Select Committee on Health Minutes of Evidence

Examination of Witnesses (Questions 80 - 99)



  80. Is that a recognition that the resource allocation formula—I think it goes back to the 70s, does it not—did not give enough weight to health inequalities and to chronic ill health and that we can look forward to that being rectified for the new formula or PCTs?
  (Mr Douglas) That is one of the clear aims of the review of the formula, to better recognise needs within the overall resource allocation, in particular what we call the unmet need in the formula. The adjustment change last year was extended to years of life lost to death under one year old, that is the additional change we brought in.

  81. I notice that some health authorities received a health inequality payment, some also received a pay cost top-up as well. Can I ask you about relative weighting given different factors, deprivation and pay costs in arriving at the figures given?
  (Mr Douglas) The two adjustment figures we had on top of the formula were the health inequality adjustment, which was £148 million and the cost of living adjustment/supplement which was £102 million.

  82. In future that money is not going to be kept?
  (Mr Douglas) There has not been a final decision made yet and the recommendations on the review of the formula have been put to officials for modelling and they will go to the Secretary of State before allocations are made this year and then a decision will be made on what is incorporated in the formula.

  83. There is a similar debate going on about the local government funding formula at the moment. There are roughly the same pots of money allocated for both, pay pressures and health inequality. Does that suggest that they are given equal weighting in the overall equation?
  (Mr Douglas) No. There is a formula primarily driven by needs, the overall formula is primarily need driven.

  84. Under the current formula it gives age profile, that is not necessarily need driven, the age of the population. If people are living longer they might be a healthier population.
  (Mr Douglas) It is not entirely needs.
  (Mr Foster) In relation to the cost of living supplement this is a much more recent allocation of money and really it is a response to the changing problems in the labour market. I think it was first introduced something like three or four years ago and subsequently expanded as recently as two years ago. The two policies and respective costs have not been brought together, they are quite separate evolutionary policies.

  85. The may be brought together in the new PCT?
  (Mr Foster) The money will arrive in the same way. In terms of policy they come from completely different directions.

  86. I have a genuine concern that the priority given to pay costs is actually channelling public funds into areas that are more affluent by definition and likely to have a healthier population. Are you satisfied overall that deprivation and ill health is going to be given adequate weighting and that you might lose the emphasise that should be given to that in terms of fighting off and fuelling possible wage inflation in others parts of the country?
  (Mr Foster) The cost of living supplements are monies that are applied to nursing and the other professional staff who have to live in those very high cost areas. It is a labour market force payment that enables us to sustain staffing levels in those areas.

  87. You know Wigan and the area very well. One thing that worries me about this policy and about policies generally is recognising in budgets the house price inflation and wage inflation for certain parts of the country, and it is precisely those parts of the country where it is possibly easier to recruit because people they are attractive parts of the country to live, whereas if you look at the Wigan and Leigh area we are significantly under-GP'd, one of the worst parts of the country in terms of lack of GPs. It might be that you need to pay people more to be a GP in Wigan than you have to pay to be a GP Bournemouth. Are you satisfied that that problem that is being picked up by the formula is being developed?
  (Mr Douglas) I think overall we are satisfied that we get the right balance. We have to recognise both of those things. We do have significant problems in recruiting and retaining staff in areas of high cost.

  88. Are there problems in areas of high deprivation as well?
  (Mr Douglas) Yes. What we try to get is a formula that balances the needs element and the cost element.

  89. The solution in areas of high deprivation is to pay them more because people are not attracted to go there.
  (Mr Douglas) The issues round staff shortages are far more significant generally in the higher cost areas than in the lower cost areas of the country.

  90. Is it fair to say that the new formula will give weighting to health inequality/deprivation and pay costs?
  (Mr Douglas) It will bring into account both costs and needs.

  91. No decision has been made on the relative weighting.
  (Mr Douglas) The final decisions round the formula are still to be made.

  92. When will they be made?
  (Mr Douglas) In time for us to make allocations by the end of November, in the next few weeks.

Dr Naysmith

  93. Just quickly while we are on this table, can someone remind me exactly how the Performance Fund monies are allocated. I know I should know the answer to that question but it might prove interesting.
  (Mr Douglas) I may have to check with one of my colleagues. I think it was on a fair shares basis in line with the allocations that the Performance Fund went out?
  (Ms Edwards) Yes. My recollection is it was fair shares but the way in which organisations were able to use the money depended on their status. In other words, those organisations that had performed well were given a lot of freedom about how to use the funding and those who had not were given more direction.


  94. Can we just raise a question about the issue of deficits and the handling of deficits. My understanding is that the current planning is that no NHS organisation will be in deficit at the end of the current financial year. Is that correct?
  (Mr Douglas) The original plan we set at the start of the year was for each organisation to be in balance for the year. That was after we had set aside the £100 million in what we call the NHS Bank to support some areas of the country that were particularly challenged in meeting that target.

  95. I think I represent one of those areas. Wakefield has got a historical deficit which has caused some concerns. I know there is a worry that the pressure that is being placed upon the local trusts that are involved here is resulting in a sense in perhaps the undermining of wider policy objectives. For example, we have in Wakefield one of the highest bed usages in the country and the attempts to develop care services have been undermined by the strategy for addressing the deficit. At what stage do you review this objective of wiping out the deficits and the weighting pattern on your other policy, initiatives which most of us would support?
  (Mr Douglas) The key thing on the deficit issue is that people tend to think it is a book-keeping thing that accountants like me get interested in and that it does not really mean anything. If one organisation in the NHS has a deficit someone else is paying for that in the NHS. The key thing we are trying to do is other than in a structured way not to transfer money from one part of the NHS to another. That is really all this policy is. I do not know the details of Wakefield, but if within your area or around your area there are other organisations that can help fund the deficit, then that would be acceptable, but only if someone else could find the resource to meet that.

  96. What I was trying to get at is where would you step in if the strategies that are having to be implemented to address the deficit undermine the longer-term strategies that have sensibly been adopted to move away from reliance on acute provision?
  (Mr Douglas) It depends what you mean by "step in". What we would look to first of all is the local strategic health authority to see if they could sort the problem out themselves. If they cannot then we would look at other strategic health authorities within that directorate of social care areas to see if they could help sort it out. Only after that would we look at anything across the rest of the country. But if the problem could not be dealt with within Wakefield, within West Yorkshire or within the North of England, then that money would have to be found from someone else; someone else would have to pay for it.

  97. Do you have an overview of strategies that have been adopted to address the deficits and the way in which those strategies may be impacting upon other government objectives, because quite clearly what I am being told in my own area is a contradiction with, on the one hand, the pressure to address the very serious deficit and, on the other hand, the pressure to move away from dependency on acute beds, which in a sense is partly responsible for the deficit in the first place.
  (Mr Douglas) I do not have the detail of the strategy in every part of the country.

  98. I appreciate that.
  (Mr Douglas) But what we have made quite clear is that people have to both achieve financial balance and deliver the targets that have been set for this year.

Julia Drown

  99. I do not know Wakefield well but I know the deficits around my part of the region in Swindon and Avon and Wiltshire. What if it is decided that some of it—not in Swindon but elsewhere—is down to managerial incompetence in the past? There is a serious question over whether the people in that particular area should suffer, having suffered before from management incompetence, and that they should pay that at a fairly local level by not having the services they were expecting or having services cut back.
  (Mr Douglas) That is absolutely right. That is why we established this £100 million NHS Bank initially to say that where there are problems that really cannot be managed within that local health community without very serious effects, then we would look effectively at the rest of the NHS to pool together to help sort that.

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