Resource Allocation

26-01-2016

The national overview is provided in the NHS England summary document with the full detail in the CCG and place-based allocation tables.


£m

2015-16

2016-17

2017-18

2018-19

2019-20

2020-21

CCGs

69,484

71,853

73,358

74,849

76,469

79,374

Primary care

7,342

7,652

7,958

8,317

8,716

9,188

Specialised

14,643

15,662

16,413

17,151

17,918

18,820

 

 

 

 

 

 

 

Subtotal

91,469

95,167

97,729

100,317

103,103

107,382

 

 

 

 

 

 

 

Sustainability

            -

1,800

 

 

 

 

Transformation

200

339

2,864

2,947

3,434

3,405

Total sustainability and transformation

200

2,139

2,864

2,947

3,434

3,405

 

 

 

 

 

 

 

Other direct commissioning

6,684

6,642

6,642

6,609

6,526

6,462

NHS England central budgets

1,708

1,637

1,559

1,402

1,312

1,227

Non recurrent use of drawdown

300

250

400

400

400

400

Total

100,361

105,835

109,194

111,675

114,775

118,876

Overall resources

- Real terms growth of £8.4bn to NHS England from 2015/16 to 2020/21

- Lowest year 2018/19 when growth after inflation drops to £0.4bn (0.4%)

- Higher growth in 2016/17 which is needed to fund changes to the pension scheme, existing pressures and to represent ‘front-loading’ of the government £8bn

- Second highest growth in 2020/21 associated with the full implementation of 7 day services.

Programme Resources

For allocation purposes, NHS England splits resources into three main ‘programme’ areas:  CCGs, primary care and specialised commissioning. These cover over 90% of NHS England’s overall funding (a further 7% is spent on central commissioning) and from 2016/17 the share of these three programmes at individual CCG level makes up the Place-based allocation.

- Place based allocations used to determine position against target and allocate growth monies

- 3 year firm allocations published plus further 2 year indicative

- Minimum Contributions to the Better Care Fund (BCF) are announced as part of the CCG allocations , increasing at national level in line with inflation (1.7%)

- Expenditure on mental health services to increase at a rate at least in line with growth in allocation

Programme budgets

- CCG programme element receive the lowest growth across the five year period (after inflation, real terms increases are barely positive from 2017/18 to 2019/20)

- Primary care grows at 4% (approx. 2.5% after inflation). Huge calls on this funding to deal with major issues relating to a shortage of GPs and closed lists in a number of areas

- Specialist commissioning budgets grow most: 7% 2016/17 and over 4.5% in later years in cash terms (5.3% and approx. 2.5% after inflation). Rationale for larger increase is legally binding pressures for drug cost increases, with hints that actual costs might be higher. Note the 70% marginal tariff reimbursement for specialist services introduced in 2015/16 has been removed for 2016/17 meaning an immediate pressure on this funding where growth in services is sustained.

Sustainability and Transformation Funding

- £2.1bn has been allocated in 2016/17 to establish the Sustainability and Transformation (S&T) fund

- Sustainability element (£1.8bn) to bring the Provider sector back into balance in 2016/17.  Will consist of two elements: general allocation to distribute to providers, targeted element to support providers through additional efficiency gains

- Sustainability funding to be released quarterly based on performance on financial, access and transformation eligibility criteria - specific sums for organisations to be determined by the investment committee of NHS England in partnership with NHS Improvement

- As the provider sector comes back into balance (assumed by the end of 2016/17), the funding switches from sustainability to transformation, with the overall level of funding increasing in line with the spending review announcement

- Direct allocation of £450m to Greater Manchester (representing the fair share of S&T funding over 5 years) to be overseen by GM Strategic Partnership Board

- In setting the budgets, NHS England have assumed that an element of activity related savings will be achieved as a contribution to the overall efficiency challenge. They also state that ‘moderating demand in this way is dependent on effective government action on prevention and sustained availability of social care’. 

Funding Formula for Allocations

- NHS England has a legal requirement to reduce inequalities in healthcare. The main way this is enacted is through trying to ensure each geographical area (represented by a Clinical Commissioning Group or CCG) receives a fair share of the overall resources

- Greater weighting in the latest allocation formula given to inequalities by using a more granular, 16 tier system replacing the previous system based on 10 tiers

- Sparsity adjustment introduced to reflect additional costs where services are more widely spread

- Many of the elements reworked and updated to reflect improved information available eg latest population estimates

- Combined overall impact is to increase the range of target allocations relative to actual resources. In particular, there is an increased number of CCGs which are under target (was 17, now 24). 

- NHS England is sticking to its commitment that no CCG will be more than 5% under target and allocates growth monies differentially to reflect this. The calculation of distance from target based on the combination of all three programmes has caused some significant changes to which CCGs will benefit from the levelling up of resources

- Primary care allocation formula includes an element relating to GP workload using data from 2014 – this has revealed an increase in relative need for primary care in London

- Specialist allocation has a new, needs-based formula so that for the first time CCG areas can see their predicted demand for specialist services and compare this with actual spend

- 50% of the spend has been estimated using data from SUS-PBR to recreate the target formula, the rest uses historic expenditure analysis

- ACRA plan to do further work on specialist allocations to improve the accuracy of the formula in future

The NHS England paper on allocations indicates that consideration was given as to whether pace-of-change should be adjusted for the ‘potential differential nature of growth in social care spend over the next 5 years as a result of the’ CSR. Ultimately this was not pursued as data was inadequate and to avoid the risk of ‘wrongly signalling that the local NHS has in some way been funded to offset reductions in social care, which is not the case’.

Bringing together the allocations makes good sense, as it has proved difficult to keep all the elements of the system in balance separately, which diverts attention from the underlying overall position. It also facilitates discussion and work to align public services across local geographical patches. However, although place-based allocations assist the understanding of financial flows in an area, the NHS continues to consist of a large number of legally separate bodies for day to day management and accounting purposes. Even at national level, despite bringing together the regulators of NHS providers to form NHS Improvement in March, there remains a structural divide between commissioners (who report to NHS England) and providers who report to NHS Improvement.