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Health and Social Care Act 2001

Section 1: Determination of allotments to and resource limits for Health Authorities and Primary Care Trusts

20.Section 1 changes the way in which resources are allocated between Health Authorities (“HAs”) by the Secretary of State and between Primary Care Trusts (“PCTs”) by HAs.

21.When distributing the resource and cash limited elements the Secretary of State and the National Assembly for Wales (for HAs) and HAs (for PCTs) may take into account how much is being spent on the non-resource and non-cash limited family practitioner services. Those who are spending more than their fair share on these services may get a smaller increase for their other services. Conversely if they are spending less than their fair share they can be given a larger increase. This monetary device will have the effect of supporting action taken to increase the number of GPs in under-doctored areas.

22.Section 1 provides for changes to the way in which unified allocations – which are cash limited – are made to HAs and PCTs. This provision will allow the Secretary of State and the National Assembly for Wales and HAs to take account of general Part 2 expenditure (non cash limited expenditure on family health services) when making decisions about unified allocations. In the first instance the intention is to take into account only the general Part 2 expenditure on general medical services (GMSNCL). It is envisaged that the power will be exercised so as to make larger increases in the unified allocations of areas which are “ under- doctored” than if GMSNCL was not taken into account; and to make smaller increases in the unified allocations of areas which are “over-doctored” than if GMSNCL was not taken into account. It will also provide a financial mechanism for regulating the number of doctors in a Health Authority area (the abolition of the Medical Practices Committee – see sections 14 and 15 - will mean that HAs will become responsible for declaring GP vacancies).

23.The Department has asked the Advisory Committee on Resource Allocation to devise a new funding formula for GMSNCL expenditure. Using this new formula in conjunction with the existing formula for HA and PCT unified allocations will allow the Department to determine targets, or “fair shares” of available resources for an area covering both unified allocations and GMSNCL. But changes to funding will only be made to unified allocations. Health Authority and Primary Care Trust unified allocations will move towards this overall target level over time (e.g. if the Health Authority is over target it will receive lower funding growth than if it was under target). While these changes will see resources for under doctored areas grow more quickly than the resources for over doctored areas, they will not lead to the cash limiting of Part 2 general expenditure or change the entitlement of primary care practitioners.

24.The statutory provision dealing with the public funding of Health Authorities is section 97 of the National Health Service Act 1977 (the “1977 Act”). Health Authorities are paid money in each year by the Secretary of State under section 97(1) and (3). Section 97(1) concerns the remuneration of persons providing services under Part 2 of the 1977 Act (for example, General Medical Practitioners). Unless such remuneration is excepted from section 97(1), it is not cash limited. The Secretary of State is under a duty to pay each Health Authority the cost of such remuneration, and cannot impose a ceiling on such expenditure (defined as “general Part 2 expenditure” in paragraph 1 of Schedule 12A to the 1977 Act). Section 97(3) provides that the Secretary of State must pay to each Health Authority money not exceeding the amount allotted to it by the Secretary of State. This amount is allotted towards meeting an Authority’s “main expenditure” (defined in paragraph 2 of Schedule 12A to the 1977 Act). In the case of a Health Authority this includes all expenditure attributable to the performance of their functions in relation to the provision of hospital-based and community health services, all their administrative costs, the costs of drugs attributed to them by the Secretary of State and certain other expenditure. The amount allotted constitutes a limit on the cash which may be spent by the Authority.

25.Health Authorities are under similar obligations to provide funds to Primary Care Trusts. Each Primary Care Trust is established for an area contained within the area of a Health Authority. Under section 97C, each year the Health Authority must pay each of its Primary Care Trusts (a) the cost of general Part 2 expenditure incurred by the trust and (b) money not exceeding the amount allotted by the Authority for that year towards meeting main expenditure. As with the allotments to Health Authorities, the amount allotted to each Primary Care Trust covers all expenditure attributable to the performance of their functions in relation to the provision of hospital-based and community health services, all their administrative costs and the costs of drugs attributed to them by the Secretary of State. The amount allotted constitutes a limit on the cash which may be spent by the Authority.

26.Subsection (2) inserts a new subsection (3AA) into section 97 of the 1977 Act. This allows the Secretary of State to take account of expenditure attributable to the remuneration paid to Part 2 practitioners in the Health Authority area in determining the amount to be allotted to the Health Authority. Subsection (4) inserts a new subsection (1A) into section 97C of the 1977 Act. This allows a Health Authority to take account of the distribution within their area of expenditure attributable to the remuneration paid to Part 2 practitioners in determining the amount to be allotted to each of its Primary Care Trusts.

27.The Government Resources and Accounts Act 2000 inserts two new sections into the 1977 Act (sections 97AA and 97E). These new sections provide for the setting of resource limits for every Health Authority and Primary Care Trust in addition to cash limits. Section 97AA concerns resource limits for Health Authorities; section 97E concerns resource limits for Primary Care Trusts. Section 97AA(2) provides for general Part 2 expenditure to be excluded from the resource limit.

28.Subsection (3) inserts a new subsection (2A) into section 97AA of the 1977 Act. This allows the Secretary of State to take account of general Part 2 expenditure in setting the resource limits for Health Authorities, mirroring the new subsection (3AA) of section 97 which allows the Secretary of State to take account of general Part 2 expenditure in determining the amount to be allotted to a Health Authority.

29.Subsection (5) inserts a new subsection (2A) of section 97E into the 1977 Act. This allows a Health Authority to take account of the distribution within their area of general Part II expenditure in setting the resource limits for its Primary Care Trusts, mirroring the new subsection (1A) of section 97C which allows the Health Authority to take account of the distribution within their area of general Part 2 expenditure in determining the amount to be allotted to each of its Primary Care Trusts.

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