Representing estates and facilities professionals operating within the  



NAO adds its voice to calls for long-term NHS capital funding solution

The National Audit Office (NAO) has published two reports looking at the financial and operational performance of the NHS and its capital expenditure and concludes that short-term fixes have made some parts of the NHS seriously financially unstable.


Gareth Davies, Head of the NAO, says: “The short-term fixes that were introduced to manage the NHS’ finances are not sustainable. The Department of Health and Social Care continues to provide some trusts with short-term loans just to meet their day-to-day costs with little hope they will be repaid. This is not a sustainable way to run public bodies.


“To bring about lasting stability, the Department and NHS England and NHS Improvement need to move away from short-term financial fixes and provide longer-term solutions.”


The NAO finds that the extra money brought in by government to stabilise the finances of individual NHS bodies has not been fully effective. Although the NHS treated more people in 2018-19, it has struggled to transform services. Patient waiting times continue to get worse and the number of people waiting for treatment continues to increase. Trusts in financial difficulty are increasingly relying on short-terms loans from the Department of Health & Social Care (DHSC). These are effectively being treated as income by these organisations and they have built up a level of unsustainable debts (£10.9 billion in March 2019) which they are unlikely to ever repay.


In the past five years, the government has transferred £4.3 billion from capital to revenue budgets to cope with day to day pressures facing the NHS. It has been unable to clearly say how this has affected patient services and acknowledges its approach to capital funding requires reform. The rising demand for capital spending and the growing maintenance backlog means there is an increasing risk of harm to patients.


The NAO concludes that DHSC, NHS England and NHS Improvement should revamp the way the system is funded. This includes developing a clear long-term capital funding strategy and establishing a more stable funding system that is not reliant on loans.


Commenting on the NAO reports, Sally Gainsbury, Senior Policy Analyst at Nuffield Trust says they raise serious questions about whether the increases in budget for NHS England that the government is about to enshrine in law will be sufficient to make a difference, “in the context of yawning staffing gaps, hospital Trusts being forced to rely on one-off savings, short-term loans or emergency funds to balance the books and the lack of a long-term financial settlement for social care.”


She adds a warning: “The NAO’s report is a stark reminder of the very fragile financial state of the NHS. Government now needs to heed these warning and put in place concrete plans to address staff shortages, invest in buildings and equipment and support social care and public health.” 


Saffron Cordery, Deputy Chief Executive of NHS Providers says the NAO’s conclusions mirror its own and support what is has been calling for through its ‘Rebuild the NHS’ campaign. “We will continue to call for the government to make significant changes to the capital strategy as the current system of bidding, prioritisation, allocation and approval desperately needs to change.”  


Key Facts:

• £4.3bn was transferred from the capital to revenue budget between 2014-15 and 2018-19

• £6.5bn estimated total backlog maintenance, with £1.1bn of this high-risk, reported at October 2019

• £1.7bn difference between the capital spending plans of NHS Trusts and Foundation Trusts and the available capital budget at the start of 2019-20

• 20% minimum reduction requested by NHS England and NHS Improvement in the revised capital spending plans of NHS providers in July 2019 before additional funds were announced in August

• 99% increase in the funds raised from the sale of assets between 2016-17 and 2018-19

• £600m remaining gap between NHS providers’ original capital spending plans and their capital budget for 2019-20 following the announcement of additional funding.


Download the reports here:

NHS financial management and sustainability

Review of capital expenditure in the NHS