With the vast majority of the NHS estate’s wealth in London, and as the health service looks for savings over the next decade to fund its £10bn repairs backlog and find space for 26,000 homes, attention will focus on the few NHS trusts in the capital and, where appropriate, selling off land to developers. The regions will have to wait their turn.
According to the man advising the NHS on its rationalisation, London is where the real problems lie, and where the estate needs the most care.
“The largest backlog in maintenance by a long way is in London. It’s been much more difficult to rebuild hospitals in the capital because there is so much political interest,” says Sir Robert Naylor, author of the Naylor Review.
The review, which is in consultations now and contains ideas that could be implemented by 2018, sets out 17 proposals for how best to use, rationalise and encourage development on the NHS Estate.
Much relies on the creation of a centralised board to advise on disposals and strategy. This board would incorporate the currently separate NHS Property Services and Community Health Partnerships.
Ian Ellis, chairman of NHS Property Services, and Elaine Hewitt, its chief executive, could both have to re-apply for their roles in 2018 – though Ellis is already chair of the new shadow board.
Get your service in order
Like many public bodies, the NHS was told in 2010 that it needed to clean up its crumbling estate, find considerable savings and release land for housing.
But unlike the Ministry of Defence or Ministry of Justice, the NHS consists of hundreds of localised, fiercely competitive organisations, and has little central autonomy. Naylor’s review addresses that anomaly.
“It’s a privilege to be asked and it’s been a fascinating piece of work. Some of [the estate] hasn’t been looked at since 1962,” he says “There were ad-hoc initiatives, but no real review of strategy for the NHS estate.”
Naylor has some experience of how best to use NHS trust resources: he spent 15 years as chief executive of University College London Hospital, overseeing its expansion and £1bn infrastructure investment, arguably making it the most important hospital research campus in Europe.
“I guess the reason they looked to me was because they saw UCLH as a model. While the first phase was PFI, all the subsequent phases have been internally funded,” he says.
“What we did, which was quite different to what has been done before, was to act like property developers ourselves.”
He oversaw a programme of rationalising and strategic planning on the estate, determining what was needed and what was surplus to requirements. He found that securing planning permission and wrapping up assets paid off.
When he started in 2000 he was under pressure to sell the Middlesex Hospital on Mortimer Street, W1, for £32m in order to finance the hospital’s PFI. Naylor held out, and obtained planning for the site before selling it for £175m in 2007. It was ultimately redeveloped to be Fitzroy Place by Exemplar, Aviva Investors and Kaupthing.
Not a regional outlook
Naylor’s review and his ideas for land disposals can not be implemented with any certainty outside London, where land values tail off sharply.
Only 13% of the NHS’s land sits in London, but it represents 57% of its potential value.
He does not, however, foresee land disposals to be hugely important financially outside the M25.
“If you look at the development of hospitals outside London, the estate tends to be in a much better condition. It is the big hospitals in London that have the largest amount of backlog maintenance,” he explains.
But the regions will still need attention, says Naylor. Although land receipts will not be as high, efficiency savings will be, and will be backed up by incentives from the Treasury.
Naylor says estates have the choice: invest money in backlog maintenance from the public purse with strings attached, or use land more effectively through investment, including partial sales, but with match funding from the Treasury.
His report asks for £10bn of capital investment from three sources: land disposals, the private sector, backed up by the Treasury. The incentive for trusts is if they develop, or at least lay out a plan, they will get the funding to invest in maintenance.
“We looked at models used elsewhere,” says Naylor, who says they toyed with the idea of centralising the management of all assets. “There are many different vehicles that trusts can use.”
“We came up with recommendations in our report which suggest there should be a high degree of local autonomy, but strong oversight and regulation, supported by additional capacity and capability through the development of the NHS property board.”
Making it stick
Though any future board will be advisory, Naylor says it will have teeth through benchmarking and measurement, and be able to withhold funding from poorly performing trusts. This, he says, will not lead to the worst trusts getting worse.
“The reason many of these trusts are not achieving acceptable benchmarks is because they are not using their assets effectively: vacant land or poorly utilised buildings. They don’t have to achieve it, but they have to have a plan to achieve it,” says Naylor.
It all means that the NHS could soon be in a position to provide the next big tranche of public land – especially in London.
Naylor’s recommendations
■ Improving capability and capacity
Establish an NHS Property Board to provide leadership, expertise and delivery support to sustainability and transformation plans (STPs), arm’s length form the department of health, to empower speedy executive action. The board should be established in shadow form immediately and substantively by April 2018.
■ Encouraging and incentivising local action
STPs should develop affordable estates and infrastructure plans, with an associated capital strategy, to address backlog maintenance. Benchmarks should be developed for these plans. STPs failing to develop plans should not be granted access to capital funding either through grants, loans or private finance.
■ Funding and national planning
All national bodies should work together, sharing intelligence, to develop a robust capital investment plan for the NHS by summer 2017. Capital investment of around £10bn could be met by property disposals, private capital for primary care and by the Treasury.
To send feedback, e-mail alex.peace@egi.co.uk or tweet @egalexpeace or @estatesgazette
