NHS capital expenditure and financial management Contents

Conclusions and recommendations

1.The NHS had not made the transformation required to meet rising demand before the COVID-19 pandemic. We have reported on the financial and service sustainability of NHS bodies every year since 2011, and have consistently highlighted a range of challenges faced by the NHS, including rising demand, lack of capital investment, tackling trust deficits and workforce issues. The NHS has failed to get a grip on these challenges. The NHS did not achieve the vision of its last long-term plan, the Five-Year Forward View for the five years to 2020–21 including moving more care out of hospitals. This plan was superseded by the NHS Long Term Plan in 2019. Although the NHS delivered increased activity in 2018–19, patient waiting times continued to slip and variations in financial performance continued to grow.

2.In addition, a lack of clarity persists on key areas of health and care spending that are likely to affect the NHS’s ability to deliver the Plan, including capital, education and training and social care. Even before the COVID-19 crisis, there were concerns that the NHS may struggle to deliver all its commitments in the Plan with the additional money available. In response to the crisis, NHSE&I suspended the implementation of the Plan and temporary changes to existing payment mechanisms for trusts. These changes have resulted in a shift from the earlier move towards more local devolved control, back to a command and control system coordinated by national bodies. Stakeholders tell us that this has helped to improve decision-making in many areas of working. It is unclear how this will develop and what impact this will have on local trusts, but NHSE&I thinks it unlikely that it will fully go back to the previous regime after the crisis.

Recommendation: To ensure a sustainable NHS, the Department and NHSE&I should review how it directs its support to the most challenged parts of the NHS and how this will support a coherent plan to return to normal services and service improvements after the COVID-19 peak. This includes continuing to take on board our previous recommendations and the current ones in this report on improving financial and service sustainability across the NHS. The Department and NHSE&I should write to us by December 2020 to update us on its progress in this regard.

3.Writing off the loans owed by struggling trusts does not solve the underlying problems facing these NHS bodies. We are concerned that the trust sector has not been in surplus since 2012–13. Despite increased one-off support from national bodies, trusts were unable to contain their combined deficit to NHSE&I’s ambition for 2018–19. 106 out of 227 trusts reported a deficit, and variation in the financial performance of trusts grew. The 10 trusts with the worst financial results reported a combined deficit of £844 million, up from £758 million in 2017–18. Struggling trusts are increasingly dependent on short-term measures to meet financial targets, including loans issued by the Department to pay for their day-to-day services. In April 2020, the Department announced that it would be writing off £13.4 billion of loans owed by trusts and replacing this with non-repayable public dividend capital. However, writing off loans itself does not tackle the underlying deficits of these trusts, and is not a substitute for a sustainable system of proper funding. National bodies do not yet seem to fully understand what is driving the deficits of these trusts and failed to outline how they will support those trusts most in deficit to become sustainable. Uncertainties around demand and service requirements going forward will put additional strain on the system, but COVID-19 should not be used as an excuse not to address underlying problems.

Recommendation: NHSE&I should set out a plan with a timetable of steps aimed at getting the 10 most financially distressed trusts back to financial balance and report back to the Committee on that plan by December 2020.

4.Access to health services has reduced substantially, creating backlogs that will need to be addressed. For several years now this Committee has been reporting on the increasingly poor performance against waiting times standards for A&E and cancer, and the growing waiting lists for elective treatments. To respond to COVID-19, the NHS was told by NHSE&I to suspend elective activity to free up capacity, which will inevitably add even more pressure to waiting lists. Fewer people have been using A&E services, despite NHSE&I encouraging people who should use them to do so. This means that patients in need of urgent care may not be accessing it on a timely basis, creating further demand for services in future. NHSE&I has asked local health systems to step up non-COVID-19 urgent services and consider options to resume non-urgent care. However, there is uncertainty about what capacity is required to deliver services during and following the pandemic, and how this should be allocated. The initial financial arrangements for trusts during the COVID crisis were for the period April to July 2020. Trusts will need guidance and potential financial support to plan beyond the summer and respond to winter pressures, as they are also being required to retain spare capacity for future surges in COVID-19 cases.

Recommendation: NHSE&I should clearly set out and communicate to the public the range and extent of health services that will be available, what patients can expect in terms of access and waiting times, and what it is doing to encourage patients to access services when they need to.

5.The NHS has still not published a capital funding strategy to support the NHS Long Term Plan. The Department had planned to announce its capital strategy to support the Plan in the autumn 2019 Spending Review. However, a one-year spending round was delivered given the government’s focus on exiting the EU, with a full spending review postponed to 2020. At October 2019, trusts reported an estimated total backlog maintenance cost to restore their estate to an appropriate standard of £6.5 billion, of which £1.1 billion was high-risk, indicating that not doing the maintenance meant an increased risk of harm to patients. NHSE&I recognises the issue of the growing backlog and accepts that improved capital investment is vital. In October 2019, the Department published the Health Infrastructure Plan which announced 40 new hospital projects and associated funding. During the COVID-19 crisis, implementation of the NHS Long Term Plan was halted and capital expenditure requests from trusts were required to be clearly linked to delivery of the COVID-19 response. The crisis has also demonstrated the potential of, and the need to, invest further in IT and digital services.

Recommendation: The Department and NHSE&I should identify a capital strategy and provide clear guidance to local partnerships, that supports the NHS Long Term Plan, including expectations on how backlog maintenance costs will be addressed alongside competing priorities for digital investment and the Health Infrastructure Programme.

6.NHSE&I has yet to publish its long-awaited ‘people plan’ and there is a continued lack of long-term investment in people and training, which is not helped by the lack of alignment across the Department, NHSE&I and Health Education England. The people plan, intended to be published in 2019 to support the NHS Long Term Plan has been repeatedly delayed, and only an interim, non-costed plan has been published. The delayed people plan has now been put on hold again by the COVID-19 crisis. We remain concerned by the 40,000 nursing vacancies and 9,000 vacancies for medical staff in the NHS. Local NHS bodies have also reported that staffing shortages are one of the biggest risks to delivering the long-term plan. NHSE&I tells us that responsibilities and funding for workforce planning and training are spread across several bodies including the Department, NHSE&I, Health Education England and universities. Although it states that these bodies now have an “aligned view as to what now is needed on workforce support and growth”, we are not convinced that the current system will work effectively without a clear line of accountability.

Recommendation: The Department should review the effectiveness of having a separate body overseeing the planning and supply of the NHS’s future workforce. NHSE&I should work with Health Education England to evaluate how workforce planning can be improved including the integration of training and education funding models with service planning and delivery in order to overcome persistent challenges. The Department, NHSE&I and Health Education England should write to the Committee by December 2020 to update us on progress in this regard.

7.We are extremely concerned by the widely reported shortages of personal protective equipment (PPE) faced by NHS and care workers during the COVID-19 pandemic. There have been numerous reports of the lack of PPE for clinical and social care staff during the crisis. The Department says that nationally it never ran out PPE stock, but that COVID-19 had put supply chains and distribution networks under unprecedented strain. It tells us that this required substantial changes to how the system managed distribution and posed great challenges getting the available equipment to the right place at the right time. The Department says that it buys the vast majority of its PPE on international markets and will continue to do so. Although the Department says it is committed to building up stocks to meet longer-term demand, we were not convinced that it was treating the matter with sufficient urgency. In particular, the governance arrangements to procure and distribute PPE across health and social care remain unclear and uncertainty prevails around future provision of local PPE across the health and social care sectors. It is absolutely vital that the same problems do not happen again in the event of a second wave.

Recommendation: The Department should write to the Committee within two months to clarify its governance arrangements and outline at what point in the future it expects to have a predictable supply of stock and ready access to PPE supply within the NHS and care sectors. This should include detail on the roles and responsibilities for the procurement and distribution of personal protective equipment across NHS and social care settings.

Published: 8 July 2020