Funding for mental health services in England faces many challenges including operating under financial constraints where it is not easy to demonstrate the link between activity and funding. Mental health services need to operate alongside and collaborate with acute hospital services where there is a well-established system for paying for activity. The funding landscape is shifting at a rapid pace and we outline the distinctions between the three main options – block contracts, episodic payment and capitation. Classification of treatment episodes via clustering presents an opportunity to demonstrate activity and reward it within these payment approaches. We have been engaged in research to assess how well the clustering system is performing against a number of fundamental criteria. Clusters need to be reliably recorded, to correspond to health needs, and to treatments that require roughly similar resources. We find that according to these criteria, clusters are falling short of providing a sound basis for measuring and financing services. Yet, we argue, it is the best available option and is essential for a more transparent funding approach for mental health to demonstrate its claim on resources, and that, as such, clusters should be a starting point for evolving a better funding system.