NHS chief exec planning radical shift in how central budgets are held

The Department of Health will cede control of billions of pounds of central funds to local organisations, under plans being developed by new NHS chief executive David Nicholson.

Speaking to HSJonly a week after taking up his new post, Mr Nicholson said he wanted money previously held centrally to be rolled out at the beginning of the financial year to make it easier for trusts to plan their budgets. He also pledged to speed up DoH decision-making over areas such as the payment by results tariff calculation.

The DoH's central budget covers spending such as public health, medical education and training, GPs' performance-related payments, and services such as walk-in centres and out of hours.

'What I would like to see over the next two to three years - although I can't promise it because we haven't got into the detail - is a radical shift in the way central budgets are held,' said Mr Nicholson. 'Some of the money in the centre would be better spent in the service.'

'We should put out to the NHS everything we can, according to the same sort of timetable as for the allocations. Having things like workforce money coming out half way through the year is no way to run a system.'

Appetite for change

Mr Nicholson said the current funding system encouraged dependency by trusts because they were forced to make assumptions about possible funding. He said that within the DoH there was an appetite for change. 'There is a general understanding about wanting to do it, although there's been some difficulty in the past with the detail.'

The DoH would also be moving more quickly on policy issues and helping implementation, said Mr Nicholson. On areas such as payment by results and supply-side development he said it was not necessary to wait 12 months for 'very clever people to come up with a decision that would improve quality and be relatively straightforward to implement. Take PbR and whether it reflects quality - I don't think we have to drag those decisions out over months.

'There are a series of questions the service needs answering that I think we can answer quite quickly. We just need to make sure we are answering the right set of questions. We depend a lot on SHAs to interact with their local health economies.'

Mr Nicholson said that it was reasonable to expect a better level of service from the centre, but managers should not expect the DoH to get engaged in things that were rightfully their responsibility.

He said: 'I'm not sure it's the right way of putting it, but we have to let reform fray around the edges a bit and give a lot more local colour and make sure innovation happens. A lot of organisations feel hamstrung.'

HSJcolumnist and former NHS finance director Noel Plumridge said the DoH wants to ensure that decisions on spending are taken closer to where services are delivered.

'Part of NHS culture has been to wait for a central bail-out when an organisation gets into difficulties, but, from 2007-08, the growth in NHS spending will be much smaller, so the DoH is keen for PCTs and other organisations to take more responsibility for their own financial decisions,' he said.

'A lot of central funding has been new investment money waiting for a home, but that is not going to be there after 2007-08.'

'Balance will win us some space' but not enough

Mr Nicholson said he had 'fairly modest' ambitions for the service this financial year, but that achieving balance was essential for retaining the backing of 'politicians, journalists and the public'.

He said: 'I have to restore confidence. Balance will win us some space, although it is not the complete picture.

'We have to hit some big targets, in particular the 18-week [waiting time] target. I need plans to deliver in 2007-08, but want to be fairly modest in what we can do in the next six months.'

Failing to make the promised progress on 18-week target would be 'staggering', he said. 'It would be a pretty unambitious set of managers who accepted that as a reasonable pace.'

He said there was a 'big risk' that a focus on debt-hit trusts in the south would neglect efficiency in the north. 'We need the same emphasis on improving performance in the north as the south.'