Targeting Poor Health in Wales -Townsend Report

Summary of the report & recommendations of the NHS Wales Resource Allocation Review by Mark Drakeford and Dave Collins

Targeting Poor Health in Wales

“We have learnt from 15 years experience of the Health Service that the higher income groups know how to make better use of the Service; they tend to receive more specialist attention; occupy more of the beds in better equipped and staffed hospitals; receive more elective surgery; have better maternity care; and are more likely to get psychiatric help and psychotherapy than low income groups – particularly the unskilled.” (Titmuss, 1968, p. 196)

The problem of inequality in access to healthcare is, sadly, nothing new. Welsh Labour takes pride in the role we played in founding a National Health Service based on need, not on ability to pay. We have however long recognised that, despite the NHS being free at point of use, there remain serious and growing inequalities in health. Although the overall health of the population has improved dramatically during the past 50 years, the gap in health between rich and poor individuals, and rich and poor areas, has widened substantially.

Over 30 years ago, this experience led Welsh Valleys GP Julian Tudor Hart, to deduce that areas of social deprivation, containing high proportions of people from lower social groups, tend to have access to less good health services, even though their need for such services is greater than that of higher groups. His conclusion was summed up in the ‘Inverse Care Law’ which states that:

“The availability of good medical care tends to vary inversely with the need of the population served.” (Tudor Hart, 1971, p. 412)

Inequalities in health and early death are not simply, or even mainly due to failings in the Health Service but are rooted in poverty and inequality in material wellbeing. The 1980 Black Report on Inequalities in Health concluded that:

“While the health care service can play a significant part in reducing inequalities in health, measures to reduce differences in material standards of living at work, in the home and in everyday social and community life are of even greater importance” (Black Report, 1980, p357)

Sir Donald Acheson, Chief Medical Officer, Department of Health, ‘On the State of Public Health’ for 1990, stated that:

“the clearest links with the excess burden of ill-health are:

  • low income
  • unhealthy behaviour and
  • poor housing and environmental amenities.”

The Conservatives from 1979-1997 disputed both the explanation of health inequalities offered in the Black Report, and the recommendation that additional public spending, (in particular on; increasing child benefit, introducing childcare allowances, improved housing and free school meals), were required to address these inequalities.

Since Labour’s 1997 election victory, central government attention has once more been refocused on health inequalities. We commissioned the Acheson Report. We also commissioned reviews of the Resource Allocation formulae for Health Services in England, Scotland, Wales and Northern Ireland.

In Wales the Labour-led Assembly set up a National Steering Group to oversee the Review. The Group was chaired by Professor Peter Townsend.

Peter Townsend is one of Britain’s leading social policy experts. He is Emeritus Professor of Social Policy at Bristol University and Professor of International Social Policy at the LSE. He has been a leading figure in the study of Social Policy in Britain for 40 years, with an international reputation. He was one of the most influential members of the group behind the Black Report.

Peter Townsend is married to Jean Corston, Labour MP for Bristol East.

Professor Townsend’s recommendations for targeting health inequalities come under three broad headings:

  1. A ‘Dual Strategy’ for action within and beyond the NHS to target health inequalities and their causes.
  2. Better ways of ‘Tracking Expenditure’ within the NHS so that we can trace the way in which resources are used and the effect that they have on reducing or deepening inequalities.
  3. A new ‘Direct Formula’ to ensure that the NHS budget is allocated to Local Health Groups in line with need, as measured by the Welsh Health Survey.

Each of these strands is considered below.

Dual Strategy

Action within the NHS cannot be isolated from action outside the service. Health promotion and the incidence of ill-health, also depends on income, housing, working conditions, environment, and other factors. Some of the policies to address these are within the responsibilities of the Assembly, others lie with the UK government. There is a strong link between poverty and poor health. Labour in the Welsh Assembly and in Westminster are pursuing a range of policies to tackle poverty. Townsend also suggests how an expanded Health Inequalities Fund can help the NHS to play its part in helping tackle the causes of ill-health.

Labour has set a target to totally eradicate child and pensioner poverty by 2020. It is an ambitious aim and we have a great deal more to do, but we have already made much progress.

UK Government

Child Poverty:

Families with children are, on average, £850 per year better off as a result of the personal tax and benefit measures introduced by Labour since 1997. (This is an average of all families with children across the UK and includes the 1p cut in the basic rate, the new 10p starting rate and the Children’s Tax Credit.)

Labour is committed to the principle of universal child benefit and we have raised it to its highest ever level in real terms. We increased it from £11.05 for the first child and £9 for subsequent children in May 1997 to £15.50 a week for the first child and at least £10.35 a week for subsequent children since April 2001. This is a 26% real terms increase, the highest ever level of child benefit.

As a result of measures introduced over the last parliament (1997-2001) alone, over one million children have been lifted out of poverty.

Pensioner Poverty:

  • Overall we are spending £4.4 billion extra a year, in real terms, on pensioners in 2001/02 compared to 1997.
  • By April 2001 the average pensioner household was £580 a year better off in real terms than in 1997 – over £11 a week.
  • In 2003 we plan to introduce a Pension Credit designed to help around 5.5 million pensioners with low or modest savings.

Tackling pensioner poverty has been Labour’s priority. More than half the extra money we have spent on pensioners has gone to the poorest third. In 1999 we replaced income support with a new Minimum Income Guarantee to boost the incomes of the poorest pensioners, and already 2 million pensioners are benefiting. Under Labour no single pensioner has to live on less than £92.15 a week and no pensioner couple has to live on less than £140.55.

Full Employment

The best way to lift people out of poverty is by helping them to find work. Labour’s policies of, economic stability, low interest rates and low inflation have helped create over a million more jobs. That means more people in work than ever before and the lowest unemployment for almost 30 years.

In 1997 Labour pledged “to get over 13,000 under-25 year olds in Wales off benefit and into work.” By August 2000 16,579 young people in Wales had secured a job as a result of Labour’s New Deal for 18-24 year olds.

Youth unemployment has fallen by 63% in Wales since the New Deal was launched in 1998. 7% of all jobs created through the New Deal for 18-24 year olds have been created in Wales – better than the UK average.

Labour has now made the New Deal permanent and extended it to the long term unemployment, 50 plus and lone parents.

Labour is also committed to making work pay.

  • We have brought in the first ever national minimum wage, now set at £3.70 per hour for an adult worker and benefiting around 1.5 million people.
  • The Working Families Tax Credit is boosting the incomes of 1.1 million hard working families, guaranteeing an income of £214 per week for full-time work with no net income tax payable until £255 per week.
  • We have abolished the entry fee which employers and employees pay on reaching the threshold for NI contributions. Also we raised the point at which people start to pay national insurance from £66 to £76 a week.

Welsh Assembly Government


The Assembly’s pioneering Communities First programme is targeting the 100 most severely deprived wards in Wales. Communities First is a long-term commitment for the regeneration of our poorest communities. Unlike previous attempts at regeneration, Communities First will not prescribe solutions, but aim to build partnerships to provide the particular improvements prioritised by each individual community. The Labour-led Assembly government has committed over £80 million for the first 3 years of the Communities First programme and a Labour administration in the Assembly’s second term would look to extend this.

The Labour-led Assembly government has pledged £3.8 million to help develop the credit union movement in Wales. Credit Unions not only provide financial services to which many of our poorest citizens have no other access, they also, through their ethos of self-help and mutual obligation, promote savings and a responsible attitude to money management. The Assembly aims to see a trebling of the numbers of people enrolled in a Credit Union in Wales by 2003.


The Labour-led Assembly government has developed a National Housing Strategy for Wales. This aims at:

  • Fighting fuel poverty through a new £40 million Home Energy Efficiency Scheme.
  • Setting tough new quality standards for social housing and bring the proportion of vacant social housing below 3% by 2003.
  • Driving up standards in the private rented sector with a £3 million scheme of voluntary registration of Houses in Multiple Occupation in Wales. Welsh Labour looks forward to the UK Labour government making such registration compulsory within the lifetime of the current parliament.
  • Investing £4.1 million to tackle homelessness and rough sleeping, eliminating the need for rough sleeping in Wales by 2003.

Economic Development:

Labour secured Objective One status and has provided the necessary funding. For the first time ever, the Labour Government has provided £421 million up to 2003 over and above the Assembly’s block grant for Objective One funding. By October 2001, nearly £240 million of Objective One funding had been distributed to more than 360 projects in West Wales and the Valleys. Programmes are ahead of schedule on lifelong training for the workforce and providing people, with new skills. At the end of August, £77 million of the £88 million available for improving lifelong learning and workplace skills had been used or committed to Objective One projects. There is enough extra money in the Assembly’s budget to provide any necessary ‘match funding’ without cutting into core budgets of health, education or local government.

The Assembly’s National Economic Development Strategy ‘A Winning Wales’ sets the target of achieving a 135,000 increase in employment in Wales by 2010, with particular emphasis on communities and groups with low participation rates.

Education & Children:

The Labour-led Assembly has developed a childcare action plan to tackle the childcare needs of children and families in disadvantaged areas. 9,000 new childcare places have been funded since 1999. We have ensured that nursery places are available to all 4 year olds and, by 2004, for all 3 year olds.

Welsh Labour are taking forward a Healthy Schools initiative to encourage awareness of healthy lifestyles and nutrition among our young people.

Extending Entitlement is putting Wales at the forefront of developing support for young people with Sure Start and Children First.

Action within the NHS:

The Townsend Report praises the Assembly’s initiative in establishing a Health Inequalities Fund. – £17 million over three years 2001-02 – 2003-04 – it is designed to stimulate action to reduce health inequalities by targeting resources at the most deprived areas in Wales. The initial priorities have been set as measures to tackle Coronary Heart Disease and dental health.

The Fund was a new departure because it created a vehicle, open to bodies within and outside the NHS, for supporting action specifically targeted on the underlying determinants of ill – health. The Fund was originally seen as a temporary measure while the Resource Allocation Review was underway.

It is now proposed however that the Fund be maintained on a permanent basis to provide ‘pump priming’ for innovative ideas for reaching out to the health needs of the most deprived groups. This reflects the view that while a more equitable formula will improve the capacity of the NHS to respond to existing inequalities in health and prevent them from increasing, it will not permit the additional, ‘needs plus’ investment needed to reduce inequalities. New initiatives, once shown to be worthwhile, can be absorbed subsequently on a far bigger scale into statutory services. Relatively small sums of money can be used in a pioneering way to justify the wide adoption of good proposals.

The Townsend Report gives some examples of the kind of projects that might be funded via the Inequalities in Health Fund :

Equity training grants : A short-term measure to enable members of professional bodies, hospitals, health centres and other organisations to be freed to meet and identify severe unmet health needs, especially of those with low income and/or living in conditions where they lack social support and access to public and private services.

Advocacy grants : We all appreciate the importance of not adding to the demands that are placed on good health care professionals but, knowing that so many undertake such “outside” work in their everyday practice, we believe it should be better recognised and accepted as part of the job. To encourage formal recognition of this wider health role we recommend that provision should be made for an advocacy grant to be made available to health professionals, to enable them to meet to pool their experience of unmet health needs – the responsibility for which lies outside the health care system, and to enable them to make representations for change to the appropriate external bodies.

Such a grant system would build on the Assembly’s existing Welfare Rights in Health pilot scheme. Announced last year, the scheme aims to recognise that GPs have to deal with many clinical problems which are not medical but depend on improving a patient’s quality of life. £2m has already been allocated over three years for the Welfare Rights Initiative which, in partnership with the Citizens Advice Bureau, aims to:

  • Improve the up-take of unclaimed benefits;
  • Improve income levels for some poorer people, and
  • Reduce the time GPs spend resolving non-medical queries.

Tracking Expenditure

Although this may be considered a largely technical issue, it needs to be recognised that without being able to show where or how money is actually being spent it is impossible to make decisions as to how it could be better directed for purposes of equity or other policy considerations.

The Townsend Report makes clear that there are major concerns about the quality and consistency of the information currently collected by Health Authorities and Trusts and by the Assembly.

These concerns have also been emphasised by the Audit Commission, who state that “meaningful information” about financial distribution of the NHS budget “requires urgent attention.” As the Commission has said, the problems of financial and clinical information “have contributed to the inability to trace money through the system and to demonstrate that additional funds have had a measurable impact in terms of improving the quality of services and outcomes for patients.”

It speaks volumes about the current state of NHS Wales accounting processes that Health Authorities are unable to calculate the impact of the proposed new formula for any individual local authority/Local Health Board area. This is due to the fact that they are incapable of making any estimates of how much they currently spend in each area.

An indispensable step in tackling inequalities in health in Wales is therefore to establish a mechanism that ensures, in addition to the objectives of improving accountability and budgetary management:

  • That expenditure in relation to the objective of reducing inequitable access to health care can be tracked consistently at central and local levels
  • That statistical information for the purposes of improved public information, and the monitoring of progress year on year towards greater equity, is standardised.

The National Assembly is currently funding the Information Quality Programme which includes Data Accreditation across NHS Wales. This will aim firstly at the collection of the required data for Local Health Group level, with still more sophisticated information by ward, and eventually postcode level to follow.

This enhanced information capacity will enable the investment priorities of individual LHB’s, Trusts, and even practices to be tracked to show the extent to which they tend to challenge or deepen health inequalities at local level.

Tackling inequality is not simply a matter of putting in place a fair formula, but depends on ensuring that the money distributed by the formula is used by Local Health Boards to focus on those people with the greatest health needs. With their experience and knowledge of local needs the health professionals and councillors on LHB’s are well positioned to ensure that they are meeting the needs of local people in an equitable way. There will henceforward however be a clear emphasis from the Assembly on targeting inequality and LHB’s will be expected to show how they are addressing this.

Direct Formula

The Townsend Report provides a devastating indictment of the existing formula for allocating resources between the five Welsh Health Authorities. The current formula was devised in 1991 to underpin the Conservatives internal market. The formula is currently used to divide around two-thirds (nearly £2 billion) of the NHS budget between Wales’ five Health Authorities. The Townsend Report concludes that: “it is not satisfactory because its statistical basis is still not yet robust and it also provides an indirect and incomplete measure of health need.”

The Townsend Report notes that statistics on utilisation of health services used elsewhere in the UK are not available in Wales and would take at least 2 years to introduce. Furthermore, Townsend makes clear that the use of indirect measures (e.g. Standardised Mortality Ratio’s and evidence on the utilisation of services between age and social groups as proxies for health need) are far from ideal. They do not measure need itself but are forced to assume that past utilisation is an adequate guide to future requirements, including un-met need.

Instead it proposed that Wales adopt a direct measure of health need to gauge inequalities and provide the basis for resource allocation. The Welsh Health Survey, which is unique in the UK provided the opportunity for a pioneering direct approach to resource allocation which represents a distinct methodological advance on formulae currently in operation in the rest of the UK or in European countries with similar healthcare systems to our own.

Of the 46 detailed responses to the consultation on the Townsend Report all but one supported the use of the direct method for measuring health need for NHS resource allocation in Wales.

The use of direct indicators of health need is an innovative and significant scientific advance, which, if implemented, will provide Wales with the fairest and most scientifically accurate method of health resource allocation in the UK.

The formula proposed is open and transparent and allows for alternative measures of health need to be easily incorporated or substituted into the formula as and when they become available.

The next Welsh Health Survey, to be undertaken in 2003, will be improved and extended, for instance to include children, in future. However, the data used in the proposed new health resource allocation formulae are of sufficient quality to allow their rapid implementation. It is unlikely that improvements in the health needs data quality would result in significant changes to the resource allocations.


The table below shows the impact of the new formula on Health Authority shares using 1998/99 figures.

Current Formula (£ million) New Formula (£ million) Difference between current & new formula (£ million)
Gwent 254.2 267.3 13.1
Bro Taf 330.9 334.5 3.5
Dyfed Powys 229.6 220.4 -9.2
North Wales 310.8 294.7 -16.1
Morgannwg 230.4 239.1 8.7
All HA’s 1,356.0 1,356.0

Although a redistribution of just 2% of total hospital and community expenditure in Wales, and just 5% of the overall budget of the most severely affected Health Authority is not particularly enormous it is still a significant sum of money.

Welsh Labour is determined to see this fair formula based directly on health need introduced as soon as possible.

But we are also determined that no part of the NHS in Wales should be in the position of receiving less money overall in real terms. That’s why we are making the change at a time of record investment in the NHS.

In 2000/2001 the Assembly budget provides for a 7.7% increase in health funding with further increases of 7.6% and 7.9% in budgets for the next two years, taking the health budget from £2,620 million in 1999-2000 to £3,601 million in 2003-4, an increase of 37.4% over 4 years. Labour is committed to increase health spending to European levels, meaning that further significant increases can be expected over the coming years. It is against this backdrop that Labour in the Assembly can give effect to a revitalised National Health Service, funded in a way that addresses real health needs throughout Wales.

Spending on Health services will grow, above inflation, in every part of Wales over the next few years, but in some places it will grow faster than in others until the target shares set out by the formula are reached.

Key Messages

Redressing inequalities in healthcare is what Labour is all about.

The reason why Nye Bevan founded the NHS was because of the basic socialist belief that access to good quality care when it is needed is a basic right and should be completely free at point of delivery.

50 years on, Welsh Labour’s vision remains rooted in the immutable conviction that the NHS is a service for all, free-at-the-point-of-use and intended to meet the collective aspirations of the people of Wales for better health for all. The principle of universal healthcare provision, accessible to all irrespective of circumstances remains the central guiding concept in all that Labour does to reform and improve the NHS.

Labour’s democratic socialist values remain the same today as when the party was formed. We recognise that tackling ill health means attacking the causes of economic and social inequality. That is why we will reduce the inequalities in health care that exist in Wales, redistributing funding growth to those areas most in need.

Our direct formula approach is a unique Welsh solution to a common problem.

It is based on data that is not collected in other parts of the UK and which allows us to take a lead which is already generated great interest in other parts of Britain and beyond.

We are delivering record rises in health spending, which will allow for real growth in every part of Wales.

But we are raising spending most in those areas where the need is greatest.

Giving most to those who need it most.