Comment / False economy

Current discussion around the NHS appears to be preoccupied with two things in particular – productivity and capital funding. In reality, the two issues are completely intertwined.

No-one can be in any doubt about the difficult financial position that the NHS is in right now. NHS England acknowledged ‘significant financial challenges’ in its November letter announcing an £800m increase in system allocations to contribute towards the costs of this year’s strike action. 

Welsh health minister Eluned Morgan went further in unveiling the £460m boost to local health boards, alongside a requirement to reduce original planned deficits by 10%. ‘The NHS in Wales, like other healthcare systems, is facing the most challenging financial pressure in recent history,’ she said.

The allocations are very welcome. But no-one is under any illusion that it solves the financial problems. Difficult decisions are having to be taken across England, Wales and the whole of the UK to keep spending within departmental budgets. 

There was no further boost for health in the autumn statement to acknowledge the way inflation has eaten into health systems’ purchasing power.

So, the focus has turned to productivity – getting more activity for the same resources. As HFMA president Claire Wilson argues in her comment, getting a real understanding of how productivity has changed is vital in keeping staff engaged in the transformation challenges that lie ahead. 

There are opportunities to improve productivity, but we also need to ensure that productivity measures capture new ways of working. However, NHS systems cannot simply magic up improved productivity. Old buildings and equipment are a significant barrier to more efficient ways of working. 

A report from the NHS Confederation in November said that the biggest reason for poor UK healthcare productivity over the past 25 years – averaging a ‘mere 0.9%’ – was lower capital investment than other healthcare systems internationally and other industries domestically. 

Simply put, ‘staff find it harder to work when buildings are outdated and IT systems do not work’. 

The confederation is not alone in identifying insufficient capital as a major obstacle to improved productivity – leading to downtime of machinery and clinical space and typically requiring more staff. The National Audit Office has also highlighted the clear links in a number of reports about NHS capital.

The confederation’s call for the capital budget to be almost doubled in the three years of the next spending review sounds like an unrealistic demand. But it argues that this needs to be seen in the context of a decade and a half of underinvestment and where capital budgets have in fact been plundered to support the revenue position. And in the context of £161bn revenue spend, a capital increase of £6.4bn appears modest.

Capital investment needs to be prioritised by whichever government is in power following the next general election. The new hospital programme (NHP) has been slow to get going. If it delivers and leads to the promised rolling programme of major schemes, it will be a good step forward after a decade of limited major building projects. 

But with backlog maintenance of more than £10bn across England, and systems having major redevelopment schemes that go far beyond the lucky few in the NHP, increasing capital spending is a no-brainer.

Limiting capital expenditure is simply a false economy. And addressing this issue could actually help to deliver the financially sustainable health service that everyone aspires to.