The King's Fund response to Alan Johnson's statement on new PCT funding allocations

Commenting on the publication of new funding allocations for primary care trusts (PCTs) in England, which will calculate how much each part of the country will receive in NHS funding over the next two financial years, The King's Fund's Chief Executive Niall Dickson said:

'It's clear from these figures that local health services need to brace themselves for leaner times ahead. The NHS has benefited from record levels of investment during the prosperous times and now needs to prepare itself for life on a tighter budget.

'PCTs face an overall real terms funding increase of 3.9 per cent next year, followed by a 2.7 per cent increase in 2010/11. This compares to growth rates after inflation of around 7.4 per cent since 2002/3 to 2007/8. This was not unexpected, and the NHS will have to demonstrate greater efficiencies and value for money, especially as government spending from 2011 will without doubt be less generous still.

'Measured against the new funding formula, for the foreseeable future some areas will still be receiving more than their target budgets while others will continue to fall short. The process and timescale for bringing PCTs' budgets in line with the formula has not been made clear, which could be worrying to managers who will have to plan for any budget changes – especially when facing a period of lower growth in any case. Handing some parts of the country significantly smaller budgets than they would have expected under the old formula – if done too quickly – risks destabilising local health economies. It may have been better to have made bolder adjustments about reallocating funds during periods of growth rather than now.'

He added: 'The weight given to inequalities within the new calculations has been left as a decision for the Secretary of State. This is a really significant move, and we need to see more detail on what impact that has had on the funding allocations for different areas.'

The King's Fund Chief Economist Professor John Appleby added:

'The new allocation formula suggests some potentially big swings in PCT budgets in London in future. For example, in 2007/8 London PCTs received £450 million (4 per cent) more than they were assessed to need based on their population and health care needs. But calculations using the government's new criteria conclude that by 2010/11 the capital's projected health budget will be £1 billion in excess of what it’s judged to need.

'This means there will have to be significantly slower rates of growth in some parts of London. Whether and how quickly London PCTs' real budgets are brought into line with this new assessment of their needs, via reductions in growth or real cuts, will be a decision for the Secretary of State.'

Notes to editors: 

  1. For further information or interviews, please contact The King’s Fund media and public relations office on 020 7307 2585, 020 7307 2632 or 020 7307 2581. An ISDN line is available for interviews on 020 7637 0185.
  2. Swings in funding can be ascertained only for PCTs in London at this stage because 2007/8 funding allocation data for the rest of England refers to the old PCT boundaries and like-for-like comparisons cannot be made.
  3. The King’s Fund seeks to understand how the health system in England can be improved. Using that insight, we help to shape policy, transform services and bring about behaviour change. Our work includes research, analysis, leadership development and service improvement. We also offer a wide range of resources to help everyone working in health to share knowledge, learning and ideas.