A new approach to capital investment

Reforming the capital regime

NHS leaders have strongly welcomed the 10YHP’s proposal to introduce multi-year capital budgets, providing greater certainty over their capital allocations over the next five years. This will enable them to plan their capital expenditure for the foreseeable future and ensure capital projects can be prioritised and sequenced more effectively. However, they also stressed that multi-year capital allocations will only go some way to resolving issues with the capital regime, most notably the requirement for capital to be spent in-year. 

While providing greater certainty over future budgets is a positive step, the inability to carry over capital funding between years creates pressure to ensure available capital funding is spent in-year. Slow or late business case approvals or supply chain delays can often force organisations to delay schemes into the following financial year, risking capital funding being wasted should it remain unspent by year-end. To give organisations more confidence to plan schemes across financial years and make capital investment more efficient, the government should consider introducing a mechanism to support the carry-over of capital funding between financial years. 

The 10YHP also proposed further devolving capital budgets and decision-making to providers. Local NHS leaders have long maintained that they are best placed to understand the needs of their estate as well as their organisation’s operational priorities. Therefore, most have strongly welcomed the proposals to devolve more control over capital allocations to providers. The new capital allocation formula due to take effect from 2026/27 will therefore need to ensure a fair distribution of capital funding for organisations of all sizes, protect investment for under-resourced services and ensure that no part of the system is left behind as autonomy increases. It will also be essential that any revised approach to capital investment maintains a system-wide approach to strategic planning and drives more integrated estate development, ensuring capital is channelled into projects that provide the best possible value for taxpayers’ money and are not constrained by organisational siloes. Without this, devolution risks reinforcing existing inequalities in access to capital rather than levelling them.

Recommendation: The government must commit to further reforms of the capital regime to enable organisations to maximise the benefits of multi-year capital allocations and provide sufficient flexibility to manage capital across financial years, while ensuring that devolved decision-making is underpinned by safeguards that protect equity across the system.

The return of public-private partnerships and a new national capital investment strategy

The 10YHP also signalled a revived willingness across government to explore the feasibility of launching new public-private partnerships as part of the approach to expanding capital investment. While organisations are supportive of opening alternative routes to strategic capital funding, they are also clear that any return to using public-private partnership models should be approached with some degree of caution. Previous experience with private finance initiative (PFI) schemes highlighted how poorly designed partnership models can create long-term affordability risks, reduce flexibility and constrain service development (NHS Confederation, 2025b). Any new model must be affordable and align with the long-term needs of the health service. 

The NHS Neighbourhood Rebuild Programme will be an important yardstick to determine whether the lessons from previous PFI regimes have been learned and projects represent good value for money. NHS leaders would welcome the government setting out a clear and consistent approach to follow should they wish to explore alternative third-party finance models and provide them with the support they need to ensure such arrangements remain consistent with accounting rules. While NHS leaders are open to exploring new public-private partnership models, they are clear that such models should complement, rather than seek to replace, a properly funded public capital regime. 

NHS leaders also stressed that any future use of alternative financing models would only be effective if set within a clearer national framework for capital investment. At present, capital decisions are fragmented across local schemes and nationally ringfenced programmes, with no overarching strategy to guide how different types of facilities should be configured, how investment should be prioritised, or how the estate should evolve to support the neighbourhood-based model of care envisaged by the 10YHP. This risks new capital investment (whether publicly funded or delivered through partnership models) being developed in isolation rather than contributing to a coherent, future-proofed vision for the wider NHS estate.

The Fuller Stocktake encouraged integrated care systems to adopt a ‘one public estate’ approach to further integrate services and make the best use of existing the NHS estate and wider community assets.  Increasingly, we hear from primary care leaders that this vision has not materialised. They continue to be constrained by factors such as outdated premises costs directions (PCDs), which incentivise siloed ways of working and make it more difficult for GPs to share premises and resources. Primary care leaders consistently highlight that pooling capital at a local level remains unnecessarily complex. Bringing together developer contributions, funding from partner organisations such as NHS trusts, the General Practice Utilisation and Modernisation Fund (UMF), and more recently funding allocated for neighbourhood health centres, is often cumbersome and challenging to navigate.

There is a growing consensus that a simpler mechanism is needed to enable organisations to pool funding, share risk and establish sustainable arrangements for the long-term ownership, management and operation of new facilities.

A comprehensive capital strategy would provide the long-term direction, prioritisation criteria and financing models needed to ensure that all capital programmes, including any new partnership approaches, align with national objectives, support multi-year capital planning, and enable the NHS to modernise its estate in line with the ambitions set out in the 10YHP. Any strategy should also provide clarity on the roles and responsibilities of all parts of the system to support strategic estate planning.

Recommendation: We would encourage the government to commit to reviewing the use of new public-private partnership models at an early stage to determine their viability, and should these be successful, consider expanding their use for larger schemes. We also recommend that the government should publish a comprehensive national capital strategy that provides a clear long-term vision for how the NHS estate will need to adapt to accommodate new models of care and respond to the demands of the future.