12 December 2008
By Tash Shifrin
NHS organisations were struggling to assess the impact of new funding arrangements this week, as the long-delayed primary care trust allocations and operating framework were finally published.
The allocations, announced by Health Secretary Alan Johnson on December 8, set out an average 5.5% increase for both 2009/10 and 2010/11 — an £8.6bn total rise that was widely welcomed. The NHS operating framework followed the next day.
But the new NHS treatments tariff and details of the 'market forces factor', which compensates trusts for local variations in costs, have yet to be published. Background 'exposition' papers showing how the allocations were derived from a complex formula had not been made available as Public Finance went to press.
Healthcare Financial Management Association spokesman Chris Calkin said: 'The two-year increase is positive because it gives an amount of certainty on funding.'
But the delay to the tariff and market forces factor information meant 'we can't assess the impact on individual trusts and PCTs', Calkin said. 'It could swallow up all the money — or they could come out ahead.'
As expected, the operating framework included permission for PCTs to draw down £800m of its £1.75bn surplus 'in a planned way' over the next two years.
But the discrepancy between the growth in PCT allocations and the markedly smaller uplift to the tariff announced in the operating framework — 1.7% this year and up to 1.2% in 2010/11 — will put a squeeze on trusts.
NHS Confederation policy director Nigel Edwards said: 'I think quite a lot of providers will have taken a big gulp when they saw that uplift.'
He warned that the Treasury's 'top-down modelling of efficiency savings' did not always match the reality of what was possible.
Other planning difficulties were highlighted by King's Fund chief executive Niall Dickson, who warned: 'The process and timescale for bringing PCTs' budgets in line with the formula has not been made clear.'
This 'could be worrying' for managers trying to plan for budget changes as the NHS headed for a spending squeeze from 2011/12.
Controversy also surrounds the effect of the new funding arrangements on health inequalities.
In a report, the independent Advisory Committee on Resource Allocation, which reviewed the funding system, said weighting for health inequalities should be left to ministers as there was 'no technical way' to assess this. The Department of Health said ministers had applied a formula to 15% of spending 'to keep the distribution of funding between the most and least deprived areas in line with the previous formula'.
But David Stout, director of the PCT Network, noted that 'some PCTs with marked health inequalities seem to be faring less well in this settlement than in other years', citing Heart of Birmingham and the east London PCTs of City and Hackney and Tower Hamlets.
Without the still unreleased background papers, it was 'hard to know' what had caused the change. But Stout suggested that the balance between age-related and deprivation-related funding might have shifted in favour of areas with older populations. He told Public Finance: 'We need to keep an eye on the impact of this over time.'
PFdec2008
