Select Committee on Health Memoranda


Memorandum by the Department of Health


  2.  The distribution of the extra resources available for 1999-2000 aimed to balance two objectives:

    —  to maintain continuity and stability in the service; and

    —  to move as quickly as practicable to fair shares as represented by weighted capitation targets.

  3.  These two objectives were pursued via the distribution of resources from both the Modernisation Fund and from general funds.

  4.  The first objective was pursued by distributing cash increases to all health authorities. The second objective was pursued by distributing the remaining funds mainly to bring under target HAs nearer to their weighted capitation target.

  5.  For 1999-2000, all HAs received 2.50 per cent price uplift (the forecast GDP deflator at the time) and a number of allocations from the Modernisation Fund.

  6.  In addition:

    —  all HAs received a minimum cash increase of 1.67 per cent regardless of their distance from target;

    —  all HAs which were at target, or not more than 2.5 per cent over target received an increase of between 2.52 per cent and 2.58 per cent;

    —  all under target HAs received an increase of between 2.59 per cent and 4.68 per cent calculated on their monetary distance from target.


Could the Department update the Committee on recent developments in the allocation of HCHS resources and provide the timetable for any planned changes?

Unified Allocations

  1.  From April 1999, Health Authorities and Primary Care Groups are funded through a single unified allocation, which covers hospital and community health services (HCHS), general practice infrastructure (GMSCL), and prescribing. These were previously three separate funding streams.

  2.  A national weighted capitation formula has been developed to determine target fair shares for unified allocations. The formula has three components, reflecting HCHS, GMSCL and prescribing. Each component of the formula produces a weighted population. These are then combined, proportional to the national expenditure on each component for the latest available year and used to produce target shares.

National Formula

  3.  The following changes were made to target setting in 1999-2000:

    —  the specialty cost weights in the HCHS age adjustment were updated;

    —  a new additional need adjustment for prescribing was introduced;

    —  a monetary adjustment to supplement the formula for the extra costs of interpretation, advocacy and translation services was introduced.

  4.  The formula used to set targets for Primary Care Groups is that used for Health Authorities. However, local flexibility is allowed in a number of areas, for example, Health Authorities are able to introduce their own adjustment to reflect the extra cost of prescribing to nursing homes.

  5.  In addition the population base used for allocations was changed. Health Authorities are responsible for their resident population, plus all patients registered with GPs who form part of Primary Care Groups for which the Health Authority are responsible but who are resident elsewhere; minus residents who are registered with GPs who form part of Primary Care Groups responsible to another HA.

  6.  Primary Care Groups are responsible for all patients registered with GPs in practices forming the Primary Care Group, plus any residents within the agreed geographical boundaries of the Primary Care Group who are not registered with a GP.

Advisory Committee on Resource Allocation

  7.  Work to develop the unified formula for Health Authorities and Primary Care Groups was overseen by the Advisory Committee on Resource Allocation (ACRA).

Review of Formula

  8.  There is to be a wide-ranging review of the formula used to make cash allocations to Health Authorities and Primary Care Groups. This review will be carried out under the auspices of ACRA. The terms of reference for the review are:

    (a)  To advise the Secretary of State on a new formula to inform the distribution of resources between Health Authorities and Primary Care Groups/Trusts.

    (b)  To advise the Secretary of State on the best way of achieving the desired policy objective: "to contribute to the reduction in avoidable health inequalities". This takes account of Ministers' priorities to secure improvements in the health of the population and, in particular, that of the worst off in society; and to narrow the health gap.

    (c)  To recommend an evidence based formula which balances:

    —  simplicity with sensitivity and;

    —  technical robustness with transparency.

    (d)  To advise on the applicability of the chosen approach to budget setting at practice level.

  9.  There will now be a freeze on further changes to the existing formula to maximise stability and certainty for Health Authorities and Primary Care Groups. Other than routine data changes the freeze will last until at least 2001-02 Health Authority allocations.

Special Allocations

HIV/AIDS treatment and care

  10.  A Stocktake Group was established to advise on a lasting formula for distributing the HIV/AIDS treatment and care budget. The Group has reported and ACRA have endorsed their recommendations, which are currently under consideration.

Drug misuse

  11.  ACRA have endorsed a proposal to review the formula used to distribute the drug misuse budget. The proposal is now being considered.


Could the Department provide a commentary on the review of the capital allocation system? Could the Department comment on the progress made by the Capital Prioritisation Advisory Group with prioritisation exercises?

  1.  A group will be established shortly to undertake a review of the allocation of capital resources. The aim of the review will be to ensure that access to capital through the NHS is equitable and in line with the Government's strategies for a modern and dependable NHS. The start of this review was postponed from last year because the need to fully consider the implications of the Comprehensive Spending Review.

  2.  The Capital Prioritisation Advisory Group completed work on its second prioritisation exercise in December 1998. Ten schemes were considered. Ministers are currently considering CPAGs report and an announcement will be made in due course.

4.8a  Could the Department provide a table showing all publicly funded capital projects with a total cost above £10 million which are under construction during 1999-2000. Could this also show the original and current estimated completion dates along with a percentage figure for any additional time overrun/saving? Likewise, the original total cost and current estimated out-turn cost should be provided along with a percentage cost performance figure.

Would the Department provide a commentary on cases where there are significant discrepancies between original estimates of completion dates and/or expenditures and current estimates?

  1.  Table 4.8a.1 provides details of all publicly funded long term capital projects with a total cost of over £10 million which are forecast to be under construction during 1999-2000.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 1999
Prepared 18 October 1999