Health and Care Bill (Fourth sitting)

Debate between Karin Smyth and Mary Robinson

Committee stage
Thursday 9th September 2021 Public Bill Committees

[Mary Robinson]

Nice and easy—thank you.

[Karin Smyth (Bristol South) (Lab)]

Q I have three obsessions with the Bill, some of which I have shared with you. First, on local governance and accountability, I have tabled an amendment to follow the logic of the Bill and make accountability local rather than going via some obscure route to the Secretary of State.

Secondly, there is the treatment of capital in the system and how local communities, healthcare systems and trusts will be able to develop estates and capital planning. The third obsession has completely eluded me for the moment. It is generally about the tariff—that may be your subject, Mr Edwards—and how the vague nod to a new tariff framework in the Bill is working out. You may be more privy than the Committee to the details on how that might work out; it is about the flow of money within the system. Would you like to start, Mr Edwards, on governance, tariff and capital?

Nigel Edwards: Richard may be able to give a more up-to-date account on capital. You will be aware that the mechanisms for the allocation of capital in the NHS are a little arcane and somewhat out of date. There have been various attempts to update the mechanisms. Richard has been looking at this and can perhaps tell us more, but my impression is that it will flow following the allocation formula for revenue. There will still need to be a tariff. Despite the fact that there is integration, a tariff allows you do to a number of useful things. Certainly, patients will flow between different ICSs, so there will need to be a mechanism to account for that. It is also quite a useful budgetary tool, so in terms of financial control, it is probably quite important that the tariff is maintained.

We have been promised guidance on the flow of funds more locally, but we have not yet seen it. My presumption is that there will be a negotiated process rather than just a straight use of the tariff in the way that we have seen up until now, with variations on block contracts, maybe using the tariff—or, more likely, the historical budgets—as the starting point. The business-as-usual capital, as opposed to major capital projects, remains as it always has been. Although it is subject to some review, at the moment I do not think a major change is proposed for it, but Richard probably knows better.

Nick Timmins: I have nothing particular to say about capital. I do think you need to retain a tariff—not for everything, because in some areas of healthcare it just does not work, but for electives and those sorts of procedures. That has two advantages: it means you need to understand your costs to construct the tariff in the first place so it is a driver of efficiency, and, equally importantly, it gives you a benchmark price with which to negotiate with the private sector whenever you do outsource some operations and procedures. You are able to say, “This is what is costs us, so this is what we’ll pay you.” If you do not have that, you are subject to a seller’s market and can be charged what you like because you do not know what your own costs are.

Richard Murray: On the flow of money, we are expecting revenue allocation to ICSs based on the current formula, trying to reflect need, inequalities, deprivation and age. The uncertainty is then how much those ICBs will allocate down to place level on a local government footprint. The expectation is that quite a large proportion of that funding—general practice, community services, quite a lot of mental health, and some acute services, too—will go down to that level, but none of that is in the Bill. The allocation to ICSs stops at that point, and as has been said, you need a payment mechanism to get the money off what are, effectively, commissioners and over into providers.

The changes to tariff are mostly about flexibility, so it should still be transparent; you should still be able to work out what people are being paid, which I think is important, and you should be able to benchmark between different providers, but instead of paying for each operation and each widget bit by bit, you can have formulas that try to reflect fixed costs. You can do it in a different way that adds some flexibility into the system, which I think is important when you are trying to bring providers and commissioners into common alignment over where the money is going. Tariffs had the problem of setting them at each other’s throats sometimes, because every time someone was admitted to a hospital you would get another payment, so commissioners wanted to keep it down and providers wanted to keep it up. There is the chance to try to align some of those incentives, but there is still a lot of gap around what actually will go down to place and what will determine it; of course, again, the budgets need to be equitable.

Nigel Edwards: Richard, if I may, I think a very important point that ought to be made here is that because the allocations will now shift from 100-plus clinical commissioning groups to 42 ICSs, the variations between them will be evened out. There will need to be some way of recognising the fact that within an ICS, you have very different patterns of need, which at the moment are recognised by the allocation formula, but in the future will not be. The money will be received by the ICS, so I think there is a question there. I know that local authorities—and, indeed, GPs and primary care networks—will want to say, “If we are in a particularly deprived area and we have historically had higher funding to recognise that, we would expect that to continue.” There ought to be a line of sight from the national allocation formula based on need to the money that is received by our locality.

Sorry, Richard. I thought you made a really good point.

Richard Murray: That is absolutely all right. On capital, the Bill does not really change the way that capital works in this system. The only difference is the ability of the Department, through NHS England, to cap the spending of foundation trusts, which they have not been able to do in the past. There are some limits around them being able to do that, but it gives an additional lever at national level. Having said that, the way that capital is working in the system has changed fundamentally already: some capital goes through an allocation system, a bit like the revenue funding, and I am leading a review for NHS England now on how that money flows.

The bit that I think is really uncertain is how the big hospital schemes get picked. That is the bit that looks very different. Obviously, there is a manifesto commitment. There used to be a process by which it was determined whether providers could afford to repay—if they could do it through loans, or if there was a need system. That is now going off in a completely different place, and I think that is the bit that is not quite clear. How does that work within this system? Who gets to choose how those projects get picked, so to speak? That is the big change but, again, it is not actually in the Bill; it is being done under the existing rules.