Published: 11/11/2004, Volume II4, No. 5931 Page 23

A New Labour spin doctor once got fired for her coarse suggestion that the 9/11 attack on New York was 'a good day to bury bad news'. I thought of that spin doctor (now a teacher) as I monitored the health secretary's progress last week in competition for media attention with the US election results.

It was more a case of trying to un-bury good news about MRSA; also about that money-saving deal with Microsoft for NHS programs and that 7 per cent price cut deal for branded drugs. Both are products of what economists call 'monopsony' - the power exercised by a monopoly purchaser rather than provider.

But monitoring health question time in the Commons, I also spotted something that puzzled me: two questions aimed at John Reid's deputy, John Hutton, by West Country Liberal Democrat Matthew Taylor (Truro and St Austell) and Steve Webb, the pensions boffin from Northavon on the upper edge of Bristol.What were they on about?

Mr Taylor was worried about the impact on Cornish hospital budgets of changes to the market forces factor, the element of the annual settlement with Whitehall which has, for nearly 30 years, tried to reflect varying pay rates in different parts of the country.

Professor Webb was trying to extract information about the tariff-based funding system, payment by results, to which the NHS is moving.

I sensed that the pair were actually talking about the same thing. I rang them and was right. Steve Webb's North Bristol trust - Frenchay and Southmead hospitals in particular - face serious financial troubles, a cumulative deficit of some£40m which managers are trying to hack back by better habits and ward closures.

The phased move towards tariff-based payments (ie you get a flat fee for a hip or heart job and make or lose money on it, according to your efficiency level) by 2008-09 will hurt a specialty hospital like Frenchay precisely because it ends up doing the trickier ops which inevitably cost more, the MP told me.

'They've been through slash and burn to drive costs down, done some clever things, some silly things. But this is going to kick them back, 'Mr Webb explains.Matthew Taylor makes a similar point from a different angle far down the western peninsula. The market forces factor is currently being revised in readiness for the world of tariff payments, he told me.

The politicians (and me) are only just grasping its implications because - in Mr Taylor's case - Cornish health managers, with encouragement from the strategic health authority, are starting to make a fuss. Labour and Tory MPs like Plymouth Sutton's Linda Gilroy and Candy Atherton (Falmouth and Camborne) are also on the case.

Why so? Under the old rules the market forces factor was tweaked in two ways to protect the poorest of the 177 wage rate areas, chiefly by lumping the 46 poorest together as one area so that number 177, the poorest - ie Cornwall - would get the same pay rate calculation as the 131st poorest.

Thanks to what is blamed on lobbying by big-city hospitals (potential winners under the new system) this tweak is being abolished. Cornish health managers will thus be expected to be more 'realistic' - ie lower pay bills, more in line with what local seasonal hotel workers get than surgeons or nurses. It means that Royal Cornwall Hospital at Treliske, the county's main NHS player, which was getting pats on the back for above-average cost efficiency, is now getting what the MP calls 'slaps on the cheek instead' for suddenly being deemed less efficient.

In other words, a Bristol trust feels its high specialist costs are not going to be recognised by the new system while a Cornish one feels that its recruitment and retention problems (for those medical staff who do not like surfing) are being cavalierly treated, too.

I am sure it is the tip of a large iceberg bearing down on the government and all who sail in her.

Mr Taylor and his allies are so alarmed that they staged a Commons debate on Tuesday where duty minister Rosie Winterton, who has been seeing delegations since the summer, was planning to be sympathetic, but not very flexible.

Ministers say they get good expert advice and that, if they give extra money to one trust, others must get less.

Backbench gossip says there is a Whitehall battle underway on this one and that NHS chief executive Sir Nigel Crisp, no less, is on the MPs' side.