Capital spending limits over Foundation Trusts
The Department for Health and Social Care is allocated a capital funding budget by Parliament and the Treasury, which amongst other capital spending covers capital spending in, in respect of the NHS (e.g. buildings, equipment and IT).
	From 1 April 2020, a major part of the NHS capital budget had been allocated to voluntary partnerships of NHS commissioners, providers and local authorities known as Sustainability and Transformation Partnerships (STPs) and integrated care systems, in system-wide envelopes. These envelopes were derived directly from the NHS’ share of DHSC’s total departmental capital budget. They were set for all NHS provider organisations within an integrated care system footprint for their annual business as usual operational investments (e.g. routine maintenance and replacing equipment), distinct from the specific nationally led programmes such as major new hospital builds.
	Under the new framework of this Act, it is the role of the integrated care board to ensure system capital expenditure is affordable within such envelopes and to prioritise its spending plans in accordance with the system wide health needs between each of the system providers. The Act establishes a joint duty between the integrated care board and its partner Trusts and Foundation Trusts to prepare a plan setting out their use of planned capital resources.
	NHS Trusts were previously set statutory annual capital expenditure limits by the TDA in accordance with their capital expenditure plans. Capital expenditure limits are now set by NHS England following its merger with the TDA and Monitor under the Act. Previously there was no limit set on NHS Foundation Trusts, which also have additional freedoms to borrow from commercial lenders and spend their own surpluses to fund capital projects. Capital expenditure by Foundation Trusts counts against the integrated care system capital envelope and DHSC’s overall capital departmental expenditure limit (CDEL). Under previous statutory powers, there was a risk that a Foundation Trust may go ahead with an individual scheme or schemes using its own cash to invest in capital without considering the overall impact on the local system integrated care system capital envelope, or on the national capital budget. This created an issue of equity as well as proper financial management. Uncertainty about Foundation Trust capital spending plans, and the risk of breaching the capital limit, could lead to capital spending in one or more NHS providers having to be reduced to ensure the NHS lives within its allotted capital resources.
	The Act gives a new power to allow NHS England to set capital spending limits for Foundation Trusts. The Foundation Trust limit would be set on an individual basis in respect of a named Foundation Trust for a single financial year (or part of it) and the limit would automatically cease at the end of that financial year. The power is intended to be used where there is a clear risk of a system breaching its system capital envelope as a result of actions of a Foundation Trust, and the issue has not been resolved more informally.
	NHS England will produce guidance on the use of the power which will set out the circumstances in which it is likely to make an order to set a capital limit and the method it will use to determine the capital expenditure limit. The power will be used proportionately and it is envisaged in a limited way. The guidance will outline the process before a limit is set, including notifications and consideration of views from the Foundation Trust and the integrated care board. The guidance will also set out the publication of the order so there is transparency in the process.
	The limit applies solely to capital expenditure (e.g. investment in new building and equipment etc.) and not to revenue expenditure (e.g. staff costs and consumables). Foundation Trusts will continue to operate as autonomous organisations, legally responsible for maintaining their estates and providing healthcare services, with their boards continuing to decide what investments they make. They will retain their freedoms around commercial borrowing or reinvesting their surpluses.