Deciphering NHS funding in the Budget

Politicos expect government budgets to contain a few surprises, and Philip Hammond’s Spring Budget was no exception. Despite beliefs social care would be the only beneficiary of additional government funding, the Chancellor produced an announcement on NHS funding, concentrated around supporting Sustainability and Transformation Plans (STPs). The announcement has three prongs to it, all relating to capital investment,  and it’s worth interrogating each of these in turn.

Before going into the funding allocations, it’s worth explaining that capital investment funds healthcare infrastructure, including new buildings for healthcare to be in and technology to support the delivery of care. The Department of Health has an annual capital allocation of £4.8 billion for each financial year between 2016/17 and 2020/21, with the intention that this is invested in new medical premises, digitising patient records, etc. This funding is needed to keep up to date with modern ways of working in the NHS, and to ensure doctors and patients are housed in safe, contemporary facilities.

However, the well-documented financial struggles of the NHS have resulted in portions of this £4.8 billion being shifted to other areas of the NHS (the revenue budget): £950 million was moved during 2015/16, £1.2 billion was moved during this financial year, and further transfers are anticipated of £1 billion in 2017/18, £500 million in 2018/19 and £250 million in 2019/20. The Public Accounts Committee’s recent report on the financial sustainability of the NHS strongly criticised this and branded it a risk to the NHS’s future performance.

Each Sustainability and Transformation Plan (STP) footprint across England has estimated how much capital they will require to successfully deliver their ambitions, and the BMA thinks it comes to an eye-watering £9.5 billion. Numerous STPs have warned that uncertainty around capital investment could jeopardise plans, as they’ll be unable to forecast how reformed services will deliver new models of care closer to the community. Given DH’s recognition that capital raids are likely to continue over the coming years, healthcare leaders are understandably concerned that the STP process could be thrown off course if the numbers around capital investment don’t start to add up soon.

So, will the Budget announcement alleviate concerns? The Chancellor has announced three components of capital funding to support STPs. Firstly, £325 million of capital funding will be allocated to STPs over the next three years “where there is the strongest case to deliver real improvements for patients and to ensure a sustainable financial position for the health service.” Second, an extra £100 million will go straight to A&E departments to fund new ways to assess patients when they arrive at department, to understand whether they should be treated there or somewhere else, potentially at an on-site GP surgery. And a multi-year capital expenditure programme will be announced in the autumn, which will be subject to “rigorous value for money tests”.

The Shadow Health Secretary Jonathan Ashworth pointed out that this capital funding is nowhere near what is estimated as needed to deliver STPs. It is right that it is a drop in the ocean compared with the level of investment the whole NHS needs, but the Government’s logic is sound. To date the STP process has been rushed, and if reforms are to be meaningful and effective they need to be thought through. In this fiscal climate, projects must demonstrate value for investment.

What matters now is how the Government classifies a “well-developed STP” with a “strong case” for delivering service improvements. The terminology around this has been vague, and there will be an expectation on DH and NHSE to produce a quantifiable evaluation. It would be wise for NHS England’s Five Year Forward View delivery plan – due to be published at the end of March – to address how “strong” STPs will be chosen to receive this funding. Critically though, this shouldn’t be entirely dependent on a footprint’s financial performance, as has been suggested before: penalising a footprint for its financial difficulties, by refusing to award them funding to improve services, is illogical.