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£148 billion 3-year NHS investment programme unveiled Details of NHS Foundation Trusts programme published

Health Secretary Alan Milburn today set out the next stages of the Government's programme of investment and reform in the National Health Service based on devolution of both power and resources to the NHS frontline.

Mr Milburn announced the allocation of the £148.3 billion to Primary Care Trusts (PCTs) over the next three years - this represents a cash increase of 30.83%.

For the first time allocations are being made directly to 304 Primary Care Trusts in England rather than through Health Authorities. For the first time allocations are being made for three years rather than one single year allowing them to plan for the medium term rather than the short term. This is the first year when allocations have been made using a new funding formula, which gives a better measure of the health needs of each local community.

Every Primary Care Trust budget will grow by a minimum of 28.08% over the next three years. As a result, from next April over 75% of the NHS budget will be controlled by local PCTs.

The allocations to PCTs include resources to finance the cost of pay reform, new drugs and treatments and additional NHS capacity. It includes the commitments we set out in the NHS Plan. None of the growth money has been identified for specific purposes. PCTs will be able to use these extra resources to deliver on both national and local priorities.

Alan Milburn said:

For the first time locally run PCTs will receive funding direct from central Government rather than through health authorities. This is about devolving power and resources direct to the NHS frontline. PCTs will now control 75% of the total NHS budget.

Short term funding has hindered long term planning in the NHS for too long so these resources are not just for one single financial year but for three years. This will give PCTs the power to plan with confidence and certainty for the longer term.

The resources are being distributed according to a new fairer funding formula. Poverty and deprivation cause excess morbidity and mortality. They bring extra costs to local health services. The new formula reflects those costs by using better measures of deprivation and by taking greater account of unmet health needs.

"The new funding formula is fair to all parts of the country. It reflects extra needs and extra costs. It benefits PCTs in both North and South. The average PCT budget will grow over the next three years by almost £42 million. No PCT will receive an increase in funding over the next three years of less than 28%."

Mr Milburn also today published the'A Guide to NHS Foundation Trusts', which sets out details of the programme of decentralisation for NHS hospitals and freedom from Whitehall control.

The Guide explains how NHS Foundation Trusts will be run, how they will ensure the highest standards of care will be delivered to NHS patients, and indicates a timetable for their establishment.

Alan Milburn said:

NHS Foundation Trusts will usher in a new era of public ownership where local communities control and own their own their local hospitals. NHS Foundation Trusts will be part of the NHS, providing NHS services to NHS patients according to NHS principles - services free, based on need not ability to pay. They will be subject to NHS standards, to NHS star ratings and to NHS inspection.

"They will be owned and controlled locally not nationally. Modelled on co-operatives and mutual organisations, NHS Foundation Trusts will have as their members local people, members of staff and those representing key organisations such as PCTs. They will be its legal owners and they will elect the hospital governors. In place of central state ownership there will be genuine local public ownership."

Subject to Parliament, NHS Foundation Trusts will be guaranteed in law freedom from Whitehall direction and control.

By putting staff and public at the heart of this key public service these NHS hospitals will have the freedom to innovate and develop services better suited to the needs of the local community.

NHS Foundation Trusts will operate on a not for profit basis. They will earn their income from legally binding agreements with PCTs based on a national tariff. They will not be able to undercut other NHS hospitals.

They will be free to borrow either from the public sector or the private sector. They will be able to retain any surpluses and any proceeds from the more efficient use of their assets where this is for the benefit of NHS patients.

They will have the freedom to recruit and employ their own staff. NHS Foundation Trusts will be amongst the first NHS organisations to implement the new pay system we have recently negotiated with NHS trades unions. Providing they can undertake extra work and make improvements in productivity they will also be able to offer staff extra rewards.

They will operate under a statutory duty of partnership under which they use these freedoms only in a way that does not undermine other NHS organisations.

NHS Foundation Trusts will operate according to a license, issued and monitored by an independent regulator - accountable to Parliament - to guarantee NHS standards and NHS values.

The proportion of private patient work undertaken by any NHS Foundation Trust will be strictly capped to its existing level. To prevent any demutualisation there will be a legal lock on the assets of NHS Foundation Trusts.

Alan Milburn today also published 'Raising Standards Across the NHS', which outlines the full range of support programmes and intervention measures available to the NHS. The Government is committed to supporting all sections of the NHS to help raise performance across the broad.

Notes to Editors

1. The Department of Health'sA Guide to NHS Foundation Trustscan be found on our website at www.doh.gov.uk/nhsfoundationtrusts/index.htm

2. Full details of the Primary Care Trust allocations are attached.

3. 'Raising Standards Across the NHS'can be found on the website at www.doh.gov.uk/raisingstandardsnhs

4. For media inquiries only please contact Lee Bailey, Nicola Plumb or Alicia O'Donnell Smith, Department of Health Media Centre on 0207 210 5724 / 5301 or 5222.