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ARRS funding won’t be used to offset rising practice costs amid high inflation, under 2023/24 GP contract

by Beth Gault, Rima Evans
29 March 2023

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A contractual clause that allows funding for primary care network staff to be diverted to protect practices against large increases in inflation has been removed in the new GP contract.

The so-called ‘balancing mechanism’ was introduced in 2019 as part of the five-year GP contract to safeguard core practice funding during periods of inflation or deflation. GPs had argued that, if implemented, it could leave practices and networks out of pocket.

However, in a BMA GPC England webinar last week updating members on the latest about the contract coming into effect in April, it was revealed the arrangement would be removed permanently.

As part of negotiations on supporting practices with their spiralling running costs, GPs asked NHS England and the Department of Health and Social Care for cost of living wage rises, help with inflationary costs and for the balancing mechanism to be removed. Only the latter was agreed to.

Despite the economy experiencing inflation levels that reached a 41-year high in 2022, the balancing mechanism has never been triggered.

There were fears it may have come into play last July, as inflation was soaring and practices were struggling to fund staff pay rises. But, at the time, Dr Richard Vautrey, the chair of the GPC when the five-year contract was negotiated, told our sister publication Pulse that the actual process for the balancing mechanism had never been finalised.

He also explained last year, that even if the mechanism was invoked, its effect on practice income wouldn’t be immediate but be retrospective because GP earnings figures (and thus how they are affected by economic factors such as inflation) are not published in real time.

‘Because of the way that GP pay calculations are done, we only find out exactly what the average earnings are almost two years after that particular year,’ Dr Vautrey had said.

‘If there was a significant change from what was expected, as part of the agreement, that would then trigger a negotiation about whether or not to invoke the balancing mechanism. But it would be retrospective.’

The recent contract letter set out other changes for 2023/24, including various stipulations on access to general practice, but mentioned no extra funding.

What is the contractual ‘balancing mechanism’?

Negotiated in the five-year 2019/20 GP contract, it aimed to protect practices and taxpayers against ’unexpectedly large increases in inflation or partner drawings’.

Its purpose was to – if required – ‘adjust between the practice level global sum and the network level Additional Roles Reimbursement Sum (ARRS) depending on levels of real-terms partner NHS earnings’ in the case of high inflation or deflation. 

If inflation was higher than expected, funding set aside for PCN staff could be used to ‘offset’ the rising costs incurred. 

In the event of deflation, funding could be removed from the global sum to prevent practices from receiving funding uplifts way above inflation. This money would then be added to the network staff funding pot.

This would ‘enable global sum adjustment equally in either direction’ providing ‘confidence to the profession and taxpayers alike’, the contract had said.