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How funding for premises is set to change

In the first of two features, Dr Bob Button guides readers through the complexities of premises funding under the new contract

The Government has now issued new instructions about premises.

The first and most important point for general practice is that the sums involved are no longer to be ring-fenced but are intended to cover all premises costs borne by primary care organisations. These include all PCOs' primary care premises needs. A further problem is that the money is to be strictly cash-limited and will include elements which, under the old Red Book system, were payable without discretion – this is no longer the case.

The money will be distributed under three main headings.

lThe PCO is to get a direct allowance regarding expenditure on its existing premises.

lIt will get direct funding for premises improvements and so on that were agreed and set in motion before September 30, 2003.

lNew money, referred to as premises flexibilities funding, is to be issued to a lead PCO in every strategic health authority area. This PCO will act as banker and assess the priorities, in agreement with the health authority, to determine whether to fund a particular application.

In our LMC's areas only one of the health authorities has actually nominated the lead PCO.

This PCO is supposed to have access to a degree of expertise in numerous areas, and have expert understanding of primary care premises problems. But I find it difficult to believe that clear and informed advice will be easy to come by.


The really revolutionary part about these new rules is the way PCOs are given almost complete discretion in their approach not

only to cost-rents and improvement grants

but also to the recurring costs that occur in premises.

Although they are required to review notional rent payments at least every three years, there is no requirement that they have to increase notional rent in line with any recommendation.

Service charges that may be incurred in health centres, as well as rates, water and sewerage payments for everyone, are equally discretionary regarding reimbursement. The only requirement is for PCOs to consider, in the light of the funding available, the degree

to which they can contribute towards these costs.

I'm sure that in the vast majority of cases PCOs expect to continue to pick up these expenses and reimburse them monthly. We know, however, that PCOs that are financially stretched will look to the primary care sector to make economies, rather than to secondary care.

I think it is only matter of time before practices start suffering from this effect.

The rules do allow PCOs to redirect spare cash to their premises expenditure, but I would not expect many of them to have funds to allow this.

In future a formulaic approach will be applied to the payment of notional rent when an improvement grant has been given.

The formula is to be found in Part 1 of Schedule 3 of the new instructions. This can effectively abate the notional rent for up to 10 years after an improvement grant has been received.

There is also a formula to determine the degree to

which abatement applies

when private income is generated while using the GP premises. It

now allows you 10 per cent of private earnings without any penalty. All payments from the PCO will in future be made not to individuals but to the contractor with whom the contract is held.


Improvement grants are specified in terms of what is and what is not acceptable. This is limited to either 33 per cent or 66 per cent reimbursement, and will be repayable if NHS services cease within five years for grants less than £100,000, and 10 years for grants greater than £100,000.

There will be no nationally set cost-rent percentage. Instead this will be calculated by the PCOs using new criteria.

The minimum standards of a GP's surgery premises are laid down in Schedule 1, and if the PCO wishes to challenge these or consider issuing any remedial notice it must consult the LMC.

I think these premises flexibilities

definitely reduce the somewhat privileged position in which GPs previously found themselves.

In summary, the degree of discretion

given to PCOs, and the dearth of finance, make me extremely concerned about the future provision of funding for GP surgery development.

Bob Button is chief executive of Wessex LMCs

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