Briefing on the funding of the NHS in Scotland
Healthcare funding review research report 2
Introduction
The BMA announced in December 1999 that in view of the large and widening gap between the resources available for the NHS and the demands and needs of patients, the Association would be undertaking a wide ranging review of healthcare funding. As part of this review the following briefing paper on NHS funding in Scotland has been prepared.
The NHS in Scotland (NHSiS) was formed by separate legislation, the NHS (Scotland) Act 1947, and has therefore always been a separate entity in a UK context. The distinct nature of the NHS in Scotland has been reinforced with the devolution of health in 1999 to the newly created Scottish Parliament. Thus the Parliament has assumed responsibility for the allocation of health spending previously vested in the Secretary of State for Scotland. The higher per capita spend on health in Scotland is as a result of decisions taken by these bodies in relation to Scotland’s overall budget and has no impact on health spending elsewhere in the UK. The emergence and development of the Scottish Parliament offers the potential for greater divergence in the future. However it is clear that the many questions being posed on the future funding of the health service are equally pertinent and relevant for Scotland.
It is in the context of acknowledging the distinct nature of the NHSiS that this paper examines the funding of the health service in Scotland. Firstly it outlines how public spending levels are determined in the UK and Scotland with specific reference to the Barnett Formula. In particular, the workings of the Barnett Formula are detailed.
The system of funding is then outlined. Next, the current method of resource allocation is discussed together with the recent review of resource allocation conducted by the Arbuthnott Committee. To place the funding and allocation systems in context, current and planned funding levels are detailed. Finally, public opinion in Scotland relating to the NHS is briefly examined.
United Kingdom departmental spending plans are formulated through the UK Government’s Public Expenditure Survey (PES). The PES sets out future departmental expenditure plans on a rolling three year basis with an additional year being added at the start of each public expenditure round. Thus this year’s PES will cover 2001/2, 2002/3 and 2003/4. In simple terms the PES is constructed by individual UK departments negotiating with the Treasury. The UK departments referred to essentially cover spending on departmental programmes in England. The PES is then voted through the House of Commons. Once this stage is complete, the Barnett formula is applied to ensure that the territorial areas of the UK (namely Scotland, Wales and Northern Ireland) receive increases or decreases to their “block” (or budget) on the basis of population share related to spending on departmental programmes in England.