Revised delegated limits set in updated capital guidance

The guidance from NHS England – Capital investment and property business case approval guidance for NHS trusts and foundation trusts ­– sets the delegated limit for trusts and foundation trusts in financial distress at £25m. This is an increase in the £15m delegated limit set in previous guidance dating back to 2016.

Foundation trusts not in financial distress have been set a delegated limit of £50m. For self-financed digital capital schemes, the limits for trusts or foundation trusts in financial distress are £25m in capital cost or £30m in total whole-life costs. The limits are £30m in both cases for foundation trusts not in financial distress.

For schemes above the relevant delegated limits, approval is needed from the NHS England and Department of Health and Social Care Joint Investment Sub-Committee (JISC). In addition, Treasury approval is needed for all schemes over £50m. The only exceptions to this are electronic patient record schemes funded from the central frontline digitisation programme.

According to the guidance, the changes aim to strike the right balance between ‘allowing NHS trusts and foundation trusts the freedom to manage their own capital investment up to an agreed threshold and ensuring there is sufficient governance and assurance for the approval of capital investments’. They also support the need to prioritise good value-for-money investments within the capital departmental expenditure limit (CDEL) set by the Treasury.

For self-funded schemes, this should enable providers to approve more capital locally, reducing delays in the completion of schemes

Trusts and foundation trusts in financial distress have been advised not to incur expenditure other than essential fees until the full business case has been approved, unless specific agreement is reached beforehand with NHS England. Until this approval is given, all costs will be incurred at the trust’s own risk and the trust must ensure it has a secured funding source and CDEL cover for it. Trusts should not assume any additional capital resource limit cover for such costs. 

All providers capital spending must be within system capital envelopes. And foundation trusts this year are being given notional capital resource limits as an additional protection to ensure overall capital spending across England does not bust the Department’s CDEL (see Guidance sets out how FT capital resource limits will work).

For national programmes including those supported by the targeted investment fund and reinforced autoclaved aerated concrete (RAAC) funding, different rules apply. For schemes below £5m, a programme of works and financial information will be required for national approval. For schemes up to £25m, a single short form business case will be needed. The aim is to allow schemes to move through te approvals process quicker and deliver schemes within the expected timeframes.

For developments up to £50m, trusts will need to submit both outline and full business cases. The Treasury will again get involved for approving schemes over £50m.

Under the new financial reporting standard for leases (IFRS 16), new leases and lease amendments will now score against capital budgets. Providers will need to seek business case approval if any business case including lease expenditure exceed the delegated limits. For leases of property, plant and equipment and building, it is the capital element of the whole-life cost payable under the contract that is compared to the delegated limit. The contractual term is the relevant period to calculate the whole-life cost.

For all leases, providers are advised that the business cases should include confirmation of the accounting treatment and there will need to be sufficient cover within system operational capital envelopes before deals are signed.