Select Committee on Health Memoranda


MEMORANDUM

Memorandum by the Department of Health

Modernisation Fund

    (f)   How many successful bids went to Health Authorities which were already over their target allocation? How will these modernisation allocations impact on future funding formulas and capitation position?

  1.  Allocation methods for the different elements of the Modernisation Fund vary. Table 1.2.2 provides details on amounts against each element of the Fund. Some funds were allocated as part of main allocations, others via capital allocations, while some are held centrally.

  2.  Bidding exercises are used to target funds either at areas with particular needs or for specific projects. Bidding by individual HAs was a factor in 12 elements of the Fund, five of which have had funds allocated.

  3.  Over-target HAs who were successful in bidding for Calman Hine lung cancer, Mental Health development fund, National Screening Pilots, Diana Nurses and Nurse Prescribing funds are shown in the table [F1].

  4.  Funds are intended to be issued recurrently to HAs for Diana Nurses and Calman Hine lung cancer, and projections have been made for funding National Screening Pilots in 2000-01. The recurrent additions will be taken into account in calculating HA distances from targets and growth for allocations.

  5.  Funds which are issued non-recurrently are issued for specific non-recurrent purposes and do not count against targets as they are specific to a single allocation year.

Table F1: Modernisation Funding to overtarget HAs from biddable budgets


Health Authority
1999-2000
Unified
DFT
Calman
Hine lung
cancer
Mental
Health
Development
Fund
National
Screening
Pilots
Diana
Nurses
Nurse
Prescribing
%
£'000s
£'000s
£'000s
£'000s
£'000s

Barnet
2.25
68
41
Bexley and Greenwich
5.31
91
67
Birmingham
0.39
403
110
Brent and Harrow
3.09
100
01
Calderdale and Kirklees
0.44
60
127
Camden and Islington
2.22
104
28
Cornwall and Isles of Scilly
2.08
93
103
61
Dorset
2.24
140
116
East Kent
1.83
125
33
East Norfolk
0.85
146
962
East Surrey
2.10
73
108
East Sussex, Brighton and Hove
2.15
169
76
Enfield and Haringey
0.54
106
58
Gloucestershire
3.85
104
85
Herefordshire
0.06
34
18
Hillingdon
0.43
51
2331
Isle of Wight
7.35
27
14
Kingston and Richmond
2.25
67
33
Leeds
0.26
150
73
Lincolnshire
0.64
117
82
Liverpool
2.09
100
117
Manchester
2.28
92
124
Merton, Sutton and Wandsworth
2.31
138
138
Morecambe Bay
4.40
67
57
Newcastle and North Tyneside
0.53
106
151
North and East Devon
1.84
93
55
North and Mid Hampshire
1.36
82
80
North Cheshire
1.80
67
41
North Cumbria
0.06
63
160
83
Northamptonshire
1.51
65
72
Redbridge and Waltham Forest
4.72
94
44
Salford and Trafford
2.13
96
185
74
Sefton
1.05
62
45
Sheffield
1.50
142
59
Solihull
1.32
31
Somerset
1.00
91
0
South and West Devon
1.86
118
300
75
South Cheshire
0.54
144
104
South Humber
3.44
62
33
South Lancashire
2.38
67
30
South Staffordshire
0.85
36
104
Southampton and South West Hampshire
0.10
104
127
Stockport
0.46
63
47
Suffolk
1.65
127
99
Wakefield
0.37
68
245
55
Warwickshire
2.66
73
39
West Hertfordshire
1.59
99
56
West Kent
0.65
176
165
160
West Surrey
2.35
115
154
Wiltshire
1.68
111
84
Wirral
1.97
71
413
41
Worcestershire
1.75
53
83


Reference:

  1.  Nurse prescribing allocation to Hillingdon HA includes funds for Brent and Harrow, Ealing Hammersmith and Hounslow and Kensington, Chelsea and Westminster HA.

  2.  Includes NW Anglia HA's allocations.

LONG TERM CARE OF THE ELDERLY

 (g)   Could the Department give a detailed breakdown of the costs of implementing the Royal Commission report proposals?

  1.  The Royal Commission estimated the costs of implementing their recommendations. The estimated costs are given below and are annual UK costs at 1995-96 prices.

  2.  The Government is currently reviewing these estimates as part of its consideration of the Royal Commission's recommendations.

Main Recommendations

  The costs of "personal care" in all settings should be met by the state—between £800 million and £1,200 million (central estimate £1,120 million).

  More services should be offered to people who have an informal carer—£220 million.

  A National Care Commission should be set up—no costing.

Other Recommendations—cost mostly subsumed within first main recommendation

  Three month disregards of assets—£90 million.
  Increase in the capital limit to £60,000—between £150 million and £200 million.
  Free nursing care in nursing homes—£220 million.

Note of Dissent Recommendations

  Expansion of services—not less than £300 million.
  Increase in the capital limit to £30,000 and halving the tariff rate—£85 million.
  Free nursing care in nursing homes—£110 million.
  Help for carers—£230 million.
  Free care after four years (suggested by David Lipsey) —£200 million to £250 million.
  Source: With Respect to Old Age. A Report by the Royal Commission on Long Term Care (TSO, 1999).

   (h)  Could the Department provide figures on the proportion of home helps/home carers (wte) per 1,000 people aged 75 and over for each of the last 10 years?

  1.  The table below shows the numbers of home care/home help staff employed by local authorities over the last ten years, the number of hours of home care purchased or provided by local authorities, the "over 75" population and the proportion of home care/home help staff employed per 1,000 population for this age group.

  2.  An equivalent time series for home care/home help staff in the independent sector is not available. However, statistics on the number of households receiving home care/home help from the independent sector show an increase from 12.5 thousand in 1993 to 95.4 thousand households in 1998. Overall the number of hours of home care purchased or provided by local authorities has risen by 43 per cent since 1989.

LOCAL AUTHORITY SOCIAL SERVICES DEPARTMENTS' HOME CARE/HOME HELP STAFF AND WEEKLY HOURS OF HOME CARE PURCHASED OR PROVIDED BY LOCAL AUTHORITIES England
whole time equivalent and numbers


Home care/Home
help staff
(1)
Total hours of
home care
purchased or
provided
by LAs
(2)
Population
aged 75
and over
staff per
1,000 population

1989
56,613
1,802,052
3,331,798
17
1990
55,805
1,849,749
3,377,902
17
1991
54,708
1,781,639
3,408,595
16
1992
54,254
1,687,000
3,410,507
16
1993
50,744
1,782,600
3,380,610
15
1994
52,683
2,215,120
3,345,248
16
1995
49,811
2,395,665
3,460,957
14
1996
47,750
2,486,708
3,542,019
13
1997
46,316
2,637,293
3,600,788
13
1998
42,883
2,572,200
3,600,788
12

Footnotes:

Source: HH1 & Key Indicators Graphical System

  1.  excludes organisers, wardens and meals services staff

  2.  based on contact hours provided or purchased by Local authorities for a sample week in the Autumn

DEFLATORS AND NHS EXPENDITURE

 (i)   Would the Department state what the increase in expenditure on the NHS has been since 1992 in cash terms, real terms (GDP deflator), and real terms (NHS deflator)? Can the Department break down the year-on-year absolute increases in cash expenditure into the part that covers general inflation, the additional part for NHS inflation, and finally the remainder as uplift in expenditure to cover charges in the level and structure of activities? Would the Department use estimated values for both general and NHS inflation where these are not yet known?

  1.  The Government gave a Manifesto commitment to increase spending on the NHS in real terms every year and put the money towards patient care. Over the lifetime of this Parliament the average annual real terms increase will be 4.0 per cent with 4.6 per cent over the Comprehensive Spending Review period. This compares with 2.7 per cent over the last five years of the Conservative administration—1991-92 to 1996-97.

TOTAL NET NHS EXPENDITURE: 1991-92 to 2001-02


Years
Total
Net NHS
Expenditure
Cash
Increase
Real Terms
Increase1
Volume
Growth2
£m
£m
%
%
%

1991-92 outturn
25,353
1992-93 outturn
27,968
2,615
10.3  
6.8
4.3
1993-94 outturn
28,942
   974
3.5
0.8
0.8
1994-95 outturn
30,590
1,648
5.7
4.2
3.0
1995-96 outturn
31,985
1,395
4.6
1.6
0.8
1996-97 outturn
32,997
1,012
3.2
0.1
0.3
1997-98 outturn
34,664
1,667
5.1
2.5
2.9
1998-99 estimate
36,860
2,196
6.3
3.8
n/a
1999-2000 plan
39,703
2,843
7.7
5.1
n/a
2000-01 plan
42,561
2,858
7.2
4.6
n/a
2001-02 plan
45,370
2,809
6.6
4.0
n/a


Footnotes:
1.  Based on GDP as at 26/6/99.
2.  Based on NHS Deflator.

  2.  It would be misleading to apportion cash growth as suggested in the question as:

    —  It is sometimes the case that the NHS deflator is lower than the GDP deflator.

    —  The whole of NHS expenditure is available to cover change in the level and structure of the service provided.

    —  Technical and allocative efficiency will also make significant contributions to the availability and distribution of NHS resources.

  3.  Financial information, for 1998-99 and 1999-2000, and workforce data for 1999-2000 are not yet available to allow for the production of volume deflators for these years.

  4.  The NHS does not provide estimates for future levels of NHS specific inflation. To do so would require assumptions to be made on future pay within the NHS. This would undermine the roles of the Review Bodies and Whitley Councils as well as the Department's position in pay negotiations, while it strives to achieve the most effective settlement for the service as a whole.

(j)   Would the Department provide a table showing the construction of the NHS inflation index from main sub-indices of pay and other factors since 1992, and comment on the assumptions underlying this construct.

  1.  The NHS inflation index is constructed using five sub indices. These are:

    —  HCHS pay index This measures the change in the average paybill per head of those employed within the HCHS;

    —  HCHS price inflation This measures the changes in price of goods and services supplied to the HCHS, it is measured by the Health Service Cost Index;

    —  HCHS capital inflation index This reflects the changes in price experienced in HCHS capital projects and is calculated using a mixture of the construction price index and the GDP deflator;

    —  FHS Index This is produced using differing assumptions for each of the main groups. For general medical services and general dental services, inflation is calculated as the increase in the average cost per practitioner. For both services, the changes in unit costs include volume and quality effects as well as pure price effects. For pharmaceutical services and general ophthalmic services, service inflation is assumed equal to movements in the GDP deflator. GP fundholders' expenditure on drugs has been included in the calculations. GMS cash limited expenditure has not been included in the calculations

    —  The "other" Index This comprises the revenue and capital expenditure on Central Health Miscellaneous Services (CHMS) and Departmental Administration (including the Medicines Control Agency and NHS Estates). The GDP deflator is used in the absence of service specific deflators.

  2.  These indices are weighted according to their proportion of total NHS expenditure to produce the NHS composite deflator. The table below shows the results.


Year
HCHS
Pay
HCHS
Prices
HCHS
Capital
FHS
Other
NHS
Total

1991-92
100.0
100.0
100.0
100.0
100.0
100.0
1992-93
107.9
104.7
97.5
104.8
103.3
105.8
1993-94
112.4
106.2
99.3
105.4
106.1
108.7
1994-95
116.3
107.1
104.1
107.9
107.6
111.5
1995-96
121.4
110.5
108.8
110.7
110.7
115.6
1996-97
125.4
112.2
112.3
114.2
114.1
119.0
1997-98
128.5
112.7
117.0
117.4
117.0
121.5


 (k)   The Government has set efficiency and other value-for-money gains in the NHS equivalent to 3 per cent of HA Unified Allocations in each of the next three years. Can the Department of Health explain how efficiency is measured in this context?

  1.  Following the Comprehensive Spending Review, the Government committed the NHS to achieving these gains by:

    —  Reducing the variation in Trust Unit Costs;

    —  Improving procurement practice in the NHS;

    —  Continuing the downward pressure on management costs; and

    —  Pushing value for money savings (such as income from the Road Traffic Act and disposal of redundant trust assets).

  2.  We have estimated the impact of each of these areas. Trusts have been set unit costs targets in the range of 2.0 per cent to 4.5 per cent that, in aggregate, provide savings of 2.9 per cent on revenue expenditure. This equates to nearly £800 million. Additional value for money savings from RTA (over £100 million) and the disposal of trust assets (£123 million) yields a total saving of around £1.0 billion. This is broadly equivalent to 3.3 per cent of the HA Unified Allocation.

 (l)   What proportion of the total pay settlement by value is yet to be finalised? Can the Department give an estimate of what pay inflation in the NHS is likely to be in 1999-2000?

  1.  For 1999-2000 the pay Review Body rounds are complete. Discussions continue around pay increases for non-Review Body staff. These account for 30 per cent of paybill within the NHS. It is not possible to estimate the level of pay inflation within the NHS until these negotiations have been completed.

 (m)   What changes in the terms of reference of the NHS staff review bodies have there been since 1997, what factors underlay such changes?

  1.  The Prime Minister wrote to the Chairmen of Pay Review Bodies on 10 July 1998 setting out a framework within which the Review Bodies should consider their recommendations proposing amended terms of reference as follows:

    In reaching its recommendations, the Review Body is to have regard to the following considerations:

    —  the need to recruit, retain and motivate Review Body staff;

    —  the Health Departments' output targets for the delivery of services as set by the Government;

    —  the financial constraints on the Health Departments as set out in the Government's plans for public spending

limits;

    —  the Government's inflation target.

    The Review Body may also be asked to consider other specific issues and should take account of the evidence submitted to them by the Government and others. Reports and recommendations should be submitted jointly to the Secretaries of State for Health, for Scotland and for Wales, and to the Prime Minister."

  2.  The Comprehensive Spending Review, announced in July 1998, set three year spending plans for departments and gave the Secretaries of State for Health, Scotland and Wales a clear responsibility for the delivery of service targets within agreed resources. These new arrangements are intended to ensure that a closer and more effective links between pay settlements, departmental expenditure limits and service delivery targets are in place. This will ensure that in the NHS, as elsewhere, pay decisions reflect organisational needs and objectives.

 (n)   What information do quarterly monitoring returns give about local NHS inflation?

  1.  None. No information is required centrally from NHS Trusts or Health Authorities on the inflation pressures they may face locally. The data used to compile most elements of the NHS deflator are from annual returns and so estimates of inflation within the NHS are not available quarterly.

 (o)   If the Department will a survey of a random sample of 10 trusts to give brief details of their assumptions about the level of inflation in input prices that they will face in 1999-2000 and 2000-01?

  1.  No, it is not feasible to properly design, distribute, collate and analyse a survey within the timescale set, even on a small sample. The information returned from a sample as small as 10 NHS Trusts would also cast doubts on the validity of any analysis that would be made available from this exercise.


 
previous page contents

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

© Parliamentary copyright 1999
Prepared 18 October 1999