Select Committee on Health Memoranda


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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