We trawl the Government’s newly-released 10-Year Health Plan to gauge the likely impact on the NHS estate

 

Earlier this month the Government unveiled its long-awaited 10-Year Health Plan for England, a 168-page document which sets out proposals to reinvent the NHS through three radical shifts: hospital to community, analogue to digital, and sickness to prevention.

And it recognises the role the estate has to play in these aims, with plans to redevelop existing facilities, build new infrastructure, and work more closely with the private sector moving forward.

In particular, the pledge to establish a new network of ‘neighbourhood health centres’ (NHCs) in every community will require significant capital investment.

The plan states: “We need an estate that provides neighbourhood teams with the equipment, working space, and technology they need to make our new care model a reality.

“Wherever possible, we will maximise value for money by repurposing poorly-used existing NHS and public sector estate.

“The ambitious proposals will require significant and strategic capital investment to drive improvements in patient care and productivity.

“We will deliver this against a historical backdrop of significant under-investment in capital for the health service.”

Ringfencing budgets

While capital investment in the healthcare estate increased substantially during the 2000s, the 2010s saw a period of significant divestment from capital – as budgets were redirected to subsidise day-to-day spending.

According to the plan, this has ‘undermined productivity’.

It states: “What is more, this under investment has been compounded by a capital regime which has widely been described as dysfunctional, with the National Audit Office concluding that it ‘made it difficult to plan and acted as a barrier to investment’.

The ambitious proposals will require significant and strategic capital investment to drive improvements in patient care and productivity

“One of the clearest signs of a broken capital regime is an NHS that regularly underspends its capital budget, despite having too little to begin with.

“As a result, problems have been stored up for the future and the NHS in 2025 has crumbling buildings, with care disrupted at 13 hospitals a day as a result.”

Ageing stock

Currently, some 44% of hospitals pre-date the creation of the internet in 1983 and 11% of the estate is older than the NHS itself.

In addition, much of the primary care estate is not fit for modern requirements, with 22% of primary care buildings pre-dating the foundation of the NHS and many of which are housed in converted residential properties.

The plan states: “We have already begun to tackle these problems through record levels of capital investment into the NHS.

“We have boosted the capital budget by £3.1bn from financial year 2023 to 2024 to financial year 2025 to 2026 and invested more than £2bn in technology and digital to support higher-quality and productive care.

One of the clearest signs of a broken capital regime is an NHS that regularly underspends its capital budget, despite having too little to begin with

“We have also put in place a credible plan for the New Hospital Programme, representing tens of billions of pounds of investment that will support our construction industry.

“Our 10 Year Infrastructure Strategy takes a long-term approach and for the first time integrates health and social infrastructure alongside economic infrastructure.

Greater certainty

“We have committed to five-year capital budgets and to extending them every two years at regular spending reviews to avoid funding ‘cliff edges’ and to provide greater certainty.”

The plan outlines key capital spending changes:

• The introduction of multi-year capital budgets, set on a rolling five-year basis in line with wider government capital allocations. Allocations will be set up to 2029-2030
• Reforms published in the 10 Year Infrastructure Strategy are designed to give greater certainty to the NHS and industry on projects and programmes across the country and allow better co-ordination of industry and supply chains across government
• Devolving more control over capital budgets to the frontline, with fewer restrictions on what providers can spend their capital on and greater flexibility to spend funding between financial years
• Radically streamlining the capital approvals process will foster dynamism and swifter delivery. There will be, at most, three approval levels on the very-largest, nationally-significant schemes (one provider level, one regional/national, and one cross government). And the time that a typical scheme spends going through central approvals will be reduced by at least two to three months, while, for smaller schemes, the reduction will be four to five months. And new NHS foundation trusts (FTs) will be able to progress larger self-financed schemes as long as they are consistent with overall financial planning

Over time, new FTs will no longer receive, or be dependent on, NHS capital allocations, but will have the freedom to determine their levels of capital spend each year in accordance with their agreed plans, with their investment constrained by their ability to finance projects through cash generated from their operating activity.

Getting a grip

“This will incentivise financial grip and delivery, requiring new FTs to focus on the total resources available to them, both revenue and capital, and ensure a relentless focus on affordability and productivity,” says the plan.

“Learning from previous financial regimes, we will work to avoid the freedoms for new FTs adversely impacting the ability of other NHS organisations to make necessary capital expenditure.

“New NHS FTs also need to set out capital spending plans as part of the planning process.

“We anticipate approval of these being automatic where spending is financed by operating activity (as opposed to drawing on the large and longstanding capital reserves some FTs).

Only where there is an exceptionally-strong case, such as for the New Hospitals Programme, will capital budgets be held nationally

“Where capital allocations, and any associated cash, are still required, these will generally flow in line with a fair and transparent formula directly to the accountable organisation best placed to prioritise and deliver value for patients.

“Funding for operational capital expenditure on routine maintenance and equipment replacement will flow to NHS providers in line with need.

“Funding to tackle maintenance backlogs will flow directly to all providers in line with the extent of their backlogs.

“This will leave systems free to focus on working with regions to ensure investment of strategic capital in new services and capacity, such as neighbourhood and diagnostic estate, that supports their population health improvement plan.

“Capital allocations for this will be based around population health need.

“Only where there is an exceptionally-strong case, such as for the New Hospitals Programme, will capital budgets be held nationally.”

Lowering the barrier

The Government is also planning a reform of public dividend capital (PDC) charges.

PDC is a unique form of financing provided to public sector organisations, principally NHS trusts and FTs, which has often disincentivised new capital investment and the regeneration and consolidation of the estate.

“There is a case for lowering this barrier to investment and we will consult with the NHS on these options,” the plan states.

Making better use of the existing estate

As well as generating new capital investment, the plan sets out the importance of making the most of existing buildings.

“We will do more to align financial incentives to increase estates utilisation and dispose of under-used and surplus land,” it states.

“Many existing flexibilities are not well explained to trusts and need to be clear, predictable features of the framework so that the frontline can plan how to use them.”

Under the proposals, all trusts will have the authority to:

• Retain 100% of receipts from the disposal of land assets they own; these are a credit in excess of existing capital limits automatically in the year of disposal and require no additional authorisation
• Use proceeds from disposals across multiple financial years by notifying DHSC by the end of the calendar year of disposal proceeds so that a transfer can be made
• Access a bridging loan facility from DHSC to allow immediate capital investment that can be repaid from disposal proceeds in future years, which allows some bringing forward of a sale benefit

And all this activity will be supported by the private sector, with the 10 Year Infrastructure Strategy committing to exploring the feasibility of new Public Private Partnerships (PPP) models for taxpayer-funded projects ‘in very limited circumstances where they could represent value for money, especially recognising the requirement in neighbourhood and community health’.

Working with the National Infrastructure and Service Transformation Authority (NISTA), the Government says it will build on the successful NHS Local Improvement Finance Trust (LIFT) programme and will ‘look to drive competition in the market to incentivise others, including third-party developers, to improve their offer to deliver better services at lower cost to the taxpayer’.

We will do more to align financial incentives to increase estates utilisation and dispose of under-used and surplus land

“We will engage with the market on this programme and support NISTA in its wider market testing of a new PPP model,” says the 10-Year Health Plan for England.

“We will progress rapidly, working across government, on a business case around neighbourhood health centres that sets out the potential and an assessment of value for money so that a final decision on the approach can be taken by the time of Budget 2025 in the autumn.

“Our approach will build on models currently in use (for example, from the operation since 2017 of the Welsh Mutual Investment Model).

What the experts say

Speaking to Healthcare Property following the publication of the plan, Sarah Livingston, CBRE’s head of UK healthcare sector, said: “Where and how healthcare is delivered is going to change fundamentally over the next 10 years.

“For the majority of outpatient services to move to neighbourhood health hubs by 2035, suitable locations need to be identified and buildings have to be developed or repurposed.

“Time will tell whether this can be achieved at the speed required, but the new 10-year plan is a welcomed and necessary first step.

“From a real estate perspective – good-quality care cannot be delivered in derelict buildings.

“To successfully execute this strategy, we will need to see significant funding for capital investment in the NHS estate.”

And Jake Roe, head of estate strategy at NHS Property Services, said the key challenge to delivering the aims set out in the plan is understanding estate utilisation.

“85% of estate leaders report low or medium awareness of how their space is being used,” he said.

“And, with tight budgets, complex commissioning processes, and a lack of complete data, it’s no surprise that many systems struggle to take a strategic view of their estate.”

He has come up with a five-point plan to help estates leaders get on top of their assets and deliver the Government’s policy changes.

1. Keep a long-term strategic view in mind: Thinking ahead helps you make the most out of your estate for years to come. And now we have the 10-Year Health Plan, we have that long-term direction to make decisions that best support the three ‘seismic’ shifts and the Neighbourhood Health Service vision

• Use the Core, Flex, and Tail model to categorise your estate:
  Core – Essential buildings that are critical for delivering services long term; Flex – Building that are currently providing unique access to services but may not be needed long term;Tail – Sub-optimal buildings that should be phased out when alternative estate is available
• Aim to carry out a strategic asset review every two to three years to stay aligned with changing service needs: Consider how your estate can support integrated care models and future population healthcare needs 

2. Set up appropriate governance structures: Taking a co-ordinated approach is key to making smart, system-wide decisions, at pace. That’s why we suggest formally involving all your key stakeholders from the outset and setting up the right governance structure.

• Establish groups like an overarching space utilisation group and smaller strategic infrastructure/estates groups and acute property management groups to handle complex decision making
• Define clear roles, responsibilities, and policies to help make decision making smarter and faster

3. Sort your data out: Data is key to optimising your space; without the right quality and depth of data, you can’t make informed decisions. Yet 55% of estate leaders in the NHS told us a lack of complete, quality data is their biggest challenge in optimising their space.

• Start with gathering the basics such as lease terms, floor areas service usage, costs, and building conditions
• Identify the gaps in your data and create a plan to fix them
• Keep your data consistent and in one place

4. Be challenging and commit to the journey: Optimising your estate won’t happen overnight. You need to be committed, brave and bold to achieve your goals.

• Be prepared to challenge assumptions about space utilisation – both current and predicted. This is why we recommend you getting your data in check so that you make informed, fact-based decision
• Expect tough conversations, difficult decisions and a few setbacks along the way. That’s all part of the process, but keep your objectives in mind to help bring you clarity
• Keep your PID live and flexible; adjust your targets and expectations as you learn more

5. Don’t be afraid to ask for help: Taking on a large, data-driven project like optimising your space takes a whole team. In fact, 36% of leaders in the NHS told us they don’t have the in-house expertise to assess and optimise their space. But there’s support available to help you

• Download the NHS Guide to Estate Optimisation
• Speak to the Estate Optimisation and Space Utilisation team