The most deprived areas will not lose out under the new formula for allocating funds to clinical commissioning groups, NHS England’s finance director has told MPs.

During a Commons health committee hearing, Paul Baumann revealed the proposed new formula will adjust for a health economy’s unmet need, where low life expectancy suggests people are not accessing health services.

This is a change to the formula previously proposed by the independent Advisory Committee on Resource Allocation, which placed significantly more weight on the age of an area’s population rather than levels of deprivation.

NHS England declined to introduce this formula for the current financial year because it said it would have resulted in funding growth for areas that already have the best health outcomes. Instead the board opted to conduct a review of allocations formula.

Mr Baumann said this was now complete and NHS England’s board would be asked to vote on the new formula in December for introduction in 2014-15.

“The most deprived areas will get the most money; the least deprived will get the least subject to age and population,” he said.

He gave the example of a comparison between Knowsley and Richmond upon Thames to demonstrate the implications of adjusting for unmet need. He said Knowsley received 44 per cent more than Richmond before adjusting for unmet need but 67 per cent more after that had been taken into account.

In the past variations in disability free life expectancy have been used to determine unmet need.

Mr Baumann told the committee the other decision the board had to take was around the “pace of change” to move areas from allocations under the current formula to the new formula. He said it was likely this would be “measured” in light of the fact there was no growth in funding.

He also revealed that NHS England has judged 37 CCGs around the country as being at high risk of a deficit and, of those, 31 received significantly less funding than they should under the formula. On the provider side he said of the 42 at risk of finishing in deficit, 30 were in health economies that are currently under funded by the formula.

He said: “What [the proposed new formula] does is to make sure at the extremes of deprivation there is a similar set of adjustments. What happens in between is different distribution between the two extremes.”

Asked by Sarah Wollaston, Conservative MP for Totnes in Devon, whether the new formula would adjust for the “sparsity” of an area’s population, Mr Baumann it did not as they had not worked out a mechanism to do that. However, he said a piece of work had been commissioned to look at the issue.