Policy paper

Health and Care Bill: capital spending limits for NHS foundation trusts

Updated 10 March 2022

This fact sheet explains how the government plans to legislate for a new power to set capital spending limits for NHS foundation trusts (FTs), as it can already do for NHS trusts.

Background

Parliament and Treasury set the Department of Health and Social Care (DHSC) a limit for how much capital it can spend. Capital spending covers long-term spend such as new buildings, equipment and technology. It doesn’t include spending such as staff costs or medicines (which is classed as revenue).

This budget limit, called the capital departmental expenditure limit (CDEL), covers all capital spending by the department and the NHS. The department and the NHS are legally obliged not to spend above this limit. A major part of NHS capital is currently allocated to NHS trusts and NHS foundation trusts in each existing Integrated Care System (ICS), in system-wide envelopes. In future, the ICB (Integrated Care Board) and partner trusts, will have a joint duty to prepare a plan setting out their planned capital resources.

A main control on the level of capital is setting yearly limits on spending by NHS trusts. However, NHS foundation trusts (FTs) have greater autonomy than NHS trusts and the current powers to set capital limits do not apply to FTs. FTs also have additional freedoms to borrow from commercial lenders and spend surpluses on capital projects which still counts against the overall CDEL and system envelopes.

What the Bill will do

The new power will allow NHS England to set capital spending limits for FTs, as it can already do for NHS trusts. The FT limit would be set on an individual, named FT for a specified period (typically a financial year), and the limit would automatically cease at the end of that period.

The limit will apply solely to capital expenditure and not to revenue expenditure.

The power is intended to be used on an FT where there is a clear risk of an ICB breaching their system capital envelope as a result of non-cooperation by a FT, and other ways of resolution have been unsuccessful.

NHS England will produce guidance on the use of the power which will set out the circumstances in which it is likely to make an order to set a capital limit. The guidance will show that the power would be used proportionately and in a limited way, and will outline the process before an order is established.

Foundation trusts will continue to operate as autonomous organisations, legally responsible for maintaining their estates and providing healthcare services, with their boards continuing to decide what investments they make.

They will their retain freedoms around commercial borrowing or reinvesting their surpluses.

How these provisions will help to promote integration

This power provides a safeguard to the taxpayer in the event that an individual FT’s actions threaten to breach system or national capital expenditure limits. This is an issue of equity as well as proper financial management – the capital spending of one FT could lead to capital spending in one or more NHS providers having to be reduced to ensure the NHS lives within its allotted capital resources. For example, an NHS Trust could be unable to carry out urgent investment, using their own funds, to rectify defects in their estate which affect patient experience, or restrict the numbers of patients they can safely treat. As a result, investments achieving greater benefits to patients and staff could be foregone.

Further information

Health infrastructure plan, Department of Health and Social Care, September 2019

See guidance on NHS system capital envelopes for 2021 to 2022, March 2021