White paper: FTs could face capital limits

In its white paper published today, the Department of Health and Social Care has placed greater emphasis on collaboration, making integrated care systems (ICSs) statutory bodies and giving statutory muscle to system financial envelopes.

Under the reforms, ICSs will be allocated a system-wide capital limit and required to create a capital plan. Currently, controls are in place for capital spending in NHS trusts and foundation trusts in financial distress, while foundations have the freedom to borrow or spend surpluses. However, the latter still counts against the Department of Health and Social Care’s overall capital departmental expenditure limits (CDEL).

The white paper said that if a foundation trust decided to press ahead with a capital scheme without regard for the impact on the ICS or overall CDEL, ICSs or the Department could be forced to pause other capital developments. While dialogue should be the first step to resolve such a situation, a reserve power was needed as a last resort, the paper said.

If a foundation trust is judged not to be working effectively to prioritise capital expenditure within its ICS – risking breaching system or national CDEL – there will be powers to set a legally binding CDEL for that trust.

The powers proposed in today’s white paper appear to be different from an NHS England and NHS Improvement proposal in 2019, which suggested setting annual capital resource limits for foundation trusts. These would have been prospective and cover all foundations, while the current proposals will be used against individual trusts as a reaction to a potential breach of CDEL.

In 2019, the HFMA disagreed with the NHS England and NHS Improvement proposals introducing powers to set annual capital limits for foundations. While the association understood the rationale behind the move, it was not clear why a change in legislation was needed.

At the same time, subject to the views of its members, NHS Providers said it would oppose the plan. It insisted more proportionate and collaborative approaches could be pursued, including a more robust capital bidding and prioritisation regime.

System objectives

ICSs will be made up of two bodies – the ICS NHS Body, which will discharge most of the functions currently provided by clinical commissioning groups, and the ICS Health and Care Partnership – a group of local health and social care organisations that will develop system plans. NHS England will set financial allocations (capital and revenue) at system level, with the ICS allocating this funding according to its plans.

Trusts will remain separate, statutory bodies, retaining their current financial statutory duties. ICS NHS bodies will not have power to direct trusts. However, providers will have a new duty compelling them to have regard for system financial objectives. This will ensure both commissioners and providers are mutually invested in achieving financial control at system level, the white paper said.

‘These proposals include many changes that will benefit the NHS, including putting ICSs on a statutory footing. Having a single lead organisation in a legal framework that supports collaboration will ensure the focus is on achieving the best and most appropriate care in ways that provide value for money,’ said HFMA policy and research director Emma Knowles (pictured).

The paper said legislation is only part of the picture, and will be accompanied by reforms in areas such as data sharing and finance to help meet the changing needs of the population, the challenges caused by the Covid pandemic, and to address health inequalities highlighted by the coronavirus.

The white paper said that experiences during the pandemic have shown that financial frameworks can have a positive impact on joint working. So, as previously trailed, legislation will reform the national tariff to allow a national tariff to be a fixed price or a price described as a formula. NHS England could amend tariff provisions in-year, while it will also be able to include provisions for NHS public health services in the tariff. The legislation will remove the requirement to apply to NHS Improvement for local tariff price modifications.

Mandate link

The link between the annual NHS England mandate and the annual financial cycle will also end. Currently, the health secretary must lay the NHS mandate, which includes funding levels, before Parliament each year. However, the white paper said this has proved problematic as it does not align with other strategic decisions that should influence the content of the mandate.

By the time the mandate is published, for example, the NHS planning round is complete and plans have been signed off. Instead of an annual mandate there will in future be a requirement to have a mandate in place, but rather than capital and resource limits being set in the mandate, they will be set separately in annual financial directions. These are currently published routinely, but will in future be laid before Parliament.

While some social care changes are envisaged, the proposals do not reveal plans for social care funding, which the government said it will bring forward later this year. However, the paper said the government wishes to ensure adult social care is affordable, high quality and sustainable, with health and social care bodies able to join up services around people.

The white paper does include provision for collecting social care data from local authorities and those who self-fund their care. It said understanding the fees paid would help identify unmet need and support the case for additional funding. Data on hours of care, cost per person and financial flows would support the understanding of the lifetime cost of care, together with improved co-operation and joint decision-making between health and social care bodies. The health and social care secretary would also be given powers to give financial aid to social care providers.