The much-touted modernisation fund owes more to smoke and mirrors than a desire to dish out significant extra cash, says John Appleby

For healthcare the word 'modernisation' is well chosen: the demand from patients tends to be for the latest, most up-to-date, cutting-edge treatment. In education, on the other hand, modernisation tends not to be what parents want for their children: 'new', in many people's educational terminology, goes with 'fangled', and 'modern' goes with 'secondary' - commonly viewed as the very embodiment of failure and blighted lives.

More than£1.16bn has been earmarked for the health modernisation fund this year - equivalent to nearly 3 per cent of the total English NHS budget. Similar amounts have been allocated for the remaining two years of the current Parliament - bringing the total spend on modernisation to about£3bn.

Significantly, the health modernisation fund also represents more than one-third of the cash increase in the total NHS budget between 1998-99 and this year, and more than 50 per cent of the real (ie GDP-deflated) increase.

The government's aims for the health modernisation fund were set out in the 1997 comprehensive spending review and included the (now nearly defunct) waiting list pledge, and a host of somewhat miscellaneous initiatives and programmes - from Diana nurses to NHS Direct.

A comparatively small proportion of the health modernisation fund has been or will be allocated directly to trusts. Health authorities will receive shares of the fund either through their main allocations or on the basis of specific plans - for example, to tackle long waiting lists. But more than half the fund is held centrally, to be distributed in a variety of ways.

None of these allocative mechanisms are particularly unusual - the Department of Health and the NHS Executive have often retained part of the total health service budget for redistribution to specific projects or to be spent on national schemes. More unusual, perhaps, is the scale of the funds either retained or handed over to the service and tied to planned developments approved by the centre.

Bearing in mind that the modernisation fund represents more than half the real increase available to the NHS this year, the degree of freedom for local commissioners and providers to make judgements about the use of the additional money on the basis of local circumstances is limited.

On the face of it, primary care - a key priority area - is a significant beneficiary of money from the modernisation fund. But 44 per cent of the primary care element relates simply to the reallocation of the management allowance previously spent under the GP fundholding scheme, and a further 13 per cent has been allocated for inflation on the general medical services budget and for the costs of closing down GP fundholding.

Is the modernisation fund simply a bit of presentational rhetoric? Is it rather post-modern - an eclectic pastiche of previous, familiar spending initiatives? Or is it in fact just an old-fashioned device, beloved of exchequers everywhere, to try to ensure that it is possible to trace a connection between every extra pound they dole out and increases in the volume and efficiency of public services?

Of course, to believe that the Treasury takes a relaxed, laissez-faire attitude to the spending of other people's money is stretching credulity. Whether the repackaging of a large slice of additional NHS funding produces the hoped-for service improvements remains to be seen. If it does - and experience suggests that targeted money combined with political will and performance monitoring does produce change - then the NHS should perhaps prepare for the next round of the comprehensive spending review to deliver an expanded health modernisation fund mark II.