NHS capital funding wave rolls in

It's good news. The government has announced £2.7 billion of additional capital for six hospital building projects as well as £100 million to work on business cases for a further 34. There's also £200 million for diagnostic equipment and the promise of more to come.

For those six hospitals it seems to be a firm funding commitment - and one that would be difficult for a future government to reverse. No government of any colour is likely to want to be seen to reduce funding for hospital building projects.

So where's the catch? Nobody works in the NHS for long without looking for one. Well, I'm not sure there is a catch, more some notes of caution.

It's harder to find funding now, so we need more Treasury cash

We need to bear in mind that, with the abolition of PFI and PF2 as funding routes, the government has run out of places to go to pay for a new hospital. The Naylor Report spoke of the scale of the funding need and proposed that it be met a third by the capital budget, a third from land sales and a third from private finance. We've lost one of those legs and there are reasons to be sceptical about the potential of land sales as well.

So the need for government cash for capital projects is potentially trebled. If we don't find new and clever forms of funding from outside, it will certainly need to double. As soon as government announced the closure of the private finance route, we were on an inevitable path to more funding for capital, with the only question being whether it would be able to bridge the gap.

The need for capital is growing faster. Can the announcements keep up?

Not only is the capital/maintenance backlog large, it is probably growing faster and faster. The longer you leave a building unrepaired, the more it costs to fix. And buildings keep getting older

We are also in the midst of a workforce crisis. Every hospital CEO will be thinking about how to make their organisation more attractive to staff. A decent working environment is important if staff are to be attracted and retained. Of course there are other benefits too. It helps world class organisations project that status and helps patients to feel safer.

Having recently spent some time in a couple of different hospitals visiting an unwell member of family, it was hard not to imagine that you are being better cared for when the hospital looks more modern and well equipped. So we are going to need more capital more quickly.

What about community and mental health?

None of the six projects are for mental or community health projects. This in a system which claims to be prioritising the development of integrated care systems which keep people out of hospital. Don't get me wrong. There is an undeniable need at the six acute hospitals – and indeed in many more. But if we are to reduce the growth in acute spending, surely we need to improve the infrastructure in the more preventative settings?

Are Foundation Trust (FT) cash reserves going to be at risk?

Regulators announced in February that they were to limit the access of FTs to capital (C-DEL) without approval. So, how long before someone asks this question: What is the point of the cash reserves held by FTs if they are not free to spend them? It's a source of funds in a cash constrained world

We also know that one of Naylor's three funding pillars is sale of surplus land. But, what if the surplus land is in one Trust and the capital need is in another? At some point, don't you need to move it somehow? I'm not saying that there aren't ways. There are – but I haven't seen any being actively promoted.

That then starts to create a big incentive on FTs to spend their cash reserves quickly, before they lose them. And that may not deliver the best value for them or the system.

What can NHS managers do for their projects?

If you are one of the six, it's time to move fast. Too often NHS capital projects stall, which sometimes pushes them outside a funding window and forces them to go through further approval processes.

If you are one of the 34 projects getting seed funding, you need to move faster. It's already clear that you will be in a competition for future funding, so you need to get your business cases done faster and better than the other contenders.

If you have projects which are not listed (particularly in community and mental health), you need to move even faster because it looks like you might already be behind. Work with your local and national system to demonstrate not only the need but the potential for the whole system (including reduction in the growth of acute spending). And hopefully that will help to channel the funding into the projects we need to deliver proper integrated care.

By Matt Custance.

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