NHS capital investment: five key considerations for getting it right

For much of the government’s first 100 days in office, we heard a strong message of fiscal restraint. Yet as Rachel Reeves prepares to deliver her first Budget as Chancellor, reports suggest she is considering modifying the government’s fiscal rules, which could allow more borrowing for public sector investment. Reeves emphasised that ‘investment is the solution’, indicating that the government now considers investment part of the remedy for the UK's stagnant economic growth.

The NHS is in need of urgent investment. A major theme highlighted by the recent independent Darzi review is the role the lack of long-term investment in capital has played in deteriorating performance levels. Hospital buildings are crumbling; latest figures show the backlog maintenance stands at £13.8bn, over £2.7bn of which is considered high risk; IT infrastructure is not fit for purpose, and NHS productivity is low, having not recovered to pre-pandemic levels.

Recognition that the NHS needs capital investment is not new. The previous government introduced the New Hospital Programme in 2020, promising 40 new hospitals by 2030. This has now been paused for review, after the first 3 years were beset by challenges and uncertainties, including about funding sources, approaches to construction and whether the new hospitals were genuinely ‘new’ or indeed hospitals. 

With so many areas of the NHS in dire need of capital investment, the new government is right to review the programme to ensure that resources can deliver value for money. But how can policymakers be sure that NHS capital funding is invested in the right way and in the right places? Here, we highlight five key considerations.

1. Assess where capital need is greatest 

Investment needs to be based on an objective assessment of those areas of the NHS where the need for capital funding is greatest. 

With safety risks posed by crumbling infrastructure, slow progress towards full digitisation of health records and a lower number of scanners and medical equipment per population than most EU comparators, capital funding must target areas where need is greatest. This is both to account for current needs but also based on an assessment of projected longer term needs that ought to be planned for now.

2. Organise capital infrastructure to best deliver value for money

Robust evidence on the most effective geographical and organisational structure of NHS infrastructure is surprisingly sparse. Is it specialisation that matters for better care, or access to more modern facilities and technologies? Is it volume of activity, to allow for staff to learn by doing – consider complex surgical skills for instance – or to achieve economies of scale whereby larger infrastructures make better technology more affordable? 

Evaluations of previous initiatives to reorganise hospital care, such as the centralisation of stroke services in London or the creation of a ‘super-trust’ in Manchester, have shown mixed impacts. While some studies have found positive outcomes, others have detailed operational challenges, with deteriorating quality where capacity was disrupted. 

Similarly, waves of hospital mergers in England in past decades have been met with scepticism, given the lack of systematic evidence that they significantly boosted productivity, quality or the financial situation of hospital trusts. Where performance did improve, it is unclear why and how this could be replicated. 

Drawing on the albeit limited evidence of what has and hasn’t worked well should be a vital consideration before major investment programmes are initiated. 

3. Ensure support for NHS staff accompanies capital investment

As more detailed data become available, research shows that staff expertise and experience and better staff engagement can help improve patient outcomes. But staff need buildings that are fit for purpose, the right tools and equipment and processes that support their work, if they are to deliver high-quality care for patients. Investing in capital and improving working conditions for staff must go hand in hand. So too should investing in high-quality management to ensure resources are used effectively.

The NHS Long Term Workforce Plan does recognise the interdependencies between investing in the workforce and capital investment, as well as across sectors of care (inside and outside of hospitals), although the investment that would be needed was not accounted for in the plan. So far, the New Hospital Programme has focused on infrastructure alone, rather than an integrated approach for how new buildings can be combined with other forms of capital and workforce to deliver better care. 

4. Consider investing in other models of care that might be more effective

Streamlining care within hospitals or expanding existing capacity may also be a promising way of investing in the NHS. For instance, recent evaluation of elective surgical hubs, an NHS initiative to ringfence resources and staff to the treatment of low-complexity cases for high-volume planned surgeries, such as hip replacements, shows this led to a significant increase in the volume of procedures carried out, compared with comparable hospital sites without elective surgical hubs. 

Alternatively, investing in other models of care might be another potentially more effective way of improving the delivery of care inside and outside hospitals. ‘Virtual wards’ are an example of schemes that aim to provide hospital care in patients’ homes, but evidence on their benefits to date is quite limited. Recent research highlights the need for better data to really assess whether virtual wards could deliver their expected benefits and reduce pressure on hospital capacity. 

Relying on solid evidence of the most effective models of care and recognising that each is context specific could help to yield greater impact with the funding available. 

5. Ensure resources are distributed to support local populations and wider local economies

Population health varies across and within regions, yet health care services tend to be scarcer in areas that need them the most, a phenomenon dubbed the inverse care law. There is some evidence that the initial New Hospital Programme proposals may have reinforced this pattern. 

Health inequalities are stark and projected to persist. Any large-scale capital investment in the NHS should therefore carefully consider the local context to ensure they benefit populations that need it most. Beyond directly providing access to care, hospitals are also considered anchor institutions, bringing wider economic benefits and opportunities to their local area.

Overall, the NHS is in critical need of capital investment and the upcoming Budget is a key test of how committed the new government is to getting the NHS back on its feet. In the meantime, the government’s decision to review the New Hospital Programme makes sense. Ensuring that the available money is invested in a way that delivers the most value for patients – and takes into account entrenched health inequalities – should be at the heart of any well thought out capital investment plan.