In September 2021, the government committed an additional £5.4bn to the NHS for the latter half of the financial year (H2) and a further £15.8bn revenue investment (HM Government, 2021) over the next three-year period, to be funded by the new health and care levy. A longer-term capital settlement for the service is yet to be confirmed, but is expected in the comprehensive spending review (CSR) on 27 October 2021.
This briefing therefore takes into account the wider financial context facing health and care services, but focuses specifically on making the case for additional capital investment by:
- outlining the need for a properly funded and well-designed system of capital funding for the NHS provider sector
- expanding on NHS Providers 2019/2020#RebuildOurNHS (NHS Providers, 2019/2020) campaign, presenting key developments over the past 18 months and summarising the results of a recent survey of finance directors across the acute, mental health, ambulance and community sectors
- setting out our 2021 CSR asks for capital reform.
Headline government announcements
Various government announcements have been made over the past 18 months that, collectively, demonstrate a welcome acknowledgement from ministers that the health and care sector will need additional funds to cover the continuing costs of the pandemic, and that NHS facilities need investment. Below, we recap on recent key funding announcements from the government ahead of the CSR, and provide a more detailed summary of relevant capital announcements.
H2 funding and the revenue settlement ahead of the CSR: In early September 2021, the government announced a welcome investment of an additional £5.4bn for the NHS in the second half of this financial year, to cover a rise in costs directly attributable to dealing with COVID-19 and supporting elective recovery. This includes £500m of additional capital, which we expect to be prioritised to support elective care this winter (Department of Health and Social Care, 2021).
The government also confirmed additional revenue funding for the NHS in England of £15.8bn over the next three years, focused particularly on supporting elective recovery. The CSR on 27 October will still be pivotal in confirming a multi-year capital investment for the NHS, decisions on funding training, public health, local authority budgets and social care, and the specific support available to mental health, community, ambulance and primary care services.
In early September 2021, the government announced a welcome investment of an additional £5.4bn for the NHS in the second half of this financial year, to cover a rise in costs directly attributable to dealing with COVID-19 and supporting elective recovery.
Recent capital announcements
Plan for Jobs: As part of a Plan for jobs 2020, the government invested an additional £1.5bn in the NHS estate in 2020/2021: £1.05bn for NHS critical maintenance and A&E capacity across England, up to £250m to make progress on replacing outdated mental health dormitories across 25 mental health providers in England, and £200m to accelerate the health infrastructure plan (HIP). In October 2020, the secretary of state for health and social care expanded the funding available to replace mental health dormitories, committing more than £400m up to 2023/24 (Department of Health and Social Care, 2020).
New Hospital Programme (NHP) and other hospital upgrades: To date, the government has committed £3.7bn until 2024/25 to the NHP, in support of its manifesto commitment to build "40 new hospitals" by 2030. A selection process to identify a further eight new hospitals was launched in July 2021 (Department of Health and Social Care, 2021). The government has also committed £1.7bn until 2024/25 to upgrade an additional 70 hospitals.
Overall, the Department of Health and Social Care (DHSC) core capital budget for 2021/22 is £8.5bn (DHSC, 2020). This represents an increase of £1.5bn compared to a 2019/20 baseline of £7.0bn. The NHS provider capital allocation for 2021/22 was set at £6.2bn (NHS England and NHS Improvement, 2021) - it was £5.8bn in 2020/21. This can be broken down into a £3.9bn system level allocation to cover day-to-day operational investments, £1.2bn of nationally allocated funds to cover national strategic projects such as hospital upgrades and new hospitals, and £1.1bn of other capital investment, for example to pay for technology and the replacement of mental health dormitory wards. This core budget does not include the extra £500m capital funding announced in September 2021, as part of the extra £5.4bn funding over the next six months to respond to the fallout from COVID-19 and tackle the care backlog (DHSC, 2021).
However, while all additional funds are welcome, they do not go far enough to address the growing maintenance backlog, which currently stands at £9bn, nor do they allow for sufficient investment in transforming services. Furthermore, there needs to be more focus on ensuring that ambulance, community, and mental health services benefit from capital investment.
However, while all additional funds are welcome, they do not go far enough to address the growing maintenance backlog, which currently stands at £9bn, nor do they allow for sufficient investment in transforming services.
Recent government funding injections follow years of prolonged underinvestment in facilities across the NHS. The latest estates return information collection (ERIC) data from NHS Digital shows there has been a substantial deterioration in the NHS estate, with the cost of bringing assets back to a suitable working condition – known as the maintenance backlog – continuing to rise. In 2019/20, the maintenance backlog was £9bn. This represents a 40% increase on the 2018/19 figure of £6.5bn. Without appropriate capital investment, issues like leaking roofs and broken boilers, ligature points in mental health facilities and outdated technology cannot be fully addressed. This compromises both quality of care and patient safety.
The potential benefits of capital investment are significant. The government has set out plans to 'build back better' (HM Treasury, 2021) and 'level up' (Ministry of Housing, Communities and Local Government, 2021) the country, promising to increase prosperity, widen opportunity and redress regional inequalities. As an employer of 1.4 million people, with an annual budget of approximately £130bn in 2020/21 (HM Treasury, 2021), the NHS is an anchor institution that creates social value in local communities, and supports broader social, economic, and environmental aims – for example, by working with partners to support more high-quality, affordable housing and widening access to community spaces (The Health Foundation, 2019). However, as things currently stand, many NHS organisations are simply unable to support their local community’s health and wellbeing through the use of land and estates due to the poor condition of many NHS estates and mounting maintenance backlogs.
Additional capital investment would also support the ambition for the NHS to become 'net zero' by 2040 – for example, by moving to zero-emission ambulances and building net zero hospitals, as well as day-to-day changes that can make a difference such as changing the light bulbs used across the NHS estate. Trusts have welcomed the progress made so far and believe the requirement to develop green plans by mid-January 2022 will help drive change (NHS England and NHS Improvement, 2021). However, trusts need further financial support to become 'net zero', on top of what has already been allocated to improve energy efficiency.
Finally, adequate capital investment is central to the ongoing response to COVID-19, especially tackling the record care backlog across acute, mental health and community services, and unprecedented pressure on urgent and emergency care. Ongoing funding will be required to:
- facilitate increased physical capacity
- create a new network of community diagnostic hubs
- continue to reconfigure hospitals to deal with future waves of COVID-19 and winter pressures
- invest in new ways of treating patients, such as using new technology solutions in ophthalmology where the waiting lists are some of the longest (NHS Providers, 2021).