Boris Johnson successfully captured the weekend headlines with his announcement of a £1.8bn “cash injection” for the NHS capital budget – which covers buildings and equipment. But the prime minister quickly became bogged down in allegations that the £1bn pledged upfront this year wasn’t quite the boost it appeared. The truth is that NHS leaders across the country won’t see this billion as extra funding, but rather the removal of a freeze on cash they already have.
That’s because it matches a pot of cash that NHS trusts already earned last year, in return for stretching their efficiency to breaking point, on a subsequently broken promise that they could invest it.
Three years ago, as overspends by hard-pressed trusts threatened to blow a hole in the entire health department budget, the Treasury devised a scheme that involved encouraging the minority of trusts who were able to break even to cut back further still, in order to deliver a surplus. That surplus would then offset the far bigger and unavoidable deficit that would be racked up by the rest.
Trusts were asked to cut expenditure and make a surplus in return for receiving a cash reward – £2.3bn in total over the last three years. Trusts weren’t able to spend that cash on everyday expenditure, because that would defeat the object of reducing the deficit in day-to-day spending, but the cash could be used on capital investment: to repair dilapidated buildings, construct new wards and purchase updated equipment, from scanners to computer systems.
For a lot of trusts, this was the reward they could promise staff and patients, who rightly asked why their local services were being squeezed more than the organisation’s bottom line needed.
Then came the catch. The Department of Health was happy to bank the trust efficiency savings and bask in the light of the multibillion-pound fix to NHS deficits. But when it came to trusts actually spending the cash they had earned through the scheme, the department realised it would bump into the Treasury’s cap on investment spending. This restricts how much funding can actually leave the government’s coffers each year, and for capital spending it has been squeezed after years of raids to fund the day-to-day budget.
The Treasury has good reason for insisting on keeping a lid on this spending. The £5.8bn cash sitting on NHS trust balance sheets after three years of the scheme might belong to those separate NHS trusts, but it is £5.8bn of cash stored in the government’s own bank account. If trusts can be stopped from spending that cash by curtailing the health department’s spending limit, the Treasury can recycle it and spend elsewhere, instead of increasing taxes or borrowing.
The fact that trusts had been promised they could spend it in return for having made steep cuts elsewhere got lost in the scramble to quickly cover up the growing hole in the NHS’s finances. Over the last three years the resulting mess has been managed by the department using a mixture of cajoling, threats and direct orders to keep trusts from spending cash they had been promised they could invest.
Last month, for example, NHS England wrote to trusts asking them to shave a fifth from their capital spending plans for 2019-20 – a figure that would come to about £1bn.
For this year at least, what the prime minister’s announcement really means is simply reversing the broken promise made to trusts when they cut their costs in return for cash they were told they could spend. This is a good thing and it does really mean the NHS will be able to spend more on what patients need than it could have done before.
But to claim this as a new money is a little like finally giving back the £10 you borrowed some time ago – and expecting to be applauded wildly.
• Sally Gainsbury is a senior policy analyst at Nuffield Trust
