Trusts are to be given tight new guidelines on capital investment to ensure that running costs of new buildings and equipment can be covered, and that new income can be generated from treating patients.

Trusts are to be given tight new guidelines on capital investment to ensure that running costs of new buildings and equipment can be covered, and that new income can be generated from treating patients.

Guidance to be circulated to strategic health authorities later this month will require trusts to draw up transparent business plans for new capital investments to ensure they do not run up huge debts and enter into costly leasing agreements with the private sector.

The tighter spending guidelines are a result of concerns by the Department of Health that NHS financial controls need to be more rigorous to ensure that do not continue spending on capital projects when extra income cannot be guaranteed under payment by results.

A DoH spokeswoman said: 'During 2006-07 we are introducing a new transparent financial regime for capital investment to ensure NHS trusts generate sufficient cashflow to finance the running costs of new buildings and equipment.'

She said the new financial regime would form a major part of the DoH response to Audit Commission chair Sir Michael Lyons' review of financial controls.

The move will bring acute trusts into line with foundation trusts, which already have to put a clear business case to Monitor before they are allowed to proceed with capital projects.

Foundation Trust Network director Sue Slipman said: 'The rigorous financial assessment by Monitor has been very important for foundation trusts gaining new freedoms and delivering high quality services to patients.'

'Rigorous review is only part of the process,' said NHS Confederation policy director Nigel Edwards. 'There remains unanswered questions about how the capital regime will work in future. Will it be in the tariff or will there be another mechanism for allocating it? And how can the DoH create a level-playing field with the independent sector?

'If we don't get it right, it's hard to see how investment will be viable in many circumstances.'