House of Commons - Health

Select Committee on Health Memoranda

2. GENERAL EXPENDITURE ISSUES

2.1 NHS Financial Balance

2.1.1 Based on current forecasts, what will be the likely financial performance of the NHS in 2002-03 in terms of financial balance, "deficit" organisations and performance. [1.1]

2.2 Overall Expenditure

2.2.1 Could the Department provide an updated version of Table 2.1.1, and of the Department's commentary which accompanied it? Could it also show this data in graphical form? Could the Department provide a brief commentary, explaining what expenditure is included under each section of the table? Can the footnote to table 2.1.1 explain the measures and their applications for lines D to G? [2.1a]

2.2.2 Could the Department identify significant changes between forecast and actual outturn for 2000-01 and between the planned level of spending and forecast outturn for 2001-02, by comparing figures in Table 2.1.1 with current figures. For each programme the planned level of spending in 2001-02 and actual outturn expenditure should be shown in tabular form. [2.1b]

2.2.3 What is the Department's assessment of each programme's performance in 2000-01 against plans for that year, and anticipated performance in 2001-02 against plans for that year and outturn in 2000-01? [2.1d]

2.2.4 The supply estimates are now presented in a simplified form which does not disaggregate the different sources for appropriations in aid. This is now presented only in an annex to the Departmental Report (Annex D, Information formerly in Supply Estimates). For the sake of clarity, could the Department give a detailed reconciliation between table 2.1.1 and appropriations in aid for each year since 1995-96 by sub-programme and source (ie miscellaneous, charges, sales of assets, capital repayments, trust debt remuneration). [2.1e]

2.2.5 Any commentary which the Department wishes to append would be welcome, including information about efficiency gains and a table showing changes in the Hospital and Community Health Services cost-weighted index of activity for the latest 10 years for which figures are available. [2.1f]

2.2.6 Could the Department provide a breakdown of what the additional NHS expenditure in 2001-02 as compared with 2000-01 has been spent on? The impacts on expenditure of additional staff, increased pay levels, medicines, capital and other expenditures should be distinguished where possible.

2.3 Programme Budgets

2.3.1 Could the Department update the information on expenditure on Programme Budgets provided in Tables 2.2? [2.2]

2.4 Special Allocations

2.4.1 Could the Department list any special allocations and likely allocations in 2002-03, and indicate any likely allocations in 2003-04? [2.5]

2.5 Expenditure on Community Care

2.5.1 Could the Department provide a table showing, by service, net expenditure in real terms by central and local government on community care, broken down by residential and non-residential care (taking into account relevant service pay and price increases), over the most recent five year period for which such data are available? Could this data include Social Security and Housing expenditures contributing to Community Care objectives? Could it also show this data in graphical form? [2.3]

2.1 NHS Financial Balance

2.1.1 Based on current forecasts, what will be the likely financial performance of the NHS in 2002-03 in terms of financial balance, "deficit" organisations and performance. [1.1]

FINANCIAL POSITION 2002-03 AND DEFICIT ORGANISATIONS

1. The NHS has set plans for 2002-03 that forecast each and every StHA, PCT and NHS Trust to achieve financial balance or better, ie no deficit organisations are planned.

2. To help achieve this position the NHS Bank has been established (with an initial £100 million working capital) to assist organisations with the most serious financial issues. This is not a soft option: grants or loans will be based on delivering agreed milestones and subject to rigorous performance management.

3. There are a small number of health bodies managing difficult financial positions, which may require longer-term financial recovery plans. In these cases the PCT or NHS Trust concerned will be working closely with their host Strategic Health Authority to develop and implement appropriate strategies to manage the financial pressures (within available resources).

4. Whilst recovery plans are expected to achieve underlying financial balance over the shortest possible period—this should not be at the expense of patient care/services.

PAYMENT PERFORMANCE

5. All PCTs and NHS Trusts must meet the Better Payment Practice Code (BPPC) (previously known as the Public Sector Payment Performance target of paying 95 per cent of non-NHS trade creditor bills within contract terms or 30 days where no terms have been agreed.

6. The BPPC target limits the extent to which PCTs and NHS Trusts can spend beyond their means by increasing the time they take to pay non-NHS creditors.

7. The DoH takes the issue of prompt payment by NHS organisations very seriously and has over a number of years taken action to emphasise the importance placed on prompt payment.

8. As a consequence, the performance of the NHS in complying with the BPPC target has shown sustained improvement over recent years. The latest projections for financial year 2001-02 indicate 85 per cent of bills are paid within 30 days/within the BPPC target. This in the context of the NHS processing and paying some 15 million invoices per annum.

9. The DoH will continue to work with NHS bodies to achieve and maintain a level of payment performance consistent with Government Accounting Regulations and the Better Payment Practice Code.

2.2 Overall Expenditure

1. The expenditure in Table 2.2.1(a) is shown on a Stage One Resource Budgeting basis. This is consistent with the presentation of data in Figure 3.4 of the 2002 Departmental Report (Cm 5403) and with the expenditure reported in Table 2.1.1(b) of last years evidence.

2. Information on trends in total expenditure is also given in Figure 2.2.1. Figures have been adjusted for classification changes, so that they provide a consistent series.

Table 2.2.1(a)

TRENDS IN ACTUAL AND PLANNED EXPENDITURE ON THE HEALTH AND PERSONAL SOCIAL SERVICES 1999-2000 to 2003-04 BY AREA OF EXPENDITURE (1) (2) (3) (4) (RESOURCES)

		1999-00	2000-01	2001-02	2002-03	2003-04
		outturn	outturn	estimated outturn	plan	plan
	Central Government Expenditure
National Health Service Hospitals,
community health, family health
(discretionary) and related services (7)
	Current
A.	Net spending	34,252	37,626	42,499	46,730	49,869
B.	Charges and receipts (5)	1,987	2,073	2,099	2,232	2,389
C.	Total spending	36,239	39,699	44,598	48,962	52,259
D.	Change over previous year in cash
per cent	—	9.5	12.3	9.8	6.7
E.	Change over previous year in input unit costs (per cent) (6)		3.9
	unit costs (per cent) (6)
F.	D adjusted for E (per cent)		5.5
G.	Change over previous years in real terms (per cent) (total)	—	7.2	9.9	7.1	4.1
H.	Change over previous years in real terms (per cent) (net)	—	7.5	10.5	7.3	4.1
	Capital
A.	Net spending	871	1,288	1,699	2,367	2,867
B.	Charges and receipts (5)	593	676	491	355	270
C.	Total spending	1,464	1,964	2,190	2,722	3,137
D.	Change over previous year in cash (per cent)		34.1	11.5	24.3	15.2
E.	Change over previous year in input unit costs (per cent) (6)	—	3.7
F.	D adjusted for E (per cent)
G.	Change over previous years in real terms (per cent/total)	—	31.2	9.1	21.2	12.4
	National Health Service family health services (non-discretionary) (7)
	Current
A.	Net spending	4,269	4,370	4,190	3,678	5,307
B.	Charges and receipts	806	849	891	898	898
C.	Total spending	5,075	5,219	5,081	4,576	6,205
D.	Change over previous year in cash
(per cent)		2.8	-2.6	-9.9	35.6
E.	Change over previous year in input unit costs (per cent) (6)		2.7
F.	D adjusted for E (per cent)		0.2
G.	Change over previous years in real terms per cent) (total)		0.6	-4.8	-12.1	32.3
	Departmental administration (8)
	Current
A.	Net spending	283	295	334	332	342
B.	Charges and receipts	36	23	20	15	12
C.	Total spending	319	318	354	347	354
D.	Change over previous year in cash
(per cent)		-0.3	11.0	-1.8	2.0
G.	Change over previous years in real terms (per cent) (total)		-2.5	8.6	-4.2	-0.5
F.	Cost of Collecting NHS element of
NI contributions	10	10	17	15	15
	Central health and miscellaneous services
	Current
A.	Net spending	504	561	639	602	646
B.	Charges and receipts	117	111	157	109	119
C.	Total spending	621	672	796	711	765
D.	Change over previous year in cash (per cent)		8.3	18.4	-10.7	7.6
G.	Change over previous years in real terms (per cent) (total)		6.0	15.8	-12.9	5.0
	Other NHS Capital
A.	Net spending	37	31	46	34	31
B.	Charges and receipts	3	4	0	0	0
C.	Total spending	40	34	46	34	31
D.	Change over previous year in cash (per cent)		-14.6	33.4	-25.4	-10.3
G	Change over previous years in real (per cent) total)		-16.5	30.5	-27.2	-12.5
	NHS Total
A.	Net spending	40,216	44,170	49,406	53,743	59,061
B.	Charges and receipts (5)	3,542	3,736	3,658	3,609	3,689
C.	Total spending	43,758	47,906	53,065	57,352	62,750
D.	Change over previous year in cash (per cent)		9.5	10.8	8.1	9.4
E.	Change over previous year in input unit costs (per cent) (6)		4.0
F.	D adjusted for E (per cent)		5.3
G.	Change over previous years in real (per cent) (total)		7.1	8.3	5.4	6.7
H.	Change over previous years in real terms (per cent)		7.5	9.4	6.1	7.2
	Central Government Personal
	Social Services
A.	Net spending	34	45	115	181	183
B.	Charges	0	0	0	18	25
C.	Total spending	34	45	115	198	208
D.	Change over previous year in cash (per cent)		31.8	155.3	71.5	5.2
G.	Change over previous year in real terms (per cent)		28.9	149.7	67.3	2.7
	Central Government (specific and special) grants to local authorities
A.	Net spending	601	612	1,003	1,777	2,042
B.	Charges	0	0	0	0	0
C.	Total spending	601	612	1,003	1,777	2,042
D.	Change over previous year in cash (per cent)		1.9	63.8	77.2	14.9
G.	Change over previous year in real terms (per cent)		-0.3	60.2	72.9	12.1
	Credit Approvals (LA capital)
A.	Net spending	57	56	56	56	56
B.	Charges	0	0	0	0	0
C.	Total spending	57	56	56	56	56
D.	Change over previous year in cash (per cent)		-1.9	0.3	-0.8	0.0
G.	Change over previous year in real		-4.0	-1.9	-3.2	-2.4
	Health and Personal Social Services Total
A.	Net spending	40,908	44,884	50,581	55,756	61,342
B.	Charges and receipts (5)	3,542	3,736	3,658	3,627	3,714
C.	Total spending	44,450	48,620	54,239	59,383	65,056
D.	Change over previous year in cash (per cent)		9.4	11.6	9.5	9.6
G.	Change over previous years in real terms (per cent)		7.0	9.1	6.8	6.9
H.	Change over previous years in real terms (per cent) (net)		7.3	10.2	7.5	7.3
	Local Authority Personal Social Services Current (9)
A.	Net spending	10,050	10,696	11,048
B.	Charges and receipts (10)	1,998	2,152	2,223
C.	Total spending	12,048	12,848	13,271
D.	Change over previous year in cash (per cent)		6.6	3.3
G.	Change over previous years in real terms (per cent) (total)		4.3	1.0
	Local Authority Personal Social Services Capital
A.	Net spending	83	101	107
B.	Charges and receipts	51	62	96
C.	Total spending	134	163	203
D.	Change over previous year in cash (per cent)		21.6	24.5
G.	Change over previous years in real (terms) (per cent) (total)		19.0	21.8
	Local Authority Personal Social Services Total
A.	Net spending	10,133	10,797	11,155
B.	Charges and receipts	2,049	2,214	2,319
C.	Total spending	12,182	13,011	13,474
D.	Change over previous year in cash (per cent)		6.8	3.6
G.	Change over previous years in real (terms) (per cent) (total)		4.5	1.3
	Local Authority, Health and Personal Social Services Total (11)
A.	Net spending	51,041	55,681	61,736
B.	Charges and receipts (5)	5,591	5,950	5,977
C.	Total spending	56,632	61,631	67,713
D.	Change over previous year in cash (per cent)		8.8	9.9
G.	Change over previous years in real terms (per cent) (total)		6.5	7.5
	Change in GDP deflator (%) (28 June 2002 assumption)	95.7	97.8	100.0	102.5	105.1

Footnotes:

1. Figures may not sum due to rounding

2. Percentages are rounded to one decimal place.

3. Real terms growth figures differ from those given last year because of subsequent changes in GDP deflators. Where not otherwise specified, the figures are calculated on total expenditure figures and therefore differ from the Departmental Report, where increases are calculated on net expenditure.

4. The measures in changes in expenditure shown in lines D to H are as follows:

Line D shows the percentage change in total expenditure.

Line E shows the level of inflation specific to each area of expenditure (where applicable).

Line F shows the percentage change in total expenditure after accounting for service specific inflation.

Line G shows the percentage change in total expenditure after accounting for inflation in the overall economy as measured by the GDP deflator.

Line H shows the percentage change in net expenditure after accounting for inflation in the overall economy as measured by the GDP deflator.

5. Includes NHS trust charges and receipts.

6. Input Cost Data is not available for years where outturn data is not available.

7. Figures for FHS non-discretionary expenditure between 1999-2000 and 2002-03 are not directly comparable because of transfers to the FHS discretionary provision, principally to fund successive waves of Personal Medical and Personal Dental Service pilots.

8. Include Trading Funds—Medicines Control Agency (MCA) and NHS Estates Agency.

9. There are no centrally generated "plan" figures for local authority expenditure, including Personal Social Services.

10. Local Authorities do not forecast receipts for future years. It is assumed that receipts for 2001-02 form the same proportion of the net expenditure as for 2000-01.

11. Local Authority, Health and Personal Social Services total excludes Central Government (Specific and Special) grants to Local Authorities and Credit Approvals (LA Capital) to avoid double counting. The total still does include an element of double counting (unquantifiable) with regard to joint working between hospitals and local authorities.

3. Table 2.2.1(b) gives a brief explanation of the main areas of expenditure in Table 2.2.1(a).

Table 2.2.1(b)

EXPLANATION OF MAIN AREAS OF EXPENDITURE IN TABLE 2.2.1(a)

Area of Expenditure	Description
NHS Hospital and Community health Services and discretionary family health services (HCHS)	This covers hospital and community health services, prescribing costs and discretionary general medical services funded from Health Authority Unified Allocations and Primary Care Act Pilots. It also includes other centrally funded initiatives, services and special allocations managed centrally by the Department of Health, such as service specific levies which fund activities in the areas of education and training and research development.
Capital	Capital expenditure is that used on the acquisition of land and premises, individual works for the provision, adaptation, renewal, replacement or demolition of buildings, items or groups of equipment and vehicles etc.
NHS Family Health Services (FHS) (non-cash limited)	Covers the remuneration of general medical and dental practitioners, and the cost of general ophthalmic and community pharmacy services. Funding of this element of FHS expenditure is demand-led and not subject to in-year cash limits at health authority level, though FHS expenditure has to be managed within the overall national vote limits.
Departmental Administration	The administrative costs of running the Department of Health.
Central health and miscellaneous services (CHMS)	These are a wide range of activities funded from the Department of Health's spending programmes whose only common feature is that they receive funding direct from the Department and not via health authorities. Some of the services are managed directly by Departmental staff; some by non-departmental public bodies, or other separate executive organisations.
Other NHS Capital	Includes the capital elements of Departmental administration and CHMS.
NHS Total	The sum of HCHS current and capital expenditure, FHS, Departmental administration, CHMS current expenditure and other NHS capital.
Personal Social Services	Personal care services for vulnerable people, including those with special needs because of old age or physical or mental disability, and children in need of care and protection. Examples are residential care homes for the elderly, home help and home care services, and social workers that provide help and support for a wide range of people.
Central Government (specific and special) grants to local authorities	Cash grants targeted at services which require a higher priority, where pump priming is appropriate or where the service is needed in only some authorities.
Credit Approvals (LA capital)	Central government permission for individual local authorities to borrow or raise other forms of credit for capital purposes.
Health and Personal Social Services Total	The sum of NHS total, central Government personal social services, central Government (specific and special) grants to local authorities, credit approvals (LA capital), and civil defence.
Local Authority, Health and Personal Social Services Total	The sum of Health and Personal Social Services Total and Local Authority Personal Social Services Total.

2.2 Overall Expenditure

1. Table 2.2.2 details significant changes (ie over £10 million) between forecast and actual outturn for 2000-01 and 2001-02. Table 2.2.3 explains any differences between information provided in Table 2.2.1(a) and information provided for last year's Inquiry.

Table 2.2.2

COMPARISON OF NET EXPENDITURE PLANS FOR 2000-01 AND 2001-02 WITH THOSE ON PAGES 28-31 OF LAST YEAR'S HEALTH COMMITTEE WRITTEN EVIDENCE (HC 242)

£ million

2000-01 2001-02

HC242
Estimated
outturn difference Table 2.1.1
Outturn HC242
Plan difference Table 2.1.1
Estimated
Outturn

HCHS current 37,910 -284 37,626 42,002 497 42,499

HCHS capital 1,353 -65 1,288 1,949 -250 1,699

FHS current 4,370 0 4,370 3,829 361 4,190

Dept admin current 315 -20 295 329 5 334

CHMS current 537 24 561 611 28 639

2.2 Overall Expenditure

1. Table 2.2.3 shows that there were underspends of more than £10 million between forecast outturn for 2000-01 and final outturn in the HCHS and CHMS programmes.

2. Overall, Table 2.2.1(a) shows that forecast outturn in 2001-02 will generally be higher than outturn expenditure in 2000-01 in all programmes except Credit Approvals (LA Capital) where the figures remain fairly constant over the period covered by the table.

Table 2.2.3

COMPARISON OF NET EXPENDITURE PLANS FOR 2000-01 AND 2001-02 WITH THOSE ON PAGES 28-31 OF LAST YEAR'S HEALTH COMMITTEE WRITTEN EVIDENCE (HC 242)

The main areas of change (£10 million or over) to the spending plans for various parts of the programme other than LAPSS are as follows. The grant to local authorities for central government is unhypothecated. Local authorities determine their own expenditure.

£ million

Difference 2000-01

HCHS current -284 -164 Provisional underspend

-120 Departmental Unallocated Provision not taken up

HCHS capital -65 Net Capital Carry Forward

Departmental Administration -20 No individual adjustments over £10 million to report

CHMS current 24 26 EEA Medical costs final outturn

Difference 2001-02

HCHS current 497 330 Take up of End Year Flexibility (EYF)

320 Transfers from HCHS capital

-306 Transfers to FHS non discretionary

240 Reclassification of NHS Trusts Depreciation

-150 Estimated underspend

35 Transfers from CHMS

18 Tranfers from PSS

12 Transfers from Other Government Departments

HCHS capital -250 -320 Tranfer to HCHS revenue

50 In year addition from Treasury Capital Modernisation Fund.

95 Take up of EYF

-75 Estimated underspend

FHS current 361 306 Tranfer from HCHS current

56 Take up of EYF

CHMS current 28 35 Take up of EYF

30 In year addition from HM Treasury

-35 Tranfers to HCHS revenue

Note: Changes less than £10 million are not listed and may slightly affect totals.

2.2 Overall Expenditure

1. The information requested is provided in Table 2.2.4.

Table 2.2.4 (Resources)

RECONCILIATION BETWEEN APPROPRIATIONS IN AID AND INCOME IN TABLE 2.1.1

	Resources	Resources	Resources	Resources	Resources
	1999-00	2000-01	2001-02	2002-03	2003-04
			forecast
	outturn	outturn	outturn	plan	plan
Central Government Expenditure
National Health Service Hospitals,community health, family health (discretionary) and related services
Current
Charges and income in table 2.1.1	1,987	2,073	2,099	2,232	2,389
Miscellaneous income mainly goods and services	60	81	152	152	152
Trusts Debt remuneration	1,307	1,286	1,242	1,375	1,532.0
Trust revenue receipts	620	705	705	705	705
Total income	1,986	2,073	2,099	2,232	2,389
Capital
Charges and income in table 2.1.1	593	676	491	355	270
Sales of assets	311	298	350	300	112
Trust capital receipts	283	378	141	55	158
Total income	594	676	491	355	270
National Health Service family health services
(non-discretionary) (2)
Current
Charges and income in table 2.1.1	806	849	891	898	898
Miscellaneous income mainly goods and services
Revenue from charges	806	849	891	898	898
Total income	806	849	891	898	898
Departmental administration
Current
Charges and income in table 2.1.1	39	27	20	15	12
Miscellaneous income mainly goods and services	32	23	20	15	12
Revenue from charges	4	0	0
Sales of assets	3	4	0	0.0	0.0
Total income	39	27	20	15	12
Central health and miscellaneous services
Current
Charges and income in table 2.1.1	117	111	157	109	119
Miscellaneous income mainly goods and services (3)	117	111	157	109	119
Total income	117	111	157	109	119
Central Government Personal
Social Services
Charges and income in table 2.1.1	0	0	0	18	25
Miscellaneous income mainly goods and services	0	0	0	18	25
Total income	0	0	0	18	25
Total Health and Personal Social Services receipts
Charges and income in table 2.1.1	3,542	3,736	3,658	3,627	3,714
Miscellaneous income mainly goods and services	208	215	329	294	308
Charges	810	849	891	898	898
Sales of assets	314	302	350	300	112
Recoveries of contracted out VAT
Trusts Debt remuneration	1,307	1,286	1,242	1,375	1,532
Trust revenue receipts	903	1,083	846	760	863
Total income	3,542	3,736	3,658	3,627	3,713
Reconciliation with the Resource Account Schedule 7 and 8
RfR1	2,480	3,852
RfR2	171	164
Total shown in Resource Account	2,651	4,016
Difference between the Resource Account and Receipts in Table 2.1.1b	-891	280
Made up as follows :
Contracted out VAT not shown as appropriation in aid	9
NDPB grant in aid identified since Departmental Report	-22
Trust loan repayments		-742
Plus Trust revenue receipts (1)	620	705
Plus Trust capital receipts (1)	283	378
Income between NHS organisations (4)		-621
Total charges	890	-280

Footnotes

(1) NHS Trusts are public corporations. Their income is not Voted and does not score as appropriations in aid, but is included in table 2.1.1.

(2) Projected FHS non discretionary income is based upon the current year plan. Actual income in future years will be dependant upon the level of demand on these services. Any variation in the proportion of patients who might qualify for relief from charges (eg on income grounds) and future decisions on charge levels will affect the level of income.

(3) CHMS planned income will be amended for 2002-03 and 2003-04 in light of actual charges identified in year—mainly to NDPB income.

(4) The Resource Account included income between NHS organisations which should be excluded when considering the Appropriations in Aid for the NHS overall.

Figures may not sum due to rounding.

2.2 Overall Expenditure

HOSPITAL AND COMMUNITY HEALTH SERVICES (HCHS) COST-WEIGHTED ACTIVITY INDEX

Background

1. The Department has traditionally measured the efficiency of the HCHS by the Cost Weighted Activity Index (CWAI—discussed in paragraphs 10 to 14), using retrospective, provider based data derived mainly from audited final accounts. Since 1992-93, the Department had complemented the CWAI index by an in-year estimation of health authority efficiency using the Purchaser Efficiency Index.

2. The PEI was abolished from 1 April 1999. The Performance Assessment Framework, which replaces the PEI, sets out a broader-based approach to efficiency and takes into account performance over a range of areas (ie health improvement, outcomes as well as efficiency). Technical efficiency targets have been set against an extended Reference Cost Index. Question 2.1e explains this process in more detail.

Cost-Weighted Activity Index

3. The index (Table 2.2.5) provides a broad measure of the overall growth in HCHS activity, in which the contributions of the individual components are weighted by their costs. Following changes in accounting practice within the NHS it has been difficult to gauge the increase in expenditure in both volume and real terms. However, estimates have been made using broadly comparable data and are shown in Table 2.2.5 and its associated graph (Figure 2.2.5). Over the 10 years since 1990-91 overall activity levels increased by just over 30 per cent. Over the same period, the volume of inputs—that is expenditure after allowing for increases in HCHS pay and other input unit prices—increased by 28 per cent, suggesting an increase in efficiency of around 2 per cent. There was a 4 per cent reduction in efficiency in 2000-01, which was driven by high growth in expenditure together with a small reduction in activity.

4. The figures for 1999-2000 have been revised from the evidence provided last year—mainly due to changes in the way the expenditure is measured. The development of PCGs, in particular, makes it difficult to produce HCHS expenditure figures on a consistent basis.

5. Improvements in HCHS efficiency are dependent on several factors. An important driver is medical advance supporting new patterns of care delivery. For example, the introduction of minimally invasive therapies has reduced hospital stays for many treatments and thereby improved efficiency over this period. The relocation of much long stay care to community settings has also had a similar effect. Each has contributed to significant gains in labour and capital productivity. In recent years the impact of these factors on unit costs has reduced. Instead, much of the impact of medical advance has been to increase quality, rather than reduce costs. The investment in quality includes an increased use of drugs, such as chemotherapy for cancer patients, and improved facilities for patients. This investment has shown up, for example, in an improvement in health outcomes. This is borne out in that the efficiency referred to in paragraph 13 has reduced from 10 per cent over the 10 years to 1998-99 to 2 per cent in the 10 years to 2000-01.

6. Trends in efficiency are the inverse of trends in unit costs. The efficiency gains, which have been recorded, are consistent with unit costs, which have fallen compared to HCHS specific inflation.

Table 2.2.5

HCHS COST-WEIGHTED ACTIVITY INDEX

	HCHS Cost-Weighted Activity Index		Expenditure Adjusted for changes in input unit costs		Expenditure in real terms
	Index 1989-90 =100	% increase over previous year	Index 1989-90 =100	% increase over previous year	Index 1989-90 =100	% increase over previous year
1990-91	100.0		100.0		100.0
1991-92	105.2	5.2%	102.6	2.6%	106.5	6.5%
1992-93	108.5	3.1%	105.8	3.1%	113.7	6.8%
1993-94	112.8	4.0%	107.5	1.6%	116.5	2.5%
1994-95	117.5	4.2%	109.0	1.4%	119.6	2.6%
1995-96	122.2	4.0%	110.9	1.8%	122.8	2.6%
1996-97	124.2	1.7%	112.5	1.5%	124.1	1.1%
1997-98	126.4	1.8%	115.0	2.2%	125.2	0.9%
1998-99	129.1	2.1%	118.4	3.0%	130.3	4.1%
1999-2000	130.5	1.1%	122.8	3.7%	138.0	5.9%
2000-01	130.5	0.0%	128.4	4.5%	147.0	6.6%

2.2 Overall Expenditure

1. Total NHS expenditure in 2001-02 rose by £5.2bn, of which £4.8bn was increased revenue expenditure and £0.4bn increased capital expenditure. This increase in expenditure was used to deliver and fund the following;

Pay

2. The NHS is a labour intensive organisation and pay accounts for roughly 60 per cent of total spend. Consequently pay increases absorb a significant part of the additional spend. The main elements of the total increase in paybill are:

(a) pay awards for NHS staff worth, on average, 3.9 per cent;

(b) increase in pensions contributions of 2 per cent of pay;

(d) introduction of Cost of Living Supplements for staff living in high cost areas in London and parts of the South East.

Staff, Drugs and Activity

3. Delivery of the NHS Plan depends critically upon increasing staff numbers. Investment in this year has led to overall staffing increases of a little over 2 per cent including: [1]

(a) 14,400 (4.3 per cent) more qualified nurse;

(b) 2,000 (4.0 per cent) more Qualified Allied Health Professionals (such as physiotherapists and chiropodists);

(d) over 200 additional GPs;

(e) 190 (5.5 per cent) more Cancer Care Specialists; and

(f) 30 more Cardiologists.

4. These staff have been deployed to help, amongst other things:

(d) allow around 11 million people to access out of hours services through NHS Direct.

5. The increased spend on drugs reflects an 11 per cent growth in GP prescribing. We estimate that implementing NICE guidance has cost around £225 million. The estimated increased cost of treatments referred to NICE include:

(a) £68 million on drugs for Coronary Heart Disease benefiting over 21,000 people;

(b) £30 million on drugs for breast and ovarian cancer benefiting over 7,000 women and £17 million on drugs for other cancers (of the pancreas, lungs, brain and for leukaemia benefiting over 23,000 people);

(d) £19 million on treatments for oesteo-arthritis and rheumatoid arthritis;

(e) £3 million on treatments for Attention Deficit Hyperactivity benefiting 48,000 people; and

(f) £5 million on treatments for Alzheimers Disease benefiting over 15,000 people.

Capital and Training

6. Delivery of further improvement in the NHS beyond 2001-02 will depend upon investment for the future in staff, buildings, equipment and information technology. In 2001-02 the additional investment allowed, amongst other things:

(i) In the areas of Capital and Information Technology:

(a) an 8 per cent increase in the level of general capital allocations to maintain and improve the NHS estate;

(b) purchase of the London Heart Hospital (£31 million);

(c) central purchase of 185 major pieces of cancer equipment (£53 million), including 71 CT scanners and 53 items of breast screening equipment;

(d) work started on a range of projects to modernise over 200 maternity units and purchase equipment (£100m over two years 2001 to 2003);

(e) substantial progress on the elimination of 233 Nightingale wards (£40 million);

(f) Mental Health investment in security, discharge to more appropriate settings, and modernisation of psychiatric wards (£55 million); and

(g) purchase of 32,000 high spec personal computers primarily for clinical staff.

(ii) In the area of Training:

(a) an increase in Nurse and midwife training places 1,750 (8.7%);

(b) an increase of around 700 (14.6%) AHP training places;

(d) an increase of around 220 in the number of GP Registrars;

(e) an increase of almost 400 (9.3%) medical school places; and

(f) an increase of over 570 (more than 40%) training places for scientific and technical officers.

2.3 Programme Budgets

2.3.1 Could the Department update the information on expenditure on Programme Budgets provided in Tables 2.2? [2.2]

INTRODUCTION

1. The response to this question is in two parts. The first part deals with the Hospital & Community Health Services (HCHS) programme budget for 2000-01 presented in the format introduced four years ago. The Department feels that this format more accurately reflects expenditure by the NHS in the latest year for which data is available (see paras 3 to 9 below).

2. The second part deals with longer-term trends in expenditure within the programme budget. Unfortunately, due to major discontinuities in the data, figures for 1996-97 are not comparable with those in earlier years and trends are reported on the period 1991-92 to 1995-96 and 1997-98 to 1999-2000 (see paras 10 to 13).

SECTION 1—HCHS PROGRAMME BUDGET : A "NEW" METHOD

3. Traditionally, detailed HCHS analysis has been carried out using provider data from directly managed units. Since NHS Trusts were created in 1991-92, provider data has become an increasingly poor proxy for healthcare commissioned by Health Authorities. The fundamental problem is that there are increasing differences between activity reported by Health Authorities and NHS providers. Figure 2.3.1(a) shows the relationship between the two sets of data.

4. As can be seen from Figure 2.3.1(a) the common ground between health authorities and NHS providers is activity that has been both commissioned and provided by the NHS in England. The traditional presentation of HCHS expenditure blurs the distinction between Health Authorities and NHS providers by fitting the provider profile of expenditure to the Health Authority total of expenditure. An alternative method of constructing the programme budget information has, therefore, been devised. This programme budget aims to capture the most recent year's expenditure by Health Authorities and present that data in a more easily readable format. The results are shown in Table 2.3.1(a).

5. There are major differences between the new HCHS programme budget format and the traditional format:

(i) The new format covers health authority expenditure regardless of whether it was provided by NHS or non-NHS providers. Conversely, private patients at NHS providers do not affect the figures.

(ii) The programmes are more logically structured and the presentation is easier to follow. For example, all general and acute expenditure on the elderly is presented as one programme, whereas previously the geriatric programme (ie care led by a consultant geriatrician) was frequently, and wrongly, taken to mean all general care for the elderly.

(iii) A clear distinction has been drawn between programmes of care (columns) and methods of care (rows).

KEY MESSAGES

6. In 2000-01 overall HCHS expenditure rose by 9 per cent to £30,099 million. This is equivalent to 5 per cent growth in volume terms and 7 per cent in real terms.

— Over 70 per cent% of HCHS expenditure is in the hospital sector, with community taking over 17 per cent, the remainder being other spending, including ambulance journeys and local administration.

— The largest programme in both the hospital and community sectors is for G&A elderly patients with 41 per cent and 27 per cent of spend respectively.

(See Figure 2.3.1(b) and Figure 2.3.1(c) for a graphical representation of the proportions of expenditure each programme makes up in the hospital and community sectors).

Table 2.3.1(a)

HCHS PROGRAMME BUDGET EXPENDITURE

£m at 2000-01 cash prices

Programme General & Acute

Service Type Total Maternity Mental
Illness Learning
Disability Children Adults Elderly

Total Hospital, of which: 21,313 1,150 2,804 528 1,253 6,766 8,811

Ordinary admissions; (1) 15,233 995 2,204 440 720 3,536 7,339

Day cases; 1,483 - - - 106 907 470

Outpatients; 3,325 154 274 16 342 1,819 720

Day care; 546 - 325 73 - 45 102

Accident & emergency. 726 - - - 86 459 182

Total Community, of which: 5,203 211 907 986 792 919 1,388

Community nursing; 2,156 211 491 131 38 425 861

Health visiting; 425 - - - 278 130 17

Professional staff groups; 663 0 9 1 51 311 291

Immunisation, surveillance 479 - - - 425 52 1

& Screening;

Residential care. 1,480 - 407 854 - - 219

Ambulance journeys 562 30 74 14 33 178 232

Other Patient Related 898 46 126 51 69 260 345

Non Patient Related 2,124 109 297 121 164 615 817

Total HCHS (2) 30,099 1,547 4,207 1,700 2,312 8,739 11,594

Footnotes

1. Includes regular day/night attenders.

2. Figures may not sum due to rounding.

7. Table 2.3.1(b) shows a summary of Table 2.3.1(a) by service sector over the last four years for which data has been available in this form.

Table 2.3.1(b)

HCHS PROGRAMME BUDGET EXPENDITURE 2000-01 PRICES (Real Terms (1))

				£m
	1997-98	1998-99	1999-2000	2000-01
Total Hospital of which:	18,603	20,096	19,756	21,313
Ordinary admissions (2);	13,375	14,250	14,183	15,233
Day cases;	1,211	1,462	1,336	1,483
Outpatients;	2,891	3,140	3,035	3,325
Day care;	471	537	511	546
Accident & emergency;	656	707	690	726
Total community of which:	4,582	5,115	4,894	5,203
Community nursing;	1,926	2,211	2,102	2,156
Health visiting;	364	399	416	425
Professional staff groups;	655	711	622	663
Immunisation, surveillance & Screening	410	449	468	479
Residential care;	1,227	1,345	1,287	1,480
Ambulance journeys	514	534	517	562
Other Patient related	678	853	974	898
Non-Patient related	1,121	80	2,103	2,124
Total HCHS	25,499	26,678	28,243	30,099

Footnotes

1. Inflated to 2000-01 prices using GDP deflators.

2. Includes regular day/night attenders.

3. Figures may note sum due to rounding.

SECTION 2—TRADITIONAL PROGRAMME BUDGET METHODOLOGY

8. This section of the reply discusses trends in Hospital and Community Health Services (HCHS) gross current expenditure over the period 1991-92 to 1995-96, and 1997-98 to 2000-01.

9. In order to gain the maximum value and usefulness from the programme budget it is necessary to compare expenditure trends over a comparative period. Major discontinuities in 1996-97 make long term comparisons difficult.

10. Expenditure on HCHS is shown in Table 2.3.1(c). The corresponding annual growth rates are also given. These rates are for the period 1991-92 to 1995-96 and 1997-98 to 2000-01. Figures 2.3.1(d) to 2.3.1(g) illustrate the breakdown of expenditure between the main programmes and how this has changed for 1991-92, 1995-96, 1997-98 and 2000-01.

Abbreviations used in Table 2.3.3

CHS = community health services;

DP = day patient;

NCHS = Hospital and Community Health Services;

IP = inpatient;

JF = joint finance;

OP = outpatient;

YPD = younger people with physical and/or sensory disabilities;

Table 2.3.1(c)

2.4 Special Allocations

2.4.1 Could the Department list any special allocations and likely allocations in 2002-03, and indicate any likely allocations in 2003-04? [2.5]

1. At this time there are no plans to award any special allocations in either 2002-03 or 2003-04.

2.5 Expenditure on Community Care

1. Table 2.5.1 provides details of central and local government net expenditure on services for community care in England, for 1996-97 to 2000-01, the latest year for which information is available. All figures have been adjusted to 2000-01 prices using the latest Gross Domestic Product deflator. The reason for using the GDP deflator is that there is no single service pay and price index that would be appropriate for all sectors.

2. Community care expenditure is taken to mean expenditure on non-residential and residential care provided or arranged by local authorities for adults; community health services provided by the NHS for adults; certain social security benefits which support community care objectives; and certain expenditure on housing. Calculation of local authority expenditure by client group involves a degree of estimation.

3. The data in the table are set out in graphical form in Figure 2.5.1. The graph illustrates annual expenditure at constant prices since 1996-97, with the figures for 1996-97 indexed to 100. Department for Work and Pensions (DW&P) payments in support of community care, local authority expenditure on both non-residential care and residential care and expenditure on community health services have all grown significantly in real terms over the period. DW&P expenditure in support of residential care has declined as a direct result of the April 1993 community care reforms. These reforms transferred care management and funding responsibility for new admissions to independent sector care homes to local authorities and ended the former system of higher Income Support payments for people in such homes unless they had preserved rights. The number of preserved rights cases has declined substantially over this period. For admissions since April 1993 Income Support has been payable to people in independent sector care homes in broadly the same way as it is payable to people in their own homes. Expenditure on housing associated with community care fluctuated over the five-year period. On a comparable basis, expenditure on housing in 2000-01 is some 7 per cent more in real terms than in 1996-97.

Table 2.5.1

NET EXPENDITURE ON SERVICES FOR COMMUNITY CARE (2000-01 PRICES) ENGLAND

£million

1996-97 1997-98 1998-99 1999-00 2000-01

A. Local Authority Domiciliary Care (1)

Assessment and Care Management (2) 814 838 848 901 942

Direct Payments 0 0 10 42 49

Home Care 1,256 1,298 1,317 1,381 1,406

Day Care for Older People 179 184 193 201 235

Day Care for Other Adults 538 534 557 585 608

Equipment and Adaptations 80 79 68 73 108

Meals 51 51 48 52 58

Other Services 362 375 394 416 340

Total A 3,280 3,358 3,436 3,649 3,745

B. Community Health (3-8)

Chiropody 91 87 95 101 108

Family Planning 59 56 63 67 73

Immunisation and Surveillance 3 3 3 3 4

Screening 58 57 64 68 74

Professional Advice and Support 105 100 120 121 122

General Patient Care 1,008 973 1,045 1,011 978

Community Mental Health 483 532 577 651 736

Community Learning Disability Nursing 313 355 383 396 411

Health Promotion 57 52 58 59 61

Services to GPs Under Open Access 208 204 230 283 344

Other Community Health Services 296 280 343 393 449

Total B 2,681 2,700 2,981 3,153 3,360

Total A plus B 5,961 6,058 6,418 6,802 7,105

C Local Authority Residential Care for (1) (2)

Older People (Aged 65 or over) 2,062 2,132 2,177 2,255 2,204

Adults aged under 65 with:

A Physical Disability or Sensory Impairment 158 163 172 183 188

Learning Disabilities 584 615 653 707 764

Mental Health Needs 151 164 170 174 192

Total C 2,954 3,074 3,171 3,319 3,348

D. Income Support:—Residential Care, Nursing

Homes and Residential Allowance Cases (9-14) 1,838 1,679 1,532 1,435 1,367

Total C plus D 4,793 4,754 4,703 4,754 4,715

E. Other Social Security Benefits

Attendance Allowance (15) 2,192 2,230 2,302 2,364 2,424

Disability Living Allowance (15) 3,963 4,333 4,455 4,642 4,853

Invalid Care Allowance 658 655 662 689 701

Independent Living Fund (16) 103 98 99 108 113

Social Fund Community Care Grants (17) 90 83 81 79 79

Total E 7,006 7,398 7,599 7,882 8,170

F. Housing

Adaptations to all LA Dwellings for Older People and Disabled Adults (18) 125 66 74 134 121

LA Grants; Disabled Facilities Grants (19) 111 108 113 122 129

Housing Corporations; Approved Development Programme (ADP) (20) 86 85 94 95 93

LA Sponsored RSL (LASHG) (20) 50 48 53 48 57

Total F 373 307 335 399 400

Total E plus F 7,378 7,705 7,934 8,280 8,570

Grand Total A to F 18,132 18,516 19,055 19,836 20,390

FOOTNOTES:

Parts A and C

1. Local Authority expenditure for 2000-01 is obtained from the PSS EX1 return; individual service lines include overhead costs. For earlier years it is obtained from the RO3 current expenditure return but with a share of overhead costs allocated to service lines on a pro-rata basis. Figures for 2000-01 are therefore not strictly comparable with those for earlier years. The RO3 return was redesigned in 1998-99 and equipment and adaptations and meals were made memorandum items leading to some underrecording and consequent inflation of the other services expenditure; data for these items for 1998-99 and 1999-2000 are therefore not strictly comparable with those for earlier years. Expenditure on direct payments was only recorded from 1998-99 onwards.

2. Assessment and care management, although included under local authority non-residential care in Part A, also includes expenditure which is relevant to residential care (Part C).

Part B

3. As it is not possible to supply net expenditure figures from the Hospital and Community health Services (HCHS) programme budget, figures are gross expenditure and this may mean that they are slightly overstated.

4. For figures derived from the HCHS programme budget analysis, it has been assumed that the following has been spent on adults: approximately 90 per cent of chiropody, 95 per cent of family planning, 1 per cent of immunisation and surveillance, 100 per cent of screening, 35 per cent of professional advice and support, 95 per cent of total general patient care, 95 per cent of community mental illness nursing, 80 per cent of community learning disability nursing, 70 per cent of health promotion and services to GPs under open access and other community spending. It has also been assumed that 100 per cent of maternity care is spent on the delivery and no costs are associated with the mother, and that 100 per cent of community dental is spent on children.

5. The above allocations have been taken from the Expenditure Per Head Of Population exercise.

6. Administration costs for community health services are not separately identifiable and are not included in the community health figures.

7. In 1996-97 several categories of the programme budget were affected by the changes to accounting practice and the changing structure of the NHS. Included in these was the need to capitalise redundancy payments and recharges were no longer included.

Part D

8. Figures for 1999-2000 onwards are on a Resource Accounting and Budgeting basis.

9. All figures are based on information received from DWP ASD Information Centre on caseload and average weekly amounts, except for Independent Living Fund which is 85 per cent of GB Outturn.

10. Any change in expenditure from previous published figures is due to more up to date information being available.

11. Income Support Quarterly Statistical Enquiries, May 1996 to February 2002.

12. Expenditure is based on Preserved Rights Residential Care and Nursing Home cases and Residential Allowance cases for England.

13. Excludes unemployed claimants who are now provided for by Jobseekers Allowance.

Part E

14. Disability Living Allowance replaced Attendance Allowance (for people under 65) in 1992.

15. Expenditure for Independent Living Fund estimated as 85 per cent of Great Britain outturn as at September 2002.

16. Final Social Fund Community Care Grant Expenditure. Information derived from Social Fund Computer System.

Part F

17. Source: Housing Investment Programme Annual Plan returns (section 5).

18. Disabled Facilities Grants are paid to the private sector, including RSL tenants, and also to LA tenants; figures shown represent totals of mandatory and discretionary grants under relevant Acts. Source: DETR P1D returns; and HIP HSSA 2001 return for 1997-98 onwards.

19. Housing Corporation ADP approvals for schemes by Registered Social Landlords (mostly housing associations) in respect of homes for rent and sale to certain "special needs" groups (frail elderly, people with mental health problems, learning, or physical disabilities) and one "general needs" group (elderly with warden support). This covers the Corporation's own programme and joint schemes, and also local authority-sponsored schemes using LA Social Housing Grant (LASHG). Source: Housing Corporation Stewardship Reports: elderly and disabled categories only.

1 The workforce data are not available for the financial year, so these figures relate to Sept 00 to Sept 01. Back

2 Source: Department of Health Quarterly Monitoring Returns (Commissioner based). Back

3 Source: Department of Health return KH09. Back



© Parliamentary copyright 2003	Prepared 17 February 2003