Recommendation 12

HM Government · verbatim extract Acknowledged

a) The allocation of funding to ICBs to support them in commissioning services for their local population is one of the key duties of NHS England. NHS allocations, which are published during the NHS planning process, are distributed using an independent ‘fair shares’ formula. NHS England published allocations for 2023 to 2024 to 2024 to 2025 on 27 January 2023. In advance of the publication of the 2023 to 2024 local government finance settlement ( LGFS ), DLUHC published a policy statement in December setting out forward notice of the measures to be included in the 2023 to 2024 provisional LGFS and those expected to be maintained into 2024 to 2025. The government’s intention was for this to support councils’ budget setting processes by giving them additional, multi-year certainty over their funding levels. For social care, this included setting out the adult social care precept referendum principle for 2024 to 2025 and reiterating the increase in grant funding as set out at the Autumn Statement. However, funding may be required outside this standard process where certain priorities require in-year funding that is accompanied with reporting requirements. For example, between December 2022 and March 2023, DHSC provided £500 million of discharge funding to reduce the number of people delayed in hospital waiting social care. We have listened to the social care sector and understand how important long-term certainty and visibility of funding is. That is why, in addition to the multi-year funding announced at the Autumn Statement, we published the details of the £600 million 2023 to 2024 Discharge Fund on 4 April 2023, to give local systems the maximum time to prepare ahead of winter 2023 to 2024. We have also confirmed that we will provide £1 billion of additional funding to reduce delayed discharges in 2024 to 2025. Similar funding may be ringfenced for a particular purpose to ensure adequate funding for a specific priority. Ringfencing in these cases provides the necessary means to control aggregated spending within control totals. DHSC recognises that should additional reporting requirements accompany future funding of this type, they should be proportionate. Additionally, for 2023 to 2024 NHS England have significantly reduced both the number of separate allocations of service development funding ( SDF ) for specific change programmes, and the level of reporting required against those allocations. This includes reducing requirements for ICBs to report individually to different national programmes in order to receive their SDF allocations. This approach gives ICBs scope to make more decisions about how to deploy their funding locally. We intend to maintain and develop this ‘bundling’ approach into 2024 to 2025. Building on this progress, significant improvement will continue to be made to reduce the prevalence of in-year funding, particularly where it entails substantial and potentially onerous reporting requirements on systems. We recognise the importance of providing systems with certainty, often providing funding on a recurrent or multi-year basis, such as the commitments regarding the building of new hospitals. The introduction of ICSs has provided systems with greater freedom and autonomy to determine how best to deploy their resources to meet local needs and, with this in mind, in-year funding should be limited to situations where it is absolutely necessary. b) DHSC agrees in principle that systems should be provided with sufficient flexibility to determine allocations for services and appropriate payment mechanisms, particularly to meet the needs of their local population. However, we believe that there are circumstances that warrant payment system incentives to encourage a particular activity; elective care, promoting value for money, and patient choice are all supported by common payment mechanisms. We feel that significant opportunities to take account of local variation currently exist in the Payment Scheme, even where payment system incentives are used. For instance, under the current NHS Payment Scheme ( NHSPS ), providers and commissioners must agree a fixed payment covering delivery of all services outside the scope of the Elective Recovery Fund ( ERF ), as well as operate a payment-by-activity mechanism with defined prices for all activity within scope of the ERF . Systems have flexibility for the level at which they agree the fixed element. Further, where a system wants to deviate from the fixed or variable payment arrangements, they can apply to NHS England to have these variations approved. There is, therefore, already a degree of flexibility in how payments are agreed. As such, alterations to the payment scheme for this reason are not required. NHS England runs regular engagement sessions with the sector and as part of this, seeks to understand what improvements can be made to the NHSPS . This engagement would cover what flexibilities could be offered to help better flow funding inside a s