• Trusts’ combined spending plans for building and maintenance projects are significantly higher than limit set by government
  • Providers told to work within their systems to achieve 20 per cent savings on average
  • Failure to reduce spending risks emergency funding for critical safety projects being held back
  • Comes as NHSE asks government for improved capital settlement

NHS providers and systems have been told to cut their combined capital spending plans by 20 per cent – or risk funding being held back from trusts that need to address critical safety issues.

As previously revealed by HSJ, trusts’ combined spending plans for building and maintenance projects in 2019-20 are significantly higher than the limit set by the Department of Health and Social Care.

In May, this prompted NHS England and NHS Improvement to ask trusts to voluntarily defer projects and scale back their planned spending.

But this has only reduced combined spending plans by 3 per cent, and national bodies have now asked providers to work on a system basis (within their sustainability and transformation partnership or integrated care system) to prioritise spending.

It comes as NHS England seeks to press government to provide a substantially increased multi-year capital funding settlement in the autumn.

In a letter to the sector today, seen by HSJ, chief finance officer Julian Kelly says that achieving the reductions quickly will mean that “emergency loan funding, where agreed as a local priority, can be released to providers without further delay”.

Emergency loan funding is relied upon by trusts which have not been able to generate cash surpluses. It is drawn down from a central pot controlled by the DHSC.

It represents the main lever by which regulators can control the sectors’ spending. Dozens of foundation trusts have relatively large cash balances and are legally permitted to spend them as they wish.

If combined spending is not reduced by 20 per cent, there is therefore a risk that non-FTs most in need of urgent and essential investment will be denied support.

Mr Kelly said regional directors would set out the spending envelope for each health economy. He also said conversations with the sector had stressed the importance of having a contingency plan if spending is not reduced voluntarily, so a consultation will also be launched on “regulatory levers we may need to use, as a last resort and on a highly targeted basis, where affordable plans are not agreed by an STP/ICS”.

The NHS’ capital budget has been severely constrained in recent years, which has led to a growing backlog of essential maintenance work.

In recent weeks NHS England’s leaders have spoken publicly about the inadequacy of the capital budget set by government, with its chair Lord Prior making particularly pointed comments about the unwillingness of the chancellor Philip Hammond to adopt a proposed solution.

HSJ asked NHSE/I what the provider sector capital spending limit is for 2019-20, but has not yet received an answer. It is thought to be slightly higher than last year’s £3.46bn. Providers say there is significant “pent up demand” to spend capital, due to projects being deferred from previous years.