Good morning, and welcome to the seventh meeting of the Public Audit and Post-legislative Scrutiny Committee. Can I ask all those present to either switch off their electronic devices or switch them to silent mode so that they do not affect the work of the committee this morning? Item 1, the committee is invited to agree to take items 5, 6 and 7 in private. Item 5 is consideration of evidence received under item 2 on the NHS in Scotland 2016 report. Item 6 is consideration of evidence received under item 3 on the NHS 24 report. Item 7 is consideration of evidence received under item 4 on the NHS Tayside report. Do members agree to take those items in private? Item 2 is an evidence session on the Auditor General for Scotland's report on NHS in Scotland 2016. I would like to welcome to the meeting this morning Caroline Gardner, Auditor General for Scotland, Angela Canning, Assistant Director, Carol Calder, Senior Manager and Gillian Matthew, Audit Manager at Audit Scotland. I now invite Auditor General to make her opening statement before I open up to questions from members. Thank you convener. Today I am bringing to the committee my annual overview report on the NHS in Scotland. It looks at the performance of NHS boards during 2015-16 and comments on the challenges and pressures facing the NHS. It also looks ahead to assess what progress the Government is making towards delivering public service reform, including its ambition for everyone to live longer, healthier lives at home or in a homely setting by 2020. Over the last decade, there have been real improvements in the way health services are delivered. The time that patients wait for hospital treatment has reduced, treatment is safer and hospital-related infections have dropped. Overall people are living longer and are now more likely to survive conditions like heart disease. These improvements are a testament to the hardworking staff of the NHS who provide a vital service for all of us here in Scotland. However, the health of Scotland's population is relatively poor compared to other developed countries and significant health inequalities still exist. I have highlighted in previous reports the challenges that NHS boards are facing. They are finding it increasingly difficult to achieve financial balance and many are used short-term measures to break even in 2015-16. The percentage of non-recurring savings has increased and, for the current year, boards are setting higher savings targets, an average of 4.8 per cent. The total planned savings of £492 million in 2016-17 are 65 per cent higher than in 2015-16. That will put considerable pressure on the NHS this year and there is a significant risk that some boards will not be able to remain within their budgets. Overall, NHS spending is not keeping pace with the growing and ageing population, increasing demand and rising costs. NHS funding has increased each year since 2008-09, but the small real-terms increases of less than 1 per cent over that period have been below the general inflation rate and well below the higher health inflation rate, which was estimated at 3 per cent in 2016-17. The committee may remember that we analysed the increasing demand for health and social care services in our report on changing models of health and social care. In today's report, we highlight a range of cost pressures, including rising drug costs, staff costs, achieving national waiting times and new technologies. It is clear that the NHS cannot continue to provide services in the same way within the resources available. The Government has had a policy to shift the balance of care for over a decade. It has published several strategies for reducing the use of hospitals and supporting more people at home, but most spending is still on hospitals and other institution-based care. Some progress is being made in shifting to new models of care, but it is not happening fast enough to meet the growing need. My report sets out a number of recommendations to increase the pace of change, including a clear plan with measures or milestones to allow progress to be assessed. There also needs to be financial modelling and a funding plan for implementation of the strategy, a clear workforce plan to ensure the right staff with the right skills for new ways of working and continuing engagement with the public about the future of health services. The cabinet secretary has accepted our recommendations and is committed to publishing a delivery plan by the end of the year, which will bring together the various strands of reform and away, and I welcome that commitment. My colleagues and I are happy to answer the committee's questions. Good morning. I would like to ask further questions in relation to the recruitment and training of staff. My major concerns are without trainees going forward into the specialist trainee things. You have unfilled vacancies, as you have stated, in old age psychiatry and clinical oncology. That will be a major problem going forward as the population gets older. Did you do any work to look at the fact that during your doctors, when they do their two years to become GMC registered, they all seem to be doing that element of it, but then it seems to be the next step when they go into specialities? Has any work been done from Audit Scotland to see why? Are they not taking up the posts or what is causing that drop-off? What the report does is pull together the evidence from the audit of each of the particularly the 14 territorial health boards during 15-16, but the last couple of reports have highlighted pressures on the NHS workforce. We are just about to start a new performance audit looking specifically at those questions and drilling down into the high-level findings that we have got here. I certainly think that that is something that does need drilled down. We need to know why we have the junior doctors at this level, but they are not going on to take the specialist training posts. I look forward to seeing that report. I had one other question to ask. On page 12, you were discussing the fact about balancing budgets, etc. There seems to be quite a wee bit—in paragraph 18—creative accounting in order to balance the budgets, and that concerns me. The more creative they are, the more easy it seems, or the better it is for balancing, and therefore they think that they are okay. Do you have any thoughts on that? You are right. As accountants, we look for the areas where there is a risk that people are to a greater or lesser extent flexing the figures to hit a target this year, which is very often simply pushing a problem into the next year. We talk about one specific instance in the report where Ayrshire and Arran had made a prepayment for holidays, which the auditor concluded was simply not acceptable. Ayrshire and Arran restated its figures and increased the pressure on achieving its break-even position. We absolutely rely on the auditors that I appoint to each of the health boards to make sure that proper accounting practice is being used. Given the attention that is focused on both the revenue and the capital resource limit, the transactions that boards undertake to hit those measures are an area that they pay particular attention to, as you would expect. I would like to generalise, as I saw in the case, that the reports that are coming forward give mixed information. Clearly, it highlights the challenging financial situation that all the public sector is facing. I am pleased to see that there is a lot of positive stuff in here as well with improvements in overall health, life expectancy, patient safety and survival rates for certain conditions and reduction in delayed discharges. Those are positive things. That does not take away the fact that, of course, there is great deal of pressure in this sector. I would like to focus on one or two points there. On page 15, paragraph 28, there was a conclusion that adequate accounting records had not been kept in relation to elements of property, plant and equipment assets. That is pretty basic stuff. Has that been rectified? I will ask Gillian to come in on the detail in that one. I think that it is fair to say that that is actually relatively unusual now, that most NHS boards have decent records of their assets and manage them well. There was a particular instance in Shetland this year, as you have highlighted. Gillian? Yes. The issue in Shetland was that they had recorded the assets that had been purchased, but they had not been adequate records kept about disposal or sale of the assets. The assets that were looked at were quite old, and the board had assumed that they had been sold or disposed of, but they did not actually have the records that had not been kept up to date on the asset register. The auditor has worked closely with the board about that and improvements have been made and that the auditors have been assured that that is not going to be a problem in the future. Just looking again at page 17, paragraph 29 and probably 30-31, there has been a small improvement in the NHS estate in that time. Would that be correct to say? I think that it is probably fair to say, but as you will see from reading through the paragraph, it is slightly more nuanced than that. The change in each of the categories from the good condition through to unsatisfactory are moving in different directions. There is a small improvement, but there is also a significant amount of the estate that still needs significant investment to bring it up to an appropriate standard. I am looking at page 19, paragraph 39. I see the statement that Scotland, along with the rest of the UK, has one of the highest generic prescribing rates in the world. Prescription of generic drugs generally reduces costs. If I remember correctly, prescriptions are something like 12 per cent of the cost of the NHS, which seems an awful lot. We are seeing year-on-year inflation-busting increases in the cost of drugs. Is the switch to generic prescribing having the impact that one would hope? If you look at the long term, it had a very significant impact. We have reported on GP prescribing in its own right on at least two occasions over the last decade or so. We have seen both significant increases in the generic prescribing rate and real savings as a result of that, to the extent where it looked as though the remaining savings that were available to achieve were pretty small. What has changed has been conditions in the market where the supply of some of the unbranded generic drugs has been restricted for different reasons and the price has risen. Gillian Scott might want to add a bit of detail to that. I think that there have been a lot of savings made through switching to generic prescribing, but there are a lot of issues that have arisen over the past couple of years around prescribing of drugs. The number of people receiving drugs or the number of drugs that people are receiving, the items that are prescribed are linked to the ageing population. More drugs have been approved and new drugs for rare conditions are very expensive that boards are having to finance now. There are a lot of pressures from various sources that are causing the overall increase. The Scottish Government is predicting that that will continue over the foreseeable future probably around 5 to 10 per cent increase each year, so that is a big pressure for boards at the moment. The statement has also made that, in the 2013 report on GP prescribing, that most of the potential savings have already been achieved. There is not a great deal to be got out of that now, I presume. As I say, in relation to generic prescribing, Scotland made real advances over the last decade and we think that most of the savings have been achieved. The challenges in new drugs coming through increasing levels of prescription for some conditions like the prescription of statins and very significant increases in the price of some drugs, whether supplies restricted to one or two manufacturers or a new supplier has bought the rights to manufacturers and has made very significant increases in the price. We have tried to set some of that out on the following couple of pages, where there are examples of drugs to which that applies. I also noticed in here that there is a fairly high proportion of prescriptions over the counter drugs, which seems odd. It is a policy matter to ask Government about. There may be good clinical reasons for prescribing, things like ibuprofen, which is one of the ones that we identify in the report, to a particular patient. Clearly, most of us can simply purchase over the counter drugs when we need them. There may be some particular preparations of the drug. There may be some patients where it simply is more appropriate for the health service to fund that and for the individual to do it. However, it seems like an area that is worth looking at, particularly since we highlight that the cost of paracetamol, ibuprofen and anti-histamines was around £17 million last year to the health service. That is a significant amount of money. I will briefly turn to the use of agency staff, which seems quite disproportionately high. The statement has made that there is difficulty for the NHS recruiting staff, and that seems to be at almost all levels. Would that be correct? We highlight in the report that the NHS is facing problems in recruiting and retaining staff. It does affect different parts of the country differently and different specialisms and types of staff. The challenge for the NHS is that, in most circumstances, it must have a member of staff there, both for patient quality and for patient safety reasons. Therefore, if there is a gap in the rotor, bringing in a temporary member of staff cannot be avoided. We have reported in more detail previously that the way that you do that matters, as a short-term fix on the whole, having your own bank both is cheaper and provides higher quality of care than having to use an agency word. Obviously, the longer-term solution is to draw back and look at workforce planning in the way that Ms Harris suggested earlier. You might not have an answer to that, but is it more profitable or is it better paid to be an agency staff than it is to be a permanent employee of the NHS? We have not looked at this in depth recently, but the last time we looked at it, it appeared that the drivers were more about the flexibility for staff, that they were able to choose their own working hours and location in ways that were less available if they were on the permanent establishment of a hospital or other healthcare setting. It costs the health service more to use an agency because there is both VAT and commission involved, but it does not necessarily mean that the member of staff is being paid more directly. It appeared to be the flexibility that was the attraction. Monica Lennon Good morning, Auditor General. Can I start by looking at Exhibit 6 on page 29? I think that illustrates perfectly the challenges that we are facing in our NHS. It is not a great picture. I know that Collins touched on some of the poses in the report, and they are welcome, but we see that national performance has declined in six of the eight key waiting standards over the past four years. We now have a situation in which we only have one out of the eight indicators being achieved.  If nothing changes, what could the table look like next year? Auditors, as you will understand, are uncomfortable with speculating about what might happen, but we have highlighted very clearly in this report that both the service pressures and the financial pressures on boards are increasing and that the solution to that is to make faster progress with the Government's vision for reducing reliance on acute hospital services. The A and E four-hour standard, for example, can be a real measure of people who simply cannot receive the care they need anywhere else, whether that is an urgent GP appointment or social care that could help to keep a frail older person at home safely. Investing in those services that might avoid the need for acute hospital care, we believe that this is a long-term solution. As we say in the report, it is not happening fast enough to relieve the pressures that you see both here in the standard performance and in the financial performance that we have reported on also. One of the stats that concerns me most is on child and adolescent mental health services, where five out of the 14 territorial boards have failed to meet the 18-week children and adolescent mental health target. Why are health boards failing to keep up with demands? We know that demand is increasing and we know that the Scottish Government has made mental health a priority with an extra £150 million committed over the next five years, but that is still a really worrying statistic. It is raised in the Parliament across the chamber from all parties. Why are we not getting this right in our NHS? I completely agree with you that this is a very important service standard. I will ask Gillian to give you a bit more detail in a moment, but it is worth noting that it is another area where we are planning to do some detailed work to drill down specifically into those services. Gillian? You have said that we have figures in the text that the number of patients has increased as well, but it has historically been a challenging target for boards to meet, although it did improve slightly over the past year. It is one of the specialties where there are great difficulties in recruiting staff and there is a shortage of consultants and other staff to work in CAMHS. However, as Carline says, it is something that we will be looking at in more detail next year. I think that that report will be very welcome. Another aspect in the report is that, in its office to all of us, that significant health inequalities still persist. Of all the reports that I have seen, I do not see any real improvement on that front. Why do you think that that is the case? It is a very third of the report that I am looking at across the NHS, but why are we still failing to tackle health inequalities? I am sure that you know better than I do that that is a very complex area. There is no single reason why we are not tackling it faster and there is no single thing that would make a difference. It is one of the really important reasons why we need to break out of this cycle of focusing on the acute health services and meeting targets for treating people in hospital without having a picture of the whole health and social care system and a plan for shifting more care and more provision closer to people's homes. Very often, health care inequality has multiple causes. It starts very early in people's lives or even during their mother's pregnancy. It is one of the reasons why we have highlighted in our recommendations the need for a public health strategy and more emphasis on the preventive agenda, as well as making sure that the acute hospitals are playing their part in the overall system. There is no one thing that would fix it, but there is a real risk that, if we keep on focusing primarily on the acute hospitals, we will make that gap even more difficult to close over time. I want to touch on part 2, the service reform. We know locally and from the Government's targets for service reform, and it is brought into sharp focus with your report that change is necessary and the way that we provide health services has to keep evolving. We do see in the other part of the report, and I want to touch on that as well, about difficulties in recruitment and retainment of staff, especially in rural areas and especially in NHS Highland. We are having to look at different models of staffing as well. Members of the public can be suspicious of change if they are not kept fully informed of what is actually happening in their area. Do you have any comment on how the public is being consulted in different NHS boards? Is it working or the public happy? I do not want to pre-empt anything, but I certainly know in my area the answer to that question already. Are the staff being taken along with the service reform as well? I think that you are absolutely right about the concern that there can be about changing services and particularly changing services at a time when finances are tight because it can very easily look like cuts rather than change. I think that there is a particular difficulty with this sort of reform because we all recognise a hospital and we know what it looks like. Our parents may have died in one, our children may have been born in one, and to feel that we are losing that bit of the health service that is so visible often feels like a loss. We are not good enough often as managers in the health service, as politicians, as people with a stake in painting a picture of what would replace it and how it would be better in many ways. I think that there is more that could be done there. I know that a lot of effort goes into this in health boards right across Scotland. I was interested to hear colleagues from NHS Highland last week giving evidence to the committee about not just consulting on plans but involving people in developing plans and taking stock of what is working now and what would work for the future. It seems to me that, given the scale and pace of change that we need, we almost cannot do too much of that. That is really where the attention needs to go. It needs leadership at all levels from the Cabinet Secretary through to the nurse on the ward whose job is going to be affected. Staff clearly need to feel that they have a stake in it rather than that they are being dragged along by change that they cannot influence. Absolutely. I will go back to page 24 where it says that the NHS is facing problems recruiting and retaining staff. We have had at different levels of staffing in NHS Highland from NHS nurses, junior doctors and consultants. In hospitals such as Caithness General, we look for general surgeons and general consultants, which there seem to be less and less of as more and more of them specialise, which is obviously good for the major hospitals and centres, but not so handy for us. We have now got our consultants and surgeons on a rotation from Rhaig Mawr, which seems to be working at the moment. It is not only NHS Highland that has challenged reading through page 24 and 25. There are a lot of health boards that have problems in recruitment and retention. Why is that? It seems to have come all at once. I do not know if we have had a satisfactory explanation as to why. In terms of the detailed answers, I think that the answer is very similar to the one that I gave to Ms Harris at the start of the session, where we do not know the answers. There are different stories, different views on what is happening, and that is why we are planning a detailed piece of work to look at it. I will ask Carol to come in and give you a bit more insight, because she is planning the work that we will be doing in that area. However, it is also worth noting that we know that, for the future, we will need different types of jobs in an area such as the Highlands. A GP will need to play a different role from the role that they play in the deep end practices in Glasgow, and that will affect the other members of the primary care team and the people who work in hospitals. That is why we think that that is a workforce plan about how many and what types of staff we need, and how we really get those skills in place. Carol, do you want to add to that? As Caroline says, it is an issue of changing roles and responsibilities to deliver different models of health and social care. We do not have a work plan, a national work plan at this stage, that we can look at that and identify what the skills, capacity will be to deliver a changed health service. We are going to be doing a piece of work this year—in fact, we have already started it—to try to unpick some of the issues around retention and recruitment of staff, but it will be about looking at what we need to deliver as a health service, and working backwards with the leading times to train GPs and nurses means that we cannot change this very quickly. We need to look forward to identifying what we need and to work backwards to try to change what is coming through in terms of trainees and so on. Just one more, convener, if that is okay, just to lead on from that. We talk about shifting the balance of care from acute services to more community-based services. It is possibly not a question that you can answer, but just to get it on the record, are our care at home and community care services ready for such a huge shift, and if not, what do we have to do to ensure that they are? The short answer is that, first of all, as we found in our work, there are some great examples of new types of care that are not just providing traditional care in people's homes but working upstream to identify older people particularly, but other people who need particular support to keep them safe, to keep them living full lives at home, and to put that around them. We reported in our March report on changing models of health and social care, but there are not enough of them. They are not developing fast enough to make a difference across Scotland. The second is that one of the things that is slowing down the growth of those services is the need to keep on meeting the demand that does turn up at the door of the acute hospital because those services are not there. There is a real risk that that is a vicious circle. What is needed is a plan that helps us to break out of it to identify how we can invest enough in community-based, homely-based services that will break that cycle of rising demand on the acute hospitals and then build the services that are needed right across Scotland. There are some real beacons of light out there, but they are too isolated to make a difference to the acute hospital so far. Liam Kerr Just a couple of questions at first, just something I wanted to check out. On page 15 of your report, paragraph 28, you just mentioned that NHS Shetland was unable to locate over 4 per cent of its assets in its fixed asset register, which I find rather concerning. Is that something that is unique to NHS Shetland or is that across the estate? It was a particular problem in NHS Shetland, and what the auditor concluded was that the assets had been recorded properly when they were first acquired, but then, as they were disposed of or taken out of service, they were not written off appropriately. The board has now undertaken to make sure that its asset register is both up-to-date and kept up-to-date for the future. It is quite an unusual problem for us to find in the health service. Right, so you can be confident that it is unique. Really, it is just a wrap-up question that I have in terms of, you have provided a number of recommendations at pages 6 and 7, and you mentioned earlier on your uncomfortable speculating, I understand why, but you do make some very important recommendations. Now, let's assume that all of those recommendations are taken on board and implemented. Is that a solution? There is a great deal of consensus, not just in Scotland but more widely, that the Scottish Government's vision to provide more care in homely settings or in people's homes is the right one and is the solution not just of the financial pressures but also to providing all of us with better care as the population ages. The reason I think that a plan is needed for implementing that vision is firstly that it's not happening fast enough and secondly that nobody is clear actually how much investment is needed, where to bring it about. The cabinet secretary in her statement yesterday committed to producing a plan by the end of this year and will be looking closely to see how far it does pick up the funding implications, the staffing implications and the public engagement questions that Ms Ross raised to make sure that it can have the desired effect. Nobody has a better plan than the overall vision. The question is now turning it into reality. Are you able to speculate about, you do mention that talk at page 36 of your report, about this shift, this idea of a shift in the balance of care has been in play for some considerable time, but clearly hasn't happened yet. Are you able to say why? If all of the stakeholders are saying that this needs to happen and this is a solution, why hasn't it happened for the best part of 11 years? It probably comes down to a couple of things. One, the acute services have no option but to respond to demand when it appears as an A&E attendant, somebody who needs an urgent emergency medical admission that means they can't stay at home anymore. We have been in a position almost a vicious circle where, because there weren't sufficient of the right services in the community near people's homes, more people have been admitted to hospital, we've done the analysis that shows the trends in that, particularly with an ageing population, and in turn that reduces the resource that's available to invest in the services that would avoid that happening in the first place. So what we think is needed is that plan to really break out of that cycle, make sure that we know where the investment is needed in terms of both the sorts of buildings and services that are required, the staff that are required, GPs, community nurses, and then much closer working between community services and the hospitals. The integration authorities should play a significant role in that. They just came into effect on 1 April this year. It's still early days. We know that some of them are still struggling with agreeing their budgets and their strategic plans. What we're recommending in this report is a boost to make sure that the aspirations that are in place become a reality quickly enough to make a difference to the pressures that we're seeing here across Scotland's health boards. Alex Neil Can I start with staffing, because obviously this is both an immediate issue in certain some of the areas of pressure that you've referred to both geographically and in terms of the specialism, but there's also a big strategic issue about how we solve this. I mean it's estimated that across the world in the next 15 years we will need to recruit an additional 70,000 doctors. So this is an international labour market we're talking about in a lot of cases. When Paul Gray was here, the chief executive of the national health service, he said and it was a very welcome development that an additional 100 training places were going to be made available for entrants into medical school, but in terms of the projected demand for services and taking into account the fact that we are operating in a competitive international labour market, is 100 anywhere near enough? I don't think it's possible to answer that question in isolation. The question of how many staff we need, of what sort, with what skills I think is something that absolutely the Government needs to set out as part of this plan for how we achieve this, and I think staffing is one of the big challenges. We know that with an ageing population there will be fewer people of working age available to provide not just to be doctors, but to work in nursing and social care and all of the things that are needed to make this work. It's possible that our exit from the European Union will make that more difficult, depending on what happens with migration across borders. There are things operating on the other side of the equation, such as new technology, for example, making some things possible that weren't in the past, consultations by Skype being an interesting innovation in some parts of the Highlands and the whole agenda of community empowerment. Can we think again about how communities can take more responsibility for looking after members and how each of us individually can do it? It's all of that detail that we'd like to see in the workforce plan that helps to say whether 100 doctors is a useful contribution or if it's what's needed to deliver the vision. We hope to get that fairly soon. The cabinet secretary committed yesterday to producing it by the end of this year? Yes. Ever since the national health service was created, the BMA has always been resistant to significantly increasing the number of trainees being recruited to medical school because, quote, we don't want any unemployed doctors. It's just one of the restrictive practices that the BMA has practised for the past 60 years. Is it not time that we actually looked at some of these restrictive practices and also at the productivity of some of our specialisms? Let me give you an example. In NHS Lanarkshire, one of the reasons for redesigning orthopedic services has been that an orthopedic surgeon to be operating safely should do a minimum of 35 procedures a year and, apparently, some are doing as few as five. Now, we will be doing other things, but is it not time that we look to the productivity of some of these consultants to see if we're getting value for money? Because what's happening is that if they're not performing during the week, they're then employed for the weekend on triple time, which is a bit of a bonanza financially for them, but it's very costly to the health service or we end up with patients having to go to the private sector in order to meet their own waiting time requirement. Is it not time that we drill down into this kind of area and see if we're getting value for money? You will know better than I, Mr Neil, that the Scottish Government has produced a couple of reviews over the last 15 years looking at the way acute hospital services should be provided for the future. I think that the first report goes back to about 2005 and there was then a review of that and a refresh of it a bit later on. It's very clear that the evidence is that we need to look again at more in the way of regional centres for some specialist procedures, thinking about the role of acute hospitals to make sure they're both safe and efficient, and productivity is a key part of that. It's very much, I think, part of the answer of how we make sure that hospital services are as high quality and efficient as they can be for patients and that they are only dealing with the patients who need that type of care, that we have resources that we can reinvest in services for people who actually could stay very happily and safely at home with more support from a good community team around them. The groundwork is there. Again, I think that what's needed is that planning for turning it into a reality. That's not to say that it's easy, but I think that it is increasingly important. My understanding is that there has been a review of productivity in the National Health Service in Scotland carried out internally. Have you seen that report? I haven't seen it and I think that that would be a question for government. I think that we should see it. We should ask for a copy of it because I think that productivity is an extremely important element in all of this. As I say, there's quite a lot of restrictive practices that inhibit our ability to rise to some of those challenges, particularly in the shorter term. I'll just come back to the drugs issue. One of the exercises that we did for now as health secretary is that we compared the use of drugs in each health board against each other. In comparing light with light, we reckoned that if every health board, if every one of the 14 territorial health boards was as efficient at managing its drugs bill as the best one, at that time we could have saved over £100 million a year. Is it not time we revisited that exercise and actually took the necessary action given those figures to make sure that we get a far, far better return on our money for the drugs bill? It's clear that making best use of the drugs bill is a really important part of helping the health service to meet the pressures that it's facing simply given the amount of money that we spend on drugs and the rate at which it's increasing. The figure that you've touched on there is very much in line with the figures that came out of our reviews of prescribing in previous years. We say in the report that the Scottish Government has established with health boards a task force that is looking at four areas of efficiency and drug costs is one of them. It may be something that you'd like to explore further with civil servants to understand more about the approach that they're taking and what they expect the benefits to be. If you can save anything like £100 million a year, that's a very significant saving that can be redirected to other front-line services. Just finally, in terms of the overall delivery plan, it's not a delivery plan, it's a delivery framework that we're getting by Christmas, apparently. Can I ask you, as Auditor General for Scotland, what do you expect to see in terms of that delivery framework? Are you looking for a business plan? Are you looking for an operating plan? Are you looking for a five or a 10-year framework? Are you looking to bring the whole thing together, the staffing, the technology, the funding and all the rest of it? What are you looking for, that delivery framework, to do? Try to be as clear as we can in the report about what we think is needed. I think that there are three areas to that. The first of all is a financial plan that contains the sort of financial modelling that we've been talking about and a funding plan if there are gaps for how we get from here to where we need to be. The second is a clear workforce plan about the numbers and the skills of staff that we need and how in the long-term train those people and how we manage any gaps that exist in the short-term. The third is the plan for engagement with people across Scotland about why that matters and how they will be involved in shaping services for their local area. They seem to me to be the three key things that need to be covered for the plan to have the effect that we think is needed. Alison Harris, I just want to come in, Auditor General, on something that Alex said regarding the BMA and restrictive practices. I think that there's more involved here because if you go back 30 years when doctors were training, there was a great deal—there was fierce competition to go from the trainee level when you became GMC registered to get into specialist training, and it was quite acknowledged amongst the generation of doctors that are now near a retirement age that that was the position. Something must have happened to change that, because in their day they can actually recount to you the competition that it was horrific to try and get into specialist training, whereas now they're scouting around begging for people to come in and train, so there's something more than just the restrictive side of the BMA. I'm not condoning the BMA in any shape or form, and that's what I was discussing earlier. We need to look at what's gone wrong at that little chink. Something has happened that switched that in a 30-year period from great demand of doctors to now we're scouting around for them. I don't understand it at all myself. Those sorts of questions are very much why we're planning our new audit on workforce planning. I would say that it's very clear that we can't do this without doctors, without nurses, being part of it. There may be some historical anomalies that need to be ironed out of the system. Equally, I think that there are more opportunities, particularly for GPs, to work as partners in the health service rather than as contractors to it. I know that the Scottish Government is thinking hard about the negotiation of the new GP contract to bring GPs very much to becoming a central part of this transformation that we all want to see. I'd like to understand a little bit more about non-recurring savings. The Exhibit 2 and Exhibit 7, if you don't mind, I'll use NHS Tayside as an example. I know that we're coming on to the report on that later. Exhibit 2 says that, if I understand it correctly, that 60 per cent of the planned savings are non-recurring. My understanding of non-recurring savings is perhaps the sale of a one-off asset. In NHS Tayside, they are selling off property. My question is, and what I need you to help me to understand is, if those are non-recurring savings like one-off, why aren't recurring savings happening at the same time as non-recurring savings? Why is that percentage so high? I'll try and keep it general in this case, because I know that you will want to explore the section 22 report on NHS Tayside in more detail later this morning. You're right. Non-recurring savings include things like the sale of property and other assets, and short-term delays to things like filling vacancies. If a member of staff leaves rather than filling the post immediately, a board might keep it vacant for a while and take the saving that comes from that period, if they feel they can do that without affecting the quality of service and the safety of service provided to patients. There are all things that can help in the short term to close a funding gap, but they clearly don't do very much at all to make the board's financial position more sustainable for the longer term. You'll see across both exhibits there's quite a significant variation between them in how much they're relying on recurring and non-recurring savings. One of the things that we found this year and in previous years is that boards often plan a higher level of recurring savings than they're able to achieve. They expect to be able to redesign a service to provide the same service at a lower cost, but actually either it takes them longer to do that or the savings don't meet the level that they expect it and they fill the gap in their budget with a non-recurring saving. Now we have a concern about that. It's not sustainable and it focuses a lot of effort on short-term financial management rather than the long-term planning that's needed for this issue. So, if there is a disparity between recurring savings and disparity between the 14 boards' successes at making recurring savings, what is the reason for that disparity? It varies between boards, as you would expect. I'll leap ahead very slightly to NHS Tayside. We've reported in the section 22 report in front of you that analysis suggests that their operating model is more expensive than that of many other boards and that so far they haven't been as successful as they had planned to be in producing efficiencies that would bring their cost down and close the funding gap at the same time. Other boards have made more progress in redesigning services and taking other approaches that help them to bring the revenue that they receive from the Scottish Government in line with their expenditure in each financial year, but the reasons are different in every health board. Do you want to add to that? Could you see that it's an issue of management and planning and strategy and all of these things? I think it's an element of all of that and it also, in many cases, reflects the starting point, the position that each board is in. Some boards had more generous funding historically than others and found it easier to make recurring savings. Some had models of service that had recently been reviewed and, therefore, there wasn't as much space or headroom for them to generate savings. There's a whole range of different reasons across different boards and, at the same time, you're right the approach that people take, the effectiveness with which they involve staff in thinking about better ways of providing services, the scrutiny and support that the board provides in making sure that plans are realistic and are being carried out as planned, all play a part. As an auditor, how comfortable are you with the percentage, like 60 per cent, that is non-recurring savings? In broad terms, I think that it's too high. I think that what we are looking for is not just an annual budget but a medium-term financial plan covering five years or so that is very clear about the likely levels of revenue from the Government and expenditure and has got detailed plans for closing that gap in ways that are sustainable. I'd like to ask you a general question about agency costs. We've already touched this morning on problems with recruitment and retention. What else could the health boards be doing to prevent spend on agencies? Focusing specifically on agencies, I think that one of the things that is very important for both cost and quality reasons is to minimise the use of agency staff in favour of a bank that is managed and owned by the health board itself in response to Mr Beattie's question. I said that often it's the flexibility that's attracted to staff rather than the fact that they're being paid more. Most health boards now do have a bank where particularly nursing staff but also medical staff in smaller numbers can register as being available for temporary work, for ad hoc shifts, for filling gaps as they occur. They're generally paid on the standard NHS terms and conditions, so the cost is lower, and they know the system. They can be trained and inducted and they know the way things work, so it's better in every respect than having to turn to an agency. Now, because of the nature of the health service, there are some occasions when most boards will have to turn to agencies, but I think that the challenge really is to minimise the reliance on agency staff, invest in their own bank and, of course, do the work of making sure that their own workforce is fully up to capacity and planned for the longer term. Can I turn back to something that you said about prevention briefly earlier on? It's an agenda that I sympathise with. We launched a cross-party group on the preventative agenda for non-communicable diseases last night here in Parliament. I know that you've tried to tackle this before, but is there a real way to audit prevention and its impact on the health service? It's a great question, and there's no easy answer to it. I would say that it's not just about the health service, that lots of the things that the health service end up having to deal with are things that come from children's very early years, from poverty, from poor-quality housing rather than just health or even health and social care services. In many ways, it's why we focus on what the Government is trying to achieve in relation to its outcomes in the national performance framework in all of the money that it spends, the budget process and the services that it provides. We try to take that look back upstream and see how far things are joined up, but it is very difficult to audit everything all at once, and that's why we tend to take slices of it in the way that we do. You maybe can't answer this, but perhaps it's been one of the reasons that we haven't seen so much of a resource shift to prevention, not just in the health service but across other services, because it's very difficult to audit and create results on. I think it's not because it's difficult to audit but because it's difficult to do. For two reasons. One, it's genuinely a difficult thing if you're saying we want to make Scotland a country where everybody has the chance to flourish. We do need to be thinking in a very holistic way about healthcare, education early years, justice, housing and be thinking about how all of those develop. I think that the new social security powers provide another dimension to that that needs thinking about. More generally, we've reported in a number of instances about what we see as a gap sometimes between the outcome that the Government wants to achieve and the detail plans that it has for its services. It's not clear how one relates to the other. It's filling that gap that we think would make the national performance framework and the outcomes approach more productive again in terms of really changing people's life chances over time and tackling some of the problems that we see in health and social care, in justice and education. Thank you all very much indeed for your evidence on this report. We now move to item 3, and I'll just allow the witnesses to change over. Item 3 is our evidence session on the AGS report entitled NHS 24 update on management of an IT contract. The Auditor General is now joined by Carol Calder, senior manager for Audit Scotland and Nick Bennett, partner of Scott Muncrief. The Auditor General will make an opening statement before I open up to questions. I'm bringing two further reports to the committee this morning which highlight matters of public interest in NHS 24 and NHS Tayside. I've prepared these reports under section 22 of the Public Finance and Accountability Act 2000. I'd like to highlight at the outset that in both cases the external auditors gave unqualified opinions on the accounts of the organisations. This means that they're satisfied that the accounts provide a true and fair view of the body's financial position. I've prepared reports on these boards because I believe there are issues of public interest that should be brought to the attention of Parliament through this committee. I'll start with NHS 24. The report on NHS 24 provides an update on the implementation of a new IT system called the Future programme. I reported to your predecessor committee in October 2014 and then again in November 2015 on how weaknesses in contract management had led to delays and escalating costs with this programme. In October 2015, NHS 24 attempted its planned launch of the new system. Following a serious deterioration in call handling times as NHS 24 staff struggled to use the new system, NHS 24 reverted to its existing system to protect patient safety. NHS 24 now plans full implementation by December 2017, four and a half years after the original intended implementation date of June 2013. Last year, I reported that the total cost of the programme had risen by 55% to £117.4 million compared to an outline business case cost of £75.8 million. NHS 24 now estimates that the total cost of the programme will be £131.2 million, 73% above that in the original business case, mainly as a result of additional double running costs. The Scottish Government has provided additional loan funding of £20.75 million to NHS 24 over the period from 2012-13 to 2014-15 to help it manage these additional costs. Of this brokerage, £20.35 million is still outstanding. Over the last nine months, under the leadership of its new chief executive, NHS 24 has undertaken a fundamental look at what needs to be done to fully implement the new system. While significant challenges do remain, I believe that the board is now taking reasonable steps to reduce the risk of further delay. I am joined, as you say, by Nick Bennett from Scotland Creek, who I appointed as the auditor of NHS 24, and between us we will do our best to answer the committee's questions. I accept what you say here that, as far as patients are concerned, this has not impacted on them. However, this is an on-going story that we have seen repeated in front of this committee in various IT projects that have been managed or mismanaged, and this one has clearly been mismanaged. I am looking at the report here on page 7. I am looking at paragraphs 22 and 23. I would ask for your comments as to whether that does not seem like overkill. Suddenly, we have a problem with the contract, so let's form umteen management groups and so on to oversee it and, presumably, trip over each other. When I was in the private sector at some point, I had an IT division report and, to me, I could not imagine working through this sort of complexity. What is your take on that? I will ask Nick to comment in a moment. My view is that most of this is almost certainly required. The review that was undertaken by the new chief executive when she took up post highlighted, as we say in the report, that some of the failings came from a failure to have engaged with the people in health boards who need to join up services with what NHS 24 does. I think that a great deal of the new architecture that you have highlighted here in paragraph 22 is about making sure that those relationships are in place and are working effectively. Nick is closer to it, and I think that he may have a perspective that you would find useful as well. Yes, I would just like to agree with the Auditor General. The groups that have been set up do provide the scrutiny and challenge that is required on this project. They have highly experienced senior individuals within those groups, and they have a sign-off process involved in any subsequent phase development of this project. They are certainly a useful development in the Government. Are they not compensation for the fact that we do not appear to have people of the right skills to manage this for the former committee? I think that, in the past, we have commented on the lack of available skills within NHS 24. What the board has done in response to that is to bring in experts from outside the board to act in this scrutiny and challenge approach. Are we paying money to bring in people from outside to sit on these groups? No, they are all internal to the NHS or the wider public sector bodies. They are highly experienced senior individuals, but they are all within the public sector. Obviously, one of the big concerns is the financial obligations. Under financial implications, it is saying that it is unlikely that any additional costs can be recovered. Do we have a feel for what the total of the additional costs are going to be over the period? I think that NHS 24 is confident that it can deliver what is required within the figure that is included in my report here. A significant amount of that relates to the double-running cost of implementing the new system while keeping the old one up and running. Clearly, there may be change over time, but this is the latest estimate from NHS 24—their projection of what the project will cost. In my view, it is based on a more thorough understanding of what is required than has been the case in my previous reports. The reference here to additional costs is purely about the double-running, not about any other. We have tried to break that down in Exhibit 1, where we compare the original business case, the projected costs from last October and the projected costs from June from NHS 24. You will see that most of the increase has been in the implementation costs, which include the double-running costs that have gone up by 39.1 million pounds—132 per cent of the original estimate. The on-going support costs for the contract itself have gone up but by a much smaller relative amount. I suppose that there are two things to this. First, you seem to be confident that now they have a grip of the project and that it will be delivered in the timescales and within the budget that they have indicated. Would that be correct? I am much more confident now that the board understands the scale of what needs to be done and has put in place appropriate mechanisms for it. It is for the board itself to provide assurance and deliver that, but I feel more comfortable now than I did a year ago about the prospects for the project, certainly. Clearly, there is a bigger issue here, which hopefully this committee will address in due course. I appreciate that you have looked at this a couple of times previously, but I was not sure about that, so I want to explore initially the contractual arrangements here. You state in the report that the arrangements were flawed. There is a very useful chronology at page 12 in the Appendix B in which we can see that the emissions in the tender document are discovered in August 2011. Two months later, a contract is awarded. Six months later, NHS 24 staff identify things that are missing and, two years later, it is reported to those in charge. That, to me, is an enormous failure. Who was found to be responsible and what were the consequences? You are right. It is a very significant failure. It was a serious concern to your predecessor committee. None of us likes to see an IT system getting out of control, but for the audit work and the inquiries to have uncovered that a member of staff was aware of emissions in the contract documentation that was not brought to the attention of the chief executive until much later on is a serious failure of governance and accountability. Nick will keep me straight on this, but there have been significant departures of staff from the chief executive down from people who were originally responsible for this. NHS 24 is now in the final stages of appointing a new permanent chief executive who has been involved in turning the project around, who will be accountable for taking it forward from here. Nick, do you want to answer that? Yes, that is correct. A new chief executive has been appointed. Basically, most of the senior management who are involved in the original procurement of the future programme have now left the organisation. As indeed most of the non-executive directors have changed as well. It is all encouraging, but we are now running under various letters of intent, and contractual documents are not due to be signed until December, and that contractual review has been running since January 2015. What is your view on that? Is that good business to be running the whole project along, changing the senior management whilst we do not even have contracts in place? It is an area of risk for sure, and I know that the board are trying to finalise those contracts. New contracts have been sent to Capgemini and to BT, and negotiations are on-going about finalising those direct contracts, but it is an important area that needs to be finalised pretty quickly. You mentioned that a final cost will only be available at launch. At this stage—this was paragraph 27—a definitive cost for implementing system is only available once launched and operating successfully. Are you comfortable with that as auditors? I think that because this whole project has been beset by problems and delays, we are not going to know that final implementation is in accordance with the timetable that is laid out until it actually happens. Given that a lot of the costs are double running costs of the existing system at the same time, the final cost is not going to be known until the new system goes live successfully. That is extraordinary. The total protected cost is £131 million. I appreciate that this is a complex system, but it cannot be a unique system. Fundamentally, things look like each other. Do you not have any idea, or is there any way to establish, what an equivalent cost would be in the private sector? If the private sector was commissioning a similar system to do something similar to what this is supposed to do, what would be the cost of that? Has that comparison been done? Not as far as I know. The outline business case was originally for £75 million, but the new system, to be fair, has progressed quite significantly since that outline business case. One of our recommendations is that a business case be prepared on what the new system actually delivers, not only what it costs, but what are the benefits. Once that business case has been prepared, I think the board will be in a better position to answer that particular question. That must be a good recommendation to prepare the business case, but meanwhile, I go back to the contracts have still been negotiated. The systems are still being progressed in the absence of that business case. At what point does it become a good idea for NHS 24 to step back, hit pause and say that this has not worked? Let us just take a step back at review what is going on, review what we need it to look like, rather than trying to negotiate in the background and run the system along. We did report to the last committee that there had been a detailed review of whether they should progress with this system. At the last time, the system failed to go live. There was a deep dive review about whether they should abandon the existing system, but that concluded that they should continue to develop the system that they were working on. One final thing. This is not the first time that this committee has looked at IT projects. Do you have any idea who is taking the macro learning from this? Do you see any evidence that all the various IT projects that are in significant trouble are being acknowledged and being future proofed for future IT? You are absolutely right that this is not an isolated incident. I have reported a couple of times on the bigger picture for developing major IT systems in the public sector. The Government has made some changes. It has appointed a chief information officer. It has plans in place to develop capacity within the Government that can support smaller bodies such as NHS 24 when they are making large investments in IT. We have also made some recommendations about the importance of really focusing effort at the very beginning of the project, being clear what it is that you intend to achieve, what the right contract structure is and how you will know that progress is being made well. The committee has taken evidence on that overall strategy a couple of times. I think that it is too soon to be clear that it is having the desired effect, but it has to be the right approach to invest in a central core of expertise at the right level to be able to do this and to make sure that bodies do not start off projects like this without the right expertise, understanding IT skills and legal skills to make it work. I hope that we will not see this again. It is too soon to say that the changes that the Government has made will deliver that. Alex Neil I really have just two questions. The first one is the outstanding loan of over £20 million that NHS 24 has to repay to the Government. Obviously, that is on top of the normal requirements for efficiency savings, etc. I appreciate that it has been extended to a longer period of time, but if you take £20 million out of an organisation like this, that is not an insignificant amount of money. What other services are going to be cut back to pay the £20 million from NHS 24 to the Scottish Government because something has to give? My second question is that, given that this project has now been running for four or five years, the whole point was to introduce new leading-edge technology. Given the pace at which technology changes, is this technology now leading-edge up-to-date? What is going to be the product life cycle of this technology, given that it is five years beyond the date when it should have gone live? I will start off by saying that, obviously, repaying £20 million to the Government would be very significant for a board of this size. It is worth noting that the revised repayment plan has been agreed between the board and the Government. Nick may be able to add more detail about where the board intends to make savings to deliver that, or it may be a question that should be directed to NHS 24. Inevitably, savings will be required in order to repay the brokerage and the additional costs that will be required going forward. A number of the initiatives that had previously been planned have had to be put back. In terms of other savings that the board has to make, it is probably best addressed to the health board themselves. I should write to them and ask them those questions. In terms of the technology, one of the reasons for asking for a full business case is to identify the changes that have taken place to the original future programme and what benefits that can be brought that were not envisaged at the time that the original business case was drafted, because there have been significant changes to the technology over this period. Will the technology be fit for purpose and if so, for how long? I think that that is another question for the board. Well, you are the auditor, so surely you have got a view on that. We would like to see the full business case prepared, because that will identify what the benefits are that are coming to the board over the next 10 years. Can you think that you can do that with the board as well? Can I ask, has the total cost of the future programme changed since the AGS report was published? No, the board is projecting £131.2 million as of June this year, I think, and there has been no change to that that we are aware of. The estimated total cost is now £55.4 million higher than the envisaged in the business case, and the Scottish Government has loaned the £20 million as discussed. Does that mean that there is a deficit of £34.7 million? Have the auditors discussed how this could be made? The cost between the £20.35 million provided in brokerage and the £55 million total have been and will be met by the board itself from its overall budget during that period. As Nick said, that has meant delaying some projects that they plan to undertake and making efficiency savings elsewhere, but the board has not run a deficit with the brokerage available from Government. It is worth pointing out that the £131.2 million includes £62.5 million for on-going support costs, which, in effect, support costs over the 10-year period hence. Those costs have not been encouraged yet, but will be encouraged. I will suspend for five minutes before the next item and for a comfort break. We now move to item number four on the agenda, which is our evidence session on the AGS report entitled the 2015-16 audit of NHS Tayside financial sustainability. The Auditor General is joined by Carol Calder, senior manager of Audit Scotland and Kenny Wilson, a partner at Price Waterhouse Coopers. The Auditor General will again make an opening statement before I open up to questions. Thank you, convener. As we discussed earlier, the NHS is under increasing financial pressure for a range of reasons. I prepared a report for the committee on NHS Tayside last year, which highlighted its reliance on brokerage from the Scottish Government to meet overspends, difficulties in achieving its planned savings and delays in selling surplus property. This year's report highlights my continuing concerns about the financial sustainability of the board. In 2015-16, NHS Tayside received a total of £5 million in brokerage from the Scottish Government to enable it to break even. The board has now received a total of £24.3 million in brokerage over the last four years, of which it has been able to repay £4.3 million. NHS Tayside did not repay any brokerage during 2015-16, and it does not anticipate that it will be able to repay any of the outstanding £20 million in 2016-17. It is currently discussing a revised repayment plan with the Government. In addition to this commitment to repay brokerage, the board is projecting a potential deficit of £11.65 million for 2016-17, and it needs to make efficiency savings of £58.4 million in the same year. Overall, I have concluded that there is a significant risk that the board will not achieve its financial plan for 2016-17 and future years. I am joined here by Kenny Wilson from Price Waterhouse Coopers, who I appoint as the external auditor for NHS Tayside, and we will do our best to answer the committee's questions. I am right in saying that NHS Tayside owes the Scottish Government £20 million. It has £58 million of savings to make, and it is projected this year to make a deficit of £11 million. How on earth is it going to achieve any of that? It is in discussion with the Scottish Government about its financial position. Our expectation is that it will agree a revised repayment plan for the brokerage that is outstanding and, likely, additional support for the current year. That is very much why this report is here, because I have concerns about financial sustainability with that widening gap. Basically, if it has to repay the existing £20 million plus, and it has a deficit this year of £11 million, which has to be funded by the Scottish Government, presumably again through brokerage loan, there is over £30 million. Where is it going to find £30 million to repay the Scottish Government and, at the same time, make £58 million of savings? That is a huge reduction in service provision. Surely that is totally unachievable, non-sustainable? I will ask Kenny to comment in a moment, but I think that that really is a question for the board. The reason for reporting here to the committee is that I have a concern that its financial position increasingly does not look sustainable. Kenny, would you like to answer that? Yes, certainly. They have put in place a five-year transformation plan where they hope to aim to make savings of £175 million over that five-year period. However, there is no doubt that this year, in 1617, £58 million of savings is required to achieve financial balance, and that is quite significantly more than they have saved in the previous years, so there will be a challenge for them. It is worth saying that Tayside has a number of things that would give them good opportunity to make those savings through a redesign of their whole service, and the board has certainly embraced that. They have a higher average patient cost than other boards. They have a higher prescribing cost than other boards. They also have a number of over 26 hospital states, and one of the largest property fruit prints across again compared to other boards. They have over 60 per cent of their properties in over 30 years, and therefore compared to other boards, they are older. There are a number of things that they can do that will take time, but they are planning to make in their five-year transformation to make those savings. The board has an ambitious plan, but it is working through that plan to try to achieve that. As you know, redesign of services takes a long time. I do not know the detail of Tayside's proposals on redesign, but presumably any significant redesign in order to facilitate the repayment of this amount of money is going to be a big redesign, and a big redesign is going to take years. We have already seen that one of the failures is the failure to dispose of assets on anything like the scale required so far. Surely it is very optimistic to assume that they are suddenly going to be able to dispose of those assets on the scale required not to make very deep cuts in service provision. Surely, as auditors, you must recognise that we cannot just say to patients in Tayside that, because of the incompetence of your board, we are going to hammer you in terms of service cuts. It is just not sustainable. In terms of the risk, it seems to me that if this was in the private sector, it would be a basket case. We are absolutely not saying that what needs to happen is that services are cut to fund the gap that I have highlighted. The reason for bringing the report to the committee's attention is that the committee and the Parliament are aware of the challenges here and that you have the opportunity to explore with the board and with the Government how they plan to address that problem. We need to talk to both the Government and the board on that, because that worries me about the potential impact on service provision in Tayside, which sounds to me as though what is being proposed is unacceptable in terms of service cuts that would require to pay for the incompetence of the board. Given the level of incompetence, in your own report, you are talking about the enhancements during leave. If you read paragraph 12 to 16, it is clear that a story of management incompetence is obviously an element. I am not suggesting that. That is the only factor, because we would all know the pressures on the national health service. Clearly, things have not been managed very well in Tayside. Has anybody been hauled over the coals for this? This is really ranked bad management by people who have paid extremely well. No, I am not aware of anyone being held accountable for that or lost in terms of that. Has anybody been held accountable for this mess? The board recognises the challenges that it has and has taken the board and is discussing regularly with the Scottish Government on how it can address those challenges. No-one, as I am aware, has been held accountable for anything that has happened in the past. Do you not think that that sends out the wrong message to everybody in the health service? If people in senior positions—we are not talking probably about medics here, we are talking about managers—holding down senior positions well, very well-paid positions, and yet they are delivering this kind of performance, surely something has to happen? Yes, I think that something should happen. I think that the action is being taken, which is encouraging to address some of the concerns and address the challenges that they are facing. Do you have any competence on the existing management team to take the necessary action when they have got the board into the mess that is in? If you look at the current management, it has been in place recently, so the chief executives have only been in for the last couple of years, along with the director of finance. The two key executives are making big changes in the transformation plan. Have steps been changed with the new management in place so that progress will be made? I wish that I was as confident as you are. We need to invite Paul Gray and the Government on this, because I just do not see how you are going to be able to get anywhere near the requirement of repaying the money and making the savings without very, very deep cuts in service provision, which I would have thought would be unacceptable to the patients in Tayside. I completely agree that this is a very serious situation. The powers that we have got to report here to the Public Audit and Post Legislative Scrutiny Committee about it so that you are aware of it and can explore with Government in Tayside what action they are taking. Mr Wilson, how appropriate are pay enhancements for senior managers, given the state of NHS Tayside finances? There is certainly something that has been in place not just in Tayside but right across other boards, so they are in line with other boards. I think that it is a practice that has been there for a number of years. Therefore, it would be up to discussions of the Scottish Government whether those pay terms were amended. How much is in the hands of the Scottish Government whether those pay enhancements are awarded? Certainly, it is part of the packages that are given to the reward of staff. Therefore, it is just like any other aspect of reward that can be adjusted through negotiation with staff. In your audit, did you reach a figure on what those pay enhancements totaled to over the past year? Yes. The annual cost of pay enhancements—I will check with the—there are two elements of the pay enhancements in Tayside. There is one off catch-up for the error that was made in prior years, and that totaled a provision of close to £10 million. Sorry to clarify, but I am talking about senior management's managers rather than the enhancements programme that has been on-going. You clarified that it is the enhancements to senior managers. To senior managers, yes. There are awards that were made very recently that were significantly above 1 per cent. I wondered whether you had totaled those during your audit. I have not got that number to hand, but I can certainly provide that to the committee after this meeting. You talked about the five-year transformation programme, which I am familiar with. It was discussed at the NHS Tayside annual review just a few weeks ago. You talked about the redesign of the whole service that was appropriate. The Auditor General said that as well. What exactly does that mean? The executive team has put forward six work streams across the health board looking at all aspects of their health board. They have a number of areas where their operating cost model is operating at higher than other boards. They are looking at workforce planning, property estate planning, realistic medicine, the way that they better buy and procurement, as well as facilities in the state. They are looking right across a number of areas and trying to see how best they can make the service more efficient and more effective. Could it mean a reduction in the number of jobs? I think that, for example, there are a number of areas where it would indicate, for example, clerical and administrative staff. They have a higher proportion of staff compared to other boards that would indicate that savings could be made if costs or jobs were reduced without, hopefully, impacting any impact on the service. The report talks about brokerage. We know that NHS Tayside has had to go to the Scottish Government for the last four years for brokerage. Can brokerage be provided indefinitely? Could it be waived by the Scottish Government? If it is required for Tayside, possibly into next year, and that would total, then, five years, does that suggest that brokerage is not really about unexpected change to planned expenditure? Brokerage is certainly intended to be a short-term loan that responds to unexpected expenditure. In order to receive brokerage, a board normally has to demonstrate to the Scottish Government that it is able to repay it in future years and a repayment plan is part of the conditions for it. In this case, it appears to me that the repayment plan has not been realistic. The health board has not been able to repay very much at all of the brokerage that it has received. It has no plans to repay in this year, and discussions are under way about future years. There is no reason why the Scottish Government could not waive brokerage if it chose to do that. My concern for the health services as a whole, as well as for NHS Tayside, is that what is needed is a more strategic, longer-term financial plan that provides a realistic balance between the funding that is available and the costs of providing services. Tayside is the health board where that gap is most apparent. It is quite possible that the Scottish Government, if it decided it, could waive the debt that NHS Tayside has incurred to them over the past four years. As far as I am aware, there is no reason why it could not do that if it decided to do it. It would obviously have to think about the impact on NHS Tayside and on the wider health service, but I think that it would be at its discretion. Given that NHS Tayside has had to go for brokerage for the past four years, the model is about unexpected change. Clearly, the debt in the future and the plan savings and all that is not unexpected. As you have identified, it is very much expected that it is going to be very difficult for them to meet their savings targets and the cuts agenda, I hope not. Is there a different model required by the Scottish Government to meet the very difficult situation of NHS Tayside other than the brokerage model? I would put it again in the context of the NHS as a whole, and I think that two things are needed. Members of the committee may recall that we have reported this year and in previous years on the need for a more flexible regime that does not require each health board to balance both its revenue spending and its capital spending to the penny every year, because that focuses a lot of attention on this year's targets rather than long-term sustainability. Secondly, as we were discussing in relation to the overview report, that longer-term financial plan for the NHS as a whole to ensure that its finances are sustainable and that change is happening is part of the solution to this. However, I completely agree that the way that brokerage is being used here is not currently helping to address the underlying questions about the financial sustainability of the board. Given that very difficult situation, would you be recommended to the Scottish Government that they need to come up with a different model to help NHS Tayside out of the situation? Our understanding is that NHS Tayside and the Government are already in discussion about the future. I do not know what those discussions are covering. It may well be an issue that the committee wants to explore with both parties. Your report says that reliance on agency staff has risen by 39 per cent just over the last year. Why is the figure so high? I think that one of the key things that they are looking to address is the agency work and to increase the nurse bank that they have. Certainly, in 1617, they aimed to reduce that by 30 per cent, which is the agency cost for non-contract agency workers, which is encouraging. I think that part of the reason is to make sure that they have a good nurse bank so that they can draw on that and not rather on them to use agency workers. That is one of the things that they have been certainly looking to try to work at. The reasons why they got into a position where the reliance of high agency is unclear is that they would have to ask the board. We talked a little bit earlier about jobs. Mr Wilson said that, due to the expensive operating model of NHS Tayside and service redesign, there would be a chance that clerical or administrative posts might be part of that redesign. I am very concerned by that. Obviously, we do not want staff to have to bear the brunt of financial mismanagement at NHS Tayside. Why is their operating model so expensive? Probably a number of factors have impacted it. It is unclear why things like agency costs are higher to me and prescribing are higher. There are two reasons why it certainly drives a big cost difference. However, as it comes back to the number of 26 hospital sites, which is a large number, there is a need to look to consolidate some of those sites to make savings from doing that. That is again the five-year transformation plan that is looking at all those options. With an older estate as well, it has an older property estate, which tends to be more inefficient because of its age. It takes more to look after and more costs to look after it. Some of the estate is very low occupancy and, therefore, there is an opportunity to consolidate that. A number of factors are contributing to their position, but that is what they are looking to try to address. That brings me on to non-recurring savings, which we touched on in your general report. How concerned are you, Mr Wilson, about the high percentage of non-recurring savings, given that the huge amount of savings that NHS Tayside has to make this year is £60 million? Yes, it is a good grief concern. The proportion of recurring savings is at a low level. I think that partly that is because to achieve the recurring savings requires some more structural change, which tends to take longer to put in place. However, it would certainly be far better positioned if it could have a lower percentage of non-recurring savings. There is no doubt about that. Prescribing has been identified as one of the costs. I know that you reported on NHS Tayside last year. Can you just confirm for me, Auditor General, if prescribing was identified as a factor in your report last year? I have to confess, convener, that I cannot confirm that from here. We can obviously do it immediately after the meeting. One of my concerns is that Mr Wilson talks about redesign of the service and much more structural change, but the initiative on prescribing was only launched about three weeks ago—at the most—a month ago. Why haven't NHS Tayside managed to deal with those issues a lot sooner? They have been aware that prescribing has been an issue for a long time now. That is true. I think that it is probably based to ask them that question. I can't answer that. Paragraph 21 refers to an efficiency savings target for 2016-17 at an unprecedented level of £58.4 million. Is this unprecedented for Tayside or for Scotland? I think that the general report NHS in Scotland 2016, Audit, suggests that Shetland's target may be slightly higher, but that might be percentage rather than total cost. I think that the shetland savings target is just about more than 7 per cent. Our report shows that it is 8.7 per cent, but that is obviously of a much smaller overall spend for the board. It is still significant for Shetland, but it is much smaller than some of the money involved. In terms of efficiency saving targets in pure numbers and hard cash, is the efficiency saving target for NHS Tayside unprecedented across Scotland? For the information available here today, yes, it is higher than anything across Scotland in cash terms. As Kenny said, it is more important that it is unprecedented for this board in terms of its ability to deliver savings over recent years. This is a significant increase and clearly very challenging for them, as you and other members have highlighted. Thank you. Alison Harris Well, I think that you really asked everything that I was thinking about, Jenny, so I don't really have any. Just a couple of things. I would like to associate myself with the comments that Alex Neil has made. Frankly, looking at all the financial indicators here and looking at this report, it is unfortunate that the management team did not handle this better. There are clear deficiencies here. If you look at a situation in which we have higher staffing and higher costs than other NHS boards, they cannot even meet more than five out of 15 national targets. It would be bad enough having the extra costs and so on, but not to meet the targets as well is pretty shameful. I think that this bears a great deal more investigation. You highlight on paragraph 29 a whole series of work streams that they are putting in place to try to sort the thing out. Those are all basic management things that should have been dealt with. This is not new, this is day-to-day management, and it does not seem to have been taking place. I would like to just pick up on something that Kenny Wilson said. We are talking about awards to senior staff. I think that it is proper that we should be clear that the Government may set the policy in terms of those, but it is actually the local board that makes the awards, so that the Government is not directly involved in giving awards. I would like to come back on the property side. Obviously, that is a great concern. Those are one-off sales. It is not sustainable, but I remember in a previous report or generally, you were talking about Ashludi hospital, and there were particular issues around that. There were particular issues in respect to the accounting for that. Has that gone away? Has it been adjusted through the accounts? Is Ashludi still one of those properties that are waiting sale? I will ask Kenny to give you the up-to-date position. You are absolutely right that one of my previous reports raised concerns about the accounting treatment where proceeds were being recognised in advance of a sale being agreed, which is clearly, again, contrary to proper practice. Kenny? In 1415, we reported that we made the board adjust for the fact that it recognised the sale of Ashludi and its accounts in 1415, and that was reversed out and not recognised in that year. The sale had an impact of requiring additional brokerage of £5 million in 1415. That sale was finalised in 1516 and recognised in the accounts as a profit. It was not. The same sum was then recognised correctly in 1516, as when the sale was concluded in October 2015. Has that one-off sale reduced to a brokerage? Yes. It was taken into discussion with the Scottish Government. They were allowed to take that into their revenue numbers for that year, for the 1516 year. The properties that are outstanding say that the board anticipates receipts of £7.6 million from 24 properties and sites. It seems an awful lot of properties and sites, but what do they consist of? I have no feel for it. It is not very much money for that number of sites. I think that one of the challenges that they face in where the sites are in terms of trying to find in the current environment buyers that want to convert the sites into different use. They have had a lot of challenges to find appropriate buyers and they have outlined that they hope to sell those sites for £7.4 million. It will take time to achieve that and to achieve the maximum value that they can get. Those are a fair number of properties and, presumably, substantial number must be empty waiting for sale. There is a cost to maintaining them, a cost to providing security and so on. Although it is a one-off benefit in selling them, do we have a feel for how much benefit there is from the revenue side in reducing those costs? There will certainly be savings from disposing of those properties, on-going savings, reducing them to means. From those particular sites, I do not have a number, but I can try to find out what the number of potential savings is. Most of the majority of those sites are unoccupied and not being used currently. As we well know, providing security to some of those sites and keeping them safe can be quite expensive. Yes, it can be. You are right. It would be interesting to know what the impact on revenue could potentially be, because that would of course be a recurring savings, as opposed to a one-off. My suspicion is that it is not going to exactly swing them round. No, but it certainly will help. We certainly can find that number out and provide it to the committee after the meeting. Can I go back briefly to any other questions from members? I had a question about what Colin Beattie has picked up. On the issue of assets held for sale, my sense of reading the report and hearing the evidence today is that there is quite a strong reliance on those 24 properties. We can see in the report that the vast majority have been held for sale for quite a long time—13 for over a year and three of them for over four years. The figure of £7.6 million, I assume, is based on projected market value. What advice is the board receiving? Does the board have internal expertise? What is the marketing plan for those properties? Has it been kept under review? From reading the report and hearing what you have just said, I am not convinced that this £7.6 million is achievable any time soon. There does not seem to be any other fallback, so I wonder what you can say about the professional advice that has been made into the board. I am aware that the board is working closely with other skills and experts in the Scottish Government. The Scottish Future Trust has been helping to advise them on the disposal of sales, but they are absolutely right. It is taking longer than they would like to sell those properties. I think that it will take longer than they may even anticipate. The values that they have put to it are estimates that they are being told by professional people that think that they can get those values. Unfortunately, only time will tell whether they can receive it. It is fair to say that the values that they have achieved to date on selling properties have not been as high as people have thought they might achieve and would like to achieve, but a lot of work has been spent by the management team to understand what the properties are and try to make sure that their estimates are realistic. The timeframe of selling those properties is difficult to measure. There is also a trade-off between trying to maximise the value as well as trying to dispose of them in a quick way. How have offers been made but rejected on the basis that they are not? There have been a couple of properties where offers were made. The management has taken the steps to accept those offers because they recognise, as Mr Beattie says, that it is better in some respects to dispose of the properties and move forward on them. They are working on that, but they are taking advice from the right people, I believe, to advise them on that. Are those offers below market value? The offers are around market value but for some of the properties and below for others. You would probably best ask the board for an update on exactly where they are with that. If properties had been sold on the cheap to put it that sense, how would that be reported at the board? I suppose that what I am asking is in terms of transparency, how would we find out if we are seeing good value and properties had not been sold off too cheaply? It is certainly something that, as part of every audit, we would look and see that the value that is coming through the accounts is a loss in the disposal of the properties and you would be able to see from the accounts on an annual basis what the impact of that is. I do not believe that there is a plan to try to sell them off at any lower than the market value. Unfortunately, the value of selling them is very much at what the market is willing to pay, and it is very difficult for them, because I said that the property market in Dundee around the Tayside area is quite challenging. Can I come back briefly to a couple of points? I want to go back to this 39 per cent rise in agency staff, because I am just not clear about why there has been such a huge rise just over the last year. I know that I have asked this question before, but can you shed any light on that? I think that the challenge that they have had is that they have not been in the position to have the sufficient bank nurse and the right staffing. I think that it is a question that you would have best placed to ask the executive team. I know that, as I said, it is an area that they are very focused on to try to address. As I said, they are looking to try to reduce agency costs by 30 per cent in 2016-17, and they are increasing the nurse bank quite significantly in order to reduce that. The reasons why the increase happened in the previous year are among clear myself as to why it got to that level. I was just checking with Carol what information we have here now. It is a question that you would need to explore with the board itself. If we look at the summary information that we have in the overview report, it is very clear that the nursing and midwifery agency spending has gone up a lot, but the nursing and midwifery vacancy rate is not particularly high compared to other boards across Scotland. It is a question that would be well worth exploring with the board to see what has led to that jump in the agency spending. They target in the submission that they have made to you that it is one of the key areas that they wish to reduce in order to bring their finances back into balance, but they do not explain what led to the increase in the first place. I know that you looked at this in your general report that we studied earlier. From best practice in other boards that have less reliance on agency staff, how do they achieve that, and what lessons could NHS Tayside learn from that? There are clearly three things that play into the use of agency staff. One is having vacancies on the establishment, and it appears from the figures here that the vacancy rate is not particularly high in NHS Tayside. The second is having high levels of sickness absence, where there is a need to fulfil that gap across the piece because services need to continue to be delivered and a member of staff needs to come in. The second is the way in which those short-term gaps are filled, whether they are filled by agencies or by the boards own nursing bank. Any of those three are possible. The figures that we have here today suggest that it is not either the vacancy rate or the sickness rate that is looking at the figures in the overview report. It is an entirely appropriate area to explore with the health board. What is the matter of managing the balance between bank nursing and contracted nurses? I would expect that that is one of the areas to explore. There may be other factors that are unique to Tayside that are not coming through the submission that they have made to you. They highlight in the submission that you have that they forecast a 30% reduction equivalent to £1.5 million this year. They do not focus on why it is as high as it is in the first place. Do you think that that is achievable? As Kenny and I have said throughout this session, we think that it is challenging whether that specific reduction is achievable. I think that it will depend on what the reasons are for the high level of spending in the first place. Given that you all think that the situation is challenging, could we be looking, as Mr Neil said, about cuts to services in NHS Tayside? I think that that very much depends on, first of all, the success with which Tayside is able to deliver its transformation plan, which they summarised in their submission to you. Secondly, in the support that the Scottish Government is able to give them during the period while they are implementing it. However, the reason why I have reported to you today is that I am concerned that their finances are currently not sustainable and that services cannot carry on being delivered against this financial background. Do you think that that transformation plan is good enough at this stage? Kenny may want to add to it. I think that our sense is that it focuses on the right areas and that the board has struggled to deliver its efficiency savings in the past. I agree with Caroline that it will be a very challenging five-year plan. The five-year plan is focusing on the correct areas that it needs to focus on. It is clear that there are circumstances unique to Tayside that lend itself the opportunity to make significant improvements in its efficiency and effectiveness, which is good. However, there is no doubt that it will still be quite a challenge to implement and to make those savings £175 million over that five-year period of time and to repay the brokerage. As we said, the deficit forecast for the current year, 1617, is that they still have to make just under £46 million of savings to achieve that, and that will be challenging. It is more than double the savings that they have made in prior years. There is risk around the transformation plan and there is no doubt about it. The good positive thing is that the board is totally engaged with that. It is talking closely with the Scottish Government on a regular basis. From what I have seen, it is certainly doing the right things. Do you fear that that could result in some post-clerical administrative going? I think that there are areas where they would indicate that they have more staffing, higher staffing in certain areas that you would compare to other boards, so there would indicate that there may be opportunities over a period of time to reduce those numbers without impacting things. However, that would be something that the board would consider and I am sure that we would be able to talk to you about it. Has any NHS board in Scotland been in a similar financial predicament before? In my time, as Auditor General, this is the most challenging position that I have seen. We have obviously in the slightly more dim and distant past had real challenges in the Western Isles and Argyll and Clyde health board, but they occurred before I had this responsibility, so I cannot compare them in that sense. Can I thank you very much indeed for your evidence today? We will now move into private session.