4.2 The 2019 National Audit Office (NAO) report on NHS financial sustainability found that the capital funding system made it difficult to plan and acted as a barrier to investment.8 As part of our interviews with NHS providers for this report a trust told us: "We need to replace our estate but there's no clarity on how to access the funds for big projects." Previous NAO reports have highlighted that filling in documents to access financial support can be resource-intensive and can require the same amount of effort irrespective of the level of funding.
4.3 NHS Providers (the membership organisation representing NHS trusts and NHS foundation trusts) has said that the current NHS capital strategy, that is, the capital bidding, prioritisation, allocation and approvals process, is broken and in need of rapid reform. HM Treasury had asked the Department and NHS England and NHS Improvement (NHSE&I) to conduct a review of the current capital strategy, which was due to outline options for a new capital system in autumn 2018.
4.4 The capital funding process has been particularly challenging for 2019-20. At the start of 2019-20, NHS providers submitted plans for capital spending that exceeded the budget available by around £1.7 billion. In response, in May 2019, the chief financial officer of NHSE&I wrote to NHS providers asking them to reduce or defer capital expenditure plans, and to only include plans that required borrowing where there was an urgent and critical need. The letter also recognised the need for "a more planned, proactive and collaborative approach" to managing capital spending in order to avoid "continuous, unnecessary resubmission of planning spreadsheets requiring significant work". As a result of the difference between providers' plans and the available budget, NHS providers were asked by NHSE&I to reduce their capital spending plans and to resubmit them.
4.5 In July 2019, following the resubmission by NHS providers of their capital spending plans, the chief financial officer of NHSE&I wrote again to providers saying that their resubmissions had only reduced the total by 3% and that a 20% reduction was required. The letter also asked NHS providers to work together on a sustainability and transformation partnership (STP)/integrated care system (ICS) footprint to prioritise capital spending to meet the limit set by the Department.
4.6 In August 2019, the government announced an additional £1.8 billion for capital investment. Of that, £850 million was specifically for 20 new capital investment projects over five years (Figure 15 in Appendix Two), with £100 million of this available for these projects in 2019-20. NHS providers can therefore spend up to a maximum of £1.1 billion more on their capital plans in 2019-20 than the limit at the start of the financial year, to address in-year pressures. However, this still leaves a gap of £600 million between the original NHS providers' capital spending plans and their capital budget for 2019-20. The Department expects the £600 million gap to reduce based on previous years' forecast of capital spending against actual outturn.
4.7 In October 2019, the Department published the Health Infrastructure Plan. The plan acknowledges the "piecemeal and uncoordinated approach to NHS buildings and infrastructure" taken by the Department and outlines the proposed new capital regime. This includes changes to an "overly bureaucratic" approvals process. The proposed new capital regime aims to provide the right incentives for providers to invest in their infrastructure, and a clearer set of capital controls. The plan also announced six new schemes to be delivered by 2025 (Figure 16 in Appendix Two), with seed funding for a further 21 schemes to develop plans for 2025 to 2030 (Figure 17 in Appendix Two).
__________________________________________________________________________
8 Comptroller and Auditor General, NHS financial sustainability, Session 2017-2019, HC 1867, National Audit Office, January 2019.