1 The Department of Health & Social Care (the Department) sets the overall strategic direction of the health system in England. It is accountable to Parliament for ensuring that its annual spending, including spending by NHS England and NHS Improvement (NHSE&I), other arm's-length bodies; and local NHS bodies, is contained within the overall budget proposed by the government and authorised by Parliament. This budget, termed a spending limit, is for day-to-day spending (the revenue budget) and capital investment (the capital budget).
2 The NHS capital budget is for the construction of new buildings and the replacement of medical and other equipment. It is also used to enhance existing assets and to develop the infrastructure for transforming services. Capital investment is essential for modernising and improving the quality of care and for achieving the changes that will make the NHS sustainable in the longer term. The Department sets an annual NHS capital budget based on local spending trends and central initiatives.
3 Many organisations share responsibility for the planning, allocation, approval and management of NHS capital. Overall, the Department is responsible for ensuring that the capital limit is not exceeded, and NHSE&I work with NHS trusts and NHS foundation trusts (NHS providers), who set out their capital needs in business plans. The rules around setting local capital spending limits are different for different types of NHS provider. NHS foundation trusts have greater freedom over their capital spending decisions compared with NHS trusts and those NHS foundation trusts in financial distress. Increasingly, individual capital plans of local NHS providers are being prepared within sustainability and transformation partnerships (STPs). STPs comprise local NHS providers, commissioners, local government and other stakeholders.
4 This report sets out the facts on capital investment in the NHS. It draws on and expands on issues we cover in our annual report on NHS financial sustainability. It includes:
• the age of the NHS estate and rising maintenance costs (Part One);
• the allocation of the capital investment budget (Part Two );
• sources of capital funding (Part Three); and
• challenges to planning and delivering an effective capital strategy (Part Four).
5 The primary care estate (for example, General Practice) is excluded from our scope as most capital investment in this area does not count towards the Department's capital budget. We also exclude capital expenditure on research and development since our focus is mainly on physical assets within NHS providers.
6 We set out our audit approach and evidence base in Appendix One. Appendix Two contains a list of the 20 projects that the government announced in August 2019 would receive additional capital funding investment, as well as the schemes and seed funding announced in the Health Infrastructure Plan.