8 June 2010

New paragraph about reaching the Cornwall funding target put at the end 8 June 2010

ORIGINAL POST 26 April 2010
The question of whether health services in Cornwall are underfunded has arisen again. Mebyon Kernow and the local Libdems argue that that they are. The current revenue shortfall is put at £56 million.

I have explored the allocation of revenue funding to primary care trusts in England before, and I am about to write about MK and its policies, but I think it is probably useful to tackle the health funding question once more in this separate post. This is about the revenue not capital funding of the primary care trusts.

Put simply, the revenue funding of health services is not based on a simple headcount of the population of a primary care trust area. For determining the funding that population is ‘weighted’ to take account of relevant factors such as the age make-up of the population as elderly people need and use health services more than people in their twenties. The result is the target allocation of funds to the primary care trust on the basis of weighted capitation. The egalitarian aim is that each health authority should have the funds to provide a similar level of service in similar circumstances. There is debate about which factors are relevant and how much each should count. Rurality is a contended factor as the costs of providing services in a rural area are usually higher than in an urban area; however, the Report of the Advisory Committee for Resource Allocation of 8 December 2008 said that allocation was not biased against rural areas. The costs of the NHS vary geographically (for example, the costs of recruiting and retaining staff are higher in some parts of England than others) and the market forces factor, which deals with this, is one of the relevant factors used to arrive at target allocations (see this post and its references). The market forces factor depresses Cornwall’s allocation. The target allocation of revenue funds to a primary care trust is what it needs according to all the factors. The formula for arriving at the target allocation was changed with effect from 2009/10.

On top of this allocation brew there are the difficulties caused by historic differences in funding health authorities. Responsible government rightly does not believe these can be wiped out over night and thus the actual funding received is different from the target, some getting more than their target and some less. For Cornwall the difference in 2010/11 is £56.6 million less than its revenue target figure. The difference is commonly abbreviated to DFT, distance from target. There is a similar difficulty in local government funding caused by a process there called damping: see this post.

More than eighty of the primary care trusts have actual funding for 2010/11 that is below their target funding, that is they have shortfalls. Of those, five have larger cash shortfalls than Cornwall.

Thus, Cornwall (and many others) receive revenue health funding below what they are judged to need; other health authorities receive more than they are judged to need. What constitutes need in this context is rationally contended and additionally Cornwall also has geographical aspects which arguably should be taken into account in funding. Getting to egalitarian funding, where each primary care trust receives what it is adjudged to need, requires management not suddenness.

Read here (NHS allocations) on the Department of health website the various explorations of health funding.

There is a constructive struggle to be ‘fair’ to everyone not a ‘do down Cornwall’ attitude and this should be acknowledged by the parties. MK apparently doesn’t do complexity but fairness is complicated, a point I have argued in several posts and will probably have to go on making. It would be interesting to see what actual funding formulas MK and the Liberal Democrats could come up with beyond the victim refrain.

A list of the 2010/11 allocations is here (PCT allocations table 1) and also at the NHS allocations website given in the previous paragraph.

This King’s Fund paper discusses the issues in allocating funds and moving from actual to target allocation in the light of the new formula and the financial crisis.

This paper History of the MFF discusses the market forces factor in NHS funding
and so does this one of 2004 from Warwick Institute for Employment Research .

This is the 2008 report of the Advisory Committee for Resource Allocation (ACRA).

Added 3 June 2010:
This is Health inequalities, the report of the House of Commons health committee, published 15 March 2009. At paragraph 96 on page 45 it says:
“…not all areas currently receive what they should receive according to the resource allocation formula. This is because historically many areas have received less funding than they need, but rather than taking away large amounts of funding from some over-funded areas to compensate more needy areas, the Government has adopted a more gradual approach to shifting resources over a number of years, meaning that some PCTs are still receiving funding below their ‘target’ amounts. This means that these areas, some of which are spearhead areas, are essentially carrying forward a ‘backlog’ of underresourcing, meaning services have been under-invested over the course of many years.”

On page 6 in the Summary of the report the committee says: “The government must move more quickly to ensure PCTs receive their real target allocations”.

Added 8 June 2010
The government was asked when Cornwall and the Scillies primary care trust would get their target funding. The government answer was: “We have guaranteed that health spending will increase in real terms in each year of the Parliament. However, health care spend will also be looked at as part of the next Spending Review. This will inform the speed at which primary care trusts move towards their target revenue allocations.” Hansard 7 June 2010 column 47W. The spending review is in autumn 2010.