Archus Budget Reflections: Transforming NHS Infrastructure with Strategic Investments

The long awaited Budget is out and some time has passed to interrogate the implications, with the commentary and responses coming in thick and fast. In focusing on our market of healthcare, and more specifically health infrastructure, there is much to be positive about; £22.6 billion increase in revenue (circa 4% growth over 2 years) and a £3.1 billion increase in capital, again over 2 years, with £1 billion to support progression of the replacement hospitals with RAAC, as well as addressing backlog maintenance and £1.5 billion for new capacity, beds, surgical hubs etc and the remainder for diagnostic kit.

All of this is very welcome but for those in the infrastructure space, perversely, the revenue figure is more interesting than the capital. £3.1 billion is under a tenth of what Lord Darzi quoted as being needed to recapitalise the infrastructure base of the NHS, with his estimate being £37 billion, so there will be more announcements on capital. We await keenly the outcome of the review on the New Hospital Programme as well as the NHS 10 year plan early next year and the Comprehensive Spending Review (CSR) in the spring.

What could come over the next six months to truly recapitalise and transform the NHS? An excellent report by the NHS Confederation sets out the options for raising capital, see: Raising NHS capital funds: options for government | NHS Confederation. The report explores public capital from NHS or Local Government (Public Works Loan Board) sources, sale of NHS land and assets, as well as raising private capital through models of Public Private Partnership and third party development.

The answer is more than likely all of the above. The last time there was transformational capital investment in the NHS was between 1997 and 2007 under the last Labour government. At that time the NHS budget increased significantly (following the Wanless Review) and PFI was embraced to deliver new hospital builds (54 in eight years), PPP for primary care under NHS LIFT (330 health centres in 5 years), third party development and listing of primary care infrastructure funds such as Assura and PHP. However, like so many home grown ideas this was all discarded rather than evolved. None of the models were perfect, but where they have been evolved such as P3 in Canada, PPP in Australia, MIM in Wales and the very successful HubCo’s in Scotland, billions of dollars or pounds of health infrastructure have been delivered to time and to cost.

So, as we look to the immediate future and a raft of policy announcements, perhaps it is time for the health infrastructure market to rally around. Constructors, Designers, Consultants, Investors and Policy Advisors to help shape the future of healthcare infrastructure investment at scale. There will be no single answer but there could be a swathe of exciting ones, an NHS Infrastructure Fund for public and private capital (part capitalised by patient capital and receipts from land sales), PPP models with NHS bodies as shareholder, capital funded through service contracts for elective surgery and diagnostics and third party development at scale in primary care. Following the budget, the borrowing headroom and revenue is now there to support this approach and in turn deliver the transformation and productivity those that work in the NHS want to deliver.

So an interesting budget which could be a transformational one, but only if all parties now stand up and be counted.