Equity of access to health care on the basis of need alone is the central principle of the NHS. A corollary of this is that resources should be distributed among local health authorities in proportion to their relative health care needs. But this is difficult in practice because population needs cannot be measured directly and the proxies that are available are difficult to interpret.

Since the publication of the report of the Resource Allocation Working Party in 1976,1 the allocation of resources to hospital and community health services has become progressively more complicated and controversial.2,3 The review of the Resource Allocation Working Party's formula in 1988, which resulted in the introduction of a weighted capitation formula, was widely criticised.4,5 Particular concern was expressed about how analyses of variations in hospital use among small areas were used to generate indicators of need.

Prompted by the availability of new data from the census in 1991, the secretary of state for health announced a review of weighted capitation at the beginning of last year. Later this week ministers …