The ambitious aims of the NHS Long Term Plan to transform services and patient care are looking like so much ‘pie in the sky’ without significant commitment to capital funding in the 2019 Spending Review, according to analysis in a briefing by the Health Foundation.
The briefing: ‘Failing to capitalise’ examines capital spending in the NHS and exposes the significant and growing gaps in capital expenditure since 2010/11. It analyses capital funding in comparison with other OECD (Organisation for Economic Co-operation and Development) countries; spending by Trusts; capital trends; the impact of capital spending on productivity; and backlog maintenance.
Capital spending
Since 2010/11 capital spending by the DHSC has declined in real terms – from £5.8bn to £5.3bn in 2017/18, a fall of 7%. UK capital spending on healthcare is now at the low end of the average for other comparable countries.
Capital-to-revenue transfers* are a contributing factor but even without this trend the original capital spending plans were still low. “For the UK to move up to the average for OECD countries, capital spending would have to almost double as a share of total health spending.”
“We estimate the cost of bringing England up to the OECD average of capital spending as a share of GDP in 2019/20 would require capital funding of £9.5bn, which is an additional £3.5bn (58%) on the 2018/19 capital budget. The autumn 2018 budget has planned for a £6.6bn capital budget for 2019/20.”
The report raises concerns about the number of scanners as an example of the inability of Trusts to afford modern technology. The UK lags far behind other countries in the number of MRI and CT scanners per capita. To bring the NHS up to the OECD average for MRI and CT scanners would in itself cost approximately £1.5bn.
Since 2010/11 spending on plant and machinery has fallen by 13%.
“It is unrealistic to expect the NHS to be a world leader in health technology when its capital spending on health care is much lower than in comparable countries, only a very small proportion of this is spent on IT and spending on plant and machinery is declining.”
The current capital budget will be insufficient for the vision of a world-leading and data-driven health and social care system to be realised.
“Without increased capital funding there is a risk that NHS Trusts will be unable to plan for the transformation of services set out in the NHS Long Term Plan and ongoing maintenance issues could risk the quality and safety of patient care.”
Asset sales
In 2017/18 the highest value of asset sales ever was recorded – at £417m – more than double some of the earlier years recorded since 2010/11.
“While the government has committed to proceeds from sales being reinvested, this is not always the case, and in 2017/18 almost two-thirds of the proceeds from land sales went into the revenue, rather than capital, budget.”
As the labour force has increased capital spending overall and per worker have fallen significantly. This ‘capital thinning’ is a negative contributor to productivity, because workers are more efficient when they have more capital (for example, machines).
At the same time as sales of NHS capital have hit an all time high, in 2017/18, the lowest level of capital per worker was recorded, 17% lower than in 2010/11, with the fall for plant and machinery per worker even higher, at 28% in real terms.
The Health Foundation’s research reveals many Trusts are finding capital-funding constraints as a direct negative impact on their ability to deliver optimal care, with staff productivity also impacted through equipment shortages and failure. The research also identifies the built environment as having negative effects on patient care and safety.
“While the government has committed to a more technologically driven NHS, buildings should also be a focus for improving productivity in hospitals.”
Maintenance backlog
It is critical that funding be focused on addressing the growing backlog, which in 2017/18 exceeded £6bn.
“The backlog is now larger than the annual DHSC capital budget and the value of the ‘high’ and ‘significant’ risk backlogs combined - £3.1bn – is similar to the total annual capital spending in all Trusts.”
In 2017/18 the sum of £412m spent on reducing the maintenance backlog, whilst it represents an increase of 23% on 2016/17 is well below the level required to reduce, or even stabilise the backlog. “Investment would have needed to be 76% (£314m) higher in 2017/18 for the backlog to remain at the same level as in 2016/17.”
As the occupied floor area has not increased in 2010/11 the rise in backlog is not driven by an increase in size but by more backlog per square metre.
Furthermore, the acute and specialist sector represents nearly all of the recent increases and 93% of the backlog in 2017/18. “At current levels of investment, the backlog as it stands would take about 15 years to pay off and eight years just to pay off the ‘high’ and ‘significant’ risk portions. Investment would have to rise by about three-quarters just to keep the current backlog at the same level going forward.”
As with overall capital spending, capital-to-revenue transfers is only a contributing factor to the growth in maintenance backlog. The research shows that the backlog has risen due to lack of spending in areas such as regular maintenance. It advises that allocating both capital and revenue funds will be necessary to tackle this problem, depending on the type of maintenance needed.
“Additional funding and a more robust policy for managing maintenance is required to address an issue that cannot be delayed – it will only create additional and more severe problems in future years if the trends of the last four years continue.”
The research also analysed the ability of Trusts to reduce their maintenance backlog. As only one quarter of Trusts invested more than 20% of the value of their backlog in addressing it, the conclusion is that most Trusts lack sufficient capital to invest in it. The issue this highlights is that as backlog maintenance increases there isn’t an associated increase in investment to reduce it.
We are now awaiting the 2019 Spending Review, which, this report stresses, needs to set out a plan for capital investment in the NHS and management of the maintenance backlog.
Conclusions
“Without a significant increase in the capital budget, NHS Trusts will not be able to invest in modern technology, improve buildings and address the current and growing maintenance backlog. But any new investment needs to be carefully managed, and it is important to examine both successes and failures in recent times. Implementing large-scale investments in the NHS at a time of unprecedented demand on services is extremely challenging, and large-scale digital changes in the NHS do not have a successful track record.”
* The DHSC is to stop the practice of capital-to-revenue transfers by the end of 2019/20.
Click here to download the full report.
