Government bids to control FT capital spending

The proposal is one of several initiatives in the Department of Health and Social Care’s “health infrastructure plan” published yesterday, following a clutch of major hospital rebuilds being announced over the weekend by prime minister Boris Johnson.

Being able to spend their own cash reserves on capital projects when they like is one of the dwindling freedoms which foundation trusts have over non-foundation trusts.

But DHSC, along with NHS England and Improvement, now wants to be able to set capital spending limits on FTs as well as trusts. This would make it easier for the centre to control capital spending across the NHS, which advocates say would ensure a fair system for all NHS trusts and FTs.

It would also reduce the threat of breaching the department’s capital spending limit, set for each year by the Treasury, which has concerned officials in recent years.

According to the infrastructure plan, the government requires “greater transparency on the [capital budget] and improved forecasting”, which will be “supported by a [senior responsible officer] structure within each organisation”.

It suggested “indicative multiyear planning envelopes over a rolling five-year period” will be set each year for both providers and systems (ie: sustainability and transformation partnerships and integrated care systems). 

The document said: “For NHS provider capital expenditure, we will provide clearer and more transparent links between local level spending plans and national level spending limits by using capital envelopes that are directly derived from the NHS’ total [capital departmental expenditure limit] allocation.”

Some in foundation trusts will be unhappy that, as well as the move encroaching on their autonomy, they might not be able to benefit from any cash they have accumulated from recording surpluses.

In an acknowledgement of this issue, the HIP stated: “We will also ensure that the capital allocations take into account accumulated cash reserves and anticipated revenue surpluses to ensure there continues to be a benefit for those systems that have delivered and maintained overall financial balance.” There are no rules set for how this will be decided.

Neither government or national agencies currently have the legal power to set foundation trust capital spending. 

However, NHSE and I last week agreed a request for legislation to give them this power, in what they say would be used in “a narrow targeted way”. 

In the HIP, the DHSC gave its backing to this proposal – although it remains unlikely to become law for at least two years.

It said: “We expect all NHS organisations to work with us to manage capital in a more strategic way. NHSE/I have assessed whether further powers are needed over actors within the system to ensure capital spending is sufficiently well controlled.

“Their response includes a proposal for a power to set an annual capital spending limit on a named foundation trust, to be used in a narrow targeted way, with published disclosure of the reasons for establishing the limit for transparency. This will now be progressed alongside wider NHS legislative proposals.”

Simplifying approvals

The DHSC also wants to simplify the way trusts bid for and access capital funds. This process has been repeatedly criticised by NHS executives, including Greater Manchester’s devolution chief Jon Rouse, who compared it to “driving in a fog”.

In proposals which are likely to be more welcome, the DHSC plans to:

• Save between six to 12 months of the business case stage by using “alternative bid documentation” in place of strategic outline cases where organisations have bid for central funds;
• Create a triage approach for schemes that either need extra support due to complexity and/or political sensitivity or can be fast-tracked due to being less complex and on a smaller scale; and
• Establish a single committee to consider major schemes which would “reduce the number of central approval layers”.

The DHSC will also consider setting up a “specialist unit” to help trusts with business cases and thereby reduce the reliance on external consultants.

On technology, the plan stated NHSX is “working on” improving the business case approvals process and that compliance with NHSX-published standards will be a key condition for approval.

The DHSC will publish its full technical guidance on the new capital regime by the end of 2019, according to the plan.

An updated version of the plan will be published along with the government’s next capital spending review, when the DHSC will be given a multiyear capital settlement.

Rebuilds

The HIP document also confirmed the prime minister’s announcement at the weekend, stating there will be: “A new five-year rolling programme of investment in NHS infrastructure – a strategic approach to improving our hospitals, primary and community care estates and health infrastructure, with waves of investment in new infrastructure initiatives.”

It added: “The full shape of the investment programme will be confirmed when the [DHSC] receives a multiyear capital settlement at the next capital review and will feed into the phases of HIP – and at that point an updated version of this document will be published.”