1.  CURRENT ISSUES

1.1  Deficits

   (i)  In November 1999, the Healthcare Financial Management Association suggested that the NHS may be facing an in-year deficit of around £200 million. This was challenged with some vigour by the Department. Can the Department now say what the expected end of year position was?

   (ii)  If there are any projected deficits, does the Department anticipate that any of the new monies announced in the Budget of March 2000 will be used to make these deficits good?

   (iii)  The NHS Executive states that NHS trusts should balance their finances in-year and not put off tackling financial problems, but this should not be at the expense of proper service provision. How does the Department monitor this aspect of trust performance? Does the current level of deficit mean that fundamental financial problems have not been tackled?

   (iv)  The NHS is committed to paying its bills in a reasonable timescale, conforming with Government Accounting Regulations and the CBI Prompt Payers Code. Can the Department provide details on the trends in meeting those targets, on a quarterly basis, for the period commencing April 1997? Would the Department like to comment on these trends, and give a view on the projected position for March 2000? Is the Department aware of any significant variation in performance between Regions or types of health body?

   (i)  In November 1999, the Healthcare Financial Management Association suggested that the NHS may be facing an in-year deficit of around £200 million. This was challenged with some vigour by the Department. Can the Department now say what the expected end of year position was?

Background—Deficits

  1.  It is important to note the distinction between an in-year deficit and a cumlative deficit (the latter is also known as the accumulated deficit and in some instances the NHS debt):

(i)   In-year deficit: The "bottom line" outcome when available income is compared with recorded expenditure in any one year, ignoring the impact of financial results in previous years.

(ii)   Cumulative financial deficit: this is the sum of all in-year deficits or surpluses over the life of the organisation, ie the impact of financial results in previous years is taken into account.

  2.  An accumulated deficit in the NHS is not necessarily indicative of a poor financial position. It is not a debt repayable on demand. It is largely a product of good accounting practice that requires Health Authorities and NHS Trusts to treat as expenditure those items that are not an immediate call on cash resources within the year. These are categorised as long-term liabilities. A good example is clinical negligence claims that can take many years to settle. Prudent accounting practice requires health bodies to make some provision for the total estimated liability that may arise from the clinical negligence claim in the period the incident occurred—rather than when the cash payment is due. In many cases the intital estimates are overly pessimistic and subject to considerable change.

  3.  Public bodies are not provided with cash in advance of need. Health Authorities and Primary Care Trusts only receive a cash allocation to cover their cash spend in any one year. Therefore when dealing with long-term liabilities there is a clear mismatch between accounting conventions and the way government currently funds the NHS. Most long-term liabilities relate to clinical negligence, and accounting conventions require them to be included in the accounts when a potential claim is notified. It may be many years before the claim is settled and the amount may be significantly less.

  4.  The recognition of a long-term liability in the accounts therefore can cause a deficit. When the cash impact of a provision arises in the future it is one of a number of pressures such as pay, technological advances, etc that are considered and planned for by the NHS.

Background—Resource Accounting and Budgeting (RAB)

  5.  The Government's Resource Accounting Bill, which is currently before Parliament, changes the basis of planning and controlling public expenditure across the public sector. From 2001-02 Health Authorities and PCTs will have a new statutory duty to remain within the resource limit set. Resource limits are limits on expenditure. They will also have a cash limit as now. Allocations will be made in resource terms and not cash. This allows expenditure on provisions for clinical negligence to be recognised in the resource limit set whereas previously it could give rise to a deficit.

  6.  HM Treasury and auditors have agreed to a change in format of the annual accounts for Health Authorities, in advance of the implementation of RAB. This year the income and expenditure statement will be replaced with an Operating Cost Statement format which more accurately reflects the funding arrangements of public sector bodies like HAs which receive the majority of their income direct from government. A new financial duty on Health Authorities and PCTs is to achieve operational financial balance. This means the concept of income and expenditure deficits is lost and instead the measure is whether HAs and PCTs have kept their expenditure within approved limits. this will lead to more transparency in reporting financial performance.

Financial Position 1999-2000

  7.  The in-year deficit for 1999-2000 is expected to be around £200 million. Further information on 1999-2000 will be available when the audited Annual Accounts are received in the Autumn. The financial position since November has been influenced by significant increases in the costs of generic drugs and clinical negligence provisions. The scale of these two pressures is estimated to be £300 million. The influenza outbreak that characterised the early months of the new year has also impacted on forecasts.

  8.  Since November the Government's new spending plans for the NHS have also been announced, which mean that the service will receive the largest level of sustained real terms growth over any four year period in NHS history—an average of 6.3 per cent real terms growth year on year. This will be used to deliver the Government's agenda for modernising the NHS and give the service the support necessary to achieve financial stability. The new monies include an additional £1.4 billion for the NHS in 2000-01—of which £660 million has already been notified to Health Authorities.

   (ii)  If there are any projected deficits, does the Department anticipate that any of the new monies announced in the Budget of March 2000 will be used to make these deficits good?

  9.  The Government has made it clear that the new monies should be used to address local priorities and pressures, particulary:

—  achieving financial balance within health systems and meeting identified pressures;

—  local PCG/T service developments to deliver convenient and accessible primary and community services for patients;

—  implementation plans that address winter pressures, such as developing intermediate care services;

—  action to improve local inpatient waiting list profiles and outpatient services.

  10.  It is not the case that the additional resources provided are being used to clear past deficits. Indeed, a large proportion of the cumulative deficit relates to longer term liabilities such as clinical negligence costs which may take many years to settle if at all. The additional resources are being used to fund new drugs, improve and develop services such as those for cancer and coronary care, and to help speed up treatment for patients. They will also help the NHS achieve financial stability—a necessary condition for delivering the Government's agenda for modernising the NHS.

  11.  It must be recognised that the achievement of financial balance and service improvements are not separate and mutually exclusive objectives. Health Authorities, Primary Care Groups, Primary Care Trusts, NHS Trusts and other key stakeholders must work together collaboratively to identify the causes of any overspending or shortage of income.

  12.  Deficits can occur, for example, through a shortage of income for the local provider NHS Trust(s). Deficits or pressures in one organisation impact on the whole local health community. By putting more income into such trusts, for example for waiting or intermediate care, services can be enhanced and financial balance improved at the same time.

   (iii)  The NHS Executive states that NHS trusts should balance their finances in-year and not put off tackling financial problems, but this should not be at the expense of proper service provision. How does the Department monitor this aspect of trust performance? Does the current level of deficit mean that fundamental financial problems have not been tackled?

  13.  NHS bodies experiencing financial problems are monitored on a regular basis, (usually monthly), by the NHS Executive Regional Office to whom they report. Part of that monitoring is to ensure that plans are being progressed which bring them back to financial balance as soon as possible in a managed and proper way—but not at the expense of service provision.

  14.  As explained in paragraphs 1-5, it is important to note the distinction between an in-year deficit and a cumulative deficit; and that an accumulated deficit is not necessarily indicative of a poor financial position. It is not a debt repayable on demand. It is largely a product of good accounting practice that requires Health Authorities and NHS Trusts to recognise future liabilities as soon as they are known. The cash payment may be some time in the future. Health Authorities and Primary Care Trusts only receive a cash allocation to cover their cash spend in any one year. Therefore when dealing with long-term liabilities there is a clear mismatch between accounting conventions and the way government funds the NHS.

  15.  The Accounting change being introduced in 2000-01 and the introduction by the Government of Resource Accounting and Budgeting in 2001-02, means this mismatch between accounting and funding will be removed and will lead to more transparency on financial performance of HAs and PCTs.

   (iv)  The NHS is committed to paying its bills in a reasonable timescale, conforming to Government Accounting Regulations and the CBI Prompt Payers Code. Can the Department provide details on the trends in meeting those targets, on a quarterly basis, for the period commencing April 1997? Would the Department like to comment on these trends, and give a view on the projected position for March 2000? Is the Department aware of any significant variation in performance between Regions or types of health body?

  16.  Table 1.1.1 provides an analysis of payment performance by region and by type of health body.

  17.  The NHS Executive takes the issue of prompt payment by NHS organisations very seriously and has, over a number of years, issued guidance to emphasise the importance placed on prompt payment, and setting out the intention to comply with both the CBI's prompt payment code and Government Accounting Regulations.

  18.  Over the last 18 months the focus has been on a small number of NHS Trusts that continued to demonstrate unacceptably poor PSPP compliance. The range between the best performing NHS Trusts and the worst performing is continuing to narrow.

  19.  As a consequence, the performance of the NHS in complying with PSPP targets has shown a sustained improvement over the years 1997-98, 1998-99 through to latest projections for March 2000 which indicate that 84 per cent of bills are paid within 30 days/within the PSPP target. This is in the context of the NHS processing and paying some 14 million invoices per annum. The number of invoices paid within 30 days is considered a better measure of NHS payment performance as measurement by value could be distorted through large one-off payments.

  20.  The NHS Executive will continue to work with all NHS bodies to achieve and maintain a level of payment performance consistent with Government Accounting Regulations and the CBI's Prompt Payment Code.

  Notes for Table 1.1.1:

  1.  PSPP performance for 1997-98 and 1998-99 is drawn from the audited Annual Accounts.

  2.  The Audited Annual Accounts for 1999-2000 will not be available until sometime in the Autumn this year. The latest forecasts for 1999-2000 have therefore been provded.

  3.  As the majority of creditors supply goods and services to NHS Trusts, only NHS performance against the PSPP is monitored in years.

1.2  National Beds Inquiry

   (i)  Could the Department outline briefly the main findings of the National Bed Inquiry? What is the evidence to support the Inquiry's 3 options for future provision? Could the department give a breakdown of the total cost of the Bed Inquiry (including the time of officials) over its lifetime?

   (ii)  Does the Department believe that any of the figures produced by the Inquiry (eg bed occupancy, day case rates, trends in elective activity) should be used as benchmarks against which current trust business cases can be measured? Did the Department examine the assumptions underlying the business cases of trust developments which are currently on site or about to go on site (either publicly or privately financed), and how do these compare with its own conclusions?

   (i)  Could the Department outline briefly the main findings of the National Bed Inquiry? What is the evidence to support the Inquiry's 3 options for future provision? Could the department give a breakdown of the total cost of the Bed Inquiry (including the time of officials) over its lifetime?

INTRODUCTION

  1.  The National Beds Inquiry, launched in September 1998, grew out of concerns that the long term decline in staffed hospital beds might have gone too far. The length of hospital waiting lists and the recurrence of winter pressures on emergency beds suggested that present hospital services were not well matched to patient need. At the same time there was continuing evidence of inappropriate and avoidable use of hospital beds. To address these issues the Inquiry was asked to review assumptions about future growth in the volume of acute services and their implications for hospital beds and other health services, looking ahead 10-20 years.

  2.  The Inquiry reviewed historical trends, examined local and international variations in services and trends, assessed key drivers of future requirements, reviewed different models of care and explored a range of projections for future activity. The Inquiry Team's own analysis was supported by a programme of commissioned research.

  3.  The Inquiry deliberately took a "whole system" approach because hospital beds cannot be considered in isolation from other parts of health and social care systems.

  4.  The report on the findings of the Inquiry was published for consultation on 10 February 2000. The period of consultation closed on 15 May.

  5.  In practice there is a continuum of options for the future pattern of care. The three scenarios put forward as part of the consultation process—maintain direction, acute focus and care closer to home—were for illustrative purposes, to focus debate and enable effective consultation.

KEY FINDINGS

6.   Overview

  General, Acute and Maternity NHS beds have been falling for over 30 years—from a peak of 250,000 around 1960 to 147,000 now.

  NHS beds have fallen by over two per cent a year since 1980—but the decline has now slowed, and for acute beds may have come to a halt in absolute terms.

  There has been a long-term increase in acute and general hospital admissions per head of almost 3.5 per cent a year.

  Overnight admissions have grown more slowly, and have mainly been of people aged 65 or over.

  The use of hospital beds to meet this increase has fallen because of offsetting growth in day care treatments and reductions in length of stay.

  Day cases per head increased by 12.4 per cent per annum between 1980 and 1994, and by 8.3 per cent per annum between 1994 and 1998.

  Average length of stay fell on average by 3.3 per cent per annum between 1980 and 1994, and by 1.8 per cent per annum between 1994 and 1998.

  Over 60 per cent of elective admissions are now day cases.

  Nearly 60 per cent of ordinary admissions are now emergencies.

  One per cent of acute beds are designated for general (not specialist) critical care.

7.   Older People

  Services for older people warrant a special focus.

  Year on year there has been a continuous growth in proportion of older people requiring overnight stays in hospitals.

  Two-thirds of general and acute beds are occupied by older people, and 65s and over account for over half the recent growth in emergency admissions.

  For older people, at least 20 per cent of bed days were probably inappropriate if alternative facilities had been in place.

8.   Variations

  In England, after adjusting for need, there remain wide variations between Health Authorities in average length of stay and day case rates—suggesting there is scope both for average length of stay to fall further and day case rates to rise.

  Large variations in hospital admissions and bed use per head (eg fourfold for emergency admissions for over 75s).

  Higher bed availability and use are not associated with better response to emergency pressures. Health Authorities using more beds for older people are prone both to longer waits for emergency admission and above average rates of delayed discharges.

  Low bed availability and lower day case rates are associated with longer waits for elective admissions, suggesting that the supply of beds can be run down too far.

  Health Authorities with the lowest average bed use had significantly higher waiting times for elective treatment.

  Increased availability of nursing home and residential care and district nurses is associated with reduced inpatient bed use. A high day-case rate has a similar effect.

  Good provision of social care and community health services and below average inpatient bed use achieve outcomes as good as those with above average inpatient use.

  Availability of community health services and social care are key to differences in acute bed use; in some case variations in primary care service delivery are also material.

COSTS

  9.  A detailed breakdown of costs would require disproportionate expense but a broad estimate would be of the order of £100,000 including the time of officials.

   (ii)  Does the Department believe that any of the figures produced by the Inquiry (eg bed occupancy, day case rates, trends in elective activity) should be used as benchmarks against which current trust business cases can be measured? Did the Department examine the assumptions underlying the business cases of trust developments which are currently on site or about to go on site (either publicly or privately financed), and how do these compare with its own conclusions?

  10.  An overview of assumptions made in business cases, conducted by the London Health Economics Consortium on behalf of the Department of Health in 1998, revealed significant variations in methodology and this contributed to the decision to launch the National Beds Inquiry (NBI).

  11.  The figures used in the NBI are national averages and cannot simply be used as benchmarks at an individual Trust level. This is because of differences in the age structure of the local population, difficulties in defining the Trust catchment area, and different local configurations of services which may mean that a perceived shortfall in acute beds at one Trust is more than compensated for at another local provider.

  12.  However, all bed modelling, whether that be for PFI or publicly-funded hospitals, should consider at least the same factors as those in the NBI. Trust business cases should therefore be checked against the factors and assumptions in the NBI, and significant divergences explained. This should be done in the context of the whole local health economy, such that any divergences which would imply a "shortfall" of acute beds could be explained by a compensating increase in provision elsewhere in the system. An explicit check that this has been done will be included in the business case approval process once the conclusions of the NBI consultation have been announced.

  13.  In response to the publication of the NBI, the Department immediately undertook a review of the first 16 major acute PFI schemes which have been approved. This confirmed that they did all consider the key drivers as in the NBI. The Department has now extended the analysis to all acute hospital schemes above £10 million capital value (PFI and public) which are near to approval or have been approved.

  14.  This will ask for explanations for divergences from NBI assumptions, confirmation that the main conclusions of the NBI have been considered (eg focus on older people, slow down in length of stay reductions, increase in proportion of day cases, increase in electives to meet waiting time targets), and an estimate as to the degree of flexibility to increase further the number of beds if required. Responses are due in June, and should hopefully assist the Department to confirm how the NBI should be incorporated into the capital approval process.

1.3  Primary Care Groups and Trusts

   (i)  Early evidence suggests that variations in the level of management costs allocated to different PCGs are being reflected in their infrastructural and organisational development. How consistently are management costs to support PCG/Ts calculated by Health Authorities, and how are these being "levelled up"?

   (ii)  PCGs at level 2 hold budgets, albeit notional ones. Nevertheless, how PCGs have managed their unified budgets should provide one measure of suitability to become Trusts. What information is available at the year end on the numbers of PCGs who face overspends? Could the Department provide information on reasons for overspends, how overspends are being managed and what measures PCGs anticipate they might need to take to reduce them?

   (iii)  What proportion of Health Authority budgets is devolved? Are PCG management resources in anyway related to the responsibilities they have taken on?

   (i)  Early evidence suggests that variations in the level of management costs allocated to different PCGs are being reflected in their infrastructural and organisational development. How consistently are management costs to support PCG/Ts calculated by Health Authorities, and how are these being "levelled up"?

  1.  Primary Care Trusts (PCTs) and Groups (PCGs) are at the centre of the Government's programme for developing faster, better and fairer health care. They have empowered local clinicians to develop, commission or provide local services which address local priorities and are tailored to local circumstances. Within the parameters set by national priorities, the Government wishes each PCT or PCG to own this agenda and to address it in the ways which best suit it. This means allowing each individual PCT or PCG to develop at its own pace, taking on the responsibilities for which it is ready and able.

  2.  Most PCGs have responded very postively to this challenge. In their first year of operation (1999-2000) some 400 PCGs (83 per cent) were operating as level 2 bodies. This means that they had taken on at least 40 per cent of their share of the Health Authority's unified budget allocation. For 2000-01, around 20 PCGs have already been replaced by the 17 PCTs which went live on 1 April. Together with a small number of Primary Care Group mergers this means there are some 459 PCGs remaining. Exact figures are currently being collated; however it is expected that there will be little change in the numbers at level 2. For 2000-01 (and subsequent years), this means that they have taken responsibility for at least 60 per cent of their share of the Health Authority's unified budget allocation (or over £20 billion in total). A further 25 or so PCTs are likely to begin operating from 1 October and initial expressions of interest in PCT status from April 2001 are higher still.

  3.  Even so, there is a wide range in the responsibilities which have been taken on by PCGs, in the organisational models which have been adopted to discharge them and in the way in which staff and other management resources have been attributed to PCGs or to the core Health Authority.

  4.  Health Authorities are expected to provide sufficient resources to their PCGs to enable them to undertake the full range of functions and responsibility to which they aspire. An additional contribution of approximately £2.47 per head was made available to HAs to help meet the running costs of PCGs. These funds were allocated to HAs using the national weighted capitation formula. HAs and PCGs working together locally are expected to determine the level of support for each PCG.

  5.  The level of management resources made available to PCGs has varied across the country. A survey undertaken last autumn shows that the range was between £1.50 and £7.10 per head. (See table 1.3.1). Information from Regional Offices suggests that some of this variation can be explained by Health Authorities not including in this return support provided in kind (ie office accommodtion, staff telephones, equipment etc). It is important to note therefore that support is about more than just making funds available.

  6.  HSC 1999/244 (Planning For Health and Health Care—December 1999) reinforced the message that the distribution of management resources should be discussed and agreed by the HA and its PCGs/Ts. MS(H) has also personally written to each HA Chair (23 February 2000) about the development of PCGs reminding them of the need for HAs to foster the development of their PCGs and PCTs and to empower them.

   (ii)  PCGs at level 2 hold budgets, albeit notional ones. Nevertheless, how PCGs have managed their unified budgets should provide one measure of suitability to become Trusts. What information is available at the year end on the numbers of PCGs who face overspends? Could the Department provide information on reasons for overspends, how overspends are being managed and what measures PCGs anticipate they might need to take to reduce them?

  7.  PCGs at level 2 are directly responsible for managing at least 60 per cent of their share of the Health Authority's unified budget allocation. These are real rather than "notional" budgets. They are expected to manage within budget.

  8.  PCT applicants must demonstrate that they are fit for the purpose, ie that they can meet the necessary criteria across four broad areas. These are Vision; Support; Competency; and Impact.

  9.  The question of competency is considered on the basis of a number of issues including an awareness of the need for sound financial management and accountability, with proper arrangements for monitoring activity (eg their performance to date in managing a devolved budget). This will become more important in the future. However, PCGs only began operating on 1 April 1999 and most PCGs spent the first six months of operational life developing themselves as new organisations. The track record in managing their unified budget is therefore limited and of limited value in considering suitability for PCT status.

  10.  Some PCGs do have a track record as either a GP Commissioning Group Pilot or Total Purchasing Pilot. These usually feature in the PCT proposal and may be taken into account when considering the PCG's financial capabilities. It has, however, been necessary therefore to look closely at the PCT proponents' plans for organisational and financial development to assess their potential for financial competence.

  11.  Information is still being collected on the year end position of PCGs and we are therefore unable to provide at this stage details of individual Primary Care Group over- or underspends.

  12.  PCGs have faced financial difficulties over the last financial year (some, like the increased price of generic drugs, unexpected). PCGs are members of a local health economy and it is a key part of Health Authorities' strategic role to co-ordinate delivery of overall financial stability. An additional £90 million was made available from the Reserve in 1999-2000 to help meet the generics pressure. A further cash boost of £1.42 billion for the current financial year, was announced by the Chancellor in the Budget statement. £660 million of this has already been allocated to HAs, who have been directed to allocate these funds to their PCTs and PCGs. They are expected to use these monies to address national and local priorities, including local financial pressures and service development.

   (iii)  What proportion of Health Authorities budgets is devolved? Are Primary Care Group management resources in anyway related to the responsibilities they have taken on?

  13.  The proportion of HA budgets devolved to PCGs is a matter for local agreement. However, most PCGs have agreed to take on over 60 per cent of their share of the unified budget (ie at level 2).

  14.  The level of management resources made available to PCGs is directly related to the level of responsibility they have taken on. As described earlier HSC 1999/244 Planning for Health and Health Care made clear that the distribution of resources should be agreed between the HA and their PCGs/Ts. The Department has now set in place a number of measures to monitor the progress of PCGs/Ts, including information on the level of management resources made available, functions retained/developed/delegated, shared support systems, development planning and accountability frameworks.

1.4  Spending in the Independent Sector

Could the Department clarify its policy as to the circumstances in which it is appropriate for the NHS to use the independent health sector, particularly in the light of ministers recent comments on the use of independent nursing homes for rehabilitation? How much has been spent on purchasing healthcare from the independent health sector in each of the last three years for which data are available? Where possible, could the Department break down this data by category, such as mental health, rehabilitation?

  1.  The Government is not ideologically opposed to the use of the independent health care system, but the priority remains the modernisation of the NHS. The Department of Health is currently exploring the potential for further developing the way in which the NHS and the independent healthcare sector can work together. For example it may be appropriate to use private nursing home beds for re-habilitation purposes, which would free up NHS acute beds. It makes sense that efforts should continue to be made to develop local NHS facilities and we would expect all appropriate local NHS services to be fully utilised before recourse to commissioning services from the private sector. We must also ensure the same standards of quality and clinical and cost effectiveness are applied to the private provider as those applied to the NHS.

  2.  The amount of NHS funds spent on the provision of services for NHS patients treated outside the NHS (in the independent healthcare sector comprising of for profit hospitals, not for profit hospitals, voluntary hospitals/hospices and independent clinics), for the last three years are as follows:

1998-99	£1.25 billion (4.8 per cent of total NHS expenditure)
1997-98	£1.08 billion (4.6 per cent of total NHS expenditure)
1996-97	£0.87 billion (3.8 per cent of total NHS expenditure)

  3.  Tables 1.4.1 and 1.4.2 are the best information available as a breakdown by category for 1998-99.

  Source:   Common information Core, Outturn 1998-89.

  Source:   Common information Core, Outturn 1998-89.

Explanation of Abbreviations for to Tables 1.4.1 and 1.4.2

  Professional Staff Groups (1)—Professional Staff Group contacts for occupational therapy and speech and language therapy—number of face to face contacts on a hospital site, education premises, patients' home, other site.

  Professional Staff Groups (2)—Professional Staff Group contacts for clinical psychology, occupational therapy and speech and language therapy—number of face to face contacts in NHS premises other than a hospital site, LA Social Services premises or premises in private/voluntary sector.

  Professional Staff Groups (3)—Number of face to face contacts by chiropodists, clinical psychology and dieticians in all location types.

1.5  HImps/Partnership Funding

  What performance management arrangements are currently in place to enable the Department to monitor joint finance arrangements between the NHS and social services departments, and how does the Department intend to monitor such arrangements under the new powers set out in the Health Act 1999?

Performance Management Arrangements to monitor Joint Finance

  1.  Joint finance has not been a separate allocation of money since March 1998. Despite a lot of projects initiated through Joint Finance, its impact on promoting joint working at the health social care interface had been slight. In the last year of Joint Finance, 1998-99, £155 million was allocated to Health Authorities as Joint Finance. Monitoring of this expenditure was carried out by local Joint Consultative Committees made up of members and officers from local authorities, Health Authorities and voluntary organisations through financial reports from the Health Authority. In 1999-2000, NHS Executive Regional Offices, calculated that Health Authorities had spent £171 million on activites which were analogous to joint finance. In addition, under Section 28A (1977 National Health Act) money transfer powers, Health Authorities transferred £500 million in 1998-99 in order to aid joint working. This demonstrates that even without a special allocation, the drive to work in partnership to deliver co-ordinated services for users had led to jointly funded services.

New Powers under the Health Act 1999

  2.  The partnership arrangements in the Health Act 1999 have been developed to give NHS bodies and local authorities the flexibility to be able to respond effectively to customers and to improve services, either by joining up existing services, or developing new, co-ordinated services. A user focused, holistic approach is their primary purpose.

  3.  They can cover all health related local authority functions, community health services, acute services (with the exception of invasive surgery) and patient transport.

  4.  The flexibilities under Section 31 of the Health Act 1999 are:

—  pooling of funds to enable resources to be used as flexibly as possible to respond to individual need, and to enable strategic change in services to be effected; and

—  delegation of functions—lead commission and integrated provision. This enables one agency to ensure through a single management structure that a coherent and responsive service, or set of services, can be provided.

  5.  In addition, the 1977 National Health Act, Section 28A, powers to enable a Health Authority to transfer money to a local authority have been extended to Primary Care Trusts, and to all health related local authority functions—(Section 29 of the 1999 Health Act). Section 30 of the 1999 Health Act gives a reciprocal power to local authorities to transfer money to Health Authorities and Primary Care Trusts, (Section 28BB). This power can be used on prescribed functions listed in Regulations (SI 2000/618).

Monitoring of New Powers set out in the Health Act

  6.  Objectives and priorities for the local community will have been identified locally in Health Improvement Programmes (HImPs) and through Community Planning. When drawing up proposals for partnership arrangements, partners must be clear how the aims and outcomes of the partnership arrangement fulfil the objectives in the local Health Improvement Programme. Partnerships must also decide what form of governance best meets local needs and circumstances. These arrangements should be proportionate to the size of the partnership, and there is an opportunity to support democratic renewal in the way that people are able to participate in their design, their development, monitoring and review. This includes users and carers, the voluntary sector and providers, as well as members of the community.

  7.  Use of the Partnership Arrangements is discretionary, and they are designed to be flexible, in terms of size, number of functions and partners, so that they can be used to respond to local conditions and solving operational issues as well as enabling joined up strategic development. As the accountability for the arrangements rests with the local partners, they will be tools which empower people at a local level to provide improved services and to innovate.

  8.  Partnership arrangements must be notified to the Department of Health. The notification form requires the partners to demonstrate that the partnership agreement supports the HImP objectives, show that governance arrangements have been put in place, provide evidence that the relevant stakeholders have been consulted, and produce a written agreement setting out the framework for the local use of the flexibility. On receipt of a notification form, the relevant NHS Executive Regional Office will check the arrangements, give advice on the nature of the proposed partnership and provide support where required. They will work closely with the local partnership, the SSI Social Care Regions and the Government Offices for the Regions to ensure all relevant advice and input is available to local partnerships. This work will provide the Regions with information needed to performance manage the health community.

  9.  At a local level, partnerships are expected to use the Performance Assessment Frameworks as the basis for drawing up indicators for measuring the effectiveness of partnerships. Targets will be set to enable staff and managers to consider how to improve their performance, and ensure that continuous improvement is integral to the plan. As those who introduce the new partnership arrangements must monitor their effectiveness, and use measures of performance to develop their work, there must be a range of measures that capture a balanced view of progress. These should cover the interests of all stakeholders and reflect the business activity as a whole. The collection of data and its use for monitoring and review will need to be agreed locally and fed into Best Value Performance Plans, Best Value Reviews and HImPs.

  10.  The NHS Executive Regional Offices and the SSI Social Care Regions will work together to assess performance at the interface. Progress against plans for partnership arrangements will be handled in the regular contact between the Regional Offices and local partners.

  11.  At a national level, a research programme has been put in place to evaluate the impact of the partnership arrangements. It will focus on two key issues; how far arrangements improve services for customers, and what the implications for organisations are of the introduction of the arrangements. The London School of Economics, and the King's Fund are also planning to carry out research on the use of pooled funds.

  12.  Work is also being taken forward by the Social Services Inspectorate and the Commission for Health Improvement to identify how best to co-ordinate inspections so that, as far as possible, each partnership arrangement between health and social services is inspected as an organisational entity rather than by function.

  13.  In addition, the Department is currently considering the possibility of statistical returns from partnership arrangements. There is currently a review of the data required centrally, to see how far it would reflect the work of the joint arrangements, where there are overlaps, and how to avoid double counting. This will have an impact on the way that the Department centrally assesses the performance of partnership arrangements.

  14.  Pooled funds will be audited separately. A 28D Certificate, Audit Commission Act 1998, is required for each pooled fund, which can then be used to support the financial accounts of each of the contributors.

Information on the use of the Health Act 1999 Partnership Arrangements

  15.  To date, 24 partnerships have notified the Department of their intention to use the Health Act 1999 flexibilities. Table 1.5.1 sets out the names of the partners, the resources being committed to the partnership arrangements, the client group being targeted, the flexibility being used and the aim of the arrangements.

  16.  The majority of partnerships are targeting either learning disability services or services for older people, especially intermediate care. They are mainly using pooled funds and lead commissioning to meet their aims which on the whole look to achieve greater efficiency, effectiveness and economy and to improve the services and outcomes for users. The total resource committed to these partnerships is over £203 million, and there are further partnerships coming on stream amounting to over £40 million. The partnerships are being used to develop both small operational projects, and large strategic changes. The present notifications range from £25,000 to £67 million. They are already demonstrating innovation, and the effective use of expertise held by particular agencies.

  17.  The Department is monitoring the take-up of partnership arrangements and hopes that the information available on the partnership arrangements being taken forward will encourage other potential local partners. The notification list is published on the website, along with all the documentation, to enable prospective users of the arrangements to make contact with others about specific issues. (www.doh.gov.uk/jointunit/partnership.html) As the number of partnerships grows, the Department will be able to identify how they are being used, and their impact.

Monitoring the use of the Section 28A and Section 28BB Money Transfer Powers

  18.  The Directions require a memorandum of agreement and annual voucher to be completed to record the money transfers. PCTs and Health Authorities should confirm with their auditors the evidence required in the memorandum to support the expenditure before agreeing to any 28A transfer.