Health and Social Care Bill

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Mr. Denham: I believe that I can assuage the concerns that hon. Gentlemen have raised. It may help the Committee if I follow the lead of the hon. Member for Runnymede and Weybridge and set the amendments and the clause in context, touching on how they relate to later clauses about the Medical Practices Committee.

Clause 1 allows the Secretary of State to take into account spending on non-cash limited spending on primary care services when determining health authority allocations. The amendments and the discussion have been asking us how we intend that to work in practice and what the practical effects of the change will be, so I shall address those issues before moving on to the amendments.

The underlying purpose of clause 1 is part of the Government's drive to close the health gap between the worst off and the better off in health terms. It will enable the Secretary of State to take account of all the health care resources that are available to meet the needs of a health authority's local population and to target increases in allocations accordingly. In effect, areas with fewer doctors than might be expected for the needs of their population will expect to receive higher levels of growth in their allocations.

It will be common ground in the Committee that different parts of the United Kingdom have different health needs. The formula used for determining fair shares for health authority allocations already recognises that, and the Government are already reviewing the formula to ensure that it is better focused on addressing those needs properly and fairly. At present, the formula sets fair shares only for the cash limited services. Clause 1 will allow us to extend the formula and the concept of fair shares to include some or all of the non-cash limited primary care services. It will allow the Secretary of State to take account of spending on non-cash limited primary care services when he makes the cash limited, unified budget allocations to health authorities. It will allow health authorities to take account of the distribution of spending on non-cash limited primary care services when they make cash limited allocations to primary care trusts or to set the budgets for primary care groups.

We have commissioned the Advisory Committee on Resource Allocation—ACRA—to develop the general medical services non-cash limited element of the new formula. ACRA will build on earlier work that was undertaken with the Medical Practices Committee, which developed a formula that set fair shares of unrestricted GP principles at health authority level. We have now asked ACRA to advise on whether and how that formula needs to modify to operate in cash terms for the whole GMS non-cash limited budget at health authority level and in respect of the allocations from health authority to primary care trust or group level.

The first point of reassurance for the Committee is that we intend it to be a formula based system. We have gone to the usual advisory group for advice in drawing up the formula that will back up clause 1.

When the new formula is available and is implemented, there will be a single funding formula that will set a target or fair share for each health authority and primary care trust that covers GMS non-cash limited expenditure as well as the existing unified allocations.

Mr. Hammond: The Minister is telling us that he intends to introduce a transparent formula. However, will he confirm that clause 1 does not require that and will not in future require that any formula is used and applied even-handedly to all health authorities, and that it would be possible for the Secretary of State to apply different criteria to different health authorities?

Mr. Denham: I was going to come to that in due course, but I shall deal with it now. The existing provisions of section 97 of the National Health Service Act 1977 referred to the Secretary of State determining allocations for individual health authorities rather than determining the amounts for health authorities globally. That is why we took the same approach in drafting the clause. I hope that the hon. Gentleman will be reassured that we have reflected the previous approach by referring to ``the health authority'' rather than to ``health authorities'', as is proposed in his amendments. To do so has always meant, as it did under the previous Government, that health authorities were not considered individually in isolation from all others, but were seen in the round. When allocations have been made under this and the previous Administration, the relative positions of all authorities were taken into account. We intend that to remain the case under the Bill.

Such a general power must be exercised in accordance with the principles of administrative law. It must be exercised rationally. It cannot be applied in an irrational way. No reasonable Secretary of State would agree with that. It follows that when non-cash limited expenditure is taken into account, the Secretary of State must carry out a proper decision-making exercise. He must consider all relevant factors and ignore all irrelevant ones. The amendments would not open the door to the type of arbitrary decision making that concerns the hon. Gentleman and which he and I would find deplorable.

3.15 pm

Mr. Hammond: I am grateful to the Minister for his helpful comments. Is there a good correlation between the level of general part II expenditure and the number of GPs in practice? In other words, how useful will the criteria that the Secretary of State will take into account be in determining the real level of services provided to patients in a given area? I ask that question because of my worry about the differential costs in different areas.

Mr. Denham: I shall try to avoid to giving an extended reply to the hon. Gentleman's question. Clearly, with the non-cash limited services, the greater the number of GPs, the greater the share of non-cash limited expenditure into such areas will be. One follows the other: the pounds follow the GPs. There is not a uniform distribution of GPs, when considering need against a weighted population per head. There seems to be a potential distortion in the overall resources going into areas in relation to need, particularly because of the separation between the unified budget, which does not cover such services, and the non-cash limited part II expenditure.

The hon. Gentleman asked the reasonable question concerning how allowance is made for the different costs that apply in different parts of the country in an allocation formula such as that which we use for distributing health authority allocations. The allocations formula already reflects different costs in different parts of the country because within the allocations formula that we use is a market forces factor. The approach taken in the formula reflects those varying costs through the market forces factor. The type of extra costs that do not reflect salary per GP are taken up in the wider market forces factor, which is part of the overall allocation mechanism.

Mr. Hammond: Perhaps the Minister missed my specific point. Will examining the level of general part II expenditure health authority by health authority provide a good correlation with the number of GPs in practice in those health authorities who provide both general medical services and personal medical services?

Mr. Denham: There will be a correlation, but it will not be a perfect correlation because of the differences in costs. It would not be a uniform correlation from one part of the country to another. It is important to recognise that because there are variations in the numbers of GPs in different health authority areas and in different primary care trusts and care group areas, the overall impact is that when the unified budget and non-cash-limited budget are put together, different areas do not collectively receive fair shares of their allocation of resources.

Our approach is intended to ensure that we move towards fair shares of health resources in each part of the country. The reason for developing a formula for a target for fair shares that includes what are currently non cash-limited general medical services, is to enable us to do that in a rational and effective way across the whole country. Clearly, if we did not believe, on the basis of our work, that that would produce any difference in resources, it would be a huge bureaucratic exercise for no purpose. We are embarking on this exercise precisely because examination of one health authority against another shows an inequality of resources.

The new formula will produce a new target or fair share for each health authority or primary care trust, which brings together non-cash-limited expenditure together and the unified allocations. In practice, that will require a second stage. When the available resources are allocated, there will need to be a pace of change policy—as there is currently—which determines how quickly an individual health authority moves towards its target, whether it receives extra resources to move faster towards its fair share target, or whether it is experiencing a slower rate of growth in a particular year. Clearly, we will continue to approach fair shares in terms of a levelling up rather than a levelling down of resources. I do not suppose that any Committee member would think otherwise, but it is worth putting on record that we would not use the mechanism to reduce the resources available in an area that was over-doctored.

Mr. Hammond: I regret to inform the Minister that some Committee members might have dreamt something else. When the abolition of fundholding was considered under a previous Bill—which became the Health Act 1999—I recall the Minister giving a clear assurance that the Government intended to level services up to the best. However, I am sure that the Minister will acknowledge that, as a result of that abolition, the experience in many areas was that fundholding GPs had to abandon services that they were providing to their patients.

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