Primary care trusts in England have been allocated a total of £148.3 billion for the next three years, representing a 30% average increase to meet growing cost pressures.

The new allocations represent the first ever to be directly controlled by PCTs, and the first ever for a three-year period, intended to allow for medium-term financial planning.

The Department of Health conceded this autumn that the previous one-year service and financial framework (SAFF) allocations had only allowed NHS bodies to deal with short-term goals.

But the budgets come with significant strings attached a new set of nearly 50 performance indicators measuring local standards from access to GPs, numbers of flu vaccinations and a staff opinion survey, to prescribing of atypical antipsychotics and anti-dementia drugs.

This year the funds have been calculated on a new formula which attempts to reflect more accurately the health needs of individual areas.

Announcing the plans, Health Secretary Alan Milburn said the new system would allow PCTs to plan with confidence for the future, and that the money had been 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," he said.

"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%."

Primary care leaders have, however, criticised many of the performance indicators that have accompanied the money, in particular those that measure wider public health issues, such as suicide rates, which they say are beyond the control of PCTs.

NHS Alliance Chairman Dr Michael Dixon said: "We don't think the indicators are at all satisfactory, and probably have a very negative effect on some PCTs who are doing well, because it won show up in performance indicators which measure things that aren't related, like levels of deprivation."

Performance indicators for PCTs, like mental health trusts, have been labelled provisional, but Dr Dixon says the consultation, which lasts just one month, is "all but rigged."

A major catch in the new funding is also causing PCTs great annoyance and confusion as they prepare to commission services for their local health economies for the first time ever.

Unlike the previous commissioners, the now defunct local health authorities, PCTs must by law balance their books at the end of each financial year. This means that, in effect, PCTs remain tied to one-year budgets, unable to run a deficit for any of the years within the new three-year period.

"If you are reconfiguring and at the same time not running down the service, you need to front load the system financially that means borrowing against years two and three. Three-year planning means nothing unless you can do that,said Dr Dixon. e must have flexibility and a bona fide plan for recovery over three years which isn just running into debt and borrowing. You need flexibility otherwise a three-year plan is a joke."

The Department of Health is now understood to be negotiating a compromise with the Treasury to produce this flexibility, but in the meantime, PCT executives are in the dark to the extent of their financial freedom.

PCTs have begun commissioning services from NHS trusts this year and continue the tricky process until March.

pharmafocus@pharmafile.co.uk