Primary care trusts are having to redraft their five year strategic plans because of out of date assumptions about funding in 2011-12.
Many of the plans, first drafted as part of the world class commissioning programme in October, have already been amended.
But even after revisions, PCTs on average assume their allocations will grow by at least twice as much as analysts such as PricewaterhouseCoopers and the Audit Commission believe is realistic. An HSJ straw poll of 15 PCTs shows they are expecting 2 per cent real terms growth on average in 2011-12 - the first year after the current three-year spending settlement (see table).
The prediction relies on a 3.5 per cent increase in allocations minus a 1.5 per cent increase in what they pay hospitals.
Audit Commission head of health Andy McKeon told HSJ even 1 per cent real terms growth was “optimistic”.
“If anyone is looking at their plans again they ought to temper them downwards and also consider that there will be a squeeze on capital,” he said.
Portsmouth City teaching PCT chief executive Tracy Sanders said it had revised its plans to assume zero growth in 2011-12.
“That reflects what’s happened in other times of recession. It is a real terms cut. We are looking at what it means for our investment - what things are less of a priority and what bring the most benefit,” she said.
Calderdale PCT has decreased its assumption for 2011-12 from 3.5 per cent growth to 1 per cent, requiring £8m less spending than planned.
But some PCTs have not reduced their forecasts, with some assuming cash increases of 4 or 4.5 per cent in 2011-12, minus increases in hospital funding of 0-3.6 per cent.
They say this is based on guidance from their strategic health authorities - many of which admit they have not revised that guidance since the summer, despite the dramatic downturn in the economy (see below).
HSJ understands some SHAs and Department of Health officials fear more realistic guidance would make them a “hostage to fortune” with the Treasury.
One PCT chief executive said some PCTs were avoiding lower forecasts because their five-year plans would no longer balance.
King’s Fund chief economist John Appleby said PCTs must also reconsider local hospitals’ ability to cope with 0 or 1 per cent increases in their income. “They wouldn’t want that to be achieved through reductions in quality,” he said.
There is also uncertainty for this new financial year. The DH has not confirmed whether NHS organisations will receive money to cover a change in the way buildings are valued that will see most organisations devalue their fixed assets by 10-25 per cent - typically between £5m and £50m for each PCT and acute trust.
For trusts the main risk is technical deficit. But PCTs without large reserves will need to fund the devaluations by cutting their spending this year.
HSJ has been told the change was supposed to happen in 2008-09 but was put off. Some organisations did make the adjustment last year - particularly if it helped minimise embarrassing surpluses.
University Hospital of North Staffordshire trust finance director and deputy chief executive Chris Calkin said: “We wouldn’t want to see changes in accountancy impacting on patient care. But there is a danger that will happen.”
A DH spokeswoman said it would amend the break-even duty for trusts to prevent the technical deficits caused by devaluations being regarded as a breach. But for PCTs she said only that the impairments would “continue to be funded centrally as in 2008-09”.
That will need extra funding for the DH from the Treasury.
PCT growth assumptions for 2011-12
|PCT cash % increase||tariff inflation % cash increase||PCT real terms growth %|
|Most optimistic PCT||4.9||2.4||2.5|
|Average PCT assumption||3.5||1.5||2.0|
|Most pessimistic PCT||1.5||1.0||0.5|
Source: HSJ straw poll of 15 PCTs
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