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Management Costs

Volume 264: debated on Thursday 19 October 1995

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To ask the Secretary of State for Health if he will make a statement on the difference between the findings of the Audit Commission report on expenditure on management trusts and information provided through parliamentary questions on expenditure on general and senior managers. [37427]

My right hon. Friend the then Secretary of State for Health confirmed on 7 June 1995 that national health service trusts would publish information about their management costs, based on the Audit Commission's M1 definition, in their annual reports and accounts. These management costs in trusts relate to the salaries of all those managers, excluding clinicians, earning over £20,000 per annum, those in a few specified posts regardless of salary, and the cost of management consultancy. In its report "A Price on their Heads: Measuring Management Costs in NHS Trusts", published on 7 June, the Audit Commission gave the average figure for senior management costs in trusts in England and Wales for 1993–94 as 4 per cent. of their net revenue expenditure. We shall be publishing later this year figures for all trusts for 1994–95.Comparable figures have not been provided before in answers to parliamentary questions. Information on NHS management costs has previously been provided in terms of the salaries and wages of all staff paid on general and senior manager terms—regardless of what function they discharge—in regional, district, special health authorities and trusts. Total salary costs for such staff in England in the financial year 1993–94, the latest year for which figures are available, were 4.4 per cent. of the total pay bill.My right hon. Friend the Secretary of State for Health announced on 11 October that he was seeking a 5 per cent. cash reduction—8 per cent. in real terms—in the costs of running health authorities and in NHS trust management costs is 1996–97 compared with planned spending in 1995–96. The savings from reducing these costs, which amount to some £140 million in real terms, will be available for patient care.

In the case of health authorities, we shall require nationally the costs of new authorities to be contained within a ceiling of £450 million. NHS executive regional offices will be responsible for agreeing cost figures for individual authorities.

For NHS trusts, the target will relate to the Audit Commission's M2 definition of management and administration costs which extends to include the salary costs of all staff in corporate functions. We shall be looking to each trust to set out in its business plan its cost limits on this basis and to publish these costs in its annual report in future.