MJ Medical

More efficiency, less capital – is the NHS just robbing Peter to pay Paul?


By Nathaniel Hobbs, MJ Medical Director

Lord Carter’s final report on operational productivity in acute hospitals reflects a robust process of engagement that saw his team visit 136 hospitals in England. It identifies several areas where action needs to be taken to reduce variation in performance between Trusts and increase efficiency; in total it claims such efficiencies would have the potential to deliver £5 billion worth of savings for the NHS.

This report is the most recent in a series of publications issued since the 2015 Spending Review, which together have significant implications for the NHS in England over the next few years. The Spending Review held capital spend at £4.8 billion per year in cash terms until 2020/21, representing a significant real-terms reduction over the period. This reflects the severe financial pressure currently being felt in the provider sector, and effectively means another significant capital-to-revenue budget transfer.

For most public sector organisations experiencing a prolonged period of budgetary tightening, the temptation to transfer investment in capital to revenue budget support is typical – as are the results. The organisation is starved of the funds needed to respond to the changes in its operating environment that have contributed to the financial pressures it faces. The proximate issues are eased with the injection of cash from the capital budget, but the medium to longer term response is compromised.

As with so many other comparisons involving healthcare, it would be an over simplification to say this scenario perfectly depicts capital-to-revenue transfers in the NHS. However for the larger part it holds true; in our view, robbing Peter’s capital to support Paul’s revenue is a false economy. Not only does it compromise the ability to deliver some of the recommendations of the Carter Review, it leads to more financial problems in the longer term. Lack of capital investment inhibits reconfiguration or replacement of aged facilities that are no longer fit-for-purpose, resulting in the perseverance of a more inefficient and costly service delivery model.

Indeed, increased capital investment is a key component in meeting the biggest challenge the NHS faces – a seismic shift in the quantity and nature of demand for healthcare. Be it through system reconfiguration to change how and where care is delivered, or in accommodating advancements in clinical best practise and medical technologies, a significant increase in capital investment is required to meet that demand in a way that is efficient, affordable and ensures a high quality of care.