As chairman of Monitor, Steve Bundred believes the health white paper will leave the NHS in better shape than ever before. But, he tells Alison Thomas, the proposed reforms represent a complete change in culture – and there are some challenging times ahead

Battle-scarred healthcare veterans may claim the NHS has been in an almost constant state of flux over the years – but there is no denying that the new government's health white paper heralds the most significant shake-up for decades.

And these are reforms that should be welcomed and supported, says Steve Bundred, chairman of foundation trust regulator Monitor, which is set to take on a bigger and wider role under the proposed changes.

The health reforms are intended to bring culture change as well as organisational change to the NHS and dovetail with the government's more general championing of local decision-making and removal of Whitehall diktats. Bundred argues they provide an opportunity for innovation as well as improved efficiency. But he cautions that the biggest culture change will be faced by the Department of Health itself as it "lets go" and devolves decision-making to GP commissioners and hospital trusts.

"That letting go is not going to be without its challenges," Bundred says. "It is not a thing that Whitehall has done well in the past, but in the past it hasn't always been under the same pressure as it is likely to be put under by this government.

"I don't doubt for a single moment that the desire of the Secretary of State to have a more devolved, more independent, more autonomous healthcare system is absolutely genuine. I believe that culture change will be brought about over a period of time, not least because that same desire is manifest in other areas of government policy."

Monitor is expected to become an economic regulator on the lines of an Ofgem or Ofwat, with three principal responsibilities: promoting competition and ensuring it operates effectively between different providers; setting tariffs – the pricing structure for healthcare; and ensuring that patients don't suffer if organisations get into difficulties.

There is some overlap with health and social care regulator the Care Quality Commission (CQC), with joint responsibility for licensing foundation trusts, and with the proposed new National Commissioning Board supervising GP commissioners, with joint responsibility for setting tariffs.

With a consultation period just completed, there are many details yet to be filled in on the white paper proposals. But Bundred appears confident that Whitehall can be dissuaded from meddling once the reformed, autonomous NHS system is up and running.

"Monitor has a pretty good track record of demonstrating its independence, over a period where successive ministers have blown hot and cold about how independent they wanted the foundation trust sector to be," he says.

"There is no doubt that the present government is fully committed to a devolved healthcare system.

The proposal to create a national commissioning board itself is an important indicator of the desire of ministers to put those sorts of decisions at arm's length from the Department of Health.

"I believe that if those proposals are followed through successfully they should produce better outcomes for patients.

"We have seen the benefits of competition in other sectors in improving quality, driving innovation and of course reducing cost, and there's no reason why those benefits can't be secured in the NHS as well."

Organisations in the new, more diverse NHS will also be expected to collaborate to produce the best outcomes for patients, but Bundred does not see a contradiction. "There is not necessarily conflict between competition and collaboration and we see examples of both in the NHS at present. And for the foreseeable future I think that where there is competition it will be between different publicly owned providers, rather than between public and private providers."

The private sector represents such a "tiny" pro-portion of UK healthcare that he expects it to make relatively little impact. "Even if it trebled or quadrupled in size it would still be very small in relation to the overall health economy because it is starting from such a low base."

That suggests perhaps that the rescue plan for the debt-ridden Hinchingbrooke Hospital, Cambridgeshire, to be run by a private contractor, may be unlikely to be replicated. "There are special factors at play in Hinchingbrooke. It's a unique position and I simply don't know if it there will be other examples of that kind."

But the squeeze on public spending will add to pressures on the NHS and, despite the government pledge to protect health spending, the sector is "feeling the pinch", Bundred says. Monitor's review of spending plans earlier this year found that for the first time foundation trusts are predicting a reduction in income over the next three years, and are aiming for an average 4.4 per cent efficiency savings this year – "more ambitious than they have been used to achieving in the past".

"There is no doubt the NHS welcomes the degree of protection from spending cuts that the government has granted it. The difficulty is that there are other pressures driving up costs. Inflation in the NHS is greater than in other parts of the economy, the population is increasing, so the NHS needs a bit of growth just to stand still. And of course it will have less of it."

But Bundred says managers are becoming better prepared. "One of the reasons we found our review quite reassuring in some respects is that we did think trusts were being more realistic than they had been in the past about the prospects they face. On the whole the sector is in reasonably good shape, but it faces a very challenging few years ahead.

"One of the challenges for Monitor will be to ensure that while preparing for our new role and ensuring the success of the overall programme of reform, we don't lose our focus on our existing responsibilities to ensure that foundation trusts are well run and financially sound."

Health Secretary Andrew Lansley expects all hospitals to become foundation trusts within the next four years – a timetable that Bundred concedes is also "challenging". "There obviously will be some trusts that are going to struggle," he says, welcoming a Department of Health move to set up a special unit overseeing strategic health authorities in helping hospitals along the path to foundation status.

"It's worth saying that the tests we apply in assessing trusts for foundation status are necessarily high and we don't intend to lower that bar, nor have we been under any pressure to do so," he adds.

So could mergers with existing successful foundation trusts be a way forward for the stragglers?

"That's always a possibility but there has to be a proper business case for it," Bundred replies. "We certainly wouldn't encourage foundation trusts to engage in mergers or acquisitions without good reason."

He is equally cautious about suggestions that foundations could turn into employee-owned social enterprises. "We would want adequate safeguards to ensure that they didn't fall prey to producer capture and continued to operate in the interests of patients and taxpayers and not of staff. That is not to say there can't be alternative models for the governance of foundations."

But Bundred does not see a conflict between the growth of GP commissioning and independent foundations on the one hand, and the need for regional and national planning of NHS resources on the other.

"Ultimately, what we are seeing here is a shift from the NHS being thought of as an institution to it becoming a system, and how that system develops in future will be determined largely by the decisions made by local GP consortia who have the commissioning responsibilities. That does reflect a view that permeates other aspects of coalition government policies that decisions are best made as close to the people affected by them as possible.

"GPs, because they are at the front end of clinical practice, of course will recognise that some specialisms will need to be provided on a regional or sub-regional basis. And there will be an ongoing dialogue between GP consortia and the national commissioning board from which they will draw their funds. So I think we should have some faith in the professionals to work these issues through."

He expects close relationships between the various regulators, commissioners and providers in this new NHS, and says lessons have been learned from Mid Staffordshire, where various regulators visited the trust over several years without anyone joining up the dots and recognising the scale of the problems at Stafford Hospital.

"One of the reasons why Monitor's relationship with CQC is so close now is precisely because one of the lessons both organisations recognised from Mid Staffordshire was that the dialogue between us hadn't been effective enough."

He says the quality of management and leadership in the sector "has improved and is improving".

"That is not to say it couldn't get better still," Bundred adds. "We have been giving out some tough messages of late around, for example, the slippage in cost improvement plans in a substantial portion of the sector. And the messages we get from auditors about the quality of internal audit is that it is not as good in the NHS, on the whole, as they see in other sectors."

Trusts have responded well to Monitor scrutiny, he says, as well as to the Audit Commission's 2009 Take it on Trust report highlighting the need for better governance. That of course brings us on to the Audit Commission, one of the highest-profile victims of the bonfire of the quangos, and where Bundred was chief executive until six months ago. He refuses to be drawn on its abolition, saying that he signalled his intention to leave over a year ago, and will leave it to those still there to comment.

As for the future, he says there is "huge enthusiasm" in the NHS for foundation status and the freedoms it brings, and predicts that concerns over reform will diminish as the details are fleshed out.

In fact, reform will provide more opportunity to harness the creativity, enthusiasm and innovation of staff, he argues. 'That has been the lesson of foundations – that where trusts have achieved foundation status it has given the freedom to innovate and they have made good use of that freedom.

"This is an ambitious programme of reform, heading on the right lines. If it achieves its objectives taxpayers as well as patients will benefit."

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