Squeezed budgets, leaky roofs and rationing: views of NHS finance officers on limited capital budgets

By Iestyn Williams (Director of Research, HSMC)

Fixing leaky roofs, servicing ageing scanners and updating antique IT systems – the maintenance of capital infrastructure in the NHS isn’t the most enthralling of topics, and it’s generally only talked about when things start to go wrong. However, recent warnings about the lack of NHS capital investment and controls on capital spending by trusts have put this issue very much in the spotlight.

At a national level, we know that for some time now, money has been diverted towards the day-to-day costs of health care and away from capital budgets, leaving them severely squeezed. However, less is known about what this means for the trusts affected and the services they provide. We tried to find out more by speaking to finance directors at NHS trusts across England.

Squeezed to breaking point?

The trusts involved in our study were clearly feeling the financial pinch. In itself, this is nothing new. For example, taking out loans to pay for new IT systems or delaying the overhaul of outdated estates are commonplace. However, when basic maintenance work starts to be repeatedly postponed, the concerns voiced become a little more insistent. This was the tone of many of our interviews. We were struck by the prominence of the word ‘crisis’ – one not used lightly by seasoned finance personnel.

Rationing

The squeeze on budgets has necessitated tough decisions about what to fund and what not to fund, and in what order. As a result, all but the most urgent of capital plans were frequently being abandoned or at least put on hold.  In many cases, considerations around efficiency and improvement have been crowded out by more immediate concerns over safety and service viability. However, while this has mitigated the short term impacts on patients and services, finance directors frequently lamented the potential long-term harm. In short, organisations were engaged in reactive rationing, rather than proactive priority setting.

Navigating the system

Interviewees described a much-changed environment in which sources of funding they had previously used for major capital projects were increasingly unavailable. Many trusts have found themselves unable to generate revenues to pay for capital projects, and were frustrated by the central financial controls imposed upon them. Others argued that the process for applying for centrally held NHS funds, including through partnerships arrangements such as STPs, was increasingly complex and inaccessible. Opportunism – for example, in the form of asset sales and charitable fund raising – offered only a partial solution to those trusts with access to these options.

All these factors are building towards something of a ‘perfect storm’, in which incremental neglect tips over into significant and costly malfunction, and opportunities for strategic renewal and improvement are being squandered. Many interviewees identified ways that their trusts could better manage their capital investment programme, but these were eclipsed by the near-universal call for increased funding and a relaxation of central controls.

Read the full research paper, published today.

The Health Foundation has also published a new report today, Failing to capitalise: Capital spending in the NHS.

This blog has also been published on the Health Foundation website.