How should we handle capital funding? | Niall Dickson

Niall Dickson

The NHS Long Term plan didn’t address capital funding. How will the forthcoming Spending Review tackle it? Niall Dickson, chief executive of the NHS Confederation, looks at the issue of capital investment and calls for a better system to be urgently agreed.

The pressure on capital funding continues to be a major headache for many provider organisations, as shown by the latest calls on them to scale back their bids.

NHS England/NHS Improvement (NHSE/I) chief financial officer Julian Kelly’s (now leaked) letter asks trusts to consider putting off expenditure “not deemed to be essential or already contractually committed”. He makes clear that plans that increase capital spending beyond acceptable limits will be rejected.

The trouble is, the service has been struggling to maintain services for years while having to preside over a steady degradation in the infrastructure on which efficient delivery depends.

At a practical level, there is an inherent risk within the backlog of maintenance, arising from equipment replacement need and issues such as fire safety work.

The HFMA has estimated the cost of eradicating backlog maintenance at £6 billion in 2017/18, up from £4 billion in 2011/12. The longer we wait for an effective approach to capital funding, the greater the cost of tackling the backlogs, and the more opportunities we will miss to develop innovative, productive care, much of which requires upfront capital investment.

We know the system for allocating capital is not working as it should. The joint report from PwC and the HFMA, published last year, and the government’s own Naylor report have both called for fundamental reform.

The NHS Long Term Plan ducked the issue and now it will come under the forthcoming Spending Review. That itself must be a cause for concern, surrounded as it is by so much uncertainty. It is likely to be a short-term fix review, probably confined to one year, and of course, the chances are, it will be overseen by a new Chancellor.

It is therefore vital and urgent that the service and the centre (Department of Health and Social Care, and NHSE/I) agree a better system and make a better case for capital investment. They should also resist the temptation to centralise responsibility for capital planning and acknowledge that the way limits are set now takes no account of development need or risk profile.

There is a national focus on larger developments, such as those driven by integrated care system priorities (although how these are prioritised can be opaque), but the ‘day-to-day’ demands of equipment replacement, maintenance backlogs and smaller-scale projects tend to be forgotten.

The emphasis from the centre is almost always confined to questions of improved performance, but without recognition that dilapidated buildings and poorly configured A&E departments are significant barriers to improved productivity. One study, reported by Nursing Times, estimated that staff had to walk an extra 3.6 miles per day for diagnostics.

As we made clear in our response to NHS England’s legislation proposals, we do not believe NHSE/I would necessarily make better decisions than the trust board, which is accountable through its governors to the local population. The centre should not be given power to set annual capital spending limits for foundation trusts.

Gaining some control over foundation trust capital spending may be desirable in some limited circumstances, but we need to be careful not to undermine the autonomy of foundation trusts.

Trying to attract political attention on anything at the moment is challenging to say the least, but capital funding is one area where renewed focus could help to avoid significant missed opportunities and increased costs further down the line.

HFMA’s report argued the tariff should cover the revenue costs of service provision, removing all capital costs from the tariff, and carrying out a financial reset “that clears the debt NHS bodies have and that is never going to be repaid”.

Now is the time to give these and other ideas proper consideration and to put together a plan to make this work better.

And finally…   Confed19 is fast approaching  and this year we are offering members: a free place for your chair,  discounted rates for all places booked for your team, an additional non-executive director place when a chief executive books a place, and a free additional place for a clinician when a medical or nursing director books a place.

Niall Dickson is chief executive of the NHS Confederation. Follow him on Twitter @NHSC_Niall and the Confederation @nhsconfed

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