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11.9 pm

The Minister for Public Health (Ms Tessa Jowell): I begin by congratulating my hon. Friend the Member for Forest of Dean (Mrs. Organ) on having secured this

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debate on a matter that is of such importance to her constituents and those of other hon. Friends who represent constituencies in Gloucestershire who are in the Chamber this evening.

I shall begin by setting out how the Department allocates money to the national health service to achieve a fair and equitable distribution of NHS resources between individual health authorities, and what we are doing to improve this system. That will help to explain why Gloucestershire health authority has received less of an increase in its funding than other health authorities, although it is important to emphasise that Gloucestershire received a real-terms increase of nearly 3 per cent. in its budget for this year. I shall also briefly address the means by which the health authority is balancing its finances. In addition, and importantly, I shall recognise some of the achievements of the health authority and highlight some of the investments in local health services to which my hon. Friend referred.

My hon. Friend has made the centrepiece of her argument her concern about the adequacy of Gloucestershire health authority's financial allocation for the present financial year. I shall discuss the authority's finances shortly but I should like to say a few words about the way in which health authority money is currently allocated. The Department of Health uses a national weighted capitation formula as the basis for allocating hospital and community health services' revenue to individual health authorities. The underlying principle of the formula is to distribute resources as equitably as possible, based on the health care needs of the local population.

The national formula uses the most recently available population figures, which are then weighted, or adjusted, to take account of three factors. The first of those is an adjustment that is made based on the age structure of the population. The second is the health needs of the population, over and above those accounted for by age. The third is unavoidable variations in the local costs of delivering services.

As well as the size of the population, its age structure is important as levels of sickness and use of the health services obviously varies by age group. The very young and the elderly, who are not evenly distributed throughout the country, make more use of health services than the rest of the population. A wide range of health and socio-economic indicators associated with the need for health care are included in determining the second element of the weighted formula. Even when differences in the age structure are taken into account, populations of the same size and age distribution display different levels of morbidity.

Lastly, to be equitable, the formula must take account of the fact that the cost of providing health care is not the same everywhere due to the impact of local market forces on staff costs and the costs of land and buildings.

Weighted capitation targets are not fixed in time but are recalculated annually to determine each health authority's relative share of the overall resources that we are able to make available to the NHS. Changes to health authorities' targets are normally the result of routine updating to take advantage of the latest available data such as population figures, boundary changes or changes to the formula.

The weighted capitation formula is kept under constant review and last year we made four changes to it. The one that is of most relevance to the debate was the

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introduction of a geographical cost adjustment for emergency ambulance services. This arose from an exercise to examine the effects of rural sparsity on the cost of providing certain services. While a geographical cost difference was found for emergency ambulances, no such differences were found in the cost of, for example, providing accident and emergency services and patient transport services. It was recommended by the resource allocation group that we introduce an adjustment to reflect the costs of emergency ambulance services and we did so.

My hon. Friend has made it clear that she considers that the formula needs to be changed as she believes that it fails adequately to cover the costs of providing health care in rural areas. She is not alone in raising concerns about the current formula. She will be aware that on 10 November 1998 we announced a wide-ranging review of the formula used to make cash allocations to health authorities and primary care groups and trusts. The aim is to produce a new, fairer formula more suitable for the NHS of the future. The review will entail assessing the health care needs of rural populations and identifying any unavoidable extra costs associated with providing health services in rural areas. There can, of course, be no guarantee about the outcome of the review.

There will be a freeze on further changes to the existing formula to maximise stability and certainty for health authorities and primary care groups while allowing the wide-ranging review to take place. Other than routine data changes, the freeze will last until at least the financial year 2001-02.

The target figures derived from the weighted capitation formula are intended to provide a fair and equitable share of NHS resources for each health authority. Although Gloucestershire health authority's target allocation for 1999-2000 was just over £322 million, its actual allocation was £334.59 million. That means that the authority will receive more than £12.4 million, or 3.85 per cent. more than the weighted capitation formula would suggest was its fair share of the available NHS resources.

In order to ensure that all health authorities move closer towards receiving their fair share, authorities that receive less than their target allocation have received a higher increase than authorities that are above their target.

Gloucestershire health authority is currently in fifth place among health authorities that have exceeded their target. Consequently, in common with another 18 health authorities across the country, it has received the minimum growth of 2.9 per cent. in its financial allocation for this year. It is important to emphasise that despite the need to move the authority closer to its weighted capitation target, the health authority has received a £17 million cash increase for the present financial year.

Mr. Drew: A particular problem in Gloucestershire, which affects the Forest of Dean especially, is not just the total allocation, but the way in which it is distributed. The way in which Gloucestershire has divvied up the money among the various districts has been extremely unfair. Will my right hon. Friend comment on that and suggest how we could put matters right, given the difficulties within the total budget?

Ms Jowell: I thank my hon. Friend for that intervention. I know how assiduous he has been in pursuing the case of his constituents, and the extent to

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which they are affected by the decisions of the health authority. Allocations are made to health authorities on the basis of the formula that I outlined. Health authorities can determine how the money is spent, according to their judgment of local need. It would be extremely unpopular if Ministers were to prescribe further the way in which allocations are spent locally. My hon. Friend will have to pursue the matter with the health authority. I know that he will do that vigorously.

I recognise that as a result of the financial allocation, the health authority needs to make substantial financial savings of £5.4 million to remain in financial balance. The authority has already made good progress towards achieving that target. It has been working closely with the local NHS trusts and primary care groups to ensure that the savings are achieved with as little impact on patient care as possible, although I appreciate that some of the decisions that have already been made were unpopular, as some of my hon. Friends have reflected.

My hon. Friend the Member for Forest of Dean raised, in particular, the changes that have already taken place to patient transport services, and those that are proposed for chiropody services. I entirely endorse her important point that chiropody services are an essential facility for many elderly people, enabling them to maintain their independence and their mobility. Not for one moment would I underestimate the importance of those services. However, having pursued those particular concerns with the health authority, I have been assured that all those people with a medical need for those services will continue to receive them and that the authority will continue to review the eligibility criteria for them. In addition, my hon. Friend was concerned about the impact that the savings announced last year to the health visiting budget would have on the elderly. However, I understand that the savings have already been made and were achieved without making a direct impact on patient care.

My hon. Friend has called for more money to be made available to the health authority, either as a special assistance grant or through allowing flexibility in the use of the modernisation fund. Following his meeting with my hon. Friend in March, my hon. Friend the Minister of State agreed to the flexible use of the modernisation fund money, and £1 million of the £2.7 million allocated to support the delivery of waiting list targets will be used to offset the costs of other essential developments. I am sure that my hon. Friend acknowledges and welcomes that flexibility and that she also welcomes the new developments in the delivery of health care locally that will be enabled by that money.

Before closing, I point out how important it is to recognise the achievements of the NHS in Gloucestershire--I am sure that all my hon. Friends who represent constituencies in the county would want to do that. Last year, we saw the highest-ever level of activity by the NHS in Gloucestershire. The latest available figures show that in the first nine months of the last financial year there were more than 85,000 finished consultant episodes; that represented a rise of more than 7.8 per cent. over the same period in the previous year. As a result of that increase, the number of patients from Gloucestershire waiting for an operation fell by more than 22.5 per cent. in the year since March 1998. There were

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slightly more than 8,000 patients waiting for an operation at the end of March; of those patients, only 40 had been waiting more than 12 months for treatment.

I pay tribute to the professionalism, dedication and effort of the NHS staff who have achieved that result. It is indeed a proud record. The health authority is confident that, despite the need to make financial savings, the waiting list position will improve further this year. The authority plans to deliver a 6 per cent. increase in out-patient activity and a 4 per cent. rise in elective in-patient activity in the current year, which will be supported by investment in several new consultant posts.

The health authority's financial position does not mean that all services are being cut back; the authority is continuing to invest in improving local services for my hon. Friend's constituents. For example, the number of local rheumatology clinics will increase this year from one to four a month, and a new back pain service was started in the Forest of Dean last year. I understand that that service is successful. Back pain is the single largest cause of absence from work, so the local economy will benefit from the health authority's efforts, not only to reduce absence from work as a result of back pain, but to improve rehabilitation and so allow people who had not previously seriously entertained the prospect of returning to work to do so.

The health authority is also committed to developing local mental health services in the forest in the coming year, and there will be substantial investment in the local health service facilities. The outline business case for the redevelopment of Lydney hospital was approved by the regional office in January. In primary care, the health authority has helped to finance new GP surgery

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premises in both Ruardean and Lydney, and has allocated £150,000 to improve primary care information technology.

Although I understand and entirely respect my hon. Friend's determination to press her case about this year's financial allocation to Gloucestershire health authority, it is important that everyone recognise how much the health authority has achieved and the extent to which, for several years, it has received a greater share of NHS resources than the existing formula would have determined it should receive. The authority will have to live within its means while it moves closer to its target allocation.

I should like to re-emphasise the health authority's achievements, especially those that have resulted from its working closely with social services, especially to ensure that elderly people do not remain unnecessarily long in hospital. My hon. Friend mentioned sure start, NHS Direct and health action zones, and I can tell her that further bids for sure start programmes will be invited later this year. I also know that a joint bid has been submitted for an NHS Direct programme to cover her constituency and those neighbouring it.

I hope that the position is clear. Tribute should be paid to those who have delivered improvements in health care to the people of Gloucestershire. I congratulate my hon. Friend again on having raising these issues in debate and urge her to continue to represent the interests of her constituents with her usual assiduity. However, I assure her that the Government are determined that a fair and equitable distribution of resources will benefit people throughout the country.

Question put and agreed to.

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