Why the NHS Capital Budget should be £16bn
NHS capital spending is going to enable the kind of transformation the service needs to get on top of its performance challenges. A compelling case can be made for boosting the NHS capital budget to around £16bn annually. Here, I present a variety of methods to estimate the need. None are perfect, but they all come to an uncannily similar number.
Current Capital Challenges
The NHS faces a daunting backlog of maintenance and an ambitious New Hospital Programme:
- New Hospital Programme: Estimated to cost at least £40bn.
- Backlog Maintenance: Estimated at £11bn.
- Planned Capital Budget for 2023/24: £11bn.
Those are substantial capital demands on the NHS. Addressing these needs over ten years would mean adding £5-6bn annually to the capital budget, leading to a total of at least £16bn per year, considering the existing budget.
Method 1: Spreading Costs Over Ten Years
Funding the New Hospital Programme and addressing backlog maintenance over a decade would add £5.1bn annually to the NHS capital budget. Combined with the existing budget of £11bn, this approach suggests an ongoing need for £16bn per year. This method does not account for additional capital needs that already exist outside these two sources (especially outside the acute estate) - so £16bn would still require some very difficult decisions.
Method 2: Matching EU Capital Expenditure
The Health Foundation estimates that NHS capital expenditure needs a 55% boost to match the EU average. This increase aligns with the £16bn figure. Achieving this would help address current infrastructure issues and put the NHS into a more comparable position with its European counterparts in terms of facility quality and technological advancements.
Method 3: Replacement Cost for Hospitals
Another method involves calculating the replacement cost of hospitals based on a (very rough) rule of thumb of £2.5m per bed. With approximately 140,000 beds in England, this totals £350bn. Replacing these facilities every 30 years would require an annual budget of £11.7bn. Adding the 42% of the current capital budget spent on IT and equipment (£4.6bn) brings the total to £16bn annually. This method too has flaws, particularly in the way it deals with primary care and community capacity, and so it's a conservative, low-end indication.
Method 4: NHS Confederation Proposal
The NHS Confederation suggests increasing the NHS capital budget by £6.4bn, raising the total to approximately £17bn. Investing to save, as the Confederation puts it, emphasises that adequate capital investment can lead to long-term savings and improved patient outcomes.
Non-Bed Capacity and Virtual Technology
Non-bed capacity, including primary care and office space, is not well catered for in any of these estimates. With the right investment in virtual technology, and through better use of high street alternatives for some services, the need for this sort of space might, in future, diminish - or come from outside the capital budget. However, without radical change in the way the NHS operates, the £16bn estimates are likely to be understated.
Conclusion
The NHS needs a capital budget of at least £16bn. Each method of estimation, whether spreading costs over ten years, matching EU averages, calculating replacement costs, or following the NHS Confederation's proposal, converges on a similar figure and most of the approaches probably systematically underestimate the need. By committing to this increase, Government can help enable a more competitive and productive NHS and ensure that our healthcare infrastructure can meet the demands of a growing and aging population.
