£1.8 billion of money announced for the NHS over the next five years isn’t all new money.
This depends on how you define ‘new money’. The Treasury will have to increase spending by this amount—but it is money that NHS trusts had already earned, but were subsequently told they couldn’t spend.
What was claimed
£1.8 billion of ‘new money’ has been announced for the NHS over the next five years.
£850 million has been announced for 20 hospitals over the next five years and £1 billion for the NHS in capital funding this year. The £1 billion is money that NHS trusts previously earned through a cost-cutting incentive scheme, but were then told not to spend. It is ‘new’ in the sense that the Treasury had not previously budgeted for them spending it.
“What it’s beginning to look like is that money hospitals were promised for cutting their costs and cutting back on their spending, they were promised extra money and the ministers came along and blocked them from spending the extra money. It now looks like all Boris Johnson has actually done is that they can spend this extra money after all.”
The Department of Health and Social Care has announced that “More beds, new cutting-edge equipment and additional wards will be delivered at hospitals across the country, as the Prime Minister confirms a new £1.8 billion NHS cash injection.”
This includes £850 million for 20 hospitals to receive upgrades to facilities and equipment over the next five years, and £1 billion more for NHS capital funding (money for infrastructure) to be spent this year.
But debate has been sparked over whether or not this is all actually ‘new money’—or whether some of it was money the NHS already had been promised but was unable to spend.
Exactly how you define ‘new money’ is the crucial issue here, and from whose perspective. A lot seems to hinge on how the different parties involved are interpreting its meaning.
What have the health experts said?
Health think tank the Nuffield Trust has saidthat some of this money isn’t new. It says the £1 billion added to the NHS capital budget was actually “cash hospitals and other NHS trusts already have but have been forbidden to spend. They earned it last [year] in incentive payments for cutting their costs”.
This, according to the Nuffield Trust, relates to a scheme called the Provider Sustainability Fund (PSF). This scheme allowed NHS trusts that reported a surplus in their accounts, (spending less than they earned overall in the year) to receive cash rewards from the Treasury for doing so. The overall aim was to improve the financial position of the NHS and bring it out of deficit.
But once trusts had this money it couldn’t be spent on the day-to-day running of hospitals (because reducing the amount spent on running costs was the aim of the scheme in the first place) so it had to be spent on capital projects instead: things like IT, equipment or new hospitals.
Money for capital spending by NHS trusts all counts towards overall capital spending by the Department of Health and Social Care (DHSC). But because a total spending limit had been placed on DHSC capital spending, trusts then found they weren’t going to be allowed spend all the PSF money once they had it.
The Health Service Journal reported that the £1 billion pledge would not be ‘new money’, but rather was a reversal of those spending limits: specifically a decision in July telling trusts to reduce their capital spending by 20% in 2019/20 in order to access funds to “address critical safety issues”. It subsequently published a letter from NHS England and NHS Improvement to trusts confirming that capital spending was being increased by £1 billion and that they could revert to their original spending plans.
The Health Foundation, another think tank, has also reported this. It says that as a result of these spending limits NHS trusts were asked to reduce their capital spending plans by 20% and “This meant that some trusts had money available to them which they were being asked not to spend.” The Health Foundation says this 20% reduction has now been reversed with the announcement of money for the NHS.
As the Health Foundation puts it, from the perspective of NHS trusts, this is “money they'd already thought they could spend”.
But the Health Foundation also says that from the Treasury’s perspective it’s correct that this is ‘new money’—as it’s an extra £1 billion of spending this year that it hadn’t planned for previously.
The Nuffield Trust had the same view. It told us that it “will feel like a new spending commitment for the Treasury. That is because it will no longer be able to recycle NHS trust cash stored in government coffers to fund other bits of government funding, and the total amount of money going out will therefore increase. However Mr Hancock was wrong to claim this was ‘new money’ to the NHS. From the point of view of trusts it is not.”
What has the government said?
In a numberof interviewson August 5 both Boris Johnson and Matt Hancock said that the money for the NHS was ‘new money’. On Radio 5 Live Breakfast, Matt Hancock was asked about the Nuffield Trust’s analysis that this was not new money and he said it was on “the wrong track” and on Twitter has said “it’s not quite right”.
On Twitter Matt Hancock later added that “It is new cash or new spending or whatever else you might want to call [it]. It’s a £1.8bn increase in the NHS budget... Some of it goes to unblocking spending that has been blocked because we didn’t have the budget - which we now do, thanks to the new cash”.
Health minister Chris Skidmore was asked on Channel 4 News whether it was untrue that the £1 billion was money that NHS trusts had saved by reducing spending on services that they’re now able to spend on capital projects. Mr Skidmore said “it’s not untrue”.
We asked the Department of Health and Social Care on 6 August for more detailed information on where the money is coming from, and precisely how it relates to the Provider Sustainability Fund. The department replied to us on 29 August, saying: “The NHS has an extra £1.8 billion of new funding to invest in projects, money which the NHS did not previously have to spend. This is a brand new injection of capital that enables the NHS to get on and release urgent planned investment this year. This includes £850 million which will directly fund 20 new hospital upgrades—money that had not been previously allocated.”
The Department did not provide us with any information that contradicted the position of the Nuffield Trust or suggested it was wrong, as the Health Secretary claimed on Twitter.
In the absence of any contradictory evidence from the department, we see no reason to doubt the conclusions of the various health expert bodies. From the perspective of NHS trusts, this is not ‘new money’—it’s money earned under the PSF scheme that they had previously been told they would be able to spend. From the government’s perspective, it counts as ‘new money’ because the Treasury had not previously budgeted for the trusts to be able to spend all the money they had earned under the scheme.
Update 5 September 2019
We updated this article to include the Department of Health and Social Care’s response.
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