CAB - Money worries mounting up?

Letters / Best financial deal

I am writing to comment on the recently published criticism from our local MSP that the NHS Shetland Board has not actively “kicked up a fuss” about not receiving our “Fair Share” of funding from the Scottish Government (Tavish on NHS finding; SN, 25/02/15 and MSP presses health minister; SN, 04/03/15)

In responding to this complex question I think there are some important points for your readers to be aware of and I apologise in advance for the lengthy and technical nature of my reply.

When the current funding formula (NRAC) was first introduced in 2009/10 NHS Shetland was deemed to be receiving £2M a year more in funding than was calculated as our fair share. We continued to receive this notional “additional” funding above our “fair share” for a number of years. Should we have kicked up a fuss then and given the extra funding back? ……. of course not, the funding formula is complex and provides an indication of relative need rather than cost of delivery.

The current funding formula (NRAC) is used to allocate around 70% of the total health budget (that used for hospital services, community health services and prescribing) to territorial health boards on a proportionate basis. The remaining amount is allocated to Scotland wide health services such as the Scottish Ambulance Service and NHS24 etc….

The formula takes account of the following factors:

  • % Population within board boundaries – used as a starting point for the allocation of all funds
  • Age/Sex mix of that population – recognising that costs increase as population age increases
  • Relative level of Morbidity and Life Circumstances of that population – using a variety of indicators to determine the relative health of the population in each Board area
  • Excess costs, i.e. the relative costs of delivering services in certain boards due to its urban/rural split or remote location.

The values of each factor are converted into an index relative to the Scottish average and the formula is applied to calculate THE TARGET SHARE of the allocated health budget commonly known as the “Fair Share”.

This calculated Target Share is known as NRAC Parity and the aim is that no board should be more than 1% away from parity although at any one time individual Boards are likely to be above or below parity. All Health Boards therefore recognise that in any one year we will not receive our exact fair share figure. However it is also agreed between Health Boards and the Scottish Government that we will all move towards our fair share, or “parity” over time.

It is probably also worth recognising that the formula is NOT designed to establish what BUDGET each individual Health Board may need, as the way each Board decides to deliver its services can vary significantly. Instead, it is concerned only with how best to distribute the annual national health budget that is set by political considerations, in a way that takes into consideration measured local circumstances and health need.

So deciding how to split the total amount of money allocated for health service spending in Scotland is not a straightforward matter based only upon the size of local population. The mechanism used to calculate funding in any Health Board area attempts to measure real local need and it changes year on year.

As I indicated at the beginning of my response, when the current funding formula (NRAC) was first introduced in 2009/10 NHS Shetland was deemed to be receiving £2M a year more in funding than was calculated as our fair share. We continued to receive this notional “additional” funding above our “fair share” for a number of years.

So what did that mean and how did it impact on our annual funding increase?

Being above our “fair share” by more than 1% was in fact a difficult position for our local services because as a result we got lower relative increase in funding each year than Health Boards considered to be below the “fair share”.

We strongly felt that the formula was not adequately recognising all of the additional costs of providing services in Shetland or in other remote and rural parts of Scotland. This matter was highlighted by Health Board Chairs and Chief Executives to the Cabinet Secretary and Government officials and agreement was reached to re-examine the funding formula to reflect our concerns.

Therefore over the past few years a number of staff in the Board, along with colleagues in other remote and rural areas of Scotland have been quietly but effectively working to ensure that the updates to the formula correctly recognises our situation. As the changes recommended from this work have been included in the formula we have now moved to the position where Shetland’s calculated target allocation has increased by £4.01M and the Board moving from receiving more than our fair share, to the current situation where in next year’s budget setting we can reasonably anticipate a relatively greater increase.

I hope that with this information your readers will be assured that rather than having been silent, your local Board has worked quietly and effectively with the Scottish Government and colleagues across Scotland to make sure that NHS Shetland receives the best financial deal it can for the local population based upon all the relevant evidence and has done so in a calm and measured way that has delivered a positive, rather than negative, outcome for the future.

Ian Kinniburgh
Chairman
Shetland NHS Board

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Scottish Parliament election, 6 May 2021