Invest to change: the capital needs of community services

Introduction

What community services do and why this matters

Community providers deliver a wide range of services that keep people well in the community throughout their lives, from health visiting and paediatric services, to urgent community response, virtual wards, and frailty services. The community sector is responsible for 13 per cent of all daily NHS activity and represents a fifth of the NHS workforce.

As part of its mission to ‘build an NHS fit for the future’, the government has committed to bringing care closer to home by shifting resources to primary care and community services. This goes alongside moving away from a health system centred on late-stage intervention towards one that puts proactive, preventative care front and centre. What’s more, investing in the community sector pays off: for every £1 spent on primary and community care, economic output (GVA) grows by up to £14.

But underinvestment is holding the NHS back. The recent report by Lord Darzi concluded that over the past decade the NHS has been starved of capital funding, with the capital budget often being raided to fund day-to-day spending; £4.2 billion was raided from capital budgets to cover in-year deficits between 2014/15 and 2018/19. The result has been estates that are not fit for purpose, a significant backlog maintenance bill of approximately £14 billion, outdated equipment and a lack of investment in digital transformation, all of which impact productivity. 

The scale of the problem around capital funding has impacted all parts of the NHS. However, community providers, and particularly community interest companies (CICs), are often unable to access the funding that is available. To date, central funding pots have tended to focus on capital funding for hospitals. To redress this, the community sector needs greater access to national capital funding to ensure providers can deliver high-quality care in the most appropriate settings. 

Our research

With the government developing its long-term plan for NHS reform and in advance of the multi-year Spending Review, this report provides timely analysis of the current challenges the sector faces regarding capital investment. It also outlines strategic priorities for integrated care systems (ICSs) and government. It has been developed through both survey engagement and interviews with a range of leaders in the community health services sector. 

Forty-three leaders from trusts and CICs responded to the survey. Additionally, those who wished to be contacted were invited to qualitative interviews, which allowed for a further discussion of the issues raised by the survey.

Our questions to leaders focused on the condition of their organisations’ facilities and digital systems; the impact these had on patient care and staff productivity; and the consequences for integrated working. In addition, we asked respondents to prioritise how they would use extra capital funding to improve their services, as well as what their key asks would be of both their system and central government.

Research questions

NOTE

• Not all charts will add up to 100 per cent because respondents were able to skip questions.
• Percentages have been rounded to the nearest whole number. 

Participants' roles

The problems of capital in the community sector

NHS England’s own analysis confirms that the poor condition of estates is holding back productivity improvements. There have been 12,000 reported estate failures that have stopped clinical services in the past two years alone. Meanwhile, Healthwatch England has found that the poor estate is worsening patients’ experience of NHS services. 

Our survey also reflected this, with respondents assessing their facilities as being largely safe but a barrier to further efficiency gains. One leader explained that his trust faced a yearly bill of £500,000 simply to manage a life-expired drainage system in one of its hospitals – an annual cost that could be eliminated altogether by a one-off investment. This type of costly, recurring expense reduces the scope to invest in tools and systems to improve efficiency and productivity. 

This has immediate consequences for the patient experience. While a large majority (79 per cent) of respondents confirmed that their estate was safe for staff and patients, two-thirds believed that the condition of their organisation’s facilities was not enhancing experiences of patients under their care.

Allocations, priorities and their consequences

Many community sector leaders said that their capital needs were not well understood or recognised either at a system or a national level. To fulfil the government’s ambitious three shifts, there must be a change in the way capital funding is distributed to and accessed by the community sector. Our respondents said that, with current investment levels, their organisation would not have the right amount of funding to deliver the government’s shifts around treatment to prevention, analogue to digital and hospital to community. 

Alongside this, the current regime governing how the NHS shares out and spends its capital budget is, as Lord Darzi described, ‘dysfunctional’, and the Hewitt Review has also advocated for its wholesale reform. Providers, too, have identified many flaws in the system: long delays in releasing funds, the duplication of different allocation and approval processes, and inflexible rules on how and when capital can be spent. 

This includes the Department of Health and Social Care (DHSC) CDEL, which enables HM Treasury to include NHS trusts’ assets on the public sector’s balance sheet. However, the rule still applies even if the funds to make such investments are available locally and no additional investment is required from the centre. 

As a result, providers can struggle to manage year-to-year budgets, with the requirement to use capital funds within annual limits often resulting in investment that does not reflect original plans or priorities. The Hewitt Review also called for flexibility so providers can use capital more efficiently, including across system borders, in order to support population need. 

Acute hospitals have been prioritised for the limited resources available, with high-profile initiatives such as the New Hospital Programme largely inaccessible to community providers. As a result, the capital needs of the community sector have continually been overlooked. 

“CDEL is a limitation... national capital pots are usually aimed at acutes and never facilitate system working...” Survey respondent.

Areas for investment

Given the scale of the productivity gains on offer, investment in better digital systems was the number one priority for survey respondents, with two-thirds citing it as their top ask. 

For community providers, capital funding can be used to expand the use of virtual health services, such as virtual consultations for planned care, and health monitoring for virtual wards. It can also be used to support interoperability between organisations. Where additional capital funding has been made available, community providers report being able to increase referrals into UCR (urgent community response) services via digital interfaces.

Forty per cent of respondents to our survey said investment to support integrated working was their number one priority. With further investment, community provider leaders are keen to focus on scaling up digital solutions and integration and driving forward government ambitions for the health and care system.  

Key to this, in the eyes of the community sector, is strong leadership from the centre to make this funding available to all community providers. CICs in particular struggle to access existing capital for digital transformation, with the result being a wide variation in digital maturity across providers.

Providers’ asks from the centre

Innovation, especially the development of integrated working, requires capital investment in the community sector. This is the funding that pays for new facilities, equipment and digital systems. Yet, highlighting a £27 billion shortfall in capital, Lord Darzi’s review stated: 

‘The NHS has been starved of capital and the capital budget was repeatedly raided to plug holes in day-to-day spending’. 

Successive governments have failed to release sufficient capital funding, despite the long-term benefits of this type of investment. 

When asked about what their organisation needed from government to support access to capital funding, the most common answers were: ability to explore alternative routes to strategic capital funding (78 per cent), access to targeted capital funding for community providers (78 per cent) and longer-term plans to leverage the NHS estate (72 per cent). 

Increasing the CDEL was also viewed as a key priority for national government. When interviewed, leaders explained how these rules were limiting their transformation plans, clinical improvements and productivity work. One chief financial officer summed up the experience of trying to transform his trust’s estate as ‘like wading through treacle’. As previously mentioned, the inflexibility of CDEL accounting also impedes new lease arrangements and further complicates the redevelopment of the community estate. Leaders also noted the challenge that community providers face as a result of the mix of owned and leased properties they work with. They stated it needs to become easier to develop estate strategies with partners, including local authorities, to deliver integrated care. 

“There are a couple of important factors to also feed in: the impact and control of leases after IFRS 16; the rising costs and lack of control over NHS Property Services estate; the temporary nature of digital funding... these all hamper the ability to ‘left shift’ to community services.” Survey respondent.

Providers’ asks from systems

Respondents to our survey wanted to see community providers appropriately prioritised within system-level capital planning (83 per cent), a longer-term estate strategy at system level (75 per cent), and better connectivity with primary care and local authorities (62 per cent). Prioritisation and long-term planning are key priorities for the sector at both a national and local level.  

Further work is needed to ensure that sufficient capital funding reaches the sector. The Treasury recently announced changes to fiscal rules preventing the NHS from ‘raiding’ capital budgets to fund revenue gaps. However, community provider leaders remain concerned that this will not have the desired effect.  As ICSs draw up their ten-year local infrastructure strategies, community provider leaders are concerned over whether these can be fulfilled with the limited pot of capital funding available at present, or within the complex rules that govern its use.

This complexity also acts as a barrier to key partners co-locating. The Fuller stocktake report outlined how integrated neighbourhood working would require smaller, localised teams, drawing staff from across the NHS together with staff from local government and not-for-profit providers. However, agreeing terms with multiple partners can be very difficult in practice.

Co-location, too, is also made more difficult by leasing arrangements. While in theory leases should offer organisations more flexibility when sharing space with partners (compared to a shared freehold or a wholly owned space), in practice, existing arrangements are not set up to take advantage of the benefits this could bring.

Vision: a fresh start for capital investment in the community sector

Community services, as with the NHS at large, are suffering the consequences of years of capital underinvestment. In order to increase capacity, achieve greater productivity and improve experience for staff and patients alike, community providers need access to adequate capital funding. 

The community sector’s buildings and systems are becoming increasingly inadequate for the task being asked of them. Without the right investment, neither keeping up with current demand nor expanding their role will be possible. Underinvestment in digital systems is holding back productivity gains in community services. This relates both to clinical tasks and to back-office functions, both of which could be made more efficient with better digital infrastructure.

As a result of historic underinvestment in both the community sector’s facilities and its digital systems, a simple injection of revenue funding would not yield the required results. To respond and grow in line with the government’s aim of bringing care closer to home, capital funding is essential for community services.

Investing today will bring better value tomorrow, with renewed estates enabling more integrated care across system partners. Likewise, improved digital systems can enhance the productivity of both clinical and managerial staff, making the most of scarce resources.

Meanwhile, investing in community services will also aid the government’s ambitions by providing a springboard for economic growth. The health of the nation and its future economic prospects are tightly connected, with a healthier population both more able to work and earn while also reducing demand on the NHS as a whole.

The forthcoming 2025 multi-year Spending Review provides an opportunity to make these necessary reforms and begin the process of bringing care closer home. The Community Network is committed to working with the government to identify how the sector can improve both its productivity and the quality of the care it provides.