Hansard

I am pleased to have the opportunity to make what I believe is a very important announcement. I realise that we are competing with a number of other important events around the country, but I am grateful for the interest that many members have shown in the issue.

My statement sets out the Executive's plans for the implementation of "Fair Shares for All", the national review of resource allocation for the national health service in Scotland, which is perhaps better known as the Arbuthnott report. On 7 September the final report was published and copies were circulated to all MSPs, so I hope that members will have had the opportunity to consider it.

The Executive is committed to working to improve the lives of the Scottish people—in short, to making a difference. At the heart of our agenda is a determination to improve health, tackle deprivation, promote social justice and improve public services. Yesterday, Jack McConnell demonstrated how the Executive's resources as a whole were being used to achieve those aims. Today, I will set out how we will put record health spending to work to deliver on them.

We have embarked on a major programme of NHS modernisation, which is based on investment and reform. A crucial part of our programme for the NHS is to ensure that resources go where they are most needed.

The Conservative Governments of the 1980s and 1990s refused to acknowledge the link between poverty and ill health. Their legacy to the NHS and the health of the Scottish people was a widening of the gap between the rich and the poor and increasing inequalities in health. Since 1997, the Labour Government and now the Labour-Liberal Democrat devolved Administration have started to turn that position around. We recognise the link between poverty and ill health and are acting on that recognition. We have abolished the Tory internal market in the NHS. We are putting the NHS together again and building a new partnership with staff and patients. Furthermore, we are backing those commitments with record resources. We know that there is a long way to go to undo the damage of the Tory years, but we have made an important start.

We believe that all the people of Scotland should have access to high-quality modern health services, that access should be equitable and that services should meet local needs. We recognise that poor living conditions, deprivation and living remotely all have an impact on the design, delivery and cost of health care provision. We are determined to ensure that resources are allocated fairly to meet those needs. That is why we want a fairer and better way of distributing the NHS's huge budget in line with need and why the Arbuthnott report is so important.

The formula that is used to allocate NHS resources across Scotland's 15 health boards—the Scottish health authority revenue equalisation formula, or SHARE formula—has been in place since 1977. As that formula is based primarily on population and death rates, it takes only limited account of needs that are reflected in deprivation and remoteness. When he was health minister in the UK Government, Sam Galbraith recognised that the formula needed to be revised. In December 1997 he set up the review group that was chaired by Professor Sir John Arbuthnott.

The first report of that group was published in July 1999. It was widely recognised as innovative and groundbreaking. Extensive consultation and discussion took place following the publication of the first report and I am grateful to all those who contributed to that consultation process—especially the Health and Community Care Committee.

The expert group considered carefully the points that were raised during the consultation and revised its work accordingly. Two weeks ago, Sir John Arbuthnott's final report was published. I was delighted by the positive response that it received. His committee's recommendations are an enormous improvement on the SHARE formula. It is a tribute to the hard and thorough work of Sir John and his team that the report has been so widely praised both in and outwith Scotland. I would like to record my appreciation to the group for its work and I am sure that other members will join me in doing so.

I have on many occasions indicated to the chamber, to the Health and Community Care Committee and more widely my desire to proceed with early implementation of a revised funding formula. Today I am pleased to be able to set out how and when we will do that.

The Arbuthnott recommendations cover three major groups of activity in the NHS in Scotland. Hospital and community services and general practitioner prescribing currently make up the bulk of the budgets that are allocated to health boards each year. The report recommends that the shares of the resources that go to different health boards must change to reflect better the health boards' relative needs. In particular, a larger share of resources needs to go to areas such as greater Glasgow that suffer from high levels of deprivation, and areas such as the Highlands that must meet additional costs because of their remoteness.

My aim is to implement the recommendations as quickly as is practicable. At the same time, I will fulfil the commitment that I gave last year—and which I have repeated—that every health board will continue to receive real-terms growth in its budget every year for the lifetime of this Administration. It is my aim that all health boards reach their Arbuthnott share within five or six years.

I am pleased to announce that £12 million extra will be allocated to health boards in this financial year to kick-start the process of implementation. Some £6 million of that money will be distributed to every health board in line with its fair share according to the Arbuthnott report. The other £6 million will be distributed to the health boards that the Arbuthnott report says need a larger share than they have.

Furthermore—as Jack McConnell announced yesterday—next year £400 million more cash will be available for health spending in Scotland than was available this year. As a result, I can also announce that in the general hospital and community health and prescribing allocations for next year, every health board will receive at least a 5.5 per cent cash increase—more than twice the rate of inflation. On average, health boards will receive 6.5 per cent more. Health boards that, based on the Arbuthnott review, need a larger share will get significantly more. For example, Greater Glasgow Health Board will receive 7.7 per cent, which will give it a hospital and community health and prescribing budget of £846 million. Those increases are in addition to the £12 million extra for this year that I have just announced. Details of the allocations to each health board are being issued today and a copy will be placed in the Scottish Parliament information centre.

Let me make it clear that health boards will decide the details of how to spend the money—that is their job. However, in doing so, they will rightly be expected to deliver on local and national priorities such as tackling waiting, reducing health inequalities and improving the experience of being a patient.

As I set out to Parliament in July's debate on NHS modernisation, we are developing a national strategic framework for the NHS in Scotland that will reflect the people's priorities and will ensure that record NHS investment is translated into record improvements for patients. Our Scottish health plan will be published in November and will include revised arrangements for governance and performance management in the NHS in Scotland. That will mean that the NHS will know what is expected of it and that it will be held to account for its actions and decisions, not only on inputs but—crucially—on results.

The Arbuthnott report recommended that we should take more time to implement its recommendations on general medical services. I accept that recommendation. It is particularly important to get that right because primary care is the key to developing services that are focused on patients and, in particular, to delivering better and more joined-up care for older people. I will announce more on that in a few weeks. I will discuss with the NHS how best to implement fully that part of the report's recommendations.

Those recommendations must also be put into effect to complement our ambitious programme of development of primary care services across Scotland, which will ensure that everyone has access to the GP and primary care services that they need. Meanwhile, I propose to start by skewing the increases of the part of the general medical services allocation that covers GPs' premises and information technology equipment to ensure that the health boards that need a larger share of that money will begin to move in the right direction.

It is vital that the new funding formula remains up to date and able to take account of additional information as it becomes available. On the other hand, it would be disruptive to make major changes to the formula too frequently. In line with the recommendation of Sir John Arbuthnott's group, I intend, therefore, to keep the formula under review and we will undertake a major updating of the data that underpin the formula every five years or so.

Finally, I will say something about the rest of the health budget. The allocations that I am announcing today are a big part of the health budget. The sum that is covered by the formula-based allocation represents more than £4.4 billion of a total cash health budget for next year of £5.8 billion. I am determined that that entire budget will be used to best effect to meet the health needs of the Scottish people. The Scottish health plan that I will publish later this year will give clear direction on how health and health-related services will develop. It will show how we will assess and manage performance and how the unprecedented resources that we are investing will be translated into real benefits for the people of Scotland.

I believe that, by beginning today the implementation of the Arbuthnott review—by putting in place a better, fairer funding formula that is linked to need—we are laying one of the foundation stones for the NHS in Scotland in the 21st century. It is a distinctive Scottish solution that will meet distinctive Scottish needs. I am sure that Parliament will welcome it.