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Lord Hunt of Kings Heath: Stability of funding is extremely important. Noble Lords will know that by 2004 we intend that some 75 per cent of the budget should be devolved to the primary care trusts. The Advisory Committee on Resource Allocation, to which I shall refer in more detail in a moment, is currently developing a formula for primary care trust allocations alongside a decision that will then need to be taken by the Government with regard to any pace of change policy in relation to movements from target on the part of primary care trusts.

As a point of interest, I understand that the current figures in relation to primary care trusts and distance from target reveal a range from minus 14 per cent to plus 14 per cent. Some 46 per cent of primary care trusts are within 2 per cent of target, while 83 per cent are within 5 per cent. My right honourable friend the Secretary of State will give great consideration to deciding what pace of change should be introduced for PCTs when they receive the full allocation.

However, there are always counterbalancing forces. If you are in a part of the country where the primary care trust is greatly under target, you will want the pace of change to move as quickly as possible. That has to be balanced against the need for stability in general across the NHS. That summarises the nature of the decision which my right honourable friend will have to reach.

The national resource allocation formula that is used to determine fair shares for health authorities and primary care trusts reflects the fact that different locations around the country have different health needs. The formula takes account of the age structure of the local population. Patterns of morbidity vary by age group. The very young and the elderly, whose populations are not evenly distributed around the country, make more use of health services than the rest of the population. Even when differences due to age are taken into account, populations display different morbidity characteristics, so the formula includes a wide range of health and socio-economic indicators associated with the need for healthcare.

The formula is already used to establish targets, or fair shares, for primary care trusts. While allocations are still made to health authorities, they are required to pass on resources to primary care trusts in accordance with national guidance. As I have already pointed out, we are asking the Advisory Committee on Resource Allocation to review the operation of the formula at primary care trust level. I listened with interest to the comments made by the noble Baroness, Lady Noakes, but she will recognise that the advisory committee has serving on it NHS management, GPs, academics and clinicians. Of course one would always welcome contributions from the NHS towards more general discussions on the way in which the formula is developed.

Lord Roberts of Conwy: Would the Minister be kind enough to clarify a point for me? He will have noted

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Amendment No. 81, which is grouped with Amendment No. 63. It relates to the local health boards to be established in Wales. Can the noble Lord give me an assurance that the formula to which he has just referred will apply equally in Wales? Alternatively, will there be different principles of allocation?

Lord Hunt of Kings Heath: I cannot answer the noble Lord's question because it will be up to the National Assembly for Wales to decide how resources are to be allocated to the health service in Wales. I hope that I am not going outside my brief if I suggest that many of the principles which govern the allocation to the health service in England will be the kinds of issues of which the National Assembly will also wish to take account when developing its own formula. However, ultimately it must be a formula that is developed by the National Assembly for Wales and not the Department of Health in England. I am reliably informed that officials of the National Assembly and of the Department of Health hold regular meetings to discuss the intricacies of resource allocation. We will allocate resources direct to primary care trusts through a national formula. That will take into account the health needs of a primary care trust's population.

Amendment No. 63 would undermine that process. If the Bill was enacted with the amendment as drafted, we would face applications from each of the 300 primary care trusts. That would be an arduous and heavy duty for both the primary care trusts—which, as we have heard, will be hard pressed to get on with the job of commissioning services from April—and for the Department of Health. The present arrangements whereby the advisory committee advises the Secretary of State about improvements to the formula is the best approach and one which has general acceptance.

As the noble Lord, Lord Roberts, suggested, the formula in Wales is different from the one in England, but it takes account of a whole range of health and socio-economic indicators associated with the need for healthcare. My understanding is that the Assembly is committed to ensuring that there is more equitable access for the entire population in accordance with their health needs. At the moment, the Welsh Assembly is considering the outcome of a major resource allocation review. As to Amendment No. 73, Clause 8, in essence, mirrors the existing powers in the Health and Social Care Act 2001 which enable us to recover sums from health authorities if they have not met the conditions set. I listened carefully to what the noble Baroness, Lady Noakes, said about that. I hope that the power will not have to be used, but it is necessary to have a discipline in the system to prevent abuse.

It is unnecessary and misleading to single out health needs as the one particular factor to be considered when the Secretary of State makes a decision as to whether to recover funds. In practice, the Secretary of State will take into account a range of factors. These may include health needs but could also include

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matters such as the performance of the organisation in general, the leadership of the trust and the chief executive, and any other number of matters.

Overall, the amendments are not required. It would be best if we put our trust in the very sensible national formula which has broad acceptance within the health service. It is as appropriate for primary care trusts as it is for health authorities.

Lord Clement-Jones: Will the Minister answer the two sets of questions that I referred to in my short contribution?

Baroness Noakes: Perhaps the noble Lord, Lord Clement-Jones, would care to wait until we get to Amendment No. 66, which deals specifically with deficits. I realise that the Minister has not answered the noble Lord's points, but he will have another opportunity to do so when we reach later amendments, to which I am sure he is looking forward.

I thank the Minister for his reply. He appears to be wedded to the processes of allocations being shrouded in some secrecy or, at least, confined to a small group of people at the centre. I would not necessarily be horrified by the prospect of up to 300 PCTs having their say about how they thought the process worked for them. That would seem to be an entirely sensible and rational debate for them to have, although I take the point that they must have the capability to handle their other functions before they move on to demanding the money that is rightfully theirs. I was disappointed by the noble Lord's answer to that.

I was even more disappointed with his answer to Amendment No. 73, which was about clawing back moneys. The Minister said that the Secretary of State might want to take into account performance in general or leadership. I suggest to him that that misses the point, that whenever moneys are taken away they are going to harm patients. Performance in general and leadership are just abstract concepts, but money taken away from primary care trusts will affect patient care. That is the inevitable arithmetic of the NHS.

As I say, I am disappointed by the Minister's responses. I shall consider them further. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

10 p.m.

Baroness Noakes moved Amendment No. 64:

    Page 9, line 35, at end insert—

"( ) From 1st April 2004 the total amounts paid to Primary Care Trusts in any financial year under subsection (1) above shall be not less than 75 per cent of the total moneys available to the Secretary of State for distribution to all NHS bodies for that year."

The noble Baroness said: The aim of the amendment is to require the Secretary of State to distribute 75 per cent of NHS money direct to PCTs. In the document Shifting the Balance of Power and in the earlier announcement on the reforms, the Secretary of State committed himself to 75 per cent of the total budget being passed to PCTs. We have no problem with that

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in principle, but with the readiness of PCTs to accept all that money being passed down to them at this time. There is no point in revisiting those discussions.

For the purpose of this amendment let us assume that all PCTs are up and running and have the capability to handle the money coming down. On that basis we completely welcome the allocation of the majority of the resources for decision-making at the lowest possible level. Indeed, we wonder why it is as low as 75 per cent. I shall be interested to hear from the Minister why 25 per cent needs to be kept back from the decision-making powers of the PCTs.

As I have said, this amendment has the simple aim of enshrining in legislation the stated distribution policy. I have no doubts about the integrity of the current Secretary of State and have no reason to believe that he will not do what he has said he will do. But as we know, Secretaries of State come and go, as indeed do governments. This amendment will at least hold any future Secretary of State to the current intent of putting the majority of the purchasing power of the NHS in the hands of PCTs.

In replying, I ask the Minister to confirm that when moneys are allocated to PCTs they will not be ring-fenced, earmarked or have any restrictions placed on them. Otherwise it would be a complete sham if the moneys were allocated on the basis of restricted local decision-making. I beg to move.

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