Select Committee on Health Memoranda


Memorandum by the Department of Health


 [N.B. New material and questions are indicated in bold type. Other question numbers are as last years questionnaire.]


1.1  Comprehensive Spending Review

  Could the Department explain the outcome of the Comprehensive Spending Review and its impact on the NHS and PSS? In particular, would it give a clear indication of:

    (i)  the size of the settlement and its impact on annual growth assumptions for the NHS;

    (ii)  the net annual cash and real terms increase year on year and not compounded;

    (iii)  a reconciliation of these figures to the headline £21 billion published at the time of the review.

  1.  On 14 July 1998 the Chancellor of the Exchequer announced a three-year settlement comprising additional resources totalling £21 billion UK. For England this provided nearly £18 billion for the NHS and nearly £3 billion for Personal Social Services. A programme of service reform was also announced to accompany the investment.

    (i) At the time of the announcement, planned NHS expenditure for the baseline year of 1998-99 was £36,507 million. The figures announced for the CSR years were £39,581 million for 1999-2000, £42,415 million for 2000-01 and £45,179 million for 2001-02. This represented annual cash growth for the NHS of 8.4 per cent for 1999-2000, 7.1 per cent for 2000-01 and 6.5 per cent for 2001-02.

    (ii) The net annual year on year cash increases for the NHS amounted to £3,074 million for 1999-2000, £2,834 million for 2000-01 and £2,764 million for 2001-02 representing real terms growth for the NHS of 5.7 per cent for 1999-2000, 4.5 per cent for 2000-01 and 3.9 per cent for 2001-02.

    (iii) The headline figure of £21 billion was the cumulative increase for the UK over the three year settlement. The equivalent cumulative rounded figure for England was £18 billion. This was calculated by totalling the extra resources additional to the baseline of £36,507 million in 1998-99 ie £3,074 million in 1999-2000, plus £5,908 in 2000-01, plus £8,672 million in 2001-02.

  2.  Since the CSR announcement there have been several changes which have resulted in changes to the baseline figures for 1998-99. These include the allocation of the winter pressures money for 1998-99, the drawing down of end-year flexibility money, transfers to and from other departments, and the award of funds from the Capital Modernisation Fund for the forward three years. These changes have resulted in the NHS having the benefit of more resources in 1998-99 and do not reduce the level of funding for future years. The new baseline figure for Total NHS Net Expenditure for 1998-99 is £36,860 million.

  3.  Planned Total NHS Net Expenditure for the CSR years is now £39,703 million for 1999-2000, £42,561 million for 2000-01 and £45,370 million for 2001-02 representing real terms growth of 5.1 per cent, 4.6 per cent and 4.0 per cent.

  4.  For Personal Social Services the net annual cash year on year increase amounted to £528 million for 1999-2000, £493 million for 2000-01 and £498 million for 2001-02 representing real terms growth for PSS of 3.6 per cent for 1999-2000, 3 per cent for 2000-01 and 2.7 per cent for 2001-02. The increases for 1999-2000 have been adjusted to reflect the transfer of responsibilities for asylum seekers, other than unaccompanied children, to the Home Office from 1 April 1999.

1.2  Modernisation Fund

  Could the Department list the monies set aside in the Modernisation Fund for the NHS and PSS (including expenditure on NHS Direct), the gains expected from each element of the fund, and the means by which results and achievements will be monitored and assessed?

  1.  The NHS Modernisation Fund has been earmarked for modernising and developing the NHS. It consists of £1.2 billion in 1999-2000 and some £5 billion over the next three years. The Fund makes up part of the three year cash allocation to the NHS following the outcome of the Government's Comprehensive Spending Review.

  2.  The Modernisation Fund demonstrates the Government's commitment to a new way of funding improvements in the NHS. Investing for reform.

  3.  The purpose of the fund is to help ensure the delivery of the new, modern and dependable NHS. Monies have been strictly targeted across the most important development programmes. Mechanisms are in place to ensure that all elements of the fund are carefully managed and that the NHS delivers its objectives for upgrading and improving service for patients.

  4.  Table 1.2.2 provides the details of monies set aside for the NHS.

  5.  Some of the extra funding secured in the Comprehensive Spending Review for Personal Social Services has been used by the Department to create a Social Services Modernisation Fund. This fund will deliver over £1.3 billion of new money over the next three years targeted at the key areas as needing reform, which were identified in the Social Services White Paper "Modernising Social Services". This funding will be a lever for modernisation throughout all services, activity and spending.

  1. Table 1.2.1 below provides detail of the monies set aside in the PSS modernisation fund:

Table 1.2.1


Social Services Modernisation Fund

Promoting independence: partnership grant
Promoting independence: prevention grant
Children's services grant
Mental health grant*
Training support grant*
£ 3.6m
Total Modernisation Fund

  *  This represents the extra money in these areas and is in addition to current grant levels.

  7.  Details of the gains and the means by which the results and achievements will be monitored and assessed are set out in response to question 5.13. That answer, provides details on the volume, purpose and monitoring arrangements for all grants to local authorities, including those grants which form part of the modernisation fund.

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Prepared 18 October 1999