Health department spent £585m on consultants

The Department of Health has spent £585m – the cost of building a district general hospital – on management, legal and financial consultants over the past four years.

The half-a-billion pound bill “is a huge amount of money”, Kevin Barron, chairman of the Commons health select committee, said. The committee has been pressing the department to disclose the sum and Mr Barron said now that it was public “we will be returning to the issue”.
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Spending on management consultancy by the NHS itself is not included in the total – an amount that the Management Consultancies Association estimates to have run to about £300m last year, although that figure is likely to include the department’s own spending.

The Conservatives are promising to slash Whitehall’s expenditure on consultants if they win the general election, with the cash earmarked to help introduce a council tax freeze. They are also promising to cut the cost of Whitehall itself by 30 per cent over a Parliament.

However, the level of spending on consultancy services “shows that, at least in part, the department does not have the capacity and staffing to do the work it needs to do,” warned Alan Maynard, professor of health economics at York university, and an adviser to the select committee.

Under pressure from the committee, the department has agreed to start publishing the NHS’s own spending on consultancy, having originally argued that to do so would amount to “micromanaging” the NHS.

The figures for the department’s consultancy expenditure for the past four years show that since 2005/06 it has spent £133m, £205m, £132m and £125m last year – a total of £585m.

A breakdown has been provided for last year only. Then, £93m was spent on general consultancy, about £23m on financial and commercial advice and some £8m on legal consultants. Just over £19m of the total was spent on Connecting for Health, the NHS’s £12bn IT programme.

The spending is spread over more than 120 consultants and advisers. The top three earners were Ernst & Young at £12m, McKinsey at £9m and QI Consulting at £7.1m. The top five, who include PA Consulting and KPMG, accounted for 30 per cent of the total.

Expenditure over the past four years is marginally distorted by the £205m spent in 2006/07 when the department bought in private sector “turnround teams” to sort out the NHS’s then £1bn deficit.

“That was an important thing to do,” Mr Barron said, “and Patricia Hewitt’s determination to sort that out was one of the bravest decisions a secretary of state has taken for a long time”.

But even allowing for that, spending is running at about £130m a year “and we do have real concerns about the ongoing cost of all this,” Mr Barron added.

The MCA argues that its estimate of total spending by the NHS amounts to less than 0.3 per cent of the NHS’s total budget. It is currently agreeing a concordat with the department aimed at ensuring that the NHS gets value for money from consultancy contracts.
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