Local growth and the NHS: Building the ... - NHS Confederation

Briefing June 2017 Issue 296

Local growth and the NHS: Building the foundations of a healthy economy Who should read this briefing? This briefing will be of interest to sustainability and transformation plan leads, NHS chairs, chief executives and non-executive directors, as well as directors of finance, strategy, HR, transformation and public health.

Key points

Introduction

• The evolution of the local growth agenda in

Successive governments’ focus on local growth is leading to radical changes in the planning, financing and provision of public services.

England is leading to the development of new geographically defined economic partnerships.

• These partnerships will determine investment

priorities for a given locality, drawing on a range of new and existing powers and financing programmes and mechanisms to stimulate local growth.

• Developments across England are uneven

and at different stages. The NHS is often viewed as an important place-maker and can help in strengthening the relationships between institutions that determine local decision-making.

• The NHS plays a significant yet often overlooked role in driving local growth across a number of areas. Health economies should determine how they can establish relations with their local economic leaders for mutual benefit.

• By influencing local strategic economic

planning, the NHS can improve its service to the community, have a much greater say in devolved strategic discussions and secure long-term, additional funding into the health service.

Historically, interactions between the health sector and those responsible for local strategic economic planning have been minimal. This has meant knowledge of the NHS’ significant contribution to driving local growth, and any resultant inward investment into the sector, has been limited. The renewed focus on ‘place’, both within health and care and across the wider local economy more generally, highlights a range of opportunities for the NHS to directly influence, and benefit from, external decision-making and investments. Developments across England are uneven, with different places progressing at different paces and with differing priorities. With the future of local economies increasingly dependent on the quality and capacity of its local institutions to collaborate, and their ability to make decisions, there is an increasing need for the NHS to act as a place-leader, contributing to effective joint leadership. This briefing explores the context within which local growth is increasingly shaping local economic planning and the NHS’ role in contributing to this agenda. It is the first in a series intended to provide NHS leaders with the necessary understanding and tools to maximise their value to the local economy.

Realising every place’s potential The government’s focus on local growth has developed rapidly since the white paper Local growth: Realising every place’s potential was issued in 2010. The paper’s priorities were to shift economic powers away from the centre to local communities, businesses and citizens, to better develop the conditions for investment, and to tackle barriers to growth. This recognition – that decisions should be made locally where the drivers of growth are local – has seen a dramatic reshaping of local economic planning and strategy. Where does the NHS fit in?

Why engage in local growth plans?

Situated at the heart of the local community, the health service should be involved in local decisions that determine its future. There is a clear mutual benefit in making the local economy as prosperous as it can possibly be.

• tailored workforce supply and transformation

Despite this, the NHS’ involvement in, and understanding of, the localisation of economic planning and strategy and its impact on the service has been limited – though recent devolution deals such as Greater Manchester point to an increasing awareness. The renewed focus around the place through sustainability and transformation plans/ partnerships (STPs), and the blurring of lines between the local health economy and the wider economy, offer the NHS new opportunities to share the burden, and benefits, of investments in healthcare more widely.

As an important local public service, the NHS is an integral part of its local economy. With the local growth agenda leading to more devolution of powers to local leaders, the NHS Confederation is the only national health body supporting NHS organisations to understand and influence local economic planning.

Better understanding of the local growth agenda can bring the NHS several benefits, including:

• access to significant external funding sources • greater influence in strategic local discussions planning

• more integrated service provision • quicker access to innovative healthcare solutions.

More information can be found at www.nhsconfed.org/localgrowth or by emailing [email protected]

“The government white paper’s priorities were to shift economic powers away from the centre to local communities, businesses and citizens, to better develop the conditions for investment, and to tackle barriers to growth.”

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Redesigning the local economy The focus on empowering local economic development has largely progressed through a succession of agreements between central government and local areas, called ‘deals’, providing for much greater local fiscal and policy responsibility. Examples of central government and local area deals

• City Deals: bespoke packages of funding and

decision-making powers for city regions agreed in waves from July 2012 onwards. More than 30 City Deals have now been agreed across the UK, giving local leaders greater local autonomy over a broad range of financial and planning matters.

• Local Growth Deals: negotiated with central

government to decide how much each local enterprise partnership (LEP) in England would receive from the Local Growth Fund (approx £2bn per annum) and in what areas the money would be spent.

• Devolution Deals: the first ‘Devo Deal’

was announced in November 2014 by the government and Greater Manchester Combined Authority. A subsequent national process saw 38 regional submissions seeking a range of powers. To date, nine combined authorities have been formally established in England, six of which include a directly elected mayor as of May 2017.

All local enterprise partnerships (LEPs) in England, increasingly in partnership with combined authorities, have published multi-year strategic economic plans, bringing together various regional resources at their disposal. The plans set out the agreed vision, objectives, strategy and actions to drive increased local economic growth and prosperity. At a more macro-level, formal developments such as the Northern Powerhouse and Midlands Engine have been agreed with government. These are intended to address historic regional economic imbalances that exist across the country and to drive additional investments into these large areas. The Northern Powerhouse, for example, has a dedicated government minister.

A shifting focus The traditional metrics by which LEPs’ economic progress locally has been measured is by gross value added (GVA) and jobs created. Importantly, and particularly so given the regional disparities evident in the Brexit vote in 2016, these are now challenged as the de facto measurements. The government’s intention to bring ‘prosperity for all’ is adding weight to the development of the inclusive growth agenda, where economic progress is defined as much by social policy, such as health, housing, environmental, as by economic policy. This offers the NHS significant economic opportunities.

“The government’s intention to bring ‘prosperity for all’ is adding weight to the development of the inclusive growth agenda, where economic progress is defined as much by social policy, such as health, housing, environmental, as by economic policy.”

June 2017 Issue 296 Local growth and the NHS: Building the foundations of a healthy economy

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Powers, policy and persuasion Many of the areas covered by city, local growth and devolution deals have the potential for fundamental change in how we plan, finance and deliver public services, including the NHS.

The range of powers The various deals agreed over time cover a broad range of powers. While they differ, many have a strong and consistent focus on areas such as further education and skills, transport, business, employment support, land and housing, and public services. These cover several areas of particular interest to the NHS, including ongoing reforms to post-16 further education, the growing devolution of the Health and Work Programme, business support for healthrelated sectors, additional access to finance, and public planning changes. Explicit powers over health and care feature in a minority of the ‘Devo Deals’ led by Greater Manchester, which has agreed much more control over the city region’s £6bn budget. London has signed a health devolution agreement, while the West Midlands Combined Authority has launched a Mental Health Commission. There exists the basis for health and care integration in the agreements for Liverpool City Region, Cornwall and Cambridgeshire and Peterborough.

The localisation of fiscal policy The government believes that fiscal devolution can provide communities with financial independence, stability and incentives to push for local growth and pioneer new models of public service delivery. Enterprise Zones, which became operational in 2012, establish defined areas in which businesses receive a range of incentives to set up or expand, such as business rate discounts, land tax exemptions, trade and investment support, local enabling infrastructure, a simplified planning regime and certain capital allowances. These zones have become an important tool in stimulating local business investment and growth, with several having a healthrelated industrial focus.

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Full business rate retention is an example of a central reduction in financial support for local authorities, encouraging them to raise more of their own revenue. By 2020, local authorities in England will likely retain 100 per cent of business rate revenues raised in their area, up from 50 per cent at present. As rates become a more important funding source, paying for adult social care and public health provision among other things, councils will be focused on more strategic and financially productive use of land, particularly in urban areas. As part of their agreed deal, combined authorities also have investment funds, guaranteeing longterm financial grant income from government, subject to local economic performance, with which to leverage further monies. This is in addition to further borrowing powers and the ability to raise both a precept on council tax and a levy on their local authority members.

Directly elected mayors From May 2017, roughly a third of the population of England will reside under a directly elected mayor, with more expected to be elected in 2018. While a relatively small number of English cities and borough councils have elected mayors, the new metro mayors associated with combined authorities will oversee a much greater population and range of powers. These metro mayors will act as the figurehead for the region and will have responsibility for setting out the strategy and vision to develop the local economy. As part of this public role, the mayor will be able to exercise a high degree of ‘soft power’ in local decision-making. It is highly likely that they will be involved in opinion-forming and the design of local public service reform, including health and social care.

The NHS: at the heart of an economy The NHS has not traditionally engaged in the cyclical de- and re-industrialisation of local economies. As public service reform increasingly reflects changing local economic and societal factors, it is important the NHS understands the necessary local solutions and partnerships that can help the health service address its challenges. In any economic area the NHS will be a significant and valued player. Understanding the value of the NHS to the local economy requires us to consider our reach and work across a number of areas.

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Workforce

As the biggest employer in any given local area and with recruitment and retention challenges at all levels of its workforce, ensuring future local skills supply is increasingly important for the NHS. Current reforms (such as area reviews) are directing local skills provision according to economic need, putting the NHS in a strong position to influence and shape entry points to health and the needs of health innovation industries.

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Commercialisation of research

As supported in the government’s industrial strategy green paper, the challenges of an ageing demographic are leading to a host of new research collaborations, with universities and businesses working to develop breakthrough healthcare advances to be marketed worldwide. These partnerships provide opportunities for the NHS to invite investments into research programmes and clinical innovation infrastructure.

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Social inclusion

Increased understanding of the role health and wellbeing plays in tackling poverty and driving both employment and productivity helps form the basis for the emerging inclusive growth agenda. Real opportunities exist for an economic recasting of the messaging around public, mental and community health, and for much strengthened links with sectors such as housing, transport and planning.

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Estates management

The NHS has a significant yet often underfunded estates portfolio. The localisation of fiscal policy is driving a more strategic approach to spatial planning across local economies, requiring the NHS to reassess the value and purpose of its properties. In addition, new infrastructure financing will in future determine capital investments, opening up opportunities for the NHS to be involved in local developments.

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Local expenditure

The NHS, through both commissioning and procurement, has a significant economic effect locally. Clinical commissioning groups (CCGs) are increasingly using the Social Value Act, and the role of hospitals as anchor institutions is becoming more understood. These developments enable the NHS to work in partnership to provide a basis for local economic development and to bring in the external support needed to embed new care models into local communities. The challenge for the NHS is to understand the value it brings to its specific local economy and thus focus on where partnerships can best be developed.


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Local leaders of growth The role of local leaders of growth is an important one and has continued to evolve since the local growth white paper was published in 2010. The key bodies for the NHS to interact with are local enterprise partnerships and combined authorities.

Local enterprise partnerships LEPs are non-statutory bodies that originated in 2010. Although accountability for their spending rests with local authorities, the 38 LEPs covering England are separate business-led bodies. One of their key tasks is to develop a strategic economic plan for their economic area, setting out the strengths and weaknesses of that particular economy and the chosen priorities for investment. The government has in recent years directed various funding through LEPs, such as the Local Growth Fund and the European Structural and Investment Funds for 2014-2020.

Combined authorities

• voluntary, community and social enterprises • chambers of commerce • special interest groups representing specific sectors. These bodies are working to influence decisions taken by local economic leaders. Their involvement will vary according to the local area but they will be aware of the local growth priorities and focused on influencing decision-making. Universities in particular will be heavily involved in shaping local economic clusters and priorities. For the NHS to truly influence, it needs to explore partnerships with the above sectors and organisations.

Next steps

Combined authorities (CAs) are statutory collaborations between a group of two or more local councils. Under national legislation, CAs can take advantage of a series of powers and resources devolved to them from government, enabling local leaders to take collective, and much more ambitious, decisions across larger areas.

Harnessing the power of the health economy

The range of areas CAs will have responsibility for differ according to the local agreement but will likely include transport, housing, infrastructure, skills and possibly health and care. Although established by parliament, CAs are locally owned and have to be supported by the councils involved. Some CAs include a directly elected mayor.

For the sector to maximise its influence, it is necessary to bring together its individual parts into one coherent plan. Economic leaders and partners want to discuss and plan place-based investments with representatives of a given sector, not a solitary institution, and to know the individuals they are dealing with are respected local decision-makers.

The partnerships that matter

There are many good examples from across England of various NHS organisations, including arm’s-length bodies, academic health science networks (AHSNs), CCGs and NHS trusts, participating in individual discussions with their respective LEP(s) and combined authorities or holding positions on local decision-making boards. There is no one rule for optimising local engagement, but alignment across the local health economy is conducive to efficient partnership working.

There are a range of traditional, and non-traditional, NHS partners involved in supporting the local growth agenda. These include:

• higher education institutions • further education colleges • local authorities

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The evolving local growth agenda impacts on the NHS in a range of areas. Failure to recognise the health sector as a local economic priority, for example, could directly and indirectly affect recruitment, capital investments, research and development capacity and patient admissions.

Assembling a collective approach to influencing the local growth agenda should seek to build on some of the natural advantages parts of the local health economy have.

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Sustainability and transformation plans/partnerships (STPs)

The new STP footprints, while often not coterminous with local economic geographies, offer an opportunity to strategically link up the health economy with the wider local economy. The NHS can appear complex to external organisations and STPs present a more unified way into the sector. Focus should be placed on how STPs can work with combined authorities and LEPs on issues such as skills, prevention, capital planning and innovation.

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Anchor institutions

The term ‘anchor institutions’, common in the USA, describes large, non-profit organisations that play a significant and recognised role in the local economy and community. While universities act as clearly labelled anchor institutions, hospitals are increasingly place-shaping through their workforce, purchasing power and wider influence on the surroundings. NHS trusts acting explicitly as anchor institutions can exert a great deal of influence in local decision-making, particularly in places where the economic conditions are difficult and the private sector presence is weak.

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Academic health science networks

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Health and wellbeing boards (HWBs)

Since their inception in 2014, the AHSNs have made significant efforts to establish relationships with their respective LEP(s). This has led to several large-scale health-related projects being financed across England and to a much increased understanding of the needs of the NHS by local business communities. In particular, AHSNs were mentioned in the government’s Smart Specialisation Strategy for England policy paper, which set out the main priorities for innovation investment. Academic health science centres and city-wide health partners can also be important locally.

Straddling both the local health service and the local authority, public health leaders can bridge the gap between health and economic development in local discussions. HWBs in particular bring together a range of parties who will be integral to developing place-based approaches to tackling health inequalities and driving inclusive growth and prosperity.

Clinical commissioning groups

The size and scale of the NHS, as well as its daily impact on the lives of citizens, will be seen across England by external partners as a key local asset. As the local growth agenda develops, and economies look to strategically align, there is likely to be an increasing need for the NHS to act as a local placeleader, contributing to effective joint leadership. Despite this, the NHS often appears fragmented, overly complex and impenetrable from the outside.

CCGs are responsible for the strategic and population-based health needs of their communities and therefore have an important role to play as place-based system leaders. By working strategically with local partners, CCGs contribute to the broader economic wellbeing of their populations in a number of ways. An increasing number of CCGs are also looking at tools such as the Social Value Act to ensure commissioning helps drive local growth.

The future of local economies increasingly depends not only on the quality and capacity of its local institutions, but their ability to collaborate. By participating in wider conversations about the strategic needs and priorities of a place, the NHS can improve its service to the community, have a greater say in local decision-making and secure long-term, additional funding into the health service.

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Further information This briefing aims to help NHS leaders understand changes in the external context in which they operate and to outline potential implications and opportunities for the planning, financing, commissioning and provision of health services. Future briefings will cover some of the areas mentioned in this briefing in more detail, including case studies.

Michael Wood, the NHS local growth adviser, leads this work for the NHS Confederation. Contact him at [email protected] and follow him on Twitter at @NHSLocalGrowth. To receive regular email updates from the NHS local growth programme, please email [email protected]

Further information, including links to external documents and reports which complement this briefing, can be found at www.nhsconfed.org/localgrowth.

The NHS Confederation The NHS Confederation is the only membership body that brings together and speaks on behalf of all organisations that plan, commission and provide NHS services. For more information, visit www.nhsconfed.org

If you require this publication in an alternative format, please contact [email protected]. We consider requests on an individual basis. © The NHS Confederation 2017. You may copy or distribute this work, but you must give the author credit, you may not use it for commercial purposes, and you may not alter, transform or build upon this work. Registered Charity no: 1090329. Registered address 50 Broadway, London SW1 0DB.

NHS Confederation 50 Broadway, London SW1H 0DB Tel 020 7799 6666 Email [email protected] www.nhsconfed.org Follow the NHS Confederation on Twitter @nhsconfed