How £250m of capital funding slipped away

Tearing hair out

In its efforts to squeeze within a tight capital budget in 2017-18, the NHS has gone and limbo-ed too far under the bar.

Despite concerns earlier in the year that NHS providers would again breach their £3.3bn capital spending limit (known as CDEL), the outturn figures have shown a £256m underspend for the year.

What will leave providers (and regulators) tearing their hair out is that the funding will not roll over into 2018-19.

This will put added pressure on this year’s CDEL – as more trusts are likely to seek emergency capital support for work that had been planned for last year (and should have hit last year’s budget).

Midway through last year, NHS Improvement was concerned about a possible overspend as trusts forecast around £4bn of spending by year-end, and asked providers to review their plans.

And in an unusually pointed section of its year-end report, the regulator simmered: “Throughout the year the sector has been forecasting in excess of £3.3 billion CDEL expenditure.

“However, at month 11 this forecast reduced and at draft accounts the expenditure was £3.074 billion, an underspend of £256 million, with no mechanism for the return of this funding in 2018-19.

“This is likely to increase the pressure on the national CDEL budget in 2018-19 as a result of emergency capital funding that could have been made available from this underspend in 2017-18.”

Everyone knows that the NHS needs urgent investment in technology and estates, and there are countless projects that could have benefited from this funding, so why did it go unspent?

Local delays are likely to have been one factor, with trust’s simply failing to carry out the work as planned, which could have happened for multiple reasons.

Meanwhile Siva Anandaciva, chief analyst at The King’s Fund, said “sustainability and transformation partnerships” have added an extra layer of work needed to win approval for larger projects (needed before the money is spent).

A new approvals framework at a national level has made the process even more demanding.

Even for smaller projects that don’t need approval, many trusts simply don’t have the cash in the bank to pay for them, and must draw down a government loan to fulfil their CDEL plans.

This can introduce further delays, with the Department of Health and Social Care keeping far tighter reins on the cash than was the case a few years ago.

A bit of blame all round then, I suppose.

Although the NHS cannot get this money back in 2018-19, it can hopefully persuade the Treasury to take the underspend into account when it comes to the imminent funding settlement.

Mind the ringfence

Capital budgets have sat outside the “ringfence” since 2015, when former chancellor George Osborne controversially excluded everything outside of NHS England’s budget.

As the NHS awaits outlines of a long-term funding plan (expected by its 70^th birthday in July), we understand that discussions have been held over putting some things back within the protection of real terms funding increases.

There will clearly be better cases for some things going back in than others (research budgets are unlikely to be a priority), but capital funding, training and education, and public health would be difficult to argue against.

Shutting up

On the headline increase, it seems Treasury officials have been prepared to at least contemplate real terms annual increases approaching 4 per cent (the average increase over 70 years).

They will certainly know that anything lower than 3 per cent is likely to be roundly rejected by the service, and would risk igniting the funding debate even further.

So, it’s likely to be a 3-point-something percentage increase, for which it will expect the NHS to shut up and get on with it.