Primary care trusts (PCTs) will suffer a real terms funding cut as the government revealed it is not increasing direct spending to match inflation.
Coalition proposals to dramatically shake-up the health service will also go ahead including an addition to allow local councils greater freedom in how NHS funded services are operated.
The announcement prompted a furious response from the British Medical Association (BMA) while the NHS Confederation warned about the dangers of the ‘radical and high risk' strategy being pursued by the government.
The Department of Health (DoH) announced that an increase of £2.6bn in cash will go direct to PCTs for frontline services in 2011/12, which is equivalent to a 3% increase.
However, with inflation presently running at 3.3% the £89bn total spend will mean a real terms cut of 0.3%.
This will include money for commissioning dentistry, ophthalmic and pharmacy services as well as, for the first time, money to support social care.
The cut is likely to be even more keenly felt by the NHS where medical inflation usually runs at a far higher rate than normal and as it attempts to make £20bn of efficency savings targeted by the coalition.
Following the consultation on its previous White Paper ‘Equity and Excellence: Liberating the NHS,' the Department also amended its plans for the NHS to include:
• commissioning of maternity services will now sit with GP consortia; and
• councils' formal scrutiny powers will be extended to cover all NHS-funded services, and local authorities will have greater freedom in how these are exercised.
The doctor's union responded angrily to the new details, accusing the government of charging forward with these changes despite warnings and risks.
Dr Hamish Meldrum, chairman of council at the BMA, said: "The government also seems to have ignored the warnings of the BMA and many others about the pace and scale of these reforms.
"Change of this magnitude was always going to be a challenge and the worsening financial pressures on the NHS, coupled with the ambitious timescale and lack of detail, make the present strategy very risky. Given the latest inflation figures, we do not accept the government's claim that it is increasing real terms funding for the NHS.
"The stated 3% 'increase' in funding for PCTs includes £1bn already announced to cover additional social care responsibilities and masks the fact that hospitals will have to do a lot more work to achieve the same income," he continued.
"Patients across the country are already discovering that local services are being rationed to achieve efficiency savings, and there are likely to be further NHS cuts on a scale we have not seen for many years," he added.
The BMA also suggested the government showed little interest in engaging with constructive criticism regarding its plans and that it disregarded most major concerns raised by the medical community.
Commenting on the announcements, Andrew Lansley MP, Secretary of State for Health, said: "Our commitment means that funding for the NHS will increase every year.
"I am proud that we are living up to our commitment to the NHS - the total allocations to Primary care trusts will increase next year by 3% on average, with not less than 2.5% and up to 4.9% increase for individual PCTs. It provides a strong platform to sustain and improve NHS services."
