Capital efficiency: how to reform healthcare capital spending

The NHS capital regime is broken. It does not support most efficient spending of the limited healthcare capital spending available. Improving efficiency of capital investment can boost NHS productivity and support economic growth. 

Drawing on engagement with NHS Confederation members, this report makes proposals for how the NHS capital regime can be improved to deliver on the government’s missions for health and economic growth. It sets out 16 practical recommendations across five areas to make the system work better. 

1. Streamline approvals and devolve more decision-making to system level. The capital approval process moves too slowly and involves too many overlapping actors. Interpretation and application of approval criteria often varies at different layers in the process and stops investment from funding the most pressing local needs. Combined, this adds cost and unnecessary complexity, and, at its most extreme, makes otherwise viable schemes unworkable. 

2. Deliver longer-term funding and planning cycles with more flexibility on capital spending limits. In recent years capital allocations have been as short as one year. Too often, national funding is allocated late in the year, delivering poor taxpayer value for money. Short-term allocation of planning cycles hampers leaders’ ability to plan strategically and have certainty over what they can deliver, particularly when it comes to long-term, complex and costly projects. 

3. Devolve capacity and capability to local systems to manage budgets and existing assets and greater control over the assets in their footprint. Local systems need sufficient management capacity (whether this sits in ICB or providers) to identify assets for recycling and then to go through the process of closing and selling them. The current set up does not allow this. 

4. Improve cross-boundary capital flows to allow better and more efficient capital movement across ICS boundaries. Ensuring capital investment follows patient flows across system boundaries is a longstanding challenge. While not an easy issue to fix, there are changes that could be made that would begin to make cross-capital flows work better.

5. Enable systems to raise private investment to meet the 2 per cent annual productivity challenge set out in NHS England’s long-term workforce plan. For decades we have consistently invested less than half as much as our OECD peers. Changing national policy and guidance to allow new routes for private investment and supporting an attractive investment market can help meet the productivity challenge and fill the existing gap in capital funding.  

The 16 recommendations in this report should be incorporated into the Department of Health and Social Care’s ten-year health plan and the Treasury’s forthcoming ten-year infrastructure strategy.