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Make funding for local healthcare fair and do it quickly, MPs tell government

Allocations vary widely and risk financial viability of most underfunded areas, says report

Caroline White

Friday, 09 January 2015

The government is moving far too slowly in ironing out the wide variations in the amount of funding allocated to local healthcare, and is failing to meet its key policy objective of equal access for equal need, say MPs in a report* published today.

Margaret Hodge, who chairs the parliamentary Public Accounts Committee (PAC), commented: "One of the government’s key policy objectives in allocating health funding is equal access for equal need. Yet we found huge variations in funding for CCGs—from £137 per person below their fair share of available funding in Corby to £361 per person above their fair share in West London.”

Around two-fifths of CCGs and three out of four local authorities are receiving more than 5% above or below their target funding allocation, which had important implications for the financial sustainability of the health service, says the report.

“Underfunded CCGs are more likely to be in financial deficit. Of the 20 CCGs with the tightest financial positions at 31 March 2014, 19 had received less than their fair share of funding,” she said.

At the current rate, it would take around 80 years for all local health commissioners to reach their target allocation, six years before no clinical commissioning group remained below its target allocation by more than 5%, and 10 years before local authorities reached this position, says the report.

“We recognise that in moving only gradually from current funding levels the Department’s and NHS England’s priority has been to maintain the stability of local health economies, but this very slow pace of change puts at risk the financial sustainability of those most under-funded,” insisted Mrs Hodge.

Furthermore, target funding allocations may be unreliable in some areas because they are based on estimates of population size taken from GP registration numbers, she added.

The report recommends that NHS England confirm its commitment to move CCGs to within 5 percentage points of their fair share of available funding and set out a precise timetable for doing so.

NHS England should also take immediate action to ensure that all area teams are complying with its guidance on validating GP lists, at the same as taking forward its longer-term plans to gain greater assurance over the data, it says.

“It is deeply concerning that the proportion of total funding devoted to primary care has fallen, even though primary care is vital for tackling health inequalities. Over the last decade, the proportion of total spending committed to primary care fell from 29% to 23% as a consequence of the NHS prioritising hospital initiatives such as reducing waiting times,” explained Mrs Hodge.

The Department and NHS England should set out the rationale for decisions about how funding is split between different funding streams, including assessing the implications of any changes in the distribution of funding, the report recommends.

Following the healthcare reforms, funding allocations** were split into three. In 2014-15, NHS England allocated £64.3 billion to 211 CCGs for hospital, community and mental health services and £12.0 billion to its 25 area teams for primary care. The Department allocated £2.8 billion to 152 local authorities for public health services.

The Department and NHS England say that making quicker progress would involve real-terms reductions in funding for some areas. But NHS England has accepted that decisions on the three separate health allocations have, to date, been made in isolation of each other.

It wants to move towards ‘place based’ funding formulae, whereby allocations for CCGs and primary care, and potentially the Department’s funding to local authorities for public health, are combined.

Dr Richard Vautrey, deputy chair of the BMA’s GP Committee, said that variation in local funding was a longstanding problem.

“Access to services should not be a postcode lottery, being dependent on the unfair variation in funding for local health services. It's imperative that all areas have the necessary funding to deliver the same quality of services as each other,” he said.

“Underinvestment is having a major impact on GPs’ ability to cope with rising demand and the growing needs of an ageing population. We cannot continue to meet rising demand with falling investment. General practice is already stretched close to breaking point so we need to address this as a matter of urgency,” he added.


* Funding healthcare: making allocations to local areas. Public Accounts Committee - Twenty-Fifth Report

** Funding healthcare: Making allocations to local areas. Allocations to local commissioners 2014-15. National Audit Office, September 2014

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