Following the Money: The capital

The question of capital

Capital funding hasn’t been front and centre of the NHS national debate in recent years, but it is now rapidly climbing up the list of urgent priorities.

It may be the absence of a prominent national infrastructure programme, in the shadow of the private finance initiative projects of the past decade, which has kept the issue quieter; or that much of the NHS came into this decade in reasonably decent shape; or the more visibly pressing need to balance revenue budgets.

Two years ago in the Five Year Forward View the NHS’s frontmen declared that upfront “infrastructure and operating investment” was needed if the NHS was to quickly reform care models and deliver the unprecedented savings required.

At the outset of negotiations for the 2015 spending review, NHS England was seeking a substantial “transformation fund” but, as a second order priority after rescuing day to day budgets, the prospect of this was quite quickly abandoned.

The final settlement granted frontloaded revenue growth for NHS England’s budgets but – far from securing an additional infrastructure fund – relied on substantial raids of the Department of Health capital allocation (as well as other DH funds). Local capital budgets were also raided in 2015-16 as part of the “undignified scramble” to protect the department’s overall spending limits.

A few months later, the squeeze is very much still on, but there are signs that the question of access to capital can’t be pushed away for much longer.

Perhaps most concerningly, recognition is spreading that if providers keep putting off basic maintenance, there will be serious consequences, and it is increasingly becoming a safety and quality concern. This is difficult to quantify, but the issue was acknowledged fairly starkly by Simon Stevens in a Daily Telegraph article, deploring the NHS’s “overcrowded and clapped out buildings in need of a makeover, if not a bulldozer”.

Meanwhile, turning to the capital investment needed for service modernisation, the sustainability and transformation process means the NHS will soon have a single national shopping list for change. This is surprisingly novel for the service, which has generally received and passed judgements on bids on an “as and when” basis. While STP leaders are being told at every opportunity to keep their capital bids to a minimum, the requests will still come in.

There has been a parallel uplift in rumblings about how more capital could be sourced.

Mr Stevens, in The Daily Telegraph piece, seized the post-referendum mood and change of prime minister to make a clear pitch, arguing: “UK government borrowing costs are now the lowest they’ve been since the Napoleonic wars. Instead of inflexibly expensive PFI, how about a substantial NHS 70th birthday public fund for infrastructure.”

This – as far as we know – remains a purely opportunistic plea rather than a sign of what to expect. There have, though, been indications that Theresa May’s government may be willing to borrow more to spend on infrastructure (incidentally new chancellor Philip Hammond has the biggest stake in, but does not currently control, a company which has done well in the primary care premises development business since the early 2000s, according to the Financial Times).

Meanwhile, in the absence of the generous birthday present arriving, renewed energy is going into looking for alternatives to government funding.

Rumours suggest there have been more conversations than the usual at the Treasury and the DH about different means for sourcing capital for the health services.

The ideas said to be on the table will bring no great surprise, offer no easy solutions and will ring alarm bells: There is consideration of PFI type arrangements – inevitably prompting concern for some, given the massive problems associated with many previous deals; and discussion about deals like that proposed for the Cambridgeshire Biomedical Campus. Sir Robert Naylor’s review for the DH on excess NHS estate and property, expected to be completed over the next month, will also feed into the national debate.

Some STPs, as well as trying to be creative with excess land, are said to be looking at new “PF2” deals and securing funds from local authorities. If any are making headway, they have not yet been shouting about it. If you know of any, I’d be very pleased to hear about it.