Towards the end of the 1960s concern began to be raised on the uneven distribution of resources for health care. MPs from the northern parts of the country, in their travels to and from their constituencies noticed that new hospitals were being built in the South, but not the North. New hospital building only began in the 1960s, after the publication of a report on hospital building needs in 1962, while Enoch Powell was Minister of Health. Between 1939 and the mid-1960s the only new hospital built in England was the Harvard Hospital on Salisbury Plain for US servicemen. Construction resources were required more urgently for house building to repair the ravages of Second World War bombing. The British Medical Association was also active in seeking medical resources – it was apparent to them that the budgets, staffing and equipment in the southern parts of England were greater than in the North.

Crossman, Secretary of State for Health and Social Security (1968-1970), responded to the political and professional pressure about unequal resources by examining the way in which resources were being distrib­uted. The basis of allocation to each entity, region or Board of Governors was the amount of money they received in 1948 (the start of the NHS) plus a percentage increase each year, dependent on the general economic position and individual advocacy. Persuasive arguments by an authority resulted in a slightly greater proportionate increase than the general level. The level of funding had been unequal at the start of the NHS when the richer parts of the country had higher levels of funding than the more deprived areas and so the differences between the various regions widened over time. In 1976-1977 there was an almost 30 per cent difference in the revenue allocation between the 14 regions per head of population, with the North West areas of the country having the least and North-East Thames region the most, Differences in capital allocation were similar; As a result of this inequality of funding, a formula based on objective criteria was introduced to guide the distribution of hospital revenue to Regional Hospital Boards, This was known as the Crossman Formula although it was actually implemented by Sir Keith Joseph. The formula was based on three factors – population, beds and cases The population factor was given an arbitrary double weight so that the relative contribution to the ‘target’ of the three elements was population 0.5, beds 0.25 and cases 0.25. This is not the place to describe all the ramifications of the process of resource redistribution. Suffice it to say that the Crossman Formula was rapidly shown to be inadequate and a full account of this can be found in a paper by Mays and Bevan. The fundamental problem was that the formula included a major contribution based on utilisation and current resources and since utilisation depends on availability of resources which were unequally distributed it could not rectify the problem,

When the Labour Party returned to power in 1974, with Barbara Castle as Secretary of State for Health, the problem of regional resource inequality was addressed again to modify the Crossman Formula. Profes­sor Brian Abel Smith was a Special Adviser to the Secretary of State for Health with a particular interest in this problem (on which he had already advised Crossman, whose Special Adviser he had been earlier). He also chaired the Advisory Committee to the Social Medicine and Health Services Research Unit at St Thomas and at a meeting of the Advisory Committee he drew attention to the problems of resource allocation and encouraged the Unit to consider possible research to rectify this unacceptable situation. As a result of this, a short draft proposal was developed. This, suggested the Health Authorities should be classified into groups based on a number of criteria – total mortality, cardiovascular disease mortality, cancer mortality and perinatal mortality. Each group was to be divided, at random, into high or low mortality. In addition a number of Health Authorities were to be divided, at random, into two groups. Additional resources were then to be allocated to one of the groups with high total mortality with no earmarking. Earmarked funds for cardiovascular services were to be given to half of the Health Authorities with high cardiovascular mortality similarly to those with high cancer mortality and high perinatal mortality. Furthermore the Health Authorities not included among those classified as having a high cancer, cardiovascular or perinatal rate of mortality were divided into two groups, one to receive extra resources, the other not. It was thus envisaged that this complicated randomised controlled trial would answer three questions.

  1. Did additional resources improve health (to be measured by a variety of indices such as health care utilisation, mortality and random sample surveys of levels of function)?
  2. Did additional resources earmarked for certain services, such as maternity and child health, improve the health of mothers and children, as measured by perinatal and maternal mortality?
  3. Were earmarked increases in funding more effective than a non­specific general increase?

Resource Allocation Working Party

The proposal was sent to the Chief Scientist who considered that it was a feasible and interesting proposal which would need detailed work before it could be applied. As the proposal required a great deal of commitment from Health Authorities, the Chief Scientist also sent it to the Minister of Health, Dr David Owen, who invited myself, as the St. Thomas’ Unit Director, and the Chief Scientist to a meeting. He told us that the proposal was interesting but politically impossible. He could not envisage allocating resources to Health Authorities according to a random scheme and knew the idea would be savaged in the House of Commons. Owen was, however, very concerned to develop a more just and transparent scheme of resource allocation. He was about to convene a Working Party, the Resource Allocation Working Party (RAWP), to examine the possibil­ities and I was invited to become a member of the main group as well as its revenue and teaching and research subgroups. In view of the major time commitments entailed I was allowed to nominate a deputy to the revenue subgroup (Professor A.E, Bennett, who had been Deputy Direc­tor of the Social Medicine and Health Services Research Unit) and the teaching and research subgroup (Dr A.H, Snaith, Area Medical Officer, Avon Health Authority (Teaching), who had collaborated on several Unit research projects).

Membership of the Resource Allocation Working Party led to a number of scientific publications, but more importantly, the Unit prepared analyses of a variety of regional mortality and morbidity indicators for consideration of linking the allocation of resources to health needs. The Unit representa­tives were able to advise the RAWP on the reliability of the various indicators, their independence from available facilities and their associ­ation with health care needs. This advice helped in coming to the decision that the Standardised Mortality Ratios (SMR) were a reasonable indicator of regional variations in health care needs in the acute sector. The arguments against the use or other indicators and the methods used in the derivation of an appropriate formula for the allocation of resources are detailed in the final Report of the Resource Allocation Working Party.

The conclusions were the subject of some criticism from a variety of academic and operational research sources, as well as both departmental and regional/area administrators and finance officers. The review by Mays and Bevan in 1987 considered these, and concluded that the formula devised was reasonable: RAWP in most respects possessed remarkable soundness of judgement in its choice or information, bold­ness in conception, and grasp of the underlying objective and how in practice this might best be achieved’ (p. 147). (It must be noted that Mays and Bevan were not in the Department or Unit at the time or involved in any way in the work.)

An important caveat was included in the conclusions of the Report by the Resource Allocation Working Party, at the insistence of the Unit:

the prevalence of many of the conditions which are among the main causes of mortality is probably not significantly influenced by the intervention of health care services and that the redistribution of resources may not therefore have a significant and early impact on morbidity characteristics. But this cannot be a reason for ignoring them since the NHS has a statutory responsibility to respond to the needs which those characteristics generate.

The Report continued by emphasising the need to develop and apply positive preventive measures (for example, by promoting changes in smoking habits) and by encouraging improvements in the environment in which people live and work (pp. 84-5).

What Happened Later?

The formula devised by the Resource Allocation Working Party, based on the work of a HSR Unit, with strong emphasis on epidemiology, was subject to a great deal of comment and criticism.

It was welcomed by the Northern regions, such as Trent, which gained resources at the expense of the Metropolitan regions. The most vicious opposition was from finance officers, those working in the Department of Health as well as regional officers. At the Department of Health there was a small unit of finance officers who were particularly upset. Since 1948 these individuals had been responsible for the allocation of resources between regions and Boards of Governors. For the first time all their power had been removed – distribution was now to occur based on challengeable, transparent data and simple principles. Regional Board Finance Officers were equally threatened – their decisions could now be challenged. The losing regions, particularly the four Metropolitan Thames regions, were extremely unhappy, as were most of the London Teaching Hospitals. Certainly the researchers at the St Thomas’ Unit were not popular!

Politicians were also unhappy. Allocation to local government was and still is made on a complicated formula basis which takes into account, such factors as proportion of ethnic minority groups, density of housing and so on. It was well known by civil servants that the Formula was manipulated by each administration so that when Labour was in power, urban authorities gained, while rural areas gained when there was a Conservative administration. This was discussed by the RAWP and the decision not to include any ‘deprivation’ weighting in the formula but to use the SMR as the only factor, other than population-age-size, was because these figures could not be manipulated (if deprivation indices had been included there would, of course have been double counting as the SMR is greatly affected by poverty).

The fact that no weighting factor was used was also attacked by operational researchers and economists who questioned that there was a one-to-one relationship between the SMR and the need for health services and wanted more elaborate models to be developed. Most epidemiologists questioned that need – their view was that, unless there was an underlying hypothesis, it was safer to use no weighting factor.

The concept that the SMR – that is, mortality – could be used to influence the distribution of health resources was also questioned by many on the grounds that much health care is provided for individuals who do not die – for example, those undergoing hernia or hip operations. They neglected to take into account that there is little geographical variation in these conditions in contrast to, for example, cancer and cardiovascular disease.

In spite of these considerations the formula devised by the Resource Allocation Working Party was applied until 1989, It was successful in reducing the gap between the resources of the Northern and the Metropolitan regions. The narrowing of this gap was achieved more rapidly than expected, largely because there was a decline in the total resources of the NHSr

Political pressure increased considerably, particularly from the more affluent regions, and so a Review was set up. The major criticisms to be addressed were threefold; (1) measures of morbidity, since the SMR was not considered a good proxy; (2) that the SMR did not capture the full consequences of social and economic deprivation; and (3) that there was no empirical reason for the one-to-one relationship between the SMR and need for health care resources.

The Review proposed that need for health care should be based on it model derived from small area statistics rather than relying on one outcome measure (mortality), This model would take account of variations in hospital utilisation adjusted for the supply of facilities accessible to the area and such factors as age-sex distribution, population size and social class. The Review team also suggested replacing the all-age SMR with the SMR <75 together with a reduction of the weighting given to the SMR in the formula from 1.0 to 0.44 and the inclusion of the Jarman deprivation score (a score based on the opinions of a number of GPs of the factors affecting need for health services), both to be weighted in accordance with their estimated coefficients from the regression analysis. Ministers decided not to include the Jarman score and to weight the SMR with an elasticity of 0,5. This was announced with the publication of Working for Patients in 1989.

None of the original members of the RAWP were involved or consulted. Much of the technical work was carried out by a management consultancy firm, Coopers and Lybrand, This formula was subjected to criticism for its conceptualisation of need (use of utilisation data with inadequate consideration of supply effects), adequacy of the database used (only six out of 14 regions) and the appropriateness of the statistical measures used.

Further concern with the formula for resource allocation has continued. An interesting contribution to the debate was made by a group of geographers and sociologists from Plymouth. In an analysis of coron­ary heart disease in 34 Primary Care Trusts they appeared to demonstrate that moving to a morbidity-based model would result in a significant shift in hospital resources away from deprived areas towards areas with older demographic profiles and towards rural areas.

In view of the changes in NHS structure it is not surprising another major report was published in 2008. This recommended major changes, the most significant being that post 2010/11 GP registered lists should be used, that age and additional need are calculated in a single index based on admitted patient and outpatient data, that there should be a separate formula for health inequalities and that the market forces factor should be refined. Most recently, a team from the Nuffield Trust has suggested further changes based on complex models of need for individual practices: need being equated to utilisation with a variety of adjustments for supply.

The original formula developed for resource allocation by the Resource Allocation Working Party was relatively simple and based on pragmatic principles of transparency and comprehensibility. It offended a variety of interest groups, politi­cians, operational researchers and economists with its simplicity. With innumerable changes in NHS organisation and structure, the availability of much more patient data, and the increasing influence of economists in influencing NHS decisions, the formula has changed considerably. It is now complex, highly dependent on a series of statistical assumptions of unproven reliability, and far less dependent on epidemiological principles. The original formula did achieve a significant redistribution of resources. It is difficult to determine whether the ‘fiddles’ which the formula developed for resource allocation by the Resource Allocation Working Party  eschewed have achieved their objectives.


Part of a chapter from my recent book “Improving Health Services”,published by Edward Elgar Publishing Ltd

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