Community services have suffered insufficient investment for many years. This is partly the result of the long-term funding squeeze on the NHS. While the amount of government spending on the community sector varies according to different sources (partly because there is no national data and partly because there are different ways to delineate which services to include), mostly it is accepted that around £10bn of the NHS budget is spent every year on care in the community. Increases in demand for community-based care and the national focus on strengthening community services have not been accompanied by a shift in resources, which has resulted in more services being delivered for less money. Community services are following a similar journey to mental health services in terms of their priority and financial investment.

This longstanding underfunding is borne out by our survey. Over half (52%) of trusts providing community services said that the income for community services in their local health economy had decreased in real terms in 2018/19 (figure 7). However, in comparison, only 37% of trusts that do not provide community services thought that funding for community services had reduced in their local area.

Our survey therefore highlights the disparity between different perspectives within the provider sector, suggesting there is no clear view of, or transparency over, the level of investment in community services. Similarly, while only 13% of trusts that provide community services responded that funding had increased in their local area, 26% of trusts that do not provide community services reported that it had increased.

Figure 7

Contracting arrangements

In addition to this context of financial constraint and underinvestment, there are some community service sector-specific issues in the way that these services are contracted, particularly through the use of block contracts. The majority of community services are commissioned under block contracts that provide a fixed annual payment for a service. Under this type of contract, funding is not directly linked to the volume of activity as it is in payment by results used to fund acute services. When using a block contract, if a provider ends up seeing more patients or undertaking more activity than they are contracted to do so, they must absorb the cost of this, which can impact on the quality of care provided. In the context of constrained resources across the NHS, block contracts can be used as a way for commissioners to manage financial pressures in the wider system. These funding arrangements epitomise how community services are at a structural disadvantage within the NHS provider sector; it is not about the quality or quantity of results, but about buying a portion of indiscriminate care.

Unlike on a hospital ward where activity is limited to the number of beds, community services are forced to absorb demand increases and cost pressures by increasing caseload size, reducing the number of staff, changing the skill mix of staff or raising the eligibility criteria for access to services. Our survey illustrates the actions taken by trusts providing community services as a result of financial and demand pressures; 61% of trusts were cutting costs, 41% had reduced staff and 33% had allowed waiting lists to increase (figure 8).

Figure 8


As one trust leader put it, "with financial envelopes being reduced, the margin on winning a successful tender does not generally contribute fully to the mobilisation and running costs of the service". In general, trusts providing community services are keen to move away from activity measures towards outcome-based contracts that incentivise prevention and offer capitated payments based on patient outcomes, or aligned contracts with incentives for all community, mental health and acute providers within the system.

Payment systems

One of the reasons why block contracts are used for community services is because the payment system for these services is less developed compared with other NHS sectors (The Health Foundation and NHS Providers, October 2017). There are concerns that current payment systems, such as payment by results, do not incentivise the right behaviours across the wider health and care system. One trust leader that we interviewed explained that in the last five years, their trust’s income for community services had reduced by 3.5%, but the trust had calculated that if the community services contract was on payment by results, it would have gone up by 11%. This puts them at a structural disadvantage compared to providers operating on a payment by results contract.

The National Audit Office’s (NAO) report reinforces the need for a new payment system that will support the community sector and manage demand, and flags the inconsistent approach between NHS England and NHS Improvement. More generally, there seems to be a lack of alignment in the national bodies’ intentions for new payment systems and what the rules currently allow, as the report states: "commissioners have been given conflicting messages on the current payment system, with NHS England giving commissioners a clear steer to explore other payment systems to help manage demand, while NHS Improvement has encouraged trusts to use payment by results to maximise their income" (National Audit Office, January 2018).

There are concerns that current payment systems, such as payment by results, do not incentivise the right behaviours across the wider health and care system.


Work is underway at a national level to develop currencies for the new pricing and payment system for community services. The new currencies and tariff structures will need to accurately reflect the delivery of care in community-based settings and include incentives to improve the transfer of care into the community, people’s health and wellbeing, and prevention. These currencies will need to focus on care pathways rather than individual services, and be based on the resources required to deliver outcomes for a group of people with similar health and care needs, such as frailty or long-term conditions. They need to be relevant to the patient, meaningful at a local and national level, and linked to patient outcomes. Work is also underway at a local level as some health and care systems are exploring more blended payment systems or capitation-based budgets. These new payment systems include risk and gain share agreements that take the financial risk of activity away from the acute sector, where it currently sits.

The national bodies must recognise that strengthening and expanding community services will require the double-running of services and the importance of additional investment to do this, which is simply unavailable in the current environment. A dedicated transformation fund, in the form of the sustainability and transformation fund (now called the provider sustainability fund), has had to be used to support the financial sustainability of the trust sector, which has meant that new models of care that prioritise prevention and care in the community have not been invested in significantly.

This lack of additional investment to increase capacity in the community means there needs to be new funding to achieve the successful transformation of community services, as set out in the FYFV. There is widespread agreement that it is not appropriate to take funding away from acute hospitals to invest in community services (The King’s Fund, January 2018). As Figure 9 shows, four out of five trusts are worried or very worried that community services will not receive the investment needed to achieve the ambition set out in the FYFV to move care into the community.  

Figure 9

For the NHS to have a robust community sector, it is clear that proper investment in community services is necessary. The recently announced "multi-year" funding plan is an opportunity to address this as a fundamental part of the sustainable solution for the NHS. In our survey, respondents from all parts of the provider sector commented that they would prioritise funding on issues such as integration with other parts of the health and care system including social care, the community workforce, such as community nurses and health visitors, and admissions avoidance through rapid response teams and step-down beds.  In addition, there is a lot of variability across England around historic community funding arrangements, so any long-term settlement should work this out through a standardised method based on population needs and best practice.

However, there is a concern that any extra investment in the community service infrastructure would reveal high levels of unmet need and increase demand for services, or it would only tackle the lower end of the acuity spectrum of unmet need rather than the top end. Another concern is that it could potentially just reduce the pressure on primary care. To mitigate these risks, the extra investment needs to focus on changing referral patterns, patient expectations and care pathways, as well as ensuring that new system working allows savings to hospital services to be diverted to community services.

While standalone community and combined community and mental health trusts tend to currently be in a better financial position than acute trusts, they still have to meet stretching control totals – a financial target decided by NHS Improvement and which all trusts are required to achieve in order to unlock additional funding (NHS Providers, March 2018). Trusts providing community services will do all they can to meet their financial targets and retain a healthy financial position, but there is a real risk of compelling trusts to make levels of efficiency savings that they believe are impossible (NHS Providers, March 2018).

The recently published Kirkup Review into failings of care at Liverpool Community Health NHS Trust highlights the potential implications of prioritising efficiency savings over the quality of care: "unless there are exceptional circumstances, an annual cost improvement programme of 4% is generally regarded as the upper end of achievability" (Kirkup B, January 2018). However, trusts are working hard to maintain the quality of and access to services despite these financial challenges, and only 7% of respondents to our survey said they were compromising the quality of care as a result of financial and demand pressures. Trusts are clearly working hard to protect patient care.

The extra investment needs to focus on changing referral patterns, patient expectations and care pathways, as well as ensuring that new system working allows savings to hospital services to be diverted to community services.


Local authority funding

The squeeze on local authority funding has also had an adverse impact on many community service providers. Trusts providing community services  (particularly those that hold more local authority contracts than NHS commissioned contracts) tend to be more concerned about the precarious nature of funding for local authority-commissioned services – particularly public health services –  than CCG allocations as there have been cuts to preventative, public health and wellbeing services [3]

There are now concerns that reforms to local authorities’ finances, namely the abolition of general grant funding from 2020 and retention of council tax and business rates, risk increasing the funding gap for adult social care (The Institute for Fiscal Studies, March 2018).

Underfunding is therefore a major barrier to developing community services. Community services need proper investment commensurate with the strategic priority of building up community services. Community service providers face particular challenges in the form of block contracts, current payment systems and the squeeze on local authority funding. This combination of under-investment and specific funding challenges contributes to concerns about maintaining quality standards. Trusts providing community services need adequate financial investment to strengthen and expand community services, as well as new payment systems and contracting models.

The King’s Fund report (March 2017) found that financial pressures were having the greatest impact on services including genitourinary medicine and district nursing. In some areas, smoking cessation services are being decommissioned which concerns trusts.