Source · Select Committees · Public Accounts Committee
Recommendation 6
6
Accepted
Agree explicitly on funding for delayed hospital schemes and realistic programme costs.
Conclusion
There appears to be insufficient funding for DHSC to build all the hospitals it plans, and to an adequate size, by 2030. HM Treasury initially allocated £3.7 billion to NHP for the period up to the end of 2024–25 with no indication of what further money it would give up to 2030. In early 2023, it finally set an indicative maximum for capital funding of £18.5 billion for the following six years, making a total of £22.2 billion. Funding is needed for the schemes to be completed by 2030, as well as for early works on the eight schemes that will now complete after 2030. Long experience suggests that many schemes in NHP will come in over budget. Schemes in NHP’s cohorts 1 and 2 have already seen forecast costs increase by 41%. Getting the standard design of future hospitals right may also have the effect of increasing estimated costs. Other factors such as high inflation, insufficient capacity in the construction industry, and the need for many more factories to manufacture modular units offsite could drive up costs further. Recommendation 6: DHSC should be realistic about the likely cost of schemes and what can be afforded by 2030. As well as addressing the shortcomings in its Minimum Viable Product version of Hospital 2.0, it should engage further with the construction industry to understand and manage likely capacity constraints. It and HM Treasury should agree explicitly and in writing whether the pre-2030 costs of eight delayed cohort 4 schemes are to be met from the current agreed funding envelope. 8 The New Hospital Programme
Government Response Summary
The government agrees to continue engaging with the construction industry, including a market event held in November 2023. It intends for the programme business case, due for approval by May 2024, to explicitly include proposed funding for the pre-2030 costs of the eight delayed cohort 4 schemes.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. and deliverable. In May 2023, the government gave greater clarity on programme scope and funding in its announcement confirming that the NHP is expected to be backed by over £20billion of investment. The department has provided all schemes with an indicative funding envelope on which they can base their programme plans. All trusts will still need to go through business case approval processes. As outlined in response to recommendation 5, the NHP is keeping assumptions on size of future hospitals under constant review. The NHP also agrees that it should continue to engage with the construction industry to understand and manage likely capacity constraints and is already implementing an extensive market engagement strategy to this effect. The NHP held a market engagement event in November 2023, which updated industry on the current status of the programme and future plans and was attended by over 300 supplier or business organisations across eight primary market areas. The NHP is developing a third version of the programme business case with different options, as is usual practice, with a view to securing approval through the government’s Major Projects Review Group by May 2024 and confirming funding through future Spending Review processes. Once agreed with HM Treasury, the intention is for the programme business case to include a specific amount of proposed funding for the pre-2030 costs of the eight schemes expected to complete after 2030. The government remains committed to all schemes in the NHP, including those expected to complete after 2030.