Memorandum by the Department of Health
PUBLIC EXPENDITURE QUESTIONNAIRE 2001
Table 2.1.2
EXPLANATION OF MAIN AREAS OF EXPENDITURE
IN TABLE 2.1.2
2.1b Could the Department identify significant
changes between forecast and actual outturn for 1999-2000 and
between the planned level of spending and forecast outturn for
2000-01, by comparing figures in Table 2.1.1 with current figures.
For each programme the planned level of spending in 1999-2000
and actual outturn expenditure should be shown in tabular form.
5. Table 2.1.3 details significant changes
(ie over £10m) between forecast and actual outturn for 1999-2000
and 2000-01. Table 2.1.3(i) explains any differences between information
provided in Table 2.1.1(a) and information provided for last year's
Inquiry.
Table 2.1.3
COMPARISON OF NET EXPENDITURE PLANS (CASH)
FOR 1999-2000 AND 2000-01 WITH THOSE ON PAGES 40-44 OF LAST YEAR'S
HEALTH COMMITTEE WRITTEN EVIDENCE (HC 882)
Table 2.1.3 (i)
COMPARISON OF NET EXPENDITURE PLANS (CASH)
FOR 1999-2000 AND 2000-01 WITH THOSE ON PAGES 40-44 OF LAST YEAR'S
HEALTH COMMITTEE WRITTEN EVIDENCE (HC 882)
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.
Note: Changes less than £10 million are
not listed and may slightly affect totals.
2.1c Please identify and explain differences
between the 2001 Departmental Report and the figures in Table
2.1.1.
6. Planned expenditure in 2001-02 has not
changed since the publication of the Departmental Report (Cm5103).
Estimated outturn for 2000-01, as stated in the Departmental Report
has been updated and the most current figures have been used in
Tables 2.1.1(a) and (b). Table 2.1.4 highlights the differences.
Table 2.1.4
COMPARISON OF CURRENT ESTIMATED NET EXPENDITURE
(CASH) FOR 2000-01 WITH PLANNED EXPENDITURE IN THE DEPARTMENTAL
REPORT (CM 5103)
Note: Changes in estimated outturn since publication
of Cm 5103 will be included in table 2.1.3(i)
2.1d What is the Department's
assessment of each programme's performance in 1999-2000 against
plans for that year, and anticipated performance in 2000-01 against
plans for that year and outturn in 1999-2000?
7. Table 2.1.3 shows that there were underspends
of more than £10 million between forecast outturn for 1999-2000
and final outturn in the HCHS and FHS programmes.
8. Overall, Table 2.1.1(b) shows that forecast
outturn in 2000-01 will generally be higher than outturn expenditure
in 1999-2000 in all programmes except Credit Approvals (LA Capital)
where the figures remain fairly constant over the period covered
by the table.
2.1e 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).
9. The information requested is contained
in tables 2.1.5 and 2.1.6.
Table 2.1.5 (Cash)
RECONCILIATION BETWEEN APPROPRIATIONS IN
AID AND RECEIPTS IN TABLE 2.1.1a
Footnotes
1 NHS contributions (collected by Inland
Revenue on behalf the Department) are appropriated in aid but
are not part of the Department's Department Expenditure Limit
and do not form part of HPSS table 2.1.1.
2 From 1995-96 until 1998-99 Trust Debt
Remuneration was treated as an Extra Receipt payable to the Consolidated
Fund.
3 VAT was not treated as an Appropriation
in Aid for the years 1996-97 and 1997-98 due to a change in accounting
treatment proposed by Treasury, this decision was later reversed.
Appropriation Accounts do therefore not reflect VAT for these
years.
4 Capital repayments represent income in
the form of Public dividend capital repayable to DH which does
not provide additional resources.
5 NHS Trusts are public corporations. Their
receipts do not have to be Voted and therefore do not score as
appropriations in aid, but are included in table 2.1.1.
Figures may not sum due to rounding
Table 2.1.6 (Resources)
RECONCILIATION BETWEEN APPROPRIATIONS IN
AID AND RECEIPTS IN TABLE 2.1.1b
Footnotes
1 NHS Trusts are public corporations. Their
receipts do not have to be Voted and therefore do not score as
appropriations in aid, but are 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.
Figures may not sum due to rounding.
2.1f 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 ten years for which figures are available.
HOSPITAL AND
COMMUNITY HOSPITAL
HEALTH SERVICES
(HCHS) COST
WEIGHTED ACTIVITY
INDEX
Background
10. The Department has traditionally measured
the efficiency of the HCHS by the Cost Weighted Activity Index
(CWAI—discussed in paragraphs 12 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.
11. The PEI was abolished from the 1st April
1999. The new Performance Assessment Framework, published on 9th
April, which is to replace 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
12. The index (Table 2.1.7) 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 2.1.7 and its associated graph (Figure
2.1.1). Over the 10 years since 1989-2000 overall activity levels
increased by over 32 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 almost
28 per cent, suggesting an increase in efficiency of over 3 per
cent. There was a 5.5 per cent reduction in efficiency in 1999-2000,
which was driven by high growth in expenditure for inpatients
and day cases (9 per cent) together with a lower growth in activity,
of under 2 per cent.
13. 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. Other efficiency measures,
such as the movement towards the use of Day Case procedures and
the closure of long stay psychiatric hospitals, which in the past
have contributed to efficiency gains appear to no longer deliver
the same benefits. On the other hand, we can be reasonably sure
that the ageing of the population works against improvements in
efficiency. Elderly people tend to require more expensive care,
and their increasing numbers have placed upward pressure on average
unit costs. This is borne out in that the efficiency referred
to in paragraph 10 has reduced from 10 per cent over the 10 years
to 1998-99 to 3 per cent in the 10 years to 1999-2000.
14. 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.
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