Millions left unspent on NHS as councils fail to cash in on money from housing developers

The health service has a £6bn backlog on infrastructure spending – but easy funds are not being obtained

Developers are legally bound to hand over funds to obtain planning permission (Getty/iStock)

The NHS is missing out on tens of millions of pounds from housing developers because councils are failing to ask for the funds, it has emerged.

And even when councils do collect the funds, the NHS often fails to spend it – £34m is currently unused.

Property developers are required to stump up this cash to obtain planning permission. The funds are intended to be spent on developing and creating buildings to alleviate pressure on the health service after an influx of residents.

But the money isn’t being spent – despite the NHS facing a backlog of more than £6bn for spending on its buildings and equipment, with £3.4bn representing an urgent risk to patients.

The failure to secure funding from developers was revealed by the right-wing think tank Reform, which is calling for clearer guidance for the NHS and councils, better communication between them, and more transparency.

Lead author of Reform’s report, Claudia Martinez, said: “The NHS estate is in dire straits and yet millions are being left unspent or untapped. Given the scale of the government’s house building ambitions, and the pressure it will put on local services, it must urgently act to rectify this.

“A new year’s resolution for local authorities and the NHS must be to cash in on the money available from developers to fund vital improvements across the estate.”

Under planning rules, councils can force developers to invest millions of pounds in local public services to mitigate the impact of their planning application. For example, the money can be used to fund a new health centre for a large housing estate.

The funding is obtained using legal requirements outlined in Section 106 regulations.

Data obtained by Reform using the Freedom of Information Act showed that between 2014 and 2019, only 36 per cent of local councils, 105 out of 293, had secured investment for healthcare projects.

Of the £87m that was promised, almost £41m has yet to be allocated and handed over to the NHS. In Lewisham, south London, more than £2m of S106 funds have not been allocated.

Twenty councils had more than £500,000 yet to be allocated to the NHS since 2018-19 and, of those, 12 had more than £1m. Exeter City Council holds more than £10m.

Many councils were not using their powers to collect money for healthcare infrastructure at all.

Newcastle City Council, which had one of the highest property development rates in the UK in 2016-17, had not collected any S106 money for healthcare in that period. It has recently started to collect money for the health service.

Maidstone Borough Council in Kent held £1.82m of unspent funds and Tamworth Council in Staffordshire told Reform it did not collect S106 contributions for healthcare because the local NHS had not identified any projects in need of funds.

The NHS was also shown to have failed to spend the money in time. After Blaby, Swindon and Oxfordshire councils obtained S106 funds, the cash had to be returned to the developer because it was not spent within the agreed legal time limit.

Reform said communication about the use of money was often poor between councils and the NHS. The think tank cited the example of Chorley Council and Lancashire County Council, which both said the other was responsible.

The think tank has called on the Ministry of Housing, Communities and Local Government to produce standardised business cases to support the NHS to engage with developers and local councils.

NHS England has issued guidance to trusts to help them secure more money. On its website, it said Section 106 was “an important opportunity for trusts to secure additional revenue and capital to support services and sites when housing growth places additional pressures on them”.

It added: “This needs to be closely coordinated to optimise outcomes.”

The Local Government Association said: “Councils want to see money from Section 106 agreements spent on delivering the infrastructure and services that communities need.

“This can be a complex process and can take time, which is why we would urge individual NHS bodies to work with councils at an early stage in the planning process to make sure that infrastructure needs are fully understood.

“It is really important the NHS engages with councils when local plans are being developed, not when individual planning applications are brought forward.”