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PCT Funding Formula ‘Adjusted’ to the Tune of £10 Billion

Extracting the truth about funding for health inequality

England is now in its 16th year of using an unscientific formula for funding NHS primary care trusts (PCTs). In a new report from Civitas, Formulas at war over two sorts of inequality in health funding, Mervyn Stone, Emeritus Professor of Statistics at University College London, examines the evidence presented by expert witnesses at a hearing of the Rural Services All-Party Parliamentary Group in February 2010. He argues that the current PCT-funding formula cannot be defended on any rational grounds:

‘…the formula is a grotesque construction – and it became grotesque in the absence of any independent statistical assessment of what was being done’.

    (p6)

In 2008, a new formula (CARAN) was devised to take account of regional variations in age-profile. The authors of the new formula were commissioned by the Advisory Committee on Resource Allocation (ACRA). However, the new formula was undermined when ACRA encouraged Health Services Minister Ben Bradshaw to cut billions of pounds from the funds to be allocated by the new formula before it had even been put to work:

‘…ambitious civil servants were exploiting the new discipline of health economics to go where statisticians would not dare to tread’

    (p16)

ACRA insisted that there was some case for adjusting CARAN in 2009 to divert money to maintain the existing ‘balance’ of funding between ‘deprived’ urban areas of England and ‘affluent’ or rural ones.

However, in Formulas at war over two sorts of inequality in health funding, Stone reveals that ACRA had absolutely no idea how big that adjustment should be:

    ‘Due to lack of evidence, ACRA concluded that it is not currently possible to technically determine the cost of reducing health inequalities between PCTs… Ultimately, ACRA considered the weight to be applied to each formula to be a ministerial decision.’ (p9)

It was left for the Minister to ‘cut and paste’ the formula and to simply choose a figure:

‘Bradshaw top-sliced £10billion out of the PCT budget of £80billion’.

    (p4)

According to Stone, Ben Bradshaw’s 13% re-allocation is now being spent by the thereby favoured PCTs just as it has been spent since 2003, except that it comes with an unobjectionable label – the reduction of long-term health inequalities. It is a sum of money that far outweighs the cost of what witnesses for the government acknowledged to be the largely ineffective public health programmes already attempted.

Stone sees a connection between this administrative scandal and the recent revelation of what Baroness Morgan told the undercover reporter for Channel 4’s cash-for-influence Dispatches expose:

“Getting through the door is the key thing… They’ve all got their Key Performance indicators, they have all got to deliver this healthy living stuff… they don’t know how to do it…”

    (p5)

Stone’s intention is to alert people to the neglect of statistical thinking in the way government disposes of huge sums of money in mathematically nonsensical formulae. The question, as one witness put it, is:

‘…on what basis the decision was made to ignore that academic evidence’.

    (p13)

Stone’s analysis is particularly relevant in the run-up to next week’s General Election, as he identifies a wider concern that politicians are avoiding discussion of this difficult issue. He calls for the government to be obliged to publicly defend its decision to “adjust” the formula.

For more information contact:

Mervyn Stone on 01895 674 715

Civitas on 020 7799 6677 or info@civitas.org.uk

Notes for Editors

i. Formulas at war over two sorts of inequality in health funding by Mervyn Stone can be downloaded below.

ii. Mervyn Stone is Emeritus Professor of Statistics at University College London.

iii. Failing to Figure by Mervyn Stone includes 19 pages worth of powerful and clear argument against the funding formula. It received the full support of the statistical profession and is available here.

iv. Civitas is an independent social policy think-tank. It receives no state funding and has no links to any political party.


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