Commissioners plan to increase their total spending on mental health services by £120m this year, a rise of 1.4 per cent in cash terms, HSJ can reveal.

The news came as health sector regulator Monitor set out more details of how it intends to shift the mental health sector away from block contracts from next April.

NHS England told HSJ that both its own specialised commissioners and clinical commissioning groups were planning cash terms increases in mental health spending in 2014-15.

According to NHS England analysis, CCGs plan to spend an extra £79m compared with the previous financial year, with specialised services spending rising by £35m. The remaining £6m will be invested in the justice system.

Under the plans total mental health spending will rise from £8.5bn in 2013-14 to £8.62bn in this financial year.

The spending hike will be welcomed in the face of 4 per cent efficiency targets that have driven year on year cash terms cuts to NHS prices.

An investigation by HSJ last month found NHS mental health trusts had suffered a 2.3 per cent real terms funding cut between 2011-12 and 2013-14, when figures were adjusted for inflation across all 57 trusts.

News of the spending increase comes as Monitor is developing plans to encourage commissioners and providers away from the use of traditional block contracts to fund mental healthcare.

Monitor, which shares responsibility for the NHS payment system with NHS England, said that from April 2015 it would require CCGs to use data on activity and service quality to underpin payment contracts, using the existing mental health “clustering” system to categorise patients.

In its response to the Commons health committee’s report on long term conditions, Monitor said it would use the 2015-16 national tariff to “require providers and commissioners” to use care clusters to underpin contract payments.

It will also publish guidance that “all contract arrangements” will need to be transparent, using activity and quality data.

Monitor said: “We expect all providers and commissioners, as a minimum, to stop using block payments that have limited levels of transparency.

“To further encourage the shift to new patterns of care, we are proposing to support providers and commissioners by providing detailed worked examples of innovative payment designs that are aligned to Monitor and NHS England’s emerging ideas of long term payment system redesign that enable integrated mental and physical health.”

But it accepted it would take “a number of years” to develop longer term changes to payment systems, such as “year of care” capitated payments and outcomes based mental health payments.

It is working with commissioners in North West London, Waltham Forest, East London and City, and East Cheshire regions on developing capitated payments for patients with long term conditions.

It said this work would help identify and eliminate perverse incentives within any new payment system adding: “The process for developing data evidenced payment approaches takes time.  It will be a number of years before these approaches can be adopted consistently at scale.”