Published: 30/06/2005, Volume II5, No. 5962 Page 18 19

The PCT funding formula for 2003-04 to 2005-06 conjured up the spectre of under-target PCTs losing tens or hundreds of millions of pounds. So is the new allocation an improvement? John Hacking of the Manchester Joint Health Unit reports

When, two years ago, I wrote an article for HSJ on the financial allocations for primary care trusts for the three years 2003-04 to 200506, I praised the introduction of a stronger needs formula as part of the government's policy of reducing geographical health inequalities but criticised the very slow speed at which the formula was being enacted (Beggars Belief, pages 2831, 10 April 2003).

I estimated that it would take 20 years for primary care trusts to move from historical funding arrangements to their target allocations which better reflected the health needs of their populations. In the meantime, under-target PCTs would lose tens or hundreds of millions of pounds in allocation, with over-target PCTs unfairly gaining commensurately. Most under-target PCTs were in poor health areas so this contradicted policy on reducing health inequalities.

Ironically, the slow pace coincided with very large year-on-year increases in total health funding - a scenario which would normally make a relatively fast pace easier to achieve.

The Joint Health Unit in Manchester began a two-year campaign for the pace to be increased at the next allocation round. We briefed PCTs, the strategic health authority, the local authority, the Department of Health and ministers and raised the issue whenever the opportunity arose.

In the second year a number of organisations lobbied for this cause, some of which worked closely with us: the North West Public Health Association, the Healthcare Commission, the Special Interest Group of Municipal Authorities, the Association of Greater Manchester Authorities and the Coalfield Communities Campaign. In addition, under-target PCTs and some SHAs in various parts of England continued to express concern.

After all this pressure on then health secretary John Reid to increase the pace, it was not surprising to hear his positive soundbites on the issue. But did he deliver? The answer is a qualified yes. Analysis of the PCT allocations for 2006-07 and 2007-08 indicate that the pace has been increased by approximately 150 per cent overall.

If this was maintained in future allocations (all other things being equal), PCTs should be close to attaining targets around 2010 - a great improvement on the previous projection of 2025. The graph opposite illustrates the increase in pace by comparing the trends in average distances from targets.

Projection of the 2007-08 trend yields attainment of targets by around 2010.

Helping under-target PCTs

In addition to the overall increase in pace, there is a concentration on helping the most under-target PCTs, and by March 2008 no PCT is less than 3.5 per cent under target. This has been achieved by large year-onyear increases - up to 15.7 per cent for 2006-07 and 14.3 per cent for 2007-08, compared with the respective overall increase of 9.2 per cent and 9.4 per cent. This is a strong move and far better than expected for markedly under-target PCTs like those in Manchester. This is a radical, much needed improvement.

Benefits of change

The rapidity of change has had further benefits for those PCTs which suffered because errors in census data meant they received lower allocations than they deserved (Speak Out, page 23, 28 October 2004). In Manchester, for example, the 2001 population was corrected upwards by 7.6 per cent. Local authorities have been compensated for the resultant financial losses, but PCTs have not.

We estimate that the total loss to Manchester was£50m - comprising a knock-on future loss of£30m and a retrospective loss of£20m. Other PCTs were similarly affected, notably some inner London PCTs and Middlesbrough, but the Department of Health had resisted all pressure to award compensation.

However, the high growth in 2006-07 from the increased pace of change has removed future knockon effects. For example, the potential£50m loss for Manchester has now been reduced to a£20m retrospective shortfall.

Although the increase in the pace of change is good for highly undertarget PCTs, there is concern that highly over-target PCTs have not been brought much nearer to target.

This is due to the high minimum growth of 8.1 per cent for both years which extends up to the most overtarget PCT. The losers are the modestly under-target PCTs which do not move much closer to target.

The official line on this approach is that it enables all PCTs to achieve service targets. The implication is that over-target PCTs need a lot more money per weighted head to do this than under-target PCTs. But why should this be the case? This becomes a searching question in the extreme cases where the differences in funding between PCTs at opposite ends of the spectrum are, even by 2007-08, running at around 15 per cent.

If this policy of setting a high minimum growth figure continues in succeeding allocations, it will act as an increasing damper on the future pace of change and make a 2010 target difficult to achieve. The table opposite illustrates this by showing how the increases in allocations for undertarget PCTs contrasts sharply with the modest downward movement in overtarget PCTs.

Money for spearheads

For the first time in PCT allocations, a portion of the growth was highlighted for spending on public health. This amounts to an average of 0.36 per cent growth for 2006-07 and a further 0.20 per cent for 2007-08. The 88 spearhead PCTs receive additional amounts of about 0.3 per cent growth in 2006-07, which is about£700,000 per PCT.

Although these figures are modest, they could act as a catalyst for PCTs to make greater investment in public health initiatives. However, 59 of the 88 spearheads remain under target at the end of 2007-08, 26 of them at the maximum of 3.5 per cent.

The treatment of spearheads contrasts with the greater generosity meted out to the 44 PCTs deemed to be within what the Office of the Deputy Prime Minister designated growth areas. This is manifested in the increase in target via a formula with total funds of£202m over two years, an average of£4.6m per PCT;

and through unexplained increases in the pace of change for some under-target PCTs 2007-08. For example, Ashford receives an extra 1.4 per cent growth, and Huntingdon 1 per cent.

So the DoH has achieved a lot.

There is a large increase for highly under-target PCTs, encouragement for public health initiatives, extra allocation for growth areas and a partial solution to the problem of census undercount for some PCTs. If the faster pace of change can be maintained, the great majority of PCTs should be close to target by around 2010.

But this cannot be taken for granted. A growing damping effect remains which will increasingly effect allocations if steep minimum increases continue to be given to highly over-target PCTs. In addition, lower total growth in the future may reduce room for manoeuvre.

Consequently, the large number of modestly under-target PCTs will be wondering if they are ever going to get to target. This is particularly worrying for those with the most challenging health problems. .

John Hacking is senior research officer at the Manchester Joint Health Unit.