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Spending watchdog exposes hospital building programme hyperbole

17 Jul 23 When Boris Johnson's 2019 manifesto promised the construction of 40 new hospitals by 2030, it sounded too good to be true – now we know it was.

A National Audit Office report today details that only 11 of the schemes are actually complete hospitals; most are extensions and refurbishments.

The fuzziness of definitions makes it hard to pin anything onto the government, but the NAO appears to succeed.

Government has not achieved good value for money with its New Hospital Programme (NHP) so far, the NAO says. It has spent £1.1bn and is making “slower than expected” progress.

The NAO also exposes a lack of transparency in decision-making process regarding which schemes are brought forward, implying that some hospitals have been advanced on the basis of political, rather than health, priorities.

Forecast costs for schemes in cohorts 1 and 2 increased by 41% between 2020 and 2023. NHP is trying to get control of costs by producing a standardised hospital design – Hospital 2.0 – based on modular components, but this work has been delayed. There have been shortages of technical staff and it will not now be completed until May 2024. The delays have constrained NHP's ability to engage with industry, the NAO.

Furthermore, the NAO finds that NHP's "minimum viable product" version of Hospital 2.0, which is intended to achieve key objectives at the lowest possible cost, may result in hospitals that are too small. This is because NHP is modelling hospital sizes using out-of-date assumptions, including dependence on wards rather than single rooms.

The NAO report, Progress with the New Hospital Programme, says that only 32 of the planned schemes will be completed by 2030.

The NHS estate maintenance backlog is £10.2bn, the report says by way of context, and seven entire hospitals are structurally unsound and in need of urgent replacement owing to the use of reinforced autoclaved aerated concrete (RAAC). Surveys have found 41 buildings at 23 hospital trusts containing the material.

The Department of Health & Social Care (DHSC) created a Health Infrastructure Plan (HIP) in 2019 to modernise the NHS estate. Under the HIP, DHSC planned 27 new hospital schemes by 2030. In October 2020, the government announced an expansion of DHSC's plans stating that 40 new hospitals would be built by 2030. It identified and provided information on the types of improvements at 32 of these new hospitals, while another eight would be selected later. Alongside eight other hospitals that DHSC had already approved for construction and which it was not counting towards the 40 new hospitals commitment, this meant a total portfolio of 48 hospital schemes by 2030. The schemes were subsequently split into five cohorts.

DHSC set up the New Hospital Programme (NHP) to deliver this. The programme was also tasked with improving efficiency, quality and standardisation in hospital construction – using prefabrication of modular components – and a centralised approach to contracting.

All but one of the 32 new hospital schemes detailed in the October 2020 announcement had previously been part of a HIP scheme.

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“Responding to NAO requests, DHSC was unable to document the process originally used to select HIP schemes,” the report says. “DHSC, supported by NHS England, used evidence-based criteria to create a shortlist but then adjusted this shortlist substantially, a part of the process for which no further documentation is available. The failure to document this part of the process is an omission which means there is no basis for the NAO to determine why DHSC selected these schemes. For large capital programmes, the NAO expects government to use clear, defensible criteria to select schemes and to maintain records of its decisions.”

Overall, DHSC has adopted a broad definition of a ‘new hospital', including: completely new hospitals; complete rebuilds of existing hospitals; major new buildings at existing sites; and major refurbishments of existing buildings. Excluding the eight pre-existing schemes, the NAO's analysis of the 32 new hospitals detailed in October 2020 suggests that only 11 (34%) represented whole new hospitals, with another 20 meeting other elements of DHSC's definition, while one scheme does not meet the definition at all. To address this, NHP now intends to split another scheme, which was for two hospitals, into two separate schemes.

In 2020, DHSC estimated it needed between £19.8bn and £29.7bn of capital funding to build 48 hospitals by 2030. This included between £3.7bn and £16bn for the programme's first four years up to 2024-25. HM Treasury's decision in the 2020 Spending Review to provide £3.7bn up to 2024-25 meant most of the larger hospital schemes would need to be delivered towards the end of the decade. In its options appraisal, DHSC labelled this "maximum risk and policy compromises". This approach would likely result in many schemes being simultaneously under construction, making it harder to find builders and potentially increasing costs, the NAO said.

DHSC reset the programme in May 2023, after HM Treasury agreed an indicative funding envelope and scope. The reset fundamentally changed the content and timing of NHP's schemes. Five hospitals made of RAAC that were not already in the programme will now be rebuilt by 2030 (in effect becoming NHP's cohort 5), and DHSC will also count three mental health hospital schemes approved outside of NHP towards the commitment. However, completion of eight of the schemes announced in 2020 will now be delayed until the 2030s. The NAO concludes: “By our analysis, this means that DHSC's plans will now lead to 32 new hospitals by 2030, according to the definition it used in 2020.”

The NAO says: “Government has not achieved good value for money with NHP so far. It can improve value for money through to 2030 but needs to manage substantial risks, including the risk of building hospitals that are too small and rising costs resulting from hospitals being built simultaneously.”

NAO recommendations to DHSC, NHS England and government more widely include:

  • announcements about major capital programmes extending over more than one spending review period should fully reflect known uncertainties
  • DHSC should choose future hospital construction projects transparently and keep full records
  • further bunching of construction schemes should be avoided
  • NHP should reconsider assumptions that may result in ‘minimum viable product' future hospitals being too small.

Gareth Davies, the head of the NAO said: "The programme has innovative plans to standardise hospital construction, delivering efficiencies and quality improvements. However, by the definition the government used in 2020 it will now deliver 32 rather than 40 new hospitals by 2030.

"Delivery so far has been slower than expected, both on individual schemes and in developing the Hospital 2.0 template, which has delayed programme funding decisions.

"There are some important lessons to be drawn for major programmes from the experience of the New Hospital Programme so far. These include strengthening the business case process to improve confidence on affordability and delivery dates, and improving transparency for key decisions."

Meg Hillier MP, chair of the House of Commons public accounts committee, said: “English hospitals are in poor condition, after years of underinvestment. Today's NAO report shows government’s woeful lack of progress against its commitment to build 40 new hospitals by 2030. It has failed to even begin construction on any of the new hospitals in its second cohort which it thought were quick wins.

“The Department of Health & Social Care has been trying to move the goal posts so it can claim it has met its target. Patients and clinicians are going to have to wait much longer than they expected before their new hospitals are completed.”

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