Memorandum by the Department of Health
PUBLIC EXPENDITURE QUESTIONNAIRE 2001
Table 4.4.1
REVIEW BODY PAY SETTLEMENTS 2001
PRICES
6. The GDP deflator is used as a proxy for
underlying non-pay inflation in the NHS. This needs to be adjusted
for assumptions about the level of procurement and other efficiency
savings that the NHS is expected to make.
CAPITAL CHARGES
7. At national level, the cost of capital
charges paid by the NHS is a circular flow of funds. The total
of the capital charges estimates made by NHS Trusts forms part
of the total cash resources available through Health Authority
allocations.
8. Indices for land, buildings and equipment
are produced for the Department each year by the Valuation Office,
in order that the NHS may calculate capital charges in advance
of the financial year.
9. The aggregate index used to uplift capital
charges to 2000-01 levels was 3.0 per cent.
4.4b Could the Department provide a breakdown
of the components of the health specific inflation indices for
revenue spending on HCHS and Family Health Services respectively,
together with capital spending on HCHS, for 1998-99 and 1999-2000,
together with estimates for 2000-01? The tables for the HCHS should
show separate inflation indices for Review Body staff and non-Review
Body staff pay, and whatever other breakdowns of staff are available.
HCHS PAY AND
PRICES INFLATION
10. Increases in the cost of goods and services,
ie the non-pay components of inflation are measured by the Health
Service Cost Index (HSCI). The HSCI weights together price increases
for a broad range of items used by the health service—for
example, drugs, medical equipment, fuel, telephone charges—using
weights derived from expenditure on these various goods and services
reported in financial returns.
11. Table 4.4.2 gives details of pay and
non-pay components used in calculating HCHS pay and price inflation.
Table 4.4.2
INFLATION FOR SPECIFIC ITEMS OF HCHS REVENUE
EXPENDITURE
12. The increase in the earnings of Review
Body staff over that of non-Review Body staff may be explained
by the larger increase in the consultant grades (6 per cent+)
than that of junior doctors (less than 2 per cent). This gives
a richer skill/grade mix for those staff covered by the Doctors
and Dentist Review Body, which when combined with the Review Body
awards has led to a higher average increase.
4.4c 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)?
13. Between 1992-93 and 1999-2000, the latest
year for which NHS specific indices are available, net NHS expenditure
has increased by:
43.0 per cent in cash terms
17.4 per cent in real terms adjusted by the GDP
deflator and
14.1 per cent after accounting for NHS specific
inflation.
14. Between 1999-2000 and 2003-04, net NHS
resources increase by:
41.6 per cent in cash terms and
29.1 per cent in real terms adjusted by the GDP
deflator.
15. Tables 4.4.3 and 4.4.4 below show the
year on year increase in Net NHS expenditure in cash, real terms
and after adjusting for NHS specific inflation up to 2000-01.
Table 4.4.3
CHANGE IN NET CASH NHS EXPENDITURE 1992-93
TO 2000-01
Table 4.4.4
CHANGE IN NET NHS RESOURCES 1999-2000 TO
2003-04
4.4d Would the Department provide a table
showing the construction of the NHS inflation index from main
sub-indices of pay and other factor costs since 1992, and comment
on the assumptions underlying this construct? Would the Department
provide the weights used for each sub-index, for each year?
16. The NHS inflation is constructed using
5 sub-indices. These are:
— HCHS pay index: This measures
the change in average paybill per head of those employed within
the HCHS;
— HCHS price inflation: This
measures the change in the 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 prices 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 different 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 change in unit costs includes 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;
— The "other" Index:
This comprises of 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.
|
| 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
| 104.3 | 103.3
| 105.8 |
| 1993-94 | 112.4
| 106.2 | 99.2
| 104.9 | 106.0
| 108.7 |
| 1994-95 | 116.3
| 107.1 | 104.1
| 107.3 | 107.5
| 111.5 |
| 1995-96 | 121.4
| 110.5 | 108.8
| 110.0 | 110.6
| 115.6 |
| 1996-97 | 125.4
| 112.2 | 112.3
| 113.7 | 114.1
| 119.0 |
| 1997-98 | 128.5
| 112.7 | 117.0
| 117.1 | 117.4
| 121.5 |
| 1998-99 | 134.8
| 115.5 | 121.3
| 120.6 | 120.7
| 126.2 |
| 1999-2000 | 144.0
| 116.8 | 125.8
| 123.5 | 123.5
| 131.8 |
|
17. The weights attached to each of the elements for
each of the years are shown in the table below.
|
| Year | HCHS
Pay
| HCHS
Prices |
HCHS
Capital | FHS
| Other | NHS
Total
|
| % |
% | %
| % | %
| % |
|
| 1991-92 | 49
| 21 | 6
| 21 | 3
| 100 |
| 1992-93 | 49
| 21 | 6
| 21 | 3
| 100 |
| 1993-94 | 49
| 21 | 5
| 22 | 3
| 100 |
| 1994-95 | 49
| 21 | 6
| 22 | 3
| 100 |
| 1995-96 | 49
| 21 | 5
| 22 | 3
| 100 |
| 1996-97 | 50
| 21 | 4
| 23 | 3
| 100 |
| 1997-98 | 47
| 25 | 3
| 23 | 2
| 100 |
| 1998-99 | 48
| 26 | 2
| 23 | 2
| 100 |
| 1999-2000 | 46
| 30 | 2
| 20 | 2
| 100 |
|
18. A change in the allocation of weights for HCHS current
expenditure between pay and prices took place in 1997-98. Prior
to this HCHS current expenditure was allocated on a 70:30 pay
: price split, based on the ratio of pay to non-pay expenditure.
In 1998-99, this was reassessed to be 65:35 in favour of pay and
in 1999-2000, the ration was 61:39 pay : prices.
4.5 Hospital and Community Health Services
Allocations and Distance from Targets.
4.5a Could the Department provide a table showing
for each health authority:
(i) allocations for resident populations for 2000-01
(cash) and 2001-02 (cash and at 2000-01 prices);
(ii) 2001-02 Distance From Targets (DFT) in cash and
percentage terms;
(iii) growth for each HA in percentage terms;
(iv) net adjustment (cash) for Primary Care Groups
and Primary Care Trusts;
(v) net adjustment for out of area treatments.
4.5b Could the Department include a commentary explaining
the key factors that determined those percentage growth increases
shown in the table?
4.5c Could the Department update the Committee on
recent developments in allocations of HCHS resources and provide
the timetable for any planned changes?
4.5a Could the Department provide a table showing
for each health authority:
(i) allocations for resident populations for 2000-01
(cash) and 2001-02 (cash and at 2000-01 prices);
(ii) 2001-02 Distance From Targets (DFT) in cash and
percentage terms;
(iii) growth for each HA in percentage terms;
(iv) net adjustment (cash) for Primary Care Groups
and Primary Care Trusts;
(v) net adjustment for out of area treatments.
1. The information requested is contained in table 4.5.1.
| 
