is limiting investment, which does seem quite a short-sighted approach.
Well, some of the investments we've made in the past, we now have a lot more scrutiny of them, as Len was saying. If they're a spend-to-save, we have a lot more scrutiny. We make sure that the investment we're making is the right investment so that the risks are taken into account, and we're making sure that the amount we put in is the right amount. There are already budgets there and those budgets could be used differently, more effectively. So, before we start putting new money in, we want to look at the whole budget to see if we can invest, yes, but at an amount that gets us the maximum benefit, with the appropriate amount of cash in, because as we've stated, we are limited because of our underlying recurrent deficit.
But, good investments are made. We've invested in nurses this year, under the nurse Act, and we've invested in service enhancements, and we've invested in patient experience and safety. So, we do make those investments—we don't shut the door on investment, but we're very careful how we make them, and then we make sure that the money we do put in is the money that's needed to get the best benefits out.
Right. So, that does suggest that the previous investments haven't been effective in—[Inaudible.]
That's a fair cop, actually. The investment—as Len was saying previously—we didn't scrutinise, to make sure that, if they were going to give us cash-out benefits in return in the future, those benefits would be realised. But we're very keen to do that, and people have bought into that. They understand the system, they understand why we're doing it, because we want the money to go further, so that we can make more sustainable services for our population.
Also, your savings targets are across the board—they're not bespoke to different departments. Why is that?
Each department has a small percentage to make. We also then do cross-cutting themes, where we look across things like major expenditure on nurses, doctors; procurements are greater if we're making savings. And we handle those across the organisation, and then they contribute to the individual target. So, everybody will get a small percentage, but, collectively, we'll work together on larger schemes, to try and extinguish that small percentage, and more, for everybody who's involved in the programme.
But you're not taking a tailored approach to savings targets identification.
We look at opportunities, and if we can see those opportunities through the efficiency board—the all-Wales efficiency board—we'll take those opportunities centrally, but then the budget that is reduced by those efficiencies will fall wherever that budget is. But what we want to do is to get to a bottom-right-hand-corner TIP. So, although everybody has got a target, the objective there is to get the total in place, and for people to do more, and make plans for the coming year as well. Because we have to make savings, I'm afraid, every year. So, everybody knows that the constant pursuit of efficiency, and doing things for the money that we've got, is something they must do year on year. So, they all know there's a level as an organisation we'll probably have to deliver, and they'll know that their contribution is required, and in some years that can be greater. Last year, we saw one or two of our clinical boards make much more than they needed to. We saw one or two clinical boards, for very good reasons, that didn't make the target. But collectively, overall, we hit that target, so we were very pleased.
You will know that Cwm Taf has been highlighted by the auditor as good practice in this area, and they've described to us how they take a bottom-up approach— where they're working with their staff, they're doing granular target settings for each section. You're not doing that in the same way.
Some of our clinical boards are £110 million boards, which are almost small organisations in themselves. They do that work, so they'll look across the specialties that sit in those £120 million clinical boards. They will look at their specialities and see which specialties have got a greater opportunity. As a board, they'll have a total that's allocated to them from us, but then they can look for other areas within that £100 million organisation where there may be greater savings or fewer savings. So, we do do that approach, but we do rely on our clinical board structure to do that, because they are such large clinical boards in their own right.
Okay. There have been arrangements to escalate departments that are not achieving their savings targets. How many departments are currently under escalation measures?
We have two on escalation, and two under observation, awaiting a decision from the management executive to consider whether they should be put in escalation.
Out of how many in total?
In total, there's—
Okay. So, four of the seven are either being escalated or on the watch list.