News / NAO: new hospital programme is failing to deliver value for money

The government’s new hospital programme will miss its target to build 40 hospitals by 2030, has not delivered value for money so far and faces substantial risks, including building hospitals that are too small and incurring cost increases, according to the National Audit Office.

The influential audit body’s report – Progress with the new hospital programme – said that the programme, launched in 2020, had made slow progress in its first three years. Just three of eight schemes in cohort 1 – not originally counted in the 40-hospital pledge as they were already in construction or pending full approval – had opened or part opened by June 2023. This compared with an expectation of five. For cohort 2, the programme had expected all 10 schemes to be entering construction between 2022 and 2024. By May this year, no building had started.

The forecast costs for schemes in cohorts 1 and 2 have also increased by 41% over the three years – adding about £1.3bn to the forecast costs. The cost increases have been due to higher-than-expected inflation and under-estimation of costs by some trusts. The Department of Health and Social Care had also not budgeted for essential elements of two schemes. Some of the additional £400m cost will need to be funded from existing allocations, reducing contingency funds and the funding available for preconstruction works on cohorts 3 and 4.

The finance watchdog also highlighted the initial uncertainty over capital funding that would be available beyond 2025/26. The initial allocation by the Treasury to the scheme of £3.7bn up to 2024/25 was the bottom end of the figure requested by the Department. And it was not until March this year that agreement was reached on further funding of £18.5bn for the period 2025/26 to 2030/31, although this remains subject to future spending reviews.

And the decision to provide limited funding for the first four years meant that most of the larger schemes in the programme would need to be delivered towards the end of the decade. The NAO said this approach would lead to many schemes being under construction at the same time, making it harder to find builders and potentially increasing costs.

The recent funding announcement also marked a fundamental reshaping of the NHP. Five new hospitals that need to be rebuilt because of major problems due to reinforced autoclaved aerated concrete have been added to the programme. But eight cohort 4 schemes have been delayed until the 2030s. And a further eight hospitals that were originally intended to make up a cohort 5 have not been given the go-ahead.

 ‘The programme has innovative plans to standardise hospital construction, delivering efficiencies and quality improvements,’ said Gareth Davies (pictured), the head of the NAO. ‘However, by the definition the government used in 2020, it will now deliver 32 rather than 40 new hospitals by 2030.’

He added that there were important lessons to be drawn from the experience so far. ‘These include strengthening the business case process to improve confidence on affordability and delivery dates, and improving transparency for key decisions,’ he said. The audit body has made a number of recommendations (see box).

The report also raised concerns about the standardised hospital design, known as Hospital 2.0, that is being developed to reduce costs and building times. It highlighted NHP assessments that it may take until May 2024 to complete the development of a standard hospital, which was crucial for progressing schemes in cohort three and beyond. It also said there was a risk that the minimum viable product version of Hospital 2.0, which the programme is considering, would result in hospitals that are too small, as it relies on challenging assumptions about the shift of care into the community and about bed occupancy.

Meg Hillier, chair of the Public Accounts Committee said the report showed the government’s ‘woeful lack of progress against its commitment to build 40 new hospitals by 2030’. ‘It has failed to even begin construction on any of the new hospitals in its second cohort, which it thought were quick wins,’ she said. While the Department was ‘trying to move the goalposts’ to claim it had met its target, patients and clinicians would have to wait much longer than expected for their new hospitals.

And trusts’ representative body NHS Providers said the government could have managed expectations better. ‘The costs of delayed NHP schemes have spiralled due to high inflation,’ said Julian Hartley, the organisation’s chief executive. ‘Many trusts in the NHP are deeply disappointed that their building plans won’t be delivered before 2030 and many more trusts were disappointed not to be offered funding at all. The government could have better managed expectations about the funding available, given the uncertainty involved and the impact of inflation.’

Sir Julian called on the government to ‘overhaul ageing NHS estate’ with too many NHS buildings and facilities ‘falling apart’.

Nigel Edwards, chief executive of the Nuffield Trust said it was extremely unlikely that ministers will meet their target of completing the programme by 2030 and the report had added ‘even more doubt’. ‘The programme has come after a lost decade of investment in hospital buildings in England. If the money being committed now had been invested a decade ago, there is no doubt that the NHS would be in a far better position,’ he said.

NAO recommendations