This chapter focuses on the use of financial incentives and contractual flexibilities for encouraging the provision and uptake of preventive services. It has been argued in the context of health care systems that the use of incentives reflects a shift from ‘command and control’ regulation towards the encouragement of entrepreneurial behaviour (Saltman, 2002). While the relationships between governance and incentives are not straightforward and outcomes cannot be predicted from particular modes of governance (Davies et al., 2005), governance through markets, for example, will encourage the deployment of performance-linked incentives agreed through a contractual route. The increased emphasis on the use of incentives over the period of the study was consistent with the introduction of market-based reforms in health care which emphasised choice and competition as routes for improving quality and involved the separation of commissioning from the provision of services.

While the use of financial incentives in health care has become increasingly influential (Mannion and Davies, 2008), there are many different kinds of incentives. As illustrated in the previous chapter, governance arrangements, such as performance management regimes, can themselves exert powerful incentive effects. It was argued, for example (Department of Health, 2007a: 50), that ‘greater alignment of accountability mechanisms should form an important part of an incentive framework, creating both greater transparency and strong drivers to collaborate’. Incentives can span intrinsic satisfaction and external rewards, including, but not limited to financial rewards, and can be used to discourage or encourage. Whether directed at individuals, groups or organisations, incentives are considered an important lever for achieving change and there are many possible routes through which commissioners can incentivise providers (across the NHS, the private sector or the voluntary and community sector [VCS]) to improve their performance or to provide additional services. Commissioners can also incentivise individuals to change their lifestyles or access specific services.

The chapter begins by reviewing financial and other incentives, locates debates on incentives in a theoretical framework and considers some of the characteristics of ‘incentive contracts’, before summarising the range of incentives available to commissioners at the time of the study and views of their impact. There follows a discussion of local enhanced services (LES), the most popular route for incentivising public health services at the time, with the aim of illustrating benefits and drawbacks of incentivising preventive services.