Category: Speeches

Below is the text of the speech made by Alan Milburn, the then Secretary of State for Health, to the Annual Social Services Conference, Cardiff, Wales on 16 October 2002.

This is the fourth year I have addressed your conference as Secretary of State for health and social services. Each year I have been able to report on real progress in the delivery of social care. I am pleased to say that this year is no exception. You have delivered more intensive support to help more older people live independently at home. Your co-operation with the health service has reduced delayed discharges from hospital. You have helped 10% more looked after children to be adopted.

Social services – local authorities, voluntary organisations, private sector providers – make a difference – every single day.

You make a difference when the foster parent, the teacher and the social worker help a child who has been in care all their lives get through school and then on to college.

You make a difference when the therapist and the advocate help a young man with a learning disability get training and then a job.

You make a difference when the home help and the social worker help an old lady return home after hospital to regain her confidence, her dignity and then her independence.

So, I want to thank you for what you have done and for the vital role you play in delivering care and offering hope to millions of people in our country. Good social services – and social workers – are valued. They do not deserve to be vilified.

Yet, today I believe social services are at a crossroads.

You are under scrutiny as never before. For all the millions of successes, it is the lapses in social services that still corrode public confidence. All of us here know that if social services fail, the consequences fall on the most vulnerable people in our society.

It would be comforting to believe the problems confronting social services stem purely from a hostile media. I do not believe they do. They stem in my view from a much deeper failure – a failure, which we all share, that has allowed the way we deliver social services to get out of step with the society we serve.

In the half century since the Welfare State was founded, and in particular, in the thirty years since Seebohm formulated the modern concept of social services, British society has undergone profound changes.

Fifty years ago, if you got a job, it was for life. Today, while the new global economy has brought more opportunities for prosperity than ever before, there is more insecurity and uncertainty. While unemployment has fallen sharply in recent years social exclusion has found new expression. Prosperity has widened but poverty has become more entrenched. Joblessness has become more concentrated in certain communities and amongst certain families. New social problems – particularly the link between drugs and crime – have emerged.

Family structure has undergone profound change. Family breakdown is more common. Teenage pregnancies are still too high. For the first time older people outnumber children in our society.

Public expectations have changed too. Thirty years ago the one size fits all approach of the 1940s was still in the ascendant. Public services were monolithic. The public were supposed to be truly grateful for what they were about to receive. People had little say and precious little choice.

Today we live in a quite different world. We live in a consumer age. People demand services tailor made to their individual needs. Ours is the informed and inquiring society. People expect choice and demand quality.

These changes challenge all our public services. For some, these changes call into question the very values on which health and social services are based. They say, public services must inevitably fail because they always put the needs of the institution above the needs of the individual. For them the only solution is a free market solution.

Nothing could be more mistaken. Think about it. A privatised health care system based on ability to pay not the depth of need would leave those needing health care most able to afford it least. Delivering up youngsters in care to the whim of the free market would only mean more lives paid for in drugs, delinquency and despair. We have lived through the decades when there was apparently “no such thing as society”. Society was poorer as a result. We all ended up paying the price. I believe that we must not pay that price again.

The values that underpin our social services – the recognition that we do achieve more together than we ever can alone – are more relevant today than they have ever been. The problems society faces today call for modern active social services.

It is the means of delivery – not the values of social services – that need to change.

Delivery requires investment. It is a fact that for too long social services have been the poor relation in the public services. Investment in social care has failed to keep pace with today’s challenges. You can see the impact of decades of neglect in high staff vacancy rates and staff who work under real pressure. I believe that we now have the opportunity to put that right.

A year ago I said at your conference that social services needed more resources. In the lead up to the Budget I fought for those extra resources. The Budget secured them. From April 2003, for the next three years, real growth in social services investment will double compared to the last three years. Whereas just six years ago real terms spending on social services was rising by just 0.1% a year it is now set to rise by 6% a year.

The extra resources will help get the extra staff we need. A year into the national social work recruitment campaign which I launched at last year’s conference we have already reversed the trend in falling applications. Over the next three years we can look forward to 50,000 more social care staff.

New challenges call for new skills. I think you all know the complexity of modern social problems requires more specialised skills not just the traditional general mix of social work skills. So I am today, asking the General Social Care Council, training organisations and local government to work with us to develop new types of social care professional.

People who can work in the community, combining the skills of the therapist and the home help to provide rehabilitation alongside home care. Family care workers combining the skills of the health visitor and the social worker to provide family support in times of trouble.

The extra resources give us the opportunity to make these reforms.

Of course, extra resources can not solve every problem but having made the case for extra investment in social services local government now has to spend those resources on social services.

Here I think that there is a tension: different communities have quite different needs – and that calls for a greater local say. And yet it must be right that an older person in one part of the country is able to enjoy similar standards of care to an older person in another part of the country – and that calls for proper national standards. Better services are not a choice between national standards and local control. Raising standards requires both. Getting the right balance holds the key to securing these improvements.

There was a time when there were no national standards. When care was a local lottery. I do not believe anyone who is serious about ensuring fairness in social care wants to go back to those days. Equally with national standards, tough inspections and performance ratings all now in place I believe the time is now right to shift the balance of power – to greater local autonomy. So I can tell this conference whilst there will be more resources for social services, there will be less earmarking of those resources for local government by central government. Today 17% of social services spending is ring-fenced. That will now fall to 15% next year, 11% the year after and 9% the year after that.

The Local Government White Paper sets out the basis for a new partnership between Whitehall and the town hall as a means of rejuvenating local democracy. Where councils have greater financial freedoms. Where inspection is more proportionate. Where local councils have powers to scrutinise local health services and ensure the well-being of local communities.

And we can go further. The new governance arrangements we will shortly bring forward for the first generation of NHS Foundation Hospitals will mean local government can represent the local community in the running of the local health service too.

We are moving into a whole new ball game with brand new rules: where flexibility and freedom come in return for delivery and reform. As performance improves – as I am confident it will – greater autonomy for social services and local councils will be earned. Those that are doing best will get more freedom. Those that are doing less well will get more help. Where there are persistent problems central government will step in. Where there is progress we will step back.

Those councils that enjoy the highest star ratings will get significant freedoms: reduced inspection; the right to carry over resources between one financial year and the next; the freedom to spend social services grant on any aspect of social care free from ring-fencing altogether. And I can tell this conference that, together with the Deputy Prime Minister John Prescott, I am examining further freedoms still for the best performers.

The better you do the more you get. That is a discipline that needs to apply just as much in the public sector as in the private sector. Both to provide a reward for those already the best – and to provide an incentive for those who can to do better.

At the other end of the spectrum there are a small minority of councils where social services are persistently in trouble and, frankly, failing to deliver. Here a different approach is needed. Here, central government can not stand idly by. We have a duty to act to uphold standards in care. And when we do it works.

Of the 21 councils put on special measures in the last few years, 18 have improved their performance. Since August, where there have been more entrenched problems still Performance Action Teams – put together by the private sector but involving the best of the public sector – have gone in to social services departments to strengthen management structures and improve service delivery.

And in extremis where there is endemic failure and where this form of external support also fails, I will use powers under the Local Government Act to appoint a nominee to take over the running of the local service. The nominee will be able to make radical recommendations about how the service is delivered and crucially how more effective local partnerships can be developed.

Today over half of all councils have broken away from the old monolithic, single social services departmental structures towards greater specialisation and more integration with other service providers. I want to set out now how I believe we can help you take this process further.

The old style, public service monoliths can not meet modern challenges. They need to be broken up. In their place we can forge new local partnerships that specialise in tackling the particular problems local communities face.

Combating social exclusion, breaking the link between drugs and crime, securing for elderly people dignity in old age is beyond the remit of any one organisation.

Dealing with these new challenges demands new forms of organisation: that enlist support in the community as well as of statutory agencies; that harness the expertise of the private and voluntary sectors alongside the public sector; that recognise that in the modern world people will no longer tolerate inflexible services from competing systems but demand instead flexible services from a single care system.

In recent years social services who have led the effort to break down boundaries and build up new partnerships. Two thirds of social services today are provided by the private and voluntary sectors. The 600,000 social care staff who work in those sectors provide the majority of home care and residential care. Most looked after children rely on foster carers. The voluntary sector today is the mainstay of learning disability services. New initiatives like Sure Start have put community and charitable organisations centre stage in delivering what are mainstream public services.

I believe that the voluntary and community sector has an even greater role to play. If we are to activate local communities to help deal with the problems they face – rather than simply complain about them – now is the time to bring those organisations in from the cold.

So I can tell the Conference I have asked the Strategic Commissioning Group – chaired by my colleague Jacqui Smith – to report to me on how local voluntary and community organisations could play a bigger part still in the delivery of social services.

Government, central or local, no longer needs to provide every public service. Gone are the days when Whitehall or indeed the town hall always knew best. What counts today is the quality of the service, not the origin of the provider. And today the sheer complexity of the social problems facing us call for services that are less homogenous and more specialist.

The job of providing services to children in need is a very different job from services to the elderly person. The one size fits all approach embodied in the traditional social services department may have been OK in the 1970s, but as more and more councils are recognising, it does not belong to today.

Let’s take children’s services. Every child deserves the best start in life. They need services that lift them up and keep them from harm. Mostly that is what social services deliver. Sadly, sometimes they do not.

Two years ago Victoria Climbie died in the most appalling circumstances. No one who has heard the evidence to the independent inquiry I established under Lord Laming could fail to be shocked by what occurred. Quite simply services which should have protected a vulnerable child failed that child.

When Lord Laming delivers his report it will consider what changes are needed to the whole system of child protection in our country – and we will consider his findings carefully.

We will also be considering the conclusions of this week’s report from the SSI and other Inspectors into safeguards for children. And later this year we will publish the first strand of the new children’s national service framework which will set out for the first time clear standards for all of our children’s services.

There is much that remains to be done despite the achievements of Quality Protects. Our goal surely has to be to give the children in care the same opportunities as every other child: to be part of a family; to do well at school; to get a job; to have a home; to live a life free from drugs and crime. But progress towards this goal is still too slow.

Today I can outline extra resources to help us do better. To reduce the number of children in care. To bring about improvements in life prospects when children leave care. Growing up in a stable family provides the best environment for children to develop. So over the next three years over £180 million will be made available to expand and strengthen fostering services and to provide extra support for adoption so that more children get the chance of growing up as part of stable and loving families.

Some children of course need further help still. Around one in ten aged between 5-15 years old have a mental health disorder. Tackling poor educational achievement, dealing with youth offending and other behavioural problems calls for a major expansion in child and adolescent mental health services. So I can announce today increased investment of £140 million over the next three years, to build capacity, improve access and, together with new NHS investment, to help deliver for the first time a comprehensive CAMHS service in each and every area.

To get the best from these resources, there will need to be reforms. All too often traditional service boundaries get in the way of good care for children. The local education service can be pulling in one direction with health going in the other and social services going another way still. That brings failures of communication as well as organisation. Children and parents get passed around the system. Confusion means that services intervene later when they should be involved sooner.

Fragmented decision-making is not delivering the best for anyone. I believe it is now time to develop more specialised local organisations which pool the knowledge, skills and resources that exist in our education, health and social services to provide a more seamless service for children.

So I intend to create specialist Children’s Trusts to jointly plan, commission, finance and – where it makes sense – deliver children’s services. Children’s Trusts which commission services will be based firmly in local councils with the power for the first time to commission health as well as social care. And for those Children’s Trusts that want to specialise in providing services we will want to explore a range of models in different parts of the country. These could potentially include local, not for profit, public interest companies that could enlist the involvement of the community, voluntary and private sectors alongside the public sector.

We want to pilot this new approach so in December this year my department alongside Estelle Morris’ will ask for expressions of interest from local organisations keen to test how Children’s Trusts could improve local services.

Children’s Trusts can help you dramatically reshape how social services are organised and delivered. Many of you have already taken advantage of the NHS Act flexibilities we introduced two years ago . They have allowed health and social services to work more closely together through at least 160 local partnerships delivering services now worth £2 billion a year. These services are breaking down barriers between services so that people who are elderly or have a mental health problem do not have to deal with two different – sometimes competing– systems. You know as well as I do that health and social care sink or swim together. They both need each other. The older person needs both.

Care Trusts provide another means to this end. Some are already in place. More will follow next year. Later this month we will launch a new national Integrated Care Network to provide more support and encourage wider take up. In the next two years I expect to see health and social services in every part of the country pooling resources and skills to deliver a seamless service for older people – either through a Care Trust or through use of the existing Health Act flexibilities. In time this should become the norm for how elderly care services are provided and commissioned.

In the meantime we intend to legislate to ensure that conflict between health and social services does not get in the way of older people receiving the care they need. I am continually struck when I visit health and social care around the country by the power of partnership when it works. But when it does not, it is the older person who suffers.

Delayed discharge from hospital is a particular problem affecting 5,000 older people at any one time. Thanks to your help and the resources we have made available, delayed discharges from hospitals have fallen but this has been achieved only through a short term fix of ringfenced money, top down targets and intensive monitoring. I do not believe this approach is sensible or sustainable for the long term.

In any partnership people have to know who is accountable and who is responsible for making things happen. So where people are needlessly waiting in hospital for social services to become available, we will shortly legislate so that councils reimburse the hospital for the cost of the bed the person occupies. This will provide an incentive – which does not currently exist – to end the misery of what is sometimes pejoratively called bed-blocking but is in fact thousands of older people needlessly trapped in hospital when they are well enough to be cared for in the community.

Councils that enjoy positive partnerships with the NHS – and those that are prepared to invest extra resources to build up capacity – have nothing to fear from this policy. Indeed the policy should help social services get the money spent on social services. It is not about punishing councils, still less about forcing them to fund people who wait for services that are not their responsibility. The policy will guarantee more seamless services for older people. I hope what ever your reservations might be, you will now work with us to deliver this reform.

It is all about putting the users of services centre stage. You can already teach the health service a thing or two about that. But today I want you to go further. If social services are going to genuinely put users first then those users have got to have more power. And that means more choice.

Choice is not just a question of consulting users or promising to take their views into account. Nor is it just about making advocacy services more widely available. It is all these things – and I believe that it is more.

Choice means opening up a broader span of services so that care can be tailored to fit the needs of the individual rather than assuming the individual will simply fit the off-the peg service.

In elderly care for example local councils will want to use some of the extra £1 billion we will provide over the next three years to stabilise the care home market and to buy extra care home places. But different forms of care are needed for older people too, in order to widen choice and promote independence. More intermediate care and better rehabilitation services through partnership with the health service. More extra-care housing in partnership with housing associations. More intensive home-based support. Free community equipment for the first time. And greater backing for our country’s carers. So more older people get what they say they want – help to live more independently for more of the time at home.

It is right that the generation which created our great public services should have more direct choice over those services. So I can confirm today that I will shortly be laying regulations in Parliament to ensure that all older people assessed as being in need of care – whether for rehab after a hip operation or for a bit of help with household chores – have, as of right, for the first time, the choice of receiving a direct service or instead receiving a direct cash payment to purchase care that better suits their individual needs. Direct payments will give older people direct choices over the services they receive.

And to ensure these are informed choices, I can also announce today that we will make available £9 million to help older people’s and other voluntary organisations make a reality of direct payments not just for tens of thousands of older people but for thousands of adults and the parents and carers of disabled children too.

It is local government that has called for devolution and decentralisation: to make services more responsive; to make social services more effective. Today, devolution and decentralisation are at the heart of the Government’s programme of investment and reform in public services.

But devolution does not start in the corridors of Whitehall and end at the doors of the Town Hall.

True devolution sees power flow from central government, through regional government and into local government and then out into communities and neighbourhoods. True decentralisation empowers the individual at the expense of the institution.

And social services are nothing if they are not about empowering the powerless: giving older people the power to stay in their own home; giving young people in care the chance of a stable family life; protecting the most vulnerable children from abuse and neglect; promoting independence and self-reliance; bringing hope to families where hope has almost gone.

Our task – together – is to reform social services so they are better able to empower the individual; better resourced to support the vulnerable; better structured in the interests of the user.

Having had the courage to invest in social services. Now is the time to make these big reforms. I look forward to working with the LGA, ADSS, private sector, voluntary sector and councils in making these changes happen.

Below is the text of the speech made by Alan Milburn, the then Secretary of State to Health, on 17 September 2002.

It is a pleasure to be here tonight at this first 1st Annual Dinner of the PPP Forum. To have gained sponsorship from over 40 major organisations that play a leading role within the PPP industry in such a short period of time is a considerable achievement and a welcome development.

The reason I wanted to attend this evening was to emphasise the importance and priority the Government attaches to the relationship between the public and private sectors, and the pivotal role these partnerships are playing in improving our vital public services.

Indeed I believe the time is right to further develop the relationship between the public and private sectors in health care – both through the Private Finance Initiative’s central role in modernising the infrastructure of the NHS and through a broader relationship between public and private in the direct provision of services to NHS patients.

Let me start with PFI. PFI is a partnership that works. It is delivering results for patients and good value for money for taxpayers. PFI is here – and here to stay.

Thanks to the involvement of the private sector, we are now in the middle of the biggest hospital building programme in the history of the NHS. Of course after decades when the NHS was starved of the capital it needs, the Exchequer is today providing huge increases in resources for buildings and equipment.

But set against the scale of the challenge – with one third of NHS hospitals older than the NHS itself – Exchequer funding alone cannot deliver the investment that is needed. The role of the private sector, through the PFI is vital, as an addition, not as an alternative to mainstream public sector capital funding, in securing the modernisation of the health service. It is allowing more new NHS buildings to be built more quickly.

Our ten year NHS Plan promised over 100 new hospital schemes between 2000 and 2010. 68 major hospital development projects worth over £7.6 billion have already been given the go-ahead. 64 of these projects involve private finance.

A dozen new PFI hospitals are now open with a further dozen under construction. Indeed tomorrow I will officially open the new Worcestershire Royal Hospital, part of the new generation of PFI built NHS hospitals.

PFI is also successfully delivering a range of medium sized community and mental health facilities, as well as smaller scale specialist projects such as heat and power plants, staff residences and IT systems. All areas incidentally where we are looking to expand and develop new investment opportunities.

Almost 100 smaller schemes – each worth up to £25 million – have now reached financial close bringing extra investment into the NHS of over £650 million.

In primary care NHS LIFT is levering in initial investment of £300 million in those parts of the country where provision is poorest and need is greatest.

PFI has proved itself in practice to be an effective way to deliver high quality, patient-focussed services out of modern, purpose designed buildings. PFI has delivered on time and within budget – something that public sector led investment projects haven’t always managed to achieve. And of course the public gains with a legal guarantee that each of these new hospitals must be maintained as new throughout the lifetime of the PFI contract.

Because PFI is delivering the goods and is supporting innovation and new solutions to delivering public services, it is little wonder that countries in Europe and across all continents have started to think about and use PFI, looking to the UK for advice and experience. The success story in the UK is something we should trumpet to the world.

Developing these partnerships has not always been easy of course. And I want to thank the PPP Forum and many of the individual organisations here tonight for working closely with us to bring about many of the improvements to the PFI.

PFI remains controversial. But I believe much of the criticism is just plain wrong.

Initially the criticism was that PFI contracts were “mortgaging the future”; that there were years of paying out for no final return. We ended that objection by ensuring that at the end of the PFI contract, the NHS can own the hospital if that is in the best interests of the local health service and it’s what the hospital wants.

Then, the criticism was that PFI inevitably meant fewer hospital beds. It is true that in the initial rounds of PFI there were fewer beds in the new hospitals than in the old ones they were replacing, but this would have been true whether private or public capital had been used to build these hospitals. Bed losses were not caused by PFI any more than Railtrack’s problems were caused by the wrong leaves on the line.

What led to fewer beds in new hospitals was the prevailing culture in the NHS at the time that more beds were not needed or were somehow bad. A culture that over a period of 18 years or so led to the loss of tens of thousands of beds, long before PFI ever arrived on the scene.

Today – precisely because this Government have ended decades of bed reduction as part of our programme to expand NHS capacity – new hospitals, whether PFI or not, do not get the go-ahead with fewer beds. Today the number of hospital beds is rising not falling. The tranche of 19 major schemes which will go out to market this year will increase NHS bed numbers by 1700 over existing provision.

Then some argued that if PFI wasn’t bad for NHS beds it was certainly bad for NHS staff. We made a commitment in our manifesto that PFI should not be delivered at the expense of the pay and conditions of staff employed in these schemes. The Retention Of Employment scheme provides just the protection that unions representing cooks, porters, cleaners, security and laundry staff have been calling for. And I can confirm tonight that the first scheme incorporating RoE at the Walsgrave Hospital, will reach financial close next month and that all future PFI schemes where soft FM services are included will have to incorporate this new approach.

Next the argument went that the taxpayer was getting a rotten deal. But the National Audit Office in examining PFI schemes has found they will all deliver value for money. And vfm continues to improve. The legal framework and payment mechanism has become standardised. You understand the risks in PFI better. This has been reflected in the improvement in lending terms over the past few years. The better and tighter pricing of risks. When you look at it in the round, PFI is simply a better means of procurement. The NHS no longer has to rely on stop-start funding with each spending round. We can plan for the future. We can plan and invest, rather than as we used to, simply patch and make do.

On all of these counts the sometimes fierce criticism that the PFI has been subjected to has proved seriously wide of the mark. Nonetheless it is all our responsibility – private sector no less than public sector – to explain clearly the benefits of the relationship and the value it can add to improving public services – and to do so energetically and forcefully. When some newspapers, and others, criticise your work, as second rate and a shoddy product, the industry alongside Government surely has a responsibility to defend its work and reputation. Indeed, I understand that, through the PPP Forum, you have plans to market PFI more aggressively.

At the same time we will continue to reform how PFI works not least by standardising the process and bundling smaller schemes into larger deals where we can extract better value for money. We will also take the PPP approach into the provision of pathology, diagnostic and IT services.

And it shouldn’t stop there. I believe this partnership between the public and private sector is more than just about providing bricks and mortar.

Just as we have harnessed private investment through the PFI to modernise NHS buildings, we now look to harness new forms of private sector investment to modernise NHS services. With the NHS still facing major capacity constraints, increasing numbers of NHS patients are already being treated in UK private hospitals as part of the wider effort to get waiting times down for treatment. New partnerships between the public and private sectors are being developed to provide stand-alone surgery hospitals in a new generation of Diagnostic and Treatment Centres. The first DTCs are already open and I expect the first privately-run NHS DTC to be operating by the end of this year. We are also working to bring new providers from overseas into this country in order to further expand services for NHS patients.

Like NHS use of existing private sector providers, this is not a temporary measure. These new providers will become a permanent feature of the new NHS landscape. They will provide NHS services to NHS patients according to NHS principles. And in the process more diversity in provision will open up more choices for NHS patients.

These reforms are about redefining what we mean by the National Health Service. Changing it from a monolithic centrally run monopoly provider to a system where different health care providers – public, private, voluntary and not-for-profit – work to a common ethos, common standards and a common system of inspection. In such a system wherever patients are treated they remain NHS patients because they get care according to NHS principles – treatment that is free and available according to need not ability to pay. This is the modern definition of the NHS.

It is also a fundamental change. Not in how the NHS is funded or the values on which it is founded, but in how it is organised. NHS healthcare no longer always needs to always be delivered exclusively by line managed NHS organisations.

As the NHS Plan indicated a complex organisation, employing over a million people cannot simply be run from Whitehall. For patient choice to thrive it needs a quite different environment. One in which there is greater plurality in local services with the freedom to innovate and respond to patient needs.

You see the Budget on April 17th marked a watershed for the NHS and not just in the scale of the resources or the length of time for which they have been committed. Yes, it is true that against any historic benchmark they are generous with five years of real terms growth averaging 7.5% taking health spending in our country beyond the EU average.

But when we put taxes up to get more resources for the NHS we entered into a new contract with the people of our country. In exchange for extra resources we need to deliver better results. Not just improvements in services for patients but services which are increasingly shaped by the informed choices of patients. Not the old style take it or leave it NHS of the last century but an NHS that is tune with the needs of this century – where services are responsive, where patients have choices, where quality always comes first. This is the challenge we now face.

It is an explicit objective of our reforms therefore to encourage greater diversity in provision and more choice for patients particularly for elective surgery. Hence primary care trusts having the explicit freedom to purchase care from the most appropriate provider – whether public, private or voluntary. From next April we will begin to move to a system of payment by results for NHS hospitals. Resources will follow the choices patients make so that hospitals who do more get more; those who do not, will not. For the first time in the NHS patients will be able to choose hospitals rather than hospitals choosing patients.

Local health services will be independently rated for their performance. There will be more information for patients. Hospitals that are doing less well get more help, those that are doing best will get more freedom. Where there are persistent problems we will step in. Where there is progress we will step back. At one end of the spectrum new management teams – whether from the public, voluntary or private sectors – will be brought in through the franchising process to turn round NHS organisations that are in trouble. At the other the best performers will become NHS Foundation Trusts legally free from Whitehall direction and control. And let me make it quite clear, as we develop our proposals for NHS Foundation Hospitals we will ensure that any change of status for an NHS Trust does not adversely affect the delivery or sponsors of a PFI project which may be associated with it.

The scale of the investment we put in must be matched by the courage to radically reform the NHS. The NHS has great strengths in how it is organised. Its ethos and its staff express the values of our nation. Its primary care services, led by Britain’s family doctors, are the envy of many other countries. However, in addition to its long standing capacity problems, the NHS has great structural weaknesses too – not least its top down, centralised system that tends to inhibit local innovation and its monolithic structure that denies patients choice.

These weaknesses are a product of the health service’s history. They need now firmly to be consigned to its history.

At the time the NHS was being formed as a nationalised industry in the UK elsewhere in Europe many socialist or social democrat governments were creating institutions which favoured greater community ownership over state ownership. Whereas in the UK’s health care system there is uniformity of ownership, in many other European countries there are many not-for profit, voluntary, church or charity-run hospitals all providing care to the public health care system. There are private sector organisations doing the same. As other European nations testify, there is no automatic correlation that tax-funded health care has to mean health care supply run purely by central government. Tax funded health care can sit side by side with decentralisation, diversity and choice.

We can build a broader spectrum of public service providers in our country, across the public and private sectors it is true but including existing and new models of voluntary, and not-for-profit organisations. We should not constrain our reforms to what exists already but look to more radical approaches to public service reform. At the heart of these reforms must be a commitment to form effective partnerships for the benefit of the patients, pupils and public who rely on public services.

Your forum is an important element in strengthening the partnership approach in our country. We share your commitment to widening and deepening these partnerships. I applaud your efforts here tonight and I look forward to working with you as we reform, invest and enhance our public services.

Below is the text of the speech made by Alan Milburn, the then Secretary of State for Health, on 2 July 2002.

It is a pleasure to be here today with you at your Conference. This event -now one of the largest HR conferences in Europe – has quite rightly become one of the major events in the NHS calendar. It’s especially heartening to see so many board members, managers and staff side representatives here today.

We meet during a week when we will celebrate the 54th anniversary of the founding of the NHS. When in all parts of the country the NHS celebrates its achievements by opening its doors to the people it serves. And I want to place on record today my thanks to the staff of the NHS – not just the doctors and the nurses – but all the staff. The porters, the cooks, the cleaners, the scientists, the therapists, the secretaries, the managers. All of the professions who, day-in, day-out, give their all in the service of others. They represent the very best of British public service and I believe that it is time we as a nation stood up and said that we are proud of the work you do.

For me – and for millions in our country – the NHS represents the best of Britain. Its values – of fairness, community, a belief that we really do achieve more together than we ever can alone – make the NHS more relevant than it has ever been. We live in an era where health care can do more – but costs more – than ever before. In this modern world, treatment that is free based on need not ability to pay, makes a tax-funded well-funded NHS the best way to deliver health care to all our people.

Today I want to set out how I believe we in this country can make the NHS the best insurance policy in the world. And I want to describe the challenges we now must meet if we are to realise that ambition.

It is true we face major problems in the NHS. Staff feel them and patients experience them. Old buildings, outdated equipment, staff shortages, long waits for treatment. But after decades of neglect today there is progress underway. Since the NHS Plan was published two years ago the NHS has chalked up achievements in which all parts of the service can share.

In primary care, where waiting times are coming down. Where 10 million people can get out-of-hours care through a single phone call to NHS Direct. Where the prescribing of cholesterol-lowering drugs is up. Where deaths from cancer and heart disease are down.

In mental health services, where in hundreds of communities new crisis and assertive outreach teams are in place, providing services to thousands of vulnerable patients. In older people’s services, where delayed discharges from hospitals are down, where more home-based care is in place and where free nursing care is now the norm.

In ambulance services, where today all but a handful are achieving the emergency response call time, when just two years ago only a handful were achieving that.

In hospital services, where a year ago people were having to wait up to 18 months for their hospital operation. Today, the maximum wait at 15 months is moving towards the NHS Plan guarantee of a maximum 3 month wait. The number of people experiencing long waits for an outpatient appointment is the lowest on record. And for those with the most serious clinical conditions – cancer and heart disease – waiting times are lower still.

Yes, of course, there is a long way to go. The NHS Plan is unashamedly a programme for ten years not just for two. But the NHS today is now beyond first base in delivering it. Each of these achievements has been hard won. There are many more challenges to come. Anyone who says there are no problems is wrong. But those who say there has been no progress have got it totally wrong.

While those who are implacably opposed to the NHS – in principle as well as in practice – accuse it of being a black hole, which simply absorbs public money without return, those critics should instead be pointing at dozens more hospitals, hundreds more beds, thousands more doctors, tens of thousands more nurses – and an NHS that is now on the up. They should go and see what I see in every hospital, health centre and surgery I visit. Not just the investment coming through but the reforms too – in how staff work and how services are organised.

The 10-year journey we mapped out in the NHS Plan is now firmly underway. And now we can move up a gear.

The Budget on April 17th marked in my view a watershed for the NHS. And I don’t just mean the scale of the resources or the length of time for which they have been committed. Yes, against any historic benchmark they are generous. Five years of real terms growth averaging 7.5% will take health spending in our country beyond the EU average – an average which the cynics said we couldn’t even get near. It is worth remembering that just six years ago spending on the NHS was falling in real terms. By 2008 it will have doubled in real terms.

What is more, social services – for too long the poor relation – are to enjoy big rises in investment too. Six years ago spending on social services was falling. Today it is rising by over 3% in real terms. From next April it will double to 6% a year over and above inflation for the next three years.

The Budget laid to rest a decades old fallacy – that we in Britain could have world class health care on the cheap. We can’t.

As the reaction to the Budget has shown, there is overwhelming public support for the extra investment. But there is considerable public scepticism about the ability of the NHS to turn those resources into results for patients. You only have to read some of our newspapers to hear the voices of scepticism. Sometimes it is not just scepticism about the NHS. It is downright hostility. Some in politics and in business say the NHS, precisely because it is run on public service principles, can never actually deliver the goods for patients.

I know those doubters are wrong. Our job is to prove them wrong. And we can only do that by working together. Staff and managers, trades unions and employers. Our job is to use the extra investment to reform the NHS so that it can deliver faster treatment, higher standards and a better experience for patients.

You see when we put taxes up to get more resources for the NHS – as people in the NHS urged us to do – we entered into a new contract with the people of our country. In exchange for extra resources we have to deliver better results. Not just improvements in services for patients, but services which are increasingly shaped by the informed choices of patients. Not the old style “take it or leave it” NHS of the last century, but an NHS that is in tune with the needs of this century – where services are responsive, where patients have choices, where quality always comes first. This is the challenge together we must now meet. I believe we can only meet it by a combination of sustained investment and far-reaching reform.

In the first place, if the NHS is to deliver for patients it has to remain focussed on what counts for patients. And the extra resources must be properly focussed too. The NHS does many things. There will be many pressures from many quarters for many good causes. But none of us will be forgiven if, having raised the resources, we fail to use them to get the results that both staff and patients want to see. Shorter waiting times. Higher clinical standards. Better health outcomes.

The public’s priorities have to be the health service’s priorities. Getting waiting times down in every aspect of NHS care from ambulances to x-rays, from primary care to secondary care. Providing quick, high-quality emergency services, not least in A&E. Making sure that the fundamentals are right – clean wards and safe care. Improving cancer, cardiac, mental health and elderly services.

These are the priorities. In time it is true we will develop further NSFs, but only at a pace the NHS can properly absorb. And to help local health services focus on these priorities, we will not only cut the number of plans that have to be submitted to the centre but, for the first time later this year, give local services three year’s worth of funding so that there is financial certainty for the medium term rather than the short term.

Stability over resources will allow the NHS to implement a sustained programme of expansion. It is time to go for growth. To use the large scale increases in both revenue and capital funding to expand capacity. To shift the balance of services so that more patients can be seen in primary, community and social services, not just in hospitals.

Each of the 28 new Strategic Health Authorities are now finishing their capacity plans. These plans will address how shortages – whether of buildings, equipment or staff – in each part of the country can be plugged. The biggest capacity constraint the NHS faces of course is the shortage of trained staff. That can place existing staff under huge strain. The new Workforce Development Confederations – working with the StHAs – have a key role to play in getting the extra staff the NHS needs into post.

And here too there are good foundations on which to build. The cuts in nurse and GP training places that took place in the 1990s have both been turned into growth. Training places for physiotherapists are up by almost two thirds. The number of applicants for nurse training has more than doubled since 1997. The fall in applicants for medical school places has been reversed. The largest ever increase in medical school places has already delivered 25% more medical students. The NHS Plan target to get an extra 20,000 nurses working in the NHS by 2004 has been hit two years ahead of schedule. Since 1997 the number of nurses working in the NHS has increased by over 30,000, the number of scientists and therapists by almost 14,000 and the number of doctors by 9,500. But there is more to do if we are to realise our latest plans for an extra 15,000 consultants and GPs, 35,000 more nurses, midwives and health visitors and 30,000 therapists and scientists on top of what has already been achieved.

Today I can report on two changes that will help NHS employers not just with recruitment but with retention too.

First, pay for staff. NHS staff deserve fair pay. There is no argument about that. But what I am not prepared to do is to see the large increases in funding for the NHS all go on extra pay. There has to be responsibility in public sector pay, including in the NHS. So I am prepared to invest more, but only in exchange for getting more. That is what lies at the heart of the new consultants contract we have agreed with the BMA. It is a something for something deal. Where consultants can earn more, but only if they do more for NHS patients. And it will be for NHS employers to make sure that is what the contract delivers.

A similar approach applies to the proposed new contract for GPs – the more they do the more they can get. Throughout the NHS better pay must be earned, through improved performance, greater productivity, more flexibility. That is the deal that is on offer through the Agenda for Change negotiations on a new pay system for staff other than doctors. These negotiations have been long and hard. I can confirm today, however, that we have started the final phase of the negotiations. I hope, after consultation, we can start implementing the new system – and a longer term pay deal alongside it – by the start of the next financial year.

Today my department is writing to all NHS Trusts seeking expressions of interest in joining this initial implementation phase. Agenda for Change holds out the prospect of better pay for NHS workers, in exchange for an end to old-fashioned working practices. It will mean an NHS where staff are paid according to the work they do not the job title they hold. So that the senior nurse who takes on more responsibility gets more pay. So that the clerical officer who provides support for a large clinical team gets paid more than the administrator who is in charge of more routine work. We need a system which makes sure people are paid for what they do and encourages them to progress. So that there is a positive incentive to encourage the ambulance technician to become a full paramedic and, in turn, for the paramedic to gain advanced skills so that they can deliver more frontline clinical care to patients.

Agenda for Change is all about transforming and modernising working practices in the NHS. If we can get it right, it will help bring to an end the remaining outdated professional demarcations that stand in the way of patients getting the faster, high quality care they need.

Pay reform alone, however, will not deliver the extra staff the NHS needs. Improvements in care for patients can only happen if there are improvements in the care we give to staff. I have never agreed with those who say that we have to choose between investing in staff or investing in services. In the NHS they are one and the same.

The HR in the NHS Plan, which Andrew Foster launched yesterday at this conference, makes the case for the health service becoming a model employer. The NHS won’t get better treatment for patients unless it offers better treatment for staff. The NHS is already Britain’s largest employer. Our aim should be to make it the best.

In a world where patients rightly want flexibility – over when they are treated – and where staff need flexibility – to balance their family and their working lives – NHS employers need to respond. That is why we put in place the Improving Working Lives programme, so that every part of the NHS offers staff flexi-time, annual hours, flexible retirement or career breaks. Some employers are already doing precisely that – and reaping the benefits through more staff and better staff morale. By next Spring I will be looking to every NHS employer to deliver these changes.

Help with childcare is crucial too. Our manifesto commits us to invest an extra £100 million – from the savings made by abolishing the old health authorities and NHS regional offices – in improved childcare for staff. A start has been made. By this time next year the NHS will have funded double the number the number of workplace nurseries than it did just last year. Staff I have met – whether at the Freeman Hospital in Newcastle or at the Lewisham Hospital in London – have all stressed how important these nurseries are for them in what are inevitably busy lives.

On-site nurseries, while good for some staff, however, are not right for all. I can announce today then a further £6 million to make other forms of childcare – such as after school clubs and holiday playschemes – available to NHS staff. All staff – including our country’s family doctors and their staff – will be eligible for help.

These changes – a new pay system and more support for staff – will help deliver the increases in professionals the NHS needs. By necessity this is a programme for the medium term. It takes 3 years to train a radiographer, and many more to train a consultant. The last few years have seen more staff of course – and there are more to come – but there are still staff shortages. This is particularly the case with doctors in certain key specialities. That is why, over recent months, we have embarked on a major drive to recruit trained medical staff to the NHS from abroad.

Today I can report on progress. Since the global recruitment campaign began we have identified around 500 doctors who are suitable for employment in the NHS. To date around 100 have been matched with NHS Trusts who are interested in employing them. In addition, Sir Magdi Yacoub is heading our efforts to bring highly qualified doctors to this country through a specially devised NHS International Fellowship Scheme. Doctors who come to this country will work in the NHS on Fellowships for up to 2 years. We are initially concentrating on recruiting them to four key shortage specialities – cardiothoracic surgery, histopathology, radiology and psychiatry.

We had expected to recruit 50 fellows in the first phase. In fact, thanks to the help of the medical royal colleges and others, I expect double this number to be short-listed. And I expect the majority of short-listed International Fellows to be in place by the end of 2002.

Last week, I also met with private health care providers from France, Germany and Sweden who are interested in bringing into this country their own clinical teams in order to further expand elective services for NHS patients. We are now in active discussions with several of them. A key stipulation for us is that they bring their own suitably qualified medical staff with them, rather than seeking to take existing NHS doctors out of NHS hospitals.

Some, both from within the NHS and from existing private sector providers, have expressed concern about this plan. Similarly, some have pointed to concerns and even resistance to our proposal to recruit individual overseas doctors into NHS hospitals. I find this surprising. Everyone knows the NHS need more doctors. It is doctors, above all others in this country, who have quite reasonably argued that case. Of course standards – including language skills – have to be right. But what we cannot have – and what I will not accept – is anyone having a right of veto on NHS patients getting the extra doctors they need. There can be no question of restrictive practices, wherever they are found, standing in the way of an expansion in services for NHS patients. I will be looking to NHS employers to always put the needs of NHS patients ahead of any other consideration.

Let me just make this general point: reform is not an optional extra in the NHS. It is as vital as the investment. It is central to the renewal of the health service. To be clear : when it comes to NHS reform our foot will be on the accelerator not, as some argue, on the brake.

So I am planning for the first of a growing number of these new overseas providers to be in place later this year. They will concentrate on elective surgery in hard-pressed specialties in those parts of the country where capacity constraints are greatest. Like NHS use of existing private sector providers, this is not a temporary measure. These new providers will become a permanent feature of the new NHS landscape. They will provide NHS services to NHS patients according to NHS principles. And, in the process, they will open up more choices for patients and more diversity in provision.

All of this is about expanding the services that are available to NHS patients so they can get faster treatment and higher standards. These reforms are also redefining what we mean by the National Health Service. Changing it from a monolithic, centrally-run monopoly provider to a system where different health care providers – public, private, voluntary and not-for-profit – work to a common ethos, common standards and a common system of inspection. In such a system, wherever NHS patients are treated they remain NHS patients because they get care according to NHS principles – treatment that is free, based on need, not ability to pay. This is the modern definition of the NHS.

This new diversity in NHS provision, coupled with sustained expansion in capacity, provides the basis for patients to exercise more choices about their care. As capacity expands so choice can grow. From next April we will begin to move to a system of payment by results for NHS hospitals. For elective services resources will follow the choices patients make so that hospitals that do more, get more; those who do not, will not. Over the next four years, an increasing proportion of each hospital’s income will come to it as a result of the choices patients make. For the first time in the NHS, patients will be able to choose hospitals rather than hospitals choosing patients so marking an irreversible shift from the 1940s take it or leave it, top down service.

That process started this week with patients waiting more than 6 months for a heart operation being offered a choice of a faster waiting time in another hospital which has the capacity to treat them – whether it is public or private, on the doorstep or further afield, in this country or abroad. This week sees the first small but significant step towards our 2005 ambition of a service where all patients needing a hospital operation can choose not just the location of their treatment but when to be treated and by whom.

Of course, different approaches will be needed to bring about improvements say, in emergency care or mental health services. But overall this is the most fundamental change the NHS will have ever faced. Not in how it is funded or the values on which it is founded, but in how it is organised. Patients will be in the driving seat – and not before time.

NHS healthcare no longer always needs to be delivered exclusively by line-managed NHS organisations. The task of managing the NHS becomes one of overseeing a system, not running an organisation. Responsibility for day-to-day management can be devolved to local services. None of this means the abandonment of national standards. Far from it. It is precisely because over these last five years we have put in place such a rigorous framework of standards nationally, that the centre of gravity can now shift to how improvements can be delivered locally.

So while some advocate a false choice between national standards and local autonomy, the truth is that securing improvements in performance requires both.

Later this month local health services will receive a star rating for their performance. Those who are doing less well will get more help. Those that are doing best will get more freedom. Where there are persistent problems we will step in. Where there is progress we will step back. At one end of the spectrum new management teams – whether from the public, voluntary or private sectors – will be brought in through the franchising process to turn round NHS organisations that are in trouble. At the other, the best performers will be able to become NHS Foundation Trusts, legally free from Whitehall direction and control. Three-star trusts will have less monitoring and greater freedom.

The more overall performance improves – as I am confident it will – the more autonomy will be earned across the NHS. That is what I want to see happen. We are at the start of a transition where more and more decisions about the NHS are taken locally rather than centrally.

The reason for this is simple enough. In the end I don’t treat patients. You do. Whitehall doesn’t provide care. That is what hospitals, health centres and surgeries do. And that is where power needs to be located. On the frontline. Our core objective is to shift the centre of gravity in the NHS. It is right that standards are set nationally, but it is wrong to try to run the NHS nationally. This is something which the new strategic health authorities in their relationships with Primary Care Trusts will need to fully understand: the PCTs need to be helped and enabled, not commanded or controlled. In turn, they need to devolve resources to their constituent practices from the growing proportion of the NHS budget the PCTs will control. From 2004, three-quarters of the NHS budget will be controlled by PCTs.

It is time to unleash the spirit of public service enterprise that I know exists in so many parts of the NHS. The simple truth is the NHS works best when it harnesses the commitment and know-how of staff to improve care for patients. That’s why we are putting ward sisters in charge of ward budgets and giving health visitors a greater say over community health budgets. It’s why matrons are being given the power to get the fundamentals of care – like clean wards and good food – right for patients. It’s why nurses are being given new powers to prescribe drugs and discharge patients.

And crucially doctors – with all their skills and knowledge – need to be empowered too. Too many doctors for too long have felt disempowered. Through PCTs there is now a major opportunity for doctors in primary care to shape local services to suit local circumstances. Devolution of budgets to practices will aid that process of clinical engagement. In secondary care there is more to do. Here a new effort to engage doctors in the process of change is needed. Just as PCTs need to devolve responsibility to their front-line staff, so do Trusts. Resources and responsibility need to be placed on the front line. That will become an absolute imperative as patients get greater choice and their choices are backed by resources. Clinical teams need to have the resources and authority to make their services more responsive to patients. And as staff at the James Cook University Hospital on Teesside were arguing with me yesterday, when clinical teams do well, staff need to be rewarded too.

The people at this conference today are the key to delivering these changes. Senior managers in the NHS – working with the NHS trade unions – have a real responsibility to ensure that staff at all levels are involved in the process of change and, crucially, that clinical teams are engaged and empowered.

When they are – as in the collaborative programmes already begun in cancer, coronary and primary care – the results are staggering. More than 90% of practices involved in the primary care collaborative for example are able to guarantee patients an appointment to see a GP within 48 hours. But staff involvement should not have to be left to special programmes in some parts of the NHS. It should be the norm in every part of the health service. Whether it is the doctor or the porter, the engineer or the cleaner, every member of staff in the NHS should be involved in helping make change happen.

In a world where knowledge is king, other industries have long since learned that the successful organisation is one that consistently develops its staff and harnesses their potential. It is a lesson that the NHS has been too slow to learn. But through the NHS University, NHS Learning Accounts, the NHS Modernisation Agency and the Leadership Centre we can now put that right.

Last year, for example, almost 20,000 NHS staff who are currently without a qualification were able to access either an NHS Learning Account or NVQ training or assessment. This year the £60m that has been allocated direct to Workforce Development Confederations will allow a further 90,000 staff to benefit. And when staff benefit, patients benefit too – through people delivering services who are better trained and better able to fulfil their potential.

There is no more important management function in today’s NHS than getting the best from all its staff.

In the end, the NHS is the people who work for it. I want to see an NHS that is true to its principles but reformed in its practices. Where patient choice drives change. And where front-line staff are empowered to make those changes happen.

The Budget this year represents an enormous vote of confidence in all of you, in the whole of the health service.

Some have said that the Budget is a gamble. In some people’s minds it may be. But not in mine. I wouldn’t have fought so hard for the resources we’ve now got if I thought there was a better way of providing health care for our country. For me there is no better way than through the NHS.

And with your help, I know that the best days of the NHS lie in the future, not in the past.

Below is the text of the speech made by Alan Milburn, the then Secretary of State for Health, to the British Association of Medical Managers on 12 June 2002.

It is a pleasure to be here today with you at your Conference. BAMM has been at, the forefront of improvement and innovation within the NHS for many years. The people at this conference today are leading change in all aspects of care and I want to place on record my thanks to you and particularly to BAMM and Jenny Simpson for the leadership you are giving.

I want today to set out the challenges facing the health service. And how I believe that with your drive and support the NHS can rise to meet them.

We are a long way from realising the ambition all of us share for a service which genuinely offers patients the choice of quick high quality care which always puts their needs first. But we are making good progress towards it. Since the NHS Plan was published two years ago the NHS has chalked up achievements in which all parts of the service can share.

In primary care, where waiting times are coming down. Where 10 million people can get out-of-hours care through a single phone call to NHS Direct. Where the prescribing of cholesterol-lowering drugs is up by one third.

In mental health services, where in hundreds of communities new crisis and assertive outreach teams are in place providing services to thousands of vulnerable patients. In older people’s services, where delayed discharges from hospitals are down, where more home-based care is in place and where free nursing care is now the norm.

In ambulance services, where today all but a handful are achieving the emergency response call time, when just two years ago only a handful were achieving that.

In hospital services, where a year ago people were having to wait up to 18 months for their hospital operation. Today the maximum wait at 15 months is moving towards the NHS Plan guarantee of a maximum 3 month wait. The number of people experiencing long waits for an outpatient appointment is the lowest on record. And for those with the most serious clinical conditions – cancer and heart disease – waiting times are lower still.

Yes, of course, there is a long way to go. But the NHS is now beyond first base in delivering the NHS Plan. Each of these achievements has been hard won. There are many more challenges to come. Anyone who says there are no problems has clearly got it wrong. But those who say there has been no progress have got it totally wrong.

While they accuse the NHS of being a black hole which simply absorbs public money without return, these critics should instead be pointing at dozens more hospitals, hundreds more beds, thousands more doctors, tens of thousands more nurses – and an NHS that is now on the up. They should go and see what I see in every hospital, health centre and surgery I visit. Not just the investment coming through but the reforms too – in how staff work and how services are organised.

And nowhere is reform more necessary than in the way we employ our staff in the NHS.

More than 50 years ago in order to establish the National Health Service my predecessor Nye Bevan concluded a contractual agreement with the BMA for the employment of hospital consultants. Today our 26,000 NHS consultants are working within a contract which has largely gone unchanged since 1948.

Most consultants work very hard for the NHS and with tremendous commitment to the principles of the NHS. I acknowledge many of them are working above and beyond their strict contractual obligations to the health service. That is a measure of their commitment which has not always been rewarded in their contracts.

The way consultants have been managed under their existing contract has been far from satisfactory. Too few consultants have proper job plans setting out their key objectives, task and responsibilities and when they are expected to carry out their duties. Even fewer have their performance regularly reviewed. And the issue of consultants’ private practice has remained a legacy of Bevan’s 1948 settlement.

In the NHS Plan, I committed the Government to a new consultant contract to recognise and reward those who do most for the NHS.

I am pleased to be able to tell the Conference that we have today reached agreement with the BMA on a new framework for the NHS consultant contract.

We are jointly proposing with the BMA that the new contract be accompanied by a 10% three year pay deal that we will also be offering to other staff in the NHS alongside reforms to their pay systems.

The new contract is good news for NHS patients and for NHS consultants. It is a something for a something deal. It offers more pay for NHS consultants so that more NHS patients benefit from more of their precious time and skills. Crucially, it recognises and rewards those NHS consultants who do most for the NHS.

It offers consultants a higher starting salary and increases in earnings over the lifetime of their work for the NHS. There will be extra pay for those with the heaviest on-call duties.

Unlike the existing contract, however, where there are automatic increases in salary, in future consultants extra earnings will be dependent for the first time on performance against agreed job plans. The job plan will set out how consultants time should be best used for the benefit of NHS patients. It will secure more face to face sessions with patients with an increase in the time consultants spend on direct clinical care. The current system of fixed and flexible sessions will go to be replaced with a new system in which NHS work is timetabled and typically carried out on site with no non-NHS work permitted during this time. The old NHS working week of 9-5 will also go. Instead NHS employers will be able to schedule consultants work and pay for it at standard NHS rates between the hours of 8am to 10pm Monday to Friday and 9am to 1pm at weekends. This new system of flexible working will be good for both consultants and for patients. As we expand consultant numbers it will make for more efficient and productive use of NHS facilities – such as operating theatres – that could otherwise lie idle. And because NHS employers will be able to buy extra consultant time within these NHS hours at NHS pay rates it will avoid some of the more inflated rates we have sometimes seen over recent years.

The new contract also deals once and for all with the vexed issue of private practice. It removes a long running sore which dates all the way back to 1948. The relationship between private practice and NHS work for consultants has for too long been clouded by lack of clarity, lack of accountability and an inevitable – often unfair – perception that some consultants do not always give full commitment and priority to the NHS and to their NHS patients. The new contract will herald an entirely fresh approach, designed to prevent any perceived or actual conflict of interest, based on one overriding principle: that an NHS consultant’s first and foremost commitment is to the NHS and to their NHS patients.

For the first time it will be explicitly part of the consultants contract of employment that NHS patients come first and the NHS always has first call on consultants time. It does this first of all, by giving exclusive use to the NHS of up to 48 hours of a newly qualified consultants time each week – the maximum the NHS could demand under the Working Time Directive. Under the new contract this exclusive use of newly qualified consultants time will apply for the first seven years of their careers, as we proposed in the NHS Plan. Secondly, the new contract goes further than the NHS Plan because any consultant wanting to undertake work on privately paying patients after seven years of NHS service will need to give the NHS an extra session of four hours a week at normal NHS pay rates. Thirdly, new rules on private practice will set out how NHS commitments must always take precedence over private work with adherence to these new rules enforceable as part of the new contract. Access to higher salary levels will depend on consultants meeting these new standards and, of course, the objectives in the consultant’s job plan being met.

These are fundamental and far reaching changes to how NHS consultants are employed, rewarded and managed. NHS consultants will get more – but only if NHS patients get more. The old contract was a throwback to the world of 1948. The new contract will reform traditional working practices to deliver modern, flexible services to more NHS patients.

So the 10-year journey we mapped out in the NHS Plan is now firmly underway. And now we are moving up a gear.

The Budget on April 17th marked a watershed for the NHS. And I don’t just mean the scale of the resources or the length of time for which they have been committed. Yes, against any historic benchmark they are generous. Five years of real terms growth averaging 7.5% will take health spending in our country beyond the EU average – an average which the cynics said we couldn’t even meet. It is worth remembering that just six years ago spending on the NHS was falling in real terms. By 2008 it will have doubled in real terms.

What is more, social services – for too long the poor relation – are to enjoy big rises in investment as well. Six years ago spending on social services was falling. Today it is rising by over 3% in real terms. We know that more is needed. We have listened to what local government, private sector care homes and local health services have all had to say. So now, spending on social services will double to 6% a year over and above inflation for the next three years.

The Budget laid to rest a decade’s old fallacy – that we in Britain could have world class health care on the cheap. We can’t. The evidence is there for all to see. The run down buildings. The outdated equipment. The failure to invest in modern IT. The shortages of trained staff. The long waits that we inflict on patients.

We are bringing the decades of NHS neglect to an end. With the economy on a stable footing we can now put the NHS on a sustainable footing for the long term. As the reaction to the Budget has shown, there is overwhelming public support for the extra investment. But there is considerable public scepticism about the ability of the NHS to turn those resources into results for patients. A failure to deliver improvements will prompt only one response: not more money in the future for the NHS, but less. Not collective provision of health care, but more individual provision. Not the public sticking with the NHS but the public walking away.

You only have to read some of our newspapers to hear the voices of scepticism. Sometimes it is not just scepticism about the NHS. It is downright hostility. You can hear other voices too. Some in politics or in business who say the NHS, precisely because it is run on public service principles, can never actually deliver the goods for patients.

We have to prove those doubters wrong. And we have to do it together.

When we put taxes up to get more resources for the NHS – as people in the NHS urged us to do – we entered into a new contract with the people of our country. In exchange for extra resources we will deliver better results. Not just improvements in services for patients, but services which are increasingly shaped by the informed choices of patients. Not the old style take it or leave it NHS of the last century, but an NHS that is tune with the needs of this century – where services are responsive, where patients have choices, where quality always comes first. This is the challenge together we must now meet.

We can only meet it by a combination of sustained investment and far-reaching reform.

In the first place, if the NHS is to deliver for patients it has to remain focussed on what counts for patients. And the extra resources must be properly focussed too. The NHS does many things. There will be many pressures from many quarters for many good causes. But none of us will be forgiven if having raised the resources we fail to use them to get the results that both staff and patients want to see. Shorter waiting times. Higher clinical standards. Better health outcomes.

The public’s priorities have to be the health service’s priorities. Getting waiting times down in every aspect of NHS care from ambulances to diagnostics, from primary care to secondary care. Providing quick, high-quality emergency services, not least in A&E. Making sure that the fundamentals are right – clean wards and safe care. Improving cancer, cardiac, mental health and elderly services.

These are the priorities. In time it is true we will develop further NSFs, but only at a pace the NHS can properly absorb. And to help local health services focus on these priorities, we will cut the number of plans that have to be submitted to the centre and, for the first time later this year, give local services three year allocations of cash so that there is financial certainty for the medium term rather than the short term.

Stability over resources will allow the NHS to implement a sustained programme of expansion. It is time to go for growth. To use the large scale increases in both revenue and capital funding to expand capacity. To get the staff, the buildings, the equipment the NHS needs. To shift the balance of services so that more patients can be seen in primary, community and social services, not just in hospitals.

The biggest constraint the NHS faces is shortages of capacity. So in addition to sustained growth in existing NHS provision, we will bring new providers from overseas into this country in order to further expand elective services for NHS patients. They will concentrate on elective surgery in hard-pressed specialties in those parts of the country where capacity constraints are greatest. I expect to see a growing number of these new providers in place beginning later this year. Like NHS use of existing private sector providers, this is not a temporary measure. These new providers will become a permanent feature of the new NHS landscape. They will provide NHS services to NHS patients according to NHS principles. And, in the process, they will open up more choices for patients and more diversity in provision.

These reforms are about redefining what we mean by the National Health Service. Changing it from a monolithic, centrally-run monopoly provider to a system where different health care providers – public, private, voluntary and not-for-profit – work to a common ethos, common standards and a common system of inspection. In such a system, wherever patients are treated they remain NHS patients because they get care according to NHS principles – treatment that is free and available according to need, not ability to pay. This is the modern definition of the NHS.

This new diversity in NHS provision, coupled with sustained expansion in capacity, provides the basis for patients to exercise more choices about their care. As capacity expands so choice can grow. From next April we will begin to move to a system of payment by results for NHS hospitals. Resources will follow the choices patients make so that hospitals who do more get more; those who do not, will not. Over the next four years, an increasing proportion of each hospital’s income will come to it as a result of the choices patients make. For the first time in the NHS, patients will be able to choose hospitals rather than hospitals choosing patients. That process will start this summer when patients waiting more than 6 months for a heart operation will be able to choose a faster waiting time in another hospital which has the capacity to treat them – whether it is public or private, on the doorstep or further afield, in this country or abroad. By 2005, all patients needing a hospital operation will be able to choose not just the location of their treatment but when to be treated and by whom.

Of course, different approaches will be needed to bring about improvements say, in emergency care or mental health services. But overall this is the most fundamental change the NHS will have ever faced. It will mark an irreversible shift from the 1940s take it or leave it, top down service. Patients will be in the driving seat – and not before time.

All of this is a fundamental change for the NHS. Not in how it is funded or the values on which it is founded, but in how it is organised. NHS healthcare no longer always needs to be delivered exclusively by line-managed NHS organisations. The task of managing the NHS becomes one of overseeing a system, not running an organisation. Responsibility for day-to-day management can be devolved to local services. None of this means the abandonment of national standards. Far from it. It is precisely because over these last five years we have put in place such a rigorous framework of standards nationally that the centre of gravity can now shift to how improvements can be delivered locally.

So while some advocate a false choice between national standards and local autonomy, the experience from elsewhere in Europe in the health sector, and from across the developed world in other economic sectors, is that securing improvements in performance requires both.

There is a simple deal on offer here. The better you do the more you get. It is a discipline that needs to work just as much in public services as in the private sector. I have lost count of the number of times I have been told by NHS managers and NHS clinicians alike that the NHS has got to stop bailing out the poorest performers, and instead reward the better performers in the NHS in order to provide the right incentives for innovation and improvement to take hold across the whole of the NHS. And that is precisely what we must do if we are to translate the extra resources into real results for patients.

That is the reason for star rating the performance of local health services so that those who are doing less well get more help, those that are doing best get more freedom and those that are persistently failing feel the consequences. Where there are persistent problems we will step in. Where there is progress we will step back. At one end of the spectrum new management teams – whether from the public, voluntary or private sectors – will be brought in through the franchising process to turn round NHS organisations that are in trouble. At the other, the best performers will become NHS Foundation Trusts, legally free from Whitehall direction and control. Three-star trusts will have less monitoring and greater freedom.

The more overall performance improves – as I am confident it will – the more autonomy will be earned across the NHS. That is what I want to see happen. We are at the start of a transition where more and more decisions about the NHS are taken locally rather than centrally.

It is time to unleash the spirit of public service enterprise that I know exists in so many parts of the NHS.

Some functions will still be carried out – as in any large organisation – at the centre. But rather than trying to drive improvements through top-down performance management, the transition will be towards improvements being driven through greater local autonomy in which PCT commissioning, new financial incentives and the choices that patients make become the driving force for change, with scrutiny through independent inspection. That transition will take time. It will require careful management and a new, more mature understanding about the relationship between government and the health service, where the government does less and the NHS does more.

In the end I don’t treat patients. You do. Whitehall doesn’t provide care. That is what hospitals, health centres and surgeries do. And that is where power needs to be located. On the frontline. Our core objective is to shift the centre of gravity in the NHS. It is right that standards are set nationally, but it is wrong to try to run the NHS nationally. This is something which the new strategic health authorities in their relationships with Primary Care Trusts will need to fully understand: the PCTs need to be helped and enabled, not commanded or controlled. In turn, they need to devolve resources to their constituent practices from the growing proportion of the NHS budget the PCTs will control. From next year, three-quarters of the NHS budget will be controlled by PCTs.

The simple truth is the NHS works best when it harnesses the commitment and know-how of staff to improve care for patients. That’s why we are putting ward sisters in charge of ward budgets and giving health visitors a greater say over community health budgets. It’s why matrons are being given the power to get the fundamentals of care – like clean wards and good food – right for patients. It’s why nurses are being given new powers to prescribe drugs and discharge patients.

And crucially doctors – with all their skills and knowledge – need to be empowered too. Too many doctors for too long have felt disempowered. Through PCTs there is now a major opportunity for doctors in primary care to shape local services to suit local circumstances. Devolution of budgets to practices will aid that process of clinical engagement. In secondary care there is more to do. Here a new effort to engage doctors in the process of change is needed. Just as PCTs need to devolve responsibility to their front-line staff, so do Trusts. Resources and responsibility need to be placed on the front line. That will become an absolute imperative as patients get greater choice and their choices are backed by funds. Clinical teams need to have the resources and authority to make their services more responsive to patients. And as patients choose particular clinical teams, to be rewarded too.

The people at this conference today are the key to delivering these changes. Chief Executives, Medical Directors and PEC chairs have a real responsibility to ensure that clinical teams are engaged and empowered. When they are – as in the collaborative programmes already begun in cancer, coronary and primary care – the results are staggering. More than 90% of practices involved in the primary care collaborative for example are already able to guarantee patients an appointment to see a GP within 48 hours. But staff involvement – particularly to harness the skills and expertise of doctors – should not have to be left to special programmes in some parts of the NHS. It should be the norm in every part of the health service.

That is why I warmly welcome the BAMM initiative – Fit to Lead – being launched at this conference. It is a critical piece of the jigsaw: for the first time, doctors in management and leadership roles will have the tools and the training to demonstrate their competence as medical leaders. It is why over these next two years, through the NHS Leadership Centre programmes, every medical director and over 500 other senior medical leaders in secondary care – mainly clinical directors – will have had the opportunity of attending a national leadership programme.

In a world where knowledge is king, other industries have long since learned that the successful organisation is one that consistently develops its staff and harnesses their potential. It is a lesson that the NHS has been too slow to learn. But through the NHS University – that BAMM has helped pioneer – through the NHS Modernisation Agency and the Leadership Centre we can now put that right.

In the end, the NHS is the people who work for it. I want to see an NHS that is true to its principles but reformed in its practices. Where patient choice and responsiveness to patients drive change. And where front-line staff are empowered to make those changes happen.

The Budget this year represents an enormous vote of confidence in all of you, in the whole of the health service.

Some have said that the Budget is a gamble. In some people’s minds it may be. But not in mine. I wouldn’t have fought so hard for the resources we’ve now got if I thought there was a better way of providing health care for our country. For me there is no better way than a tax funded, well funded NHS.

With your help the best days of the NHS lie in the future not in the past.

Below is the text of the speech made by Alan Milburn, the then Secretary of State for Health, to the NHS Confederation on 24 May 2002.

It’s a year since I last spoke to you. Those twelve months have been a time of great change and major challenge for the NHS and the people who work in it, lead it and manage it.

The old health authorities and regional offices have gone. The new primary care trusts are up and running and the new strategic health authorities are on their way. When these changes were first proposed some said they were too risky. It is certainly true that at a time when the NHS is focussed on delivering a major programme of improvement there were risks associated with making these changes.

But the transition has gone better than many feared. And that is thanks to you. Non-executive directors, managers, clinicians and chief executives. Without you these changes would not have been as well-managed as they have been. At a time when NHS management continues to face enormous criticism from some quarters – and even the occasional critical comment from me – I want to place on record my thanks for the job you have done. Good management is needed now more than ever in the NHS.

I also want to thank the NHS Confederation for the role you have played in taking the agenda of change forward in the NHS. First in Stephen Thornton and now in Gill Morgan you have strong advocates both for the NHS and for NHS reform. I am pleased that we are able to work so closely with you.

Last year I said at your conference that I wanted you to lead the negotiations for a new GPs contract. Those negotiations have gone well and thanks to the hard work both of yourselves and the BMA there is now the very real prospect of a new contract that is not only good for Britain’s family doctors but is good for NHS patients.

I hope we can build on what you have achieved in these negotiations. I want to move to a position where national negotiations over new contracts of employment are undertaken, not by the Department of Health, but by NHS employers acting collectively. Such a change would symbolise what I believe should be a new, more modern relationship between government and the health service – where devolution takes hold, where there is more power in the NHS and less in Whitehall. So that local health services can be more responsive to the needs and choices of patients.

I want to set out today the challenges facing the health service. And how I believe the NHS can rise to meet them. No-one should be in any doubt about the significance of the next few years for the NHS. It is make or break time. Either we prove that the NHS can change to become a service where the interests and choices of patients always come first or we reconcile ourselves to the fact that the NHS – great in principle – simply could not cut the mustard in practice in today’s world. I want to say unequivocally today that I have no doubt the NHS – with your help and leadership – will meet that challenge and can look to the future with confidence.

I say that in part because of the improvements already taking hold. I know too many of the stories in the newspapers are still focussed on what goes wrong rather than what is going right. Nobody in the NHS pretends there aren’t problems – there are – or that staff are not working under real pressure – they are. But the story the NHS should be telling in every community in the land is what it has been doing to put the problems right.

I want to pay tribute today to the staff of the NHS – not just the doctors and the nurses – but all the staff. The porters, the cooks, the cleaners, the scientists, the therapists, the secretaries, the managers and the administrators. They represent the very best of British public service and I believe that it is time we as a nation stood up and said that we are proud of the work you do.

There is good progress to report for which the NHS can justifiably be pleased. And the whole of the NHS can share in the achievements made.

In primary care, where waiting times are coming down. Where 10 million people can get out of hours care through a single phone call to NHS Direct. Where the prescribing of cholesterol-lowering drugs is up by one third. Tens of thousands of patients are receiving the latest drugs to combat cancer, heart disease, Alzheimer’s disease and arthritis. In the past year alone, death rates from cancer have fallen by 2 per cent., and from heart disease by 5 per cent.

In mental health services where in hundreds of communities new crisis and assertive outreach teams are in place providing services to thousands of vulnerable patients. In older people’s services where delayed discharges from hospitals are down, where more home based care is in place and where free nursing care is now the norm.

In ambulance services where today all but a handful are achieving the emergency response call time when just two years agor only a handful were achieving that.

In hospital services where a year ago people were having to wait up to 18 months for their hospital operation. Today the maximum wait at 15 months is moving towards the NHS Plan guarantee of a maximum 3 month wait. The number of people waiting more than 12 months for a hospital operation has fallen by one third in only one year. The number of people experiencing long waits for an out-patient appointment is the lowest on record. And for those with the most serious clinical conditions-cancer and heart disease-waiting times are lower still.

Yes, of course, there is a long way to go but the NHS is now beyond first base in delivering the NHS Plan. Each of these achievements has been hard won. There are many more challenges to come. Anyone who says there are no problems has clearly got it wrong. But those who say there has been no progress have got it totally wrong.

While they accuse the NHS of being a black hole which simply absorbs public money without return these critics should instead be pointing at dozens more hospitals, hundreds more beds, thousands more doctors, tens of thousands more nurses – and an NHS that is now on the up. They should go and see what I see in every hospital, health centre and surgery I visit. Not just the investment coming through but the reforms too – in how staff work and how services are organised.

The 10 year journey we mapped out in the NHS Plan is now firmly underway. And now we can move up a gear.

The Budget on April 17th marked a watershed for the NHS. And I don’t just mean the scale of the resources or the length of time for which they have been committed. Yes, against any historic benchmark they are generous. Five years of real terms growth averaging 7.5% will take health spending in our country beyond the EU average – an average which the cynics said we couldn’t even meet. It is worth remembering that just six years ago spending on the NHS was falling in real terms. By 2008 it will have doubled in real terms.

What is more, social services – for too long the poor relation – are to enjoy big rises in investment as well. Six years ago spending on social services was falling. Today it is rising by over 3% in real terms. We know that more is needed. We have listened to what local government, private sector care homes and local health services have all had to say. So now, spending on social services will double to 6% a year over and above inflation for the next three years.

I know there are many pressures and many demands. As we expand services after so many years of under-investment there will be growing pains along the way. But that is precisely what they are. The pains that come from growth. So no one should fall into the trap of saying that these unprecedented resources somehow bring problems when in fact they present the NHS with a huge opportunity.

The significance of what we have done should not be under-estimated by anyone in the NHS or outside. The Budget laid to rest a decades old fallacy – that we in Britain could have world class health care on the cheap. We can’t. The evidence is there for all to see. The run down buildings. The outdated equipment. The failure to invest in modern IT. The shortages of trained staff. The long waits that we inflict on patients.

We are bringing the decades of NHS neglect to an end. With the economy on a stable footing we can now put the NHS on a sustainable footing for the long term. We believe the time is now right to ask the British people to pay a bit more in tax to make the NHS a lot better for patients.

Make no mistake – when people are putting more in to the NHS they will expect to get more out. And rightly so. None of us can assume public confidence. Now more than ever we have got to earn it. As the reaction to the Budget has shown, there is overwhelming public support for the extra investment. But there is considerable public scepticism about the ability of the NHS to turn those resources into results for patients. A failure to deliver improvements will prompt only one response: not more money in the future for the NHS but less. Not collective provision of health care but more individual provision. Not the public sticking with the NHS but the public walking away.

You only have to read some of our newspapers to hear the voices of scepticism. Sometimes it is not just scepticism about the NHS. It is downright hostility. You can hear other voices too. Some in politics or in business who say the NHS precisely because it is run on public service principles can never actually deliver the goods for patients.

We have to prove those doubters wrong. And we have to do it together.

When we put taxes up to get more resources for the NHS – as people in the NHS urged us to do – we entered into a new contract with the people of our country. In exchange for extra resources we will deliver better results. Not just improvements in services for patients but services which are increasingly shaped by the informed choices of patients. Not the old style take it or leave it NHS of the last century but an NHS that is tune with the needs of this century – where services are responsive, where patients have choices, where quality always comes first. This is the challenge together we must now meet.

I believe that we are in a strong position to do so. NHS funding is secure. There is progress under way. There is a ten year NHS Plan, the cornerstone of all that we do. And there is a major programme of reform to match the programme of investment.

It is these reforms that are so crucial to the future of health care in our country. That are capable of making the NHS precisely the modern service that both patients and staff want to see.

These reforms began in our first term with the introduction of a new national framework of standards. As the Kennedy Report into the tragedy at Bristol confirmed, it was really the absence of national standards that was such a structural weakness in the NHS. Hence the NSF programme, the National Institute of Clinical Excellence, the system of clinical governance, the Modernisation Agency, the Commission for Health Improvement. All of this, designed to prevent bad practice and to spread good practice, so that patients everywhere get the care and treatment they need. Whatever doubts there might be about finer points of detail there is broad consensus that this new national architecture is right for the NHS and most importantly for NHS patients.

With this national framework in place, in this second term our core objective is to shift the centre of gravity in the NHS. As both the NHS Plan and our recent follow up command paper Delivering the NHS Plan make clear, it is right that standards are set nationally but it is wrong to try to run the NHS nationally. It is only frontline clinicians and managers in day to day contact with patients who can transform local services. This is something which the new strategic health authorities in their relationships with Primary Care Trusts will need to fully understand: the PCTs need to be helped and enabled not commanded or controlled. In turn, they need to devolve resources to their constituent practices from the growing proportion of the NHS budget the PCTs will control.

As the NHS Plan indicated a million strong service cannot be run from Whitehall. For patient choice to thrive it needs a different environment. One in which there is greater plurality in local services with the freedom to innovate and respond to patient needs.

It is an explicit objective of our reforms therefore to encourage greater diversity in provision and more choice for patients particularly for elective surgery. Hence primary care trusts having the explicit freedom to purchase care from the most appropriate provider – whether public, private or voluntary. From next April we will begin to move to a system of payment by results for NHS hospitals. Resources will follow the choices patients make so that hospitals who do more get more; those who do not, will not. Over the next four years an increasing proportion of each hospital’s income will come to it as a result of the choices patients make. For the first time in the NHS patients will be able to choose hospitals rather than hospitals choosing patients. That process will start this summer when patients waiting more than 6 months for a heart operation will be able to choose a faster waiting time in another hospital which has the capacity to treat them – whether it is public or private, on the doorstep or further afield, in this country or abroad.

Later this year we will also test in different parts of the country how patients with other conditions can exercise greater choice over where they are treated. We will want to work with the NHS in developing these policies – just as we have done in developing our thinking on NHS Foundation Trusts – so that by 2005 patients will be able to choose not just the location of their treatment but when to be treated and by whom.

This is the most fundamental change the NHS will have ever faced. It will mark an irreversible shift from the 1940s take it or leave it, top down service. Patients will be in the driving seat – and not before time. Of course different approaches will be needed to bring about improvements say, in emergency care or mental health services.

And more choice for patients, of course, requires more capacity in services. Patients can only choose to have an operation if a hospital is able to provide it. Consistent growth in staff numbers and in capital infrastructure will be needed if local NHS services are to expand patient choices and gain from the new system of financial incentives.

The biggest constraint the NHS faces is shortages of capacity. So I can tell this conference today that in addition to sustained growth in existing NHS provision, we will bring new providers from overseas into this country in order to further expand elective services for NHS patients.

A few have already started work in the NHS but as you know it is very early days. I can tell the Conference that we are now in discussions with a number of major overseas providers to bring clinical teams – in particular extra surgeons and other doctors – to this country. I can tell the Conference today, I will be meeting personally with prospective providers from both Europe and America over the course of the next few months with view to encouraging them to invest in England. They will concentrate on elective surgery in hard pressed specialties in those parts of the country where capacity constraints are greatest. I expect to see a growing number of these new providers in place beginning later this year. Like NHS use of existing private sector providers, this is not a temporary measure. These new providers will become a permanent feature of the new NHS landscape. They will provide NHS services to NHS patients according to NHS principles. And in the process they will open up more choices for patients and more diversity in provision.

These reforms are about redefining what we mean by the National Health Service. Changing it from a monolithic centrally run monopoly provider to a system where different health care providers – public, private, voluntary and not for profit – work to a common ethos, common standards and a common system of inspection. In such a system wherever patients are treated they remain NHS patients because they get care according to NHS principles – treatment that is free and available according to need not ability to pay. This is the modern definition of the NHS.

It is also a fundamental change. Not in how the NHS is funded or the values on which it is founded, but in how it is organised. NHS healthcare no longer always needs to always be delivered exclusively by line managed NHS organisations. The task of managing the NHS becomes one of overseeing a system not running an organisation. Responsibility for day to day management can be devolved to local services. None of this means the abandonment of national standards. Far from it. It is precisely because over these last five years we have put in place such a rigorous framework of standards nationally that the centre of gravity can now shift to how improvements can be delivered locally.

So while some advocate a false choice between national standards and local autonomy, the experience from elsewhere in Europe in the health sector, and from across the developed world in other economic sectors, is that securing improvements in performance requires both.

There is a simple deal on offer here. The better you do the more you get. It is a discipline that needs to work just as much in public services as in the private sector. I have lost count of the number of times I have been told by NHS managers and NHS clinicians alike that the NHS has got to stop bailing out the poorest performers and instead reward the better performers in the NHS in order to provide the right incentives for innovation and improvement to take hold across the whole of the NHS. And that is precisely what we must do if we are to translate the extra resources into real results for patients.

That is the reason for star rating the performance of local health services so that those who are doing less well get more help, those that are doing best get more freedom and those that are persistently failing feel the consequences. Where there are persistent problems we will step in. Where there is progress we will step back. At one end of the spectrum new management teams – whether from the public, voluntary or private sectors – will be brought in through the franchising process to turn round NHS organisations that are in trouble. At the other the best performers will become NHS Foundation Trusts legally free from Whitehall direction and control. Three star trusts will have less monitoring and greater freedom.

The more overall performance improves – as I am confident it will – the more autonomy will be earned across the NHS. That is what I want to see happen. We are at the start of a transition where more and more decisions about the NHS are taken locally rather than centrally.

It is time to unleash the spirit of public service enterprise that I know exists in so many parts of the NHS.

As in any large organisation some functions will need to be undertaken centrally but they should be strictly limited. The Department of Health will focus on setting strategic objectives, determining standards, distributing and accounting for resources and securing the integrity of the overall system through for example workforce planning and better IT. Overall the Department will be slimmed down as power and resources are devolved out of Whitehall. Some functions will move from the Department to the new Commission for Healthcare Audit and Inspection as the existing Commission for Health Improvement, National Care Standards Commission and the value for money work of the Audit Commission are brought together. The new CHAI will benefit from the comments that the Confederation and others in the NHS have made about avoiding bureaucracy and fragmentation but it will have the teeth to ensure that money is being spent wisely and that standards are improving.

Rather than trying to drive improvements through top down performance management the transition will be towards improvements being driven through greater local autonomy in which PCT commissioning, new financial incentives and the choices that patients make become the driving force for change with scrutiny through independent inspection. That transition will take time. It will require careful management and a new, more mature understanding about the relationship between government and the health service where the government does less and the NHS does more.

To help smooth that transition there are three areas where I hope government can help the NHS.

First, by focussing on the priorities for patients. If the NHS is to deliver for patients it has to remain focussed on what counts for patients. And the extra resources must be properly focussed too. The NHS does many things. There will be many pressures from many quarters for many good causes. But none of us will be forgiven if having raised the resources we fail to use them to get the results that both staff and patients want to see. Shorter waiting times. Higher clinical standards. Better health outcomes.

The public’s priorities have to be the health service’s priorities. Getting waiting times down in every aspect of NHS care from ambulances to diagnostics, from primary care to secondary care. Providing quick high quality emergency services not least in A&E. Making sure that the fundamentals are right – clean wards and safe care. Improving cancer, cardiac, mental health and elderly services.

These are the priorities. In time it is true we will develop further NSFs but only at a pace the NHS can properly absorb. I know the complaint in the service is that there are too many priorities and too many plans. I sometimes hear people say they cannot see the wood for the trees. It is true that sometimes in the rush to make change happen we have opted for the short cut of a dictat from Whitehall when what was needed was a longer discussion with the service. But in a public service like the NHS there has to be accountability to ensure that public money delivers the results that patients want to see whether that is matrons in charge of wards or shorter waiting times for treatment.

So national standards are necessary. Nobody wants to see a lottery in care where cancer patients are denied treatments in one part of the country which they are entitled to in another.

And targets are necessary – without them history shows that GP and hospital waiting times would not now be falling so consistently. But national standards and targets work best when they are focussed on key priorities.

Today I can announce some changes that will do just that. To begin with we will reduce the number of plans that local health services have to submit to the Department of Health.

At present the NHS is asked to produce scores of plans every year. We will be working with the NHS to review the number of these plans with a view to cutting their numbers by at least two thirds. If we can go further we will. In future planning will focus around delivering the core priorities. The same will be true of monitoring. The concentration will increasingly be on outcomes and outputs. That will allow the volume of overall guidance and monitoring to be reduced. We have already cut the number of circulars issued to the NHS each year and shortened the planning guidance. But senior staff still complain they receive too much clutter that does not help them focus on the core priorities.

So I can announce today that we will establish a panel of senior managers and clinicians from the NHS to act as a firebreak, to vet communications between the Department and local health services so they are limited to those that are absolutely necessary.

Secondly, I want to give the NHS the stability it needs to deliver the NHS Plan. The five year financial settlement that the health service has now got allows us to plan for the longer term particularly to meet the waiting time reductions planned for 2005. I can confirm to this Conference today that when we make financial allocations to PCTs this autumn they will receive funding not for a single year but for three years. Annual planning and annual target setting can become a thing of the past. Local health services will be able to concentrate on what needs to be done to bring about improvements over the medium rather than the short term.

Thirdly, stability will help local health services implement a sustained programme of expansion. It is time to go for growth. To use the large scale increases in both revenue and capital funding to expand capacity. To get the staff, the buildings, and the equipment the NHS needs. To shift the balance of services so that more patients can be seen in primary, community and social services, not just in hospitals.

To help this programme of expansion take hold locally there will be help nationally. As far as IT is concerned we urgently need to reverse almost two decades of failed attempts to modernise the NHS core infrastructure. So I can tell this conference today that later this summer we will bring forward a nationally run IT programme which will be backed by large scale investment.

Alongside the programme to bring overseas clinical teams to England we will be helping to establish the first generation of Diagnostic and Treatment Centres to separate elective from emergency work. Some will be run purely by the NHS, some by the private sector, some through partnerships between public and private.

To help the NHS focus on this longer term capacity building the next three years there will be a minimum amount of earmarking by the centre of local NHS resources. PCTs will have greater discretion over how growing NHS resources are spent.

These changes are all about helping the NHS to deliver. The national standards are in place. The resources are there. The NHS Plan is underway. There is a clear focus on what counts for patients.

We are in transition but the direction of travel is one way. Our supply side reforms – payment by results, freedom of commissioning, power to PCTs, NHS Foundation Trusts, plurality of provision – all lead towards a more devolved and more diverse health service where patients have greater choice.

You know transition takes time. I know that. So does bringing about improvement. Public expectations are high. But they also need to be reasonable. People need to understand that a 10 year plan is exactly what it says. It will take time to be delivered in full. But the NHS has to prove – not in five years time or in ten – but over this coming year that progress is underway in every part of the service.

The Budget this year represents an enormous vote of confidence in all of you, in the whole of the health service.

The ethos of the NHS and its staff express the values of our nation. Some have said that the Budget is a gamble. In some people’s minds it may be. But not in mine. I wouldn’t have fought so hard for the resources we’ve now got if I thought there was a better way of providing health care for our country. For me there is no better way than a tax funded, well funded NHS.

It is a genuine One Nation policy that puts need before ability to pay. Quite simply in a world where health care can do more – but costs more- than ever before the NHS should be supported with our heads as well as our hearts.

With the investment now secured, with the reforms now taking place, with the brilliance of our staff, I can tell this conference without a moments hesitation: I believe the best days of the NHS are ahead of us not behind us. I believe that investment plus reform does equal results.

And above all, I believe that you can do it.

Below is the text of the speech made by Alan Milburn, the then Secretary of State for Health, on 22 May 2002.

Thank you for coming – and particularly to our guests from Denmark, Spain and Sweden. This is a unique event. A gathering of existing “Foundation” hospitals from other European countries and of prospective Foundation hospitals from this country. We have brought you together to learn from the successes that have been achieved elsewhere in Europe. To understand how the autonomy that hospitals enjoy there and that have brought improvements in care for patients could work here. Today’s event takes place against the backdrop of the recent Budget that has put funding for healthcare in Britain on a sustainable footing for the long term. Today the NHS is the fastest growing health care system of any major European country. There is of course a huge amount of catching up to do. After decades when under-investment put Britain behind the rest of Europe now we can have the ambition as country to be up with the best. In Europe and across the developed world, every country faces similar challenges in health care – growing public expectations, advances in treatments, changes in populations. Everywhere reform is on the agenda. There is a wide ranging debate taking place about the future of health care. In essence this debate revolves around two central questions. First how health care is funded. Second how it is organised. On the first the Government’s decision to double health service spending in real terms by 2008 from the position we inherited in 1997 is a declaration of faith in the NHS. With the right level of funding we believe it can be the best insurance policy in the world. No health care system comes for free. Improvements in health care have to be paid for. Through general taxation, social insurance, private insurance, charges or a mix of approaches. We believe that the benefit of a tax-funded well funded NHS is that it is an insurance policy that comes with no ifs and no buts: whatever your illness, however long it lasts you get cover as long as you need it. In a world where healthcare can do more but costs more than ever before, the NHS precisely because it provides care that is free, according to need not ability to pay, should in our view be supported with our heads as well as our hearts. So while others say we should adopt the system of funding from elsewhere in Europe we say those countries have not enjoyed a superior system of funding but a superior level of funding. The lessons to be learned from the rest of Europe are less about how health care is funded but more about what level of funding and what form of organisation is needed to translate resources into results for patients. For what is patently clear is that elsewhere in Europe health care systems have not only benefited from more resources but from a different way of being run. The NHS has great strengths in how it is organised. Its ethos and its staff express the values of our nation.

1. Thank you for coming – and particularly to our guests from Denmark, Spain and Sweden. This is a unique event. A gathering of existing “Foundation” hospitals from other European countries and of prospective Foundation hospitals from this country. We have brought you together to learn from the successes that have been achieved elsewhere in Europe. To understand how the autonomy that hospitals enjoy there and that have brought improvements in care for patients could work here.

2. Today’s event takes place against the backdrop of the recent Budget that has put funding for healthcare in Britain on a sustainable footing for the long term. Today the NHS is the fastest growing health care system of any major European country. There is of course a huge amount of catching up to do. After decades when under-investment put Britain behind the rest of Europe now we can have the ambition as country to be up with the best.

3. In Europe and across the developed world, every country faces similar challenges in health care – growing public expectations, advances in treatments, changes in populations. Everywhere reform is on the agenda. There is a wide ranging debate taking place about the future of health care. In essence this debate revolves around two central questions. First how health care is funded. Second how it is organised.

4. On the first the Government’s decision to double health service spending in real terms by 2008 from the position we inherited in 1997 is a declaration of faith in the NHS. With the right level of funding we believe it can be the best insurance policy in the world.

5. No health care system comes for free. Improvements in health care have to be paid for. Through general taxation, social insurance, private insurance, charges or a mix of approaches. We believe that the benefit of a tax-funded well funded NHS is that it is an insurance policy that comes with no ifs and no buts: whatever your illness, however long it lasts you get cover as long as you need it. In a world where healthcare can do more but costs more than ever before, the NHS precisely because it provides care that is free, according to need not ability to pay, should in our view be supported with our heads as well as our hearts. So while others say we should adopt the system of funding from elsewhere in Europe we say those countries have not enjoyed a superior system of funding but a superior level of funding.

6. The lessons to be learned from the rest of Europe are less about how health care is funded but more about what level of funding and what form of organisation is needed to translate resources into results for patients. For what is patently clear is that elsewhere in Europe health care systems have not only benefited from more resources but from a different way of being run.

7. The NHS has great strengths in how it is organised. Its ethos and its staff express the values of our nation. Its unitary structure gives it great advantages both in overall levels of efficiency and in its focus on public health for example. Its primary care services, led by Britain’s family doctors, are the envy of many other countries. However, in addition to its long standing capacity problems, the NHS has great structural weaknesses too – not least its top down centralised system that tends to inhibit local innovation and its monolithic structure that denies patients choice. These weaknesses are a product of the health service’s history. At the time the NHS was being formed as a nationalised industry in the UK elsewhere in Europe many socialist or social democrat governments were creating institutions which favoured greater community ownership over state ownership. Whereas in the UK’s health care system there is uniformity of ownership, in many other European countries there are many not-for profit, voluntary, church or charity-run hospitals all providing care to the public health care system. There are private sector organisations doing the same. As other European nations testify there is no automatic correlation that tax-funded health care has to mean health care supply run purely by central government. Tax funded health care can sit side by side with decentralisation, diversity and choice.

8. There are important lessons to be learned in this country from the more diverse European model of provision. When I visited the Alcorcon hospital in Madrid last year for example I was struck by the fact that the greater independence it enjoyed from the rest of the state run health system had given patients there faster waiting times and improved outcomes despite dealing with a more severe case mix than comparable state run hospitals. As we will hear from our international colleagues today greater independence has improved performance in hospitals across Europe. Why? Because whatever the profession or walk of life, people perform best when they have control. Giving local organisations greater freedom helps promote innovation and encourages enterprise. In the NHS that is particularly important because of the high level of skills and knowledge that clinicians and managers have. Releasing their talents – and those of other staff – is the key to better health care.

9. Our reform programme for the NHS in this country needs to absorb some of these lessons. As the NHS Plan indicated a million strong service cannot be run from Whitehall. For patient choice to thrive it needs a different environment. One in which there is greater plurality in local services which have the freedom to innovate and respond to patient needs. It is an explicit objective of our reforms therefore to encourage greater diversity in provision and more choice for patients. Hence new providers from overseas being brought into this country – alongside greater use of existing private sector providers – to expand capacity for NHS patients. Primary care trusts having the explicit freedom to purchase care from the most appropriate provider – be they public, private or voluntary. Hospitals to be paid by results with resources following the choices that patients make so that hospitals who do more get more; those who do not, will not.

10. These reforms are about redefining what we mean by the National Health Service. Changing it from a monolithic centrally run monopoly provider to a system where different health care providers – public, private, voluntary and not for profit – work to a common ethos, common standards and a common system of inspection. In such a system wherever patients are treated they remain NHS patients because they get care according to NHS principles – treatment that is free and available according to need not their ability to pay. This is the modern definition of the NHS.

11. It is also a fundamental change. Not in how the NHS is funded or the values on which it is founded, but in how it is organised. NHS healthcare no longer needs to always be delivered exclusively by line managed NHS organisations. The task of managing the NHS becomes one of overseeing a system not running an organisation. Responsibility for day to day management can be devolved to local services. None of this means the abandonment of national standards. Far from it. It is precisely because over these last five years we have put in place such a rigorous framework of standards nationally that the centre of gravity can now shift to how improvements can be delivered locally. So while some advocate a false choice between national standards and local autonomy, the experience from elsewhere in Europe in the health sector and from across the developed world in other economic sectors, is that securing improvements in performance actually requires both.

12. As both the NHS Plan and our recent follow up command paper Delivering the NHS Plan make clear, it is right that standards are set nationally but it is wrong to try to run the NHS nationally. It is only frontline clinicians and managers in day to day contact with patients who can transform local services. That is why Primary Care Trusts are being given control over 75% of NHS resources. Why we look to PCTs in turn to devolve to their constituent practices. It is the reason for star rating the performance of local health services so that those who are doing less well get more help and those doing best get more freedom. And it is why we want to set up NHS Foundation Trusts with the local flexibility and freedom to improve services for patients without day to day interference from Whitehall.

13. In January this year I announced that we were developing plans to enable the best performing NHS organisations to become NHS Foundation Trusts. Since January my officials have been working with the chief executives of three star trusts and others to develop these ideas. They have also been looking at how services are organised in other countries and the lessons we can learn from them.

14. I can set out today how we now plan to proceed to establish NHS Foundation Trusts. First of all in the summer we will set out how NHS trusts can apply for foundation status and the criteria that will be used to assess applications. Decisions on the first NHS Foundation Trusts will be made in the autumn. The first wave will be selected from those that achieve three star ratings this July. They will need to demonstrate that they have the management capability and clinical support to make a success of NHS Foundation Trust status, and that they have the support of the local PCTs who commission services from them. They will need to show how they will use their freedoms to demonstrate rapid progress in delivering the NHS Plan.

15. A number of existing three star Trusts have given firm expressions of interest in joining the first wave of NHS Foundation Trusts. They are Northumbria Healthcare NHS Trust, Peterborough Hospitals NHS Trust, Norfolk and Norwich University Hospital NHS Trust and Addenbrooke’s NHS Trust.

16. If these Trusts are successful in meeting the criteria they and others who come forward will start operating as shadow NHS Foundation Trusts in April next year. I can also say that we intend to legislate to enshrine in statute the freedoms and responsibilities that NHS Foundation Trusts will have. Subject to legislation I expect the first of them to become fully operational before the end of next year. As performance across the NHS improves so more autonomy will be earned by more local NHS organisations.

17. NHS Foundation Trusts will operate in a quite different way from existing NHS Trusts. NHS Trusts were supposed to guarantee self governing status. In fact they were at best a half way house and at worst a sham. Trust status promised independence but in practice didn’t guarantee it. In reality their legal status – with direct accountability to Ministers – meant that Whitehall continued to hold on to the purse strings, maintained the powers of direction and continued to run the NHS as it had been since 1948. The challenge now must be to genuinely free the very best NHS hospitals from direct Whitehall control.

18. We plan to do this firstly by removing the Secretary of State’s powers of direction over NHS Foundation Trusts. Instead of being line managed by the Department of Health, they will be held to account through agreements and cash for performance contracts they negotiate with PCTs and other commissioners as well as through independent inspection. These contracts will reflect national priorities around reduced waiting times and improved clinical outcomes. The expectation must be that the greater freedoms that NHS Foundation Trusts will enjoy will help them exceed national performance targets but that will be a matter for local not national negotiation. Those that perform well will benefit from the system of payment by results and patient choice that we announced in Delivering the NHS Plan.

19. There will of course need to be appropriate safeguards in place. NHS Foundation Trusts will operate according to NHS principles. They are there to serve NHS patients by providing high quality care that is free and delivered according to need not ability to pay. They will be subject to inspection by the new Commission for Healthcare Audit and Inspection (CHAI). The Commission will play a key role in assessing performance and in reassuring patients and the public that national standards of service and quality have been met wherever care is provided. Strengthening arrangements for audit and inspection through CHAI are an essential complement to increased provider plurality, including the setting up of NHS Foundation Trusts.

20. CHAI – rather than the Department of Health – will therefore take on the function of regulating NHS Foundation Trusts and stepping in to take necessary action to protect patients and the public.

21. Secondly, we intend to establish NHS Foundation Trusts as free-standing legal entities which are indeed free from direction by the Secretary of State. We are currently exploring a number of options about how best to establish NHS Foundation Trusts in law. In particular there has been growing interest in recent years in developing the concept of the public interest company – a middle ground within public services between state-run public and shareholder-led private structures. Organisations as diverse as the Co-operative Movement and the Institute of Directors have made the case for such organisations on the basis that they have a clear public service ethos and are not for profit. These organisations are based firmly within the public service with their assets remaining within public ownership and being protected against takeover by the private sector. They are toughly regulated but not externally controlled. They open up more potential for both staff and public involvement.

22. We are continuing to actively explore the best option here based on a firm principle that should guide us. As national control over day to day management of these NHS hospitals ceases so local community input will need to be strengthened. NHS Foundation Trusts will have the ability to develop governance arrangements that enable patients and the public to play a more effective part in the running of the NHS at a local level. The NHS is a national service but it is delivered locally. The relationships that count most are those between the local patient and the local clinician, the local community and the local hospital. 1948 silenced the voice of the local community in the NHS. It is time it was heard again.

23. We are exploring how best this could be done. One potential model would involve local members of the community sitting alongside other key stakeholders such as hospital staff, local businesses, local authorities and, where appropriate, universities as lay governors. In this model day to day management of the NHS Foundation Trust would rest in a separate board including the chief executive and other senior staff such as clinical leaders. However they are constituted NHS Foundation Trusts will remain part of the NHS family but with local freedom from national control.

24. Thirdly, then, NHS Foundation Trusts will be freed up from having to respond to an excessive number of prescriptive central demands, guidance and reporting arrangements. As free-standing organisations they will be held to account through the commissioning process rather than through day to day line management from Whitehall. They will have the freedom to retain proceeds from land sales to invest in new services for patients. We are exploring how we can increase their freedom to access finance for capital investment under a prudential borrowing regime modelled on similar principles to that being developed for local government. The intention is that they will have greater freedom to decide what they can afford to borrow and they will be able to make their own decisions about future capital investment. They will be able to use the flexibilities of the new pay system we are currently negotiating to modernise the workforce including developing additional rewards for those staff who are contributing most. Exercising these freedoms will give NHS Foundation Trusts precisely the sort of autonomy that is commonplace for hospitals elsewhere in Europe.

25. Some say this is a form of backdoor privatisation. That is utter nonsense. There will be a lock on the assets of NHS Foundation Trusts so that they work for NHS patients. Their purpose will be to provide NHS services to NHS patients according to NHS principles. They will be governed by people from the local community instead of by the state or by shareholders. They will be part of the wider NHS family. They are all about unleashing the spirit of public service enterprise that exists within the NHS but for too long has been stifled.

26. NHS Foundation Trusts will help create a radically different health service. One that is true to its values but is changed in its structures. One that learns the lessons from what has worked elsewhere in Europe. I want to thank our international speakers who are here today to share their experience and their insights with us. I know that there is more we can learn from them as we develop our approach. I would also like to thank people from the NHS who have been working with us to develop our thinking on NHS Foundation Trusts. The development of policy in this area I believe exemplifies a new way of doing business between the Department and the NHS. It is one that I hope we can build on for the future.