What do the Conservatives mean by “hard cash budgets” for GPs, and why does it matter - several irate commentators on the HSJ website have asked – if said practices happen to earn several hundred thousands of interest from them?
Well, first it matters because this could potentially be yet another source of private income for those already handsomely paid GPs. Our rough estimates – based on the 3 per cent annual rate now being offered on the high street – was that a practice with a £7m commissioning budget could earn £105,000 a year if it stuck half its £7m away for six months.
The calculation was deliberately conservative and the eagle-eyed have spotted we did not factor in any compound interest (to be honest, it seems a bit irrelevant at a time when even a stable annual rate is a bit of a punt). Neither did we get engrossed in calculating precisely how much of a 12 month budget could actually be stored in a bank account for longer than six months, as it’s probably a fair bit more than half.
Our question was rather: will GPs be able to profit from the interest on what has, up to now, been public funds?
The answer, as we have reported, is a “no”. The Conservatives have very clearly stated in response to our question that any interest earned will not be available for practice profit, but rather reinvested into patient care.
If we brush aside the practicalities of that (more audit quangos anyone?) the next question is more interesting: What will the Treasury make of this?
At present commissioning budgets are allocated to Primary Care Trusts as resource, technically known as “funny money”.
The cash to back it up is only handed over as and when it is needed. This minimises the interest payments the Treasury needs to make to its creditors and helps it balance spending with its cash inflow from tax revenue. If it needs to dole out the full budget in “hard cash” on day one of the financial year, we could move into a situation of negative arbitrage, where the poor old Treasury pays interest to borrow cash for GPs, only for them to stick it in an account to earn potentially less interest than the Treasury is paying to borrow it.
This is already the concern with NHS Foundation Trusts, much to the irritation of the HMT and DH, despite the fact their cash surplus - around £3bn at last count - is a tiny fraction of what PBC budgets could be.
University College Hospital foundation for example, with its cash pile of over £100m, earned £7.6m in 2008 and (after a spending spree) £4.7m in 2009.
The irritation felt by some economists was such that there had been calls for foundation trusts to actually lend back their cash to the DH.
Of course, that was all pre the bank bail out, back when economists used to worry about the prospect of just tens of billions in PFI debts coming on balance sheet.
Pressed by HSJ on the matter the Conservatives say the final detail on what, exactly, hard cash budgets mean has yet to be worked out. It seems likely that in the event, it will be impossible for practices to get a full year’s budget on day one. But that merely returns us to our original question: what precisely does “hard cash” mean. If the GP still needs to go, cap and business plan in hand to the PCT for each month’s expenditure, the difference would appear to be minimal.