Prime Minister:
    It can only get worse.
    Chairman:
    But there is a question in that which is about how do we align the incentives to actually genuinely get hospitals committed to this vision we have of out of hospital care?
    Prime Minister:
    I will leave you to deal with the really technical part of that, but you see I think one of the things we have got to realise, in a sense almost to give ourselves confidence, is the enormity of the task we have engaged upon and to realise that as we progress in making these changes there will be adjustments along the way. And one of the things you have raised is one of the points we were talking about at our last NHS stocktake, which is you have got to be careful that you don't get incentives that collide with each other in the service, so that some incentives are to pull the care out of the acute sector, then the acute sector has an incentive to keep it there. Right, we have got to find a way of managing that situation because the basic construct of reforms for me is this, it is to build up over time, greater patient input into the service that they receive, it is then to have practice-based commissioning and the way that you work as PCTs with an incentive to get the care into the Primary Care setting insofar as that is appropriate closer to the patient. It is then to make sure through payment by results that actually you know what money you are spending and that hospitals have an incentive to make sure that they are offering a good service. And it is then within the overall framework to try to make sure therefore that you are keeping care as close to people, getting the care in the most appropriate setting, and having the patient and those at the ground floor of the service you know driving the change.
    Now that is the construct but it is massively difficult, you know this is a piece of change engineering that is absolutely enormous. And it is therefore very important I think, and you can see this reflected actually in the changes that we made in the PCTs, that there will be adjustments as we move along, we would expect this, for something like payment by results it would be utterly ridiculous to think if you were just going to introduce the system it was all going to work as absolutely as it should and you were never going to have to make changes to it. There will be adjustments continually that are happening but the important thing is that the purpose of the change is to move away from a centrally driven performance-managed system, which has the advantage that you can lash the change through the system, but has the disadvantage that it squeezes out the creativity and innovation and ability to be flexible. The idea is to switch from that system over time to change that is self-sustaining, so that if there is an innovation you want to make as a Primary Care Trust, you have an incentive through the system to make that change.
    Now I think how we manage that is going to be really, really difficult and we shouldn't be in the least bit surprised that there are these issues that arise about the way the incentives work, or that we have to sit down in partnership together based on experience as the system comes in and make changes along the way. And that is the best way to make this thing work because at each stage of this you will learn lessons on how you are implementing it, we learn lessons as policy-makers. I think one of the important things that we do in this whole process is not to be either ashamed or worried of saying to the public in a sense look there will be changes in the way the system works as we make progress, there will be things that you experiment with and think 'well actually I don't think that is the right way to do it, let's look at a different way of doing it'. And you know we have got to get to the point where we are unafraid to do what any other institutions or certainly major businesses would do as a matter of course, which is continually to re-evaluate the change process that you are putting through. The point that you raise is absolutely right, you have got to make sure that the incentives within the system don't rub up against each other. And I think this question, particularly with the acute sector, of how we make sure that they are not in a contrary way pulling care into the acute sector that doesn't need to be there, is one of the prime things that we have got to sort out.
    Patricia Hewitt:
    Yes. Normally on the technical stuff there is clearly more work we need to do on the tools we have given you as commissioners to reduce the emergency admissions and challenge excessive lengths of stay will help, but we will also reinforce this direction of travel. We have already said over time we will move the acute tariff to best practice because by basing it on average cost it is inflated by those hospitals who are keeping a patient with a hip fracture in for 30 or 40 days when the average in the best hospitals is 10 or 11. Start moving it down towards 10 or 11 and that is a pretty dramatic incentive for acute hospitals to become a great deal more effective and it will release the money you need to improve other services.
    On the Monitor point, which we discussed at the meeting in September, as you know I have asked for a meeting with some of the people in the department, some of the Primary Care Trusts, a couple of Foundation Trusts and Monitor itself, just to look at how we get right the balance between the autonomy of Foundation Trusts, which is very important, and we have signalled of course recently that if they want to apply to you to provide some services in the community themselves, you know they are free to do that as well, but we have to balance their autonomy with the cooperation that is needed right across the health economy to ensure that the whole system is in balance and doing the best for patients.
    Chairman:
    I think that is really important and I think that is really helpful, because you know one of the things when we go out to our membership on a regular basis is this issue about innovation, people want more space to innovate and that can only come from the local level, but it also comes with permission to sell. You know industry recognises that if you put in innovation, about one in five innovatory things will succeed. We are actually succeeding on virtually everything we have put in, which probably means we have quite an opportunity to try harder and to be more innovative as long as we can accept the risk that goes with that, and I think that is a real positive encouragement to everybody in the room to be thinking differently out of the box with political support.
    Question:
    I used to run a small non-governmental organisation whose aim was to help support the alleviation of poverty in some of the poorest countries of the world. We had a very difficult job, we were tackling some of the world's most difficult problems, we were not well paid, we were always short of money, we never knew what was going to happen next and we were full of optimism and energy. And when I joined the NHS I was really surprised to realise in this wonderful organisation which is fully funded and has a huge amount of national support and respect, and love actually, that it was full of people who were anxious, grumbling, resistant to change, and what I want to know is what is the Department of Health and the NHS Confederation going to do to help us to change this mentality within our own staff, because they are the people who must bring about the change, they can't do that whilst they are full of pessimism, and also they are the chief ambassadors to the public. It is from our staff that the messages about what is going on is coming, so what we need, we are aware of all this, what we need is help, advice, support and leadership from you, and we will give it locally of course.
    Prime Minister:
    Yeah! I think part of the problem, which I notice in many other walks of life, is that what is demoralising for people is when they are working in a service and they actually think they are working very hard and doing a good job, and there is a negative impression given of the service the whole time. The trouble is you know it is like some head teacher who berated me the other day and said: "Why don't you get some good publicity for all the good things that are going on in the schools?" And I said: "Look Madam I would be starting a lot further back down the chain than the head teachers if ever I was able to do such a thing." And I think the thing that we have got to do is twofold, we have got first of all to get across a balanced picture, you know of course there are tremendous challenges in the Health Service but actually there is a lot of really good stuff that is going on out there and we have got to try and proclaim that and we have got to do that together. And the second thing is, just to return to what I said earlier, about giving people a sense that actually what they are engaged in is immensely ambitious and difficult but extraordinarily worthwhile, because it is very difficult and it is very challenging. And what you are doing, as I say, there are, Jill was just saying a moment or two ago about business people, funnily enough I had a business person the other day say to me, who was a highly successful entrepreneur in the country, and he just described how he had tried to make some change in his business that involved about 3,500 people and what a complete nightmare it was to try and do it, and it had all been very very difficult and they had a terrible time and so on and so forth. And he said to me, he was actually saying to the group of people who were leading the change with him, imagine what it must be like for these people in the Health Service, you know dealing with so many people. And so I think part of it as well is just giving people a sense, （a） that it actually is improving as a service and we should be proud of the improvements that are made; but （b） there is something very exciting about making change. And I think the other thing obviously is the work that you do at a local level. You know we can support you but in a sense if you are giving that strong and confident message that will reflect itself I am sure in the people that work in the Health Service.
    Mr David Stout:
    Can I add, what the Secretary of State said earlier about allowing us to make decisions at a local level is part of the answer to that, because if our staff feel all the time we are being told what to do by someone up there, it is very hard to get that sense of ownership and belief because they don't feel they have got it. And I think if we, in partnership with government, can make decisions genuinely at the local level, which we are engaging our own staff in, and as I said earlier telling the story convincingly for the case for change, I think they are willing to do it, it is just we need that space to get on with it, and then I think it is up to us as PCTs to drive that change through at a local level.
    Chairman:
    The NHS, only the police have a workforce more dissatisfied than the NHS despite all the wonderful changes that are going on, and it has to be one of the top priorities. The other thing I think we are bad at, and I think it is something we should engage in dialogue, is how when we are making major change do we invest some of the resource, not into the patient care changes, but into changing the staff. And we are very bad at doing that because the NHS and every manager wants to spend every penny they can on direct patient care, and therefore some of the things that would make it possible to produce the change, we don't do because we see that as the use of a penny that isn't going on a patient. And actually that may be very good in the short run, but in the medium term it doesn't produce change, so we ought to be thinking about how we make that investment for change around our staff. And we have done it, you know when we closed the large mental institutions we did a wonderful job in terms of training, in changing our staff, in the attitudes of the management, and we need to revisit some of the successes of the past and be proud of what we have done.
    I am going to take three questions now because there are a lot of people who want to ask questions and I want to get through as many as I can.
    Question:
    I think everything that has been talked about is very much supporting, and we have got examples of where we have changed emergency care and really moved things forward. My question is really about the strength of levers because I think we are all aware of the challenges we face and I think that clinical leadership has been touched on and I think it is there but we massively need to increase that and make sure it happens because it is absolutely correct, having good clinical leaders will make things happen. The other issue is the strength of lever, for example practice-based commissioning is regarded as a key lever of the reform, but I think it needs to be significantly strengthened and really be powerful for it to make the difference, otherwise it will be seen as a lever but not really having the bite at the end of the day. The other issue is about responding to changes in the system, for example we talked about the incentive of payment by result, I mean there are lots of examples, for example if a patient stays in A and E an extra 15 minutes it counts as an extra admission and suddenly the hospital is charging 50% extra admissions, and there are lots of these that obviously clinicians can spot, but we have got to be able to change systems fast enough otherwise the system cannot change because it is frozen by that perverse incentive. Thank you.
    Question:
    Devon I think has the distinction of being the largest territory, if not the largest population among the PCTs, so we are very exercised about keeping in touch with our grass roots. And this is a question really about accountability, and there are two distractions I have come across in my short stint so far as a chairman. The first distraction came shortly after the Labour Party Conference when it was being suggested that PCTs were quangos and didn't bear enough accountability to their local population, and on the third day of my chairmanship I was interviewed on the local branch of the politics show pointing out the existence of Overview and Scrutiny Committees, and I am a great fan of the County Councils and their ability to scrutinise services across a broad spectrum, but I am curious about whether there is confidence among senior politicians that the partnership and the mechanism of joint commissioning between the County Councils and PCTs is one which they see as robust.
    The second distraction is a rather specific one to Devon, is that we are working quite well with Devon County Council on formulating joint commissioning, but we now have a request from Exeter City Council, which is seeking to become a unitary authority, to work with them as well on their future aspirations for the commissioning of health and social care, and I would be interested to know whether there is a plan to amalgamate the proposals of the local government White Paper and the patient-led NHS proposals. Thank you.
    Question:
    I have to say that the RCN is very excited about the reform overall of care closer to home, we totally believe in it. And I am also excited about IT and I haven't heard much about it, but my understanding is we can't really get there without a good IT system that makes a difference and that nurses are wanting to be involved in that. But one of the realities is our training budgets are being slashed and nurses are not getting away from the units and not being able to attain their professional development, and so it is almost as though there is a freezing on that and it has something to do with the response to the deficits and balancing the books. And I think that when we are trying to work with the change to go forward and things happen that seem like it is reversing the change, that it is undermining it, for example the endangerment of specialist nurses who are keeping patients out of hospital, keeping them in the community, close to home, working with them, but they are in jeopardy of being lost. So those are the kinds of concerns that it seems like we are moving forward but that these issues then push us back, and it is just not clear about how we can work together to make sure those things are minimised and that there is a safety net for patients in terms of the changes that happen.
    Chairman:
    OK. Maybe if we divide those up into two, because there is a cluster around clinical engagement, investment in training and development for clinical staff to make the changes happen, and then we have got this big question about accountability. So maybe Patricia, because I know this is something very important to you.
    Patricia Hewitt:
    Can I start, I will start with Beverly if I may, and just on the issue of IT which like you I am hugely enthusiastic about, I think it would be really helpful Beverly if we can work more closely with you and get the RCN and some of your members really making the case for something like the electronic patient record which will make an enormous difference to the quality, the speed, the safety of the care that we can give to patients, and that case needs to be made more strongly I think as we overcome some of the criticisms and worries about the IT programme.
    On the issue about what is happening in some hospitals where as you and I both know specialist nurses are being asked to go back on to the wards as part of what is often a short term set of measures designed simply to deal with financial problems, hugely frustrating to everybody. But I think we do have to recognise that in the enormous growth that has taken place in the NHS finances over several years, and partly because we are still completing the necessary reforms to the financial framework so that everybody understands really clearly what the financial position is, and it is not hidden from sight by some of the brokerage and other devices that have been used in the past, in this process some organisations have overspent. And a few of our hospitals, even last year as the deficit was building up and up and up and becoming visible to everybody, they were taking on more staff, taking on staff they couldn't afford, and now having to make decisions that are incredibly difficult for all the staff to get back into financial balance. But I think what we have to do is to go on working together, both nationally and locally, to ensure that we support staff through those difficulties, we do more, and the Chief Nursing Officer is looking at this of course with modernising nursing careers, to support nurses who want to start their careers or retrain in order to work in the community, because clearly that is where a lot of the growth is going to come, but also to support staff where a hospital assigns possibly because of the other changes taking place like more daycare surgery, they need fewer acute beds and therefore fewer staff in some of their wards. And all these changes happening simultaneously can be particularly difficult for frontline staff and we need to recognise that, we need to support them, we need to make sure that the hospitals with the biggest financial problems - the small minority - have the time they need to work through those problems, but we have to recognise the longer they take to sort themselves out, the longer somebody else has to compensate by underspending themselves for the overspending that is continuing in that minority of hospitals. So being fair to everybody in all of this, as many of you know because you are contributing towards those regional reserves, the so-called top slicing, being fair to everybody is part of the very real difficulty here.
    On Ken's point about stronger practice-based commissioning, I completely agree, it is something you and I have discussed before. That was very much the thrust of the guidance on practice-based commissioning that we have just put out. I think it is one of the key challenges for Primary Care Trusts to support GP practices who are really up for practice-based commissioning, help them to make that happen and sort of support and challenge and develop the ones who aren't really signed up for it or really taking advantage of it yet.
    Prime Minister:
    This is an issue that goes on, particularly in the Shire counties, all the time and I have got the same issue up in the north-east in County Durham. It is basically a matter for the local authorities to sort out amongst themselves, although we have certainly in my area we have been more keen on moving to a unitary situation. And I know it must be very difficult for you because then you get slightly conflicting lines coming at you, the trouble is, I will be absolutely open with you, some of these things at a local level are let us say difficult because in the end if you move to a unitary authority the question is what is the unit and that is a very very difficult thing to do. I think what we have got to try and do is iron out any of the practical problems that come from that, and I also think incidentally that more generally what we have got to do is to say why it is important that good management and good commissioning within the Health Service was one of the reasons I wanted to come along today is to say we are actually proud of people who are managing commissioning in the Health Service, it is an important part of getting it right.
    And there are just two points that I wanted to make in this regard. The first is, and I think this is partly in answer to the point that Bev is making, because at the moment it is very difficult, you are going through this process of transition and there will be difficult things that happen along the way. On the other hand, for the first time I think people are facing up to decisions and having to align their capacity with revenue streams …… and that is difficult to do. I think however what we have got to do is to make sure that as far as possible there is an alignment between our long term goals and the short term measures that we take in order to get financial balance. But you see one of the things that is really difficult about debating public services is that people, and this is something I have certainly learnt over time because frankly when I was an opposition politician I would say a public service is not a business, you have got your public services here, you have got your businesses there and the two are completely different entities. And what I have come to realise is that it is true that public services have a different ethos and a different purpose than a business, what is not true however is that some of the same challenges do not affect the business and the public service equally and that actually how you manage in things like procurement, in things like the efficiency of your through put, in things like how you handle workforce change, some of the challenges are actually identical and in exactly the same way that businesses can learn something about social and public purposes from public services, public services I think can learn something of management practice and efficiency from business. And it is a very difficult thing to say to people because they immediately say oh you want to privatise everything, you are not, you are simply saying that if you are handling a procurement budget that runs into millions of pounds, whether you procure it well or badly is a question that any business person would recognise. And the point that Patricia is making about the electronic patient record, it is obviously sensible, indeed it is potentially an amazing opportunity for the Health Service to have a single electronic patient record. But how you then manage that process of change through the service is going to be massively difficult. But the IT implications of change in the Health Service are actually not totally different from the IT implications that face any major business.
    And that brings me to the second thing, in answer to the point that Ken makes, and this is in a sense my closing plea to you today, is that one of the other things that is very difficult when you are sitting at the top of government is to get the feedback quickly enough, and for us then to respond quickly enough to it. Because the point that I was making earlier about how you adjust as you go along, I think the points you are making in practice-based commissioning need to be strong and need to have the clinical leadership. This is really, really important. And one of the things that we have often talked about in our stock-takes is the degree to which you have PCTs doing the commissioning, and then you have got GP-based commissioning and how those two inter-relate together, which have some quite tricky issues to do with that, when you come up against a snag that you feel we in the system we have designed have put in your way, we need to get that feedback as quickly as possible coming through so that we can make adjustments and changes. Because this question of the unbundling of the tariff, you know there were reasons why we did it in the way that we did it, but once you start to put the system in place you realise there is a real problem if you don't have that flexibility. So we have to make change. But the quicker you get this to us, and you shouldn't be at all afraid either as a PCT network within the confederation, of saying look here are the changes that you could make right away that would make a difference to the way this system works, and then it is our obligation frankly to respond to that.
    Now that is what I think is a sort of partnership approach to managing change. And I know this may come as a shock to you, but we don't deliberately want to get things wrong. You know it is one of the mistakes people often make about political leaders, they don't actually usually sit there and say how do we devise things that will make people's lives most difficult. It is usually because there is a difference between the information that we get, which is subject to all sorts of changes before it actually reaches you, and the people on the ground. And all the time what you have got to do with this, as I have learnt over the years, is to have it road tested by the people who are doing it. But that information needs to come back to us, and if it does come back to us all I can tell you is insofar as it is possible to make the changes and adjustments in line with the practice that you are experiencing on the ground, we will do it.
    Chairman:
    I am afraid, I know there are lots of you who want to ask questions but we have had 40 minutes of I think amazingly frank discussion with the Prime Minister and with the Secretary of State which I have certainly found very enlightening and I do think highlights how important PCTs are.
    But may I on behalf of all of you thank the Prime Minister and the Secretary of State for giving us their time this morning and being so open with us. Thank you very much.