Some NHS clinical commissioning groups could face real terms budget cuts in 2014-15 under a radical approach to funding allocations that will be considered by the NHS England board this morning.

Over the past year, NHS England has conducted a “fundamental review” of health service allocations. The organisation has concluded that current CCG funding is based on allocations which are “at least three years out of date” and which do not “recognise the substantial shifts in population and health needs which have taken place over that period”.

Its board will today be presented with a new formula for allocating funds to commissioning groups, and a series of options for moving CCGs towards their “target allocations”.

The board paper will recommend that directors pick one of two options.

An NHS England spokesman confirmed that under the first of these options, some CCGs would receive below inflation budget increases for the next two financial years.

Under this option, all CCGs would receive increases averaging 0.9 per cent in 2014-15 to reflect population growth, and additional increases ranging from 1.2 per cent to 3.3 per cent, depending on how far their current allocations are from target.

However, the total increase available for the most over-funded CCGs would be capped at the level of inflation − estimated at 2.14 per cent for 2014-15 − to “maximise the funding for those who are most underfunded”.

A similar approach would be adopted the following year, leaving just 18 CCGs significantly under-funded by the end of 2015-16.

An NHS England spokesman said: “The downside of this approach is that some CCGs, particularly those that are above target and have low population growth, can still see very low growth in their overall funding.”

The alternative recommended option would set a “floor” to ensure that all CCGs saw their total allocations grow by at least inflation, but this would reduce the resources available for underfunded CCGs, cutting the maximum per capita growth available to 2.6 per cent.

NHS England is working on inflation assumptions of 2.14 per cent in 2014-15 and 1.7 per cent the following year.

The spokesman said it was clear that no change in allocations was “not an option”.

He added: “Failure to change will mean that CCGs or providers are unable to provide the services required by their populations or live within their financial resources − or most likely both. 

“Already this is becoming apparent in a growing minority of CCGs forecasting financial deficits in 2013-14.”

The paper going to the board will also confirm that NHS England plans to reintroduce a weighting for “unmet need” − intended to tackle health inequalities − in the formula for CCG allocations.