Transformation Directorate

Who Pays for What proposals

Published 31 August 2021

Here we describe the barriers to investment in digital technology and how we propose to start to fix them in 2021 to 2022 and beyond. In 2021 to 2022 we will consolidate national funding for transformational tech projects into a single fund and take steps to support ICSs to make better investments. From 2022 to 2023, we propose to start moving away from central funding of frontline tech, and ICSs will increasingly be given control over the resources with which to deliver their tech plans. We are keen for your feedback on these proposals.

What problems are we trying to fix?

We’ve listened to people about the main barriers to investment in digital technology and these include the following.

Complex funding arrangements

  • Uncertainty over what is funded nationally and by which pots of money.
  • Lack of visibility by systems of future national funding opportunities.
  • Misalignment of local and national priorities.
  • Single-year budgets and late notification leading to poor investment decisions.
  • Burdensome and duplicative bidding processes.
  • Wrong mix of capital and revenue to support optimal tech spending including a lack of recognition of the revenue consequences of capital investment. This is an increasing problem as tech shifts to being consumed and managed as a utility.
  • Allocations focused on providers rather than ICSs and uncertainty over how to deal with shared tech assets within ICSs.

Payment, financial and other policies that impede innovative tech investment

  • Aspects of the previous financial system have hindered the shift to digital pathways, for example, organisational financial targets focused on non-recurrent savings, and activity-based payments in outpatient settings.
  • Current policies address these issues, but provide limited incentives for digital transformation.

Lack of information and measurements for optimising tech investment

  • Organisations do not know how much they are spending on tech, how much they should be spending or the cumulative impact of under-investment.
  • Measurable benefits of digital investment are not widely understood.
  • Some worthwhile investments have no measurable financial payback, for example an investment which reduces the chance of catastrophic failure from 1% to 0.1%.

How we will fix the problems: 2021 to 2022

In 2021 to 2022 we will start fixing these problems by:

Consolidating national funds for transformational tech projects into a single fund

We will publish a prospectus of projects for which ICSs can bid for funding through a single portal. We will provide guidance to bidders on what to include in their business cases and keep them fully informed on the progress of their bids throughout our approvals process.

Improving the timeliness, usefulness and reliability of digital metrics available for benchmarking

We will start with an improved data collection for the Model Health System tool in September 2021. Other work will include creating a calculator to help ICSs understand their ‘digital debt’, and what is required to meet the success measures set out in What Good Looks Like.

Providing tools and case studies to help ICSs to model and track benefits from tech investments

We will collate and make available existing products in order to share best practice and save ICSs time. We will also develop new products to meet ICS needs that aren’t already covered.

Reviewing national policies to support digital investments

We will review, and where appropriate revise, national policies to support digital investments better (See ‘Aligning financial, payment and other NHS policies with good tech investments') in order to:

  • improve compliance with ‘must do’ interoperability and cyber standards
  • encourage the consistent uptake of well-established digital products and platforms
  • promote the adoption of emerging innovations, such as patient apps, smart devices, clinical decision-support tools and novel diagnostics

How we will fix the problems: 2022 to 2023 onwards

ICSs will be expected to fund the delivery of their tech plans from their own budgets, the total funding envelope available to ICSs and their constituent organisations. They will be given control of more resources with which to do so. We will move away from central funding of frontline tech.

ICS funding

ICS funding will cover:

  • applications such as EPRs - procurement, development and management
  • cloud services and data centres
  • core kit and supplies including laptops, printers, telecoms and networks
  • local cybersecurity measures
  • IT programme management
  • training
  • IT service management
  • system transformation, for example shared care records

National funding

National funding will cover:

  • national products such as the NHS App
  • national infrastructure
  • pilots linked to the NHS Long Term Plan commitments in advance of national scaling
  • things that need to be done across multiple ICS areas - such as Office 365

To enable this over the next four years we plan to shift to funding arrangements under which:

  • the centre’s role will be one of supporting investment, setting standards, delivering national products and assuring and approving local spend
  • oversight of ICSs’ investment planning and delivery uses the What Good Looks Like framework, and is aligned to the wider NHS operational planning and oversight processes
  • ICSs know before the beginning of each financial year how much revenue and capital funding for tech they have been allocated and how much they may get from national sources, as they do for core funding
  • ICSs decide how to allocate tech investment funding to their constituent organisations to support their ICS plans, drawing on the What Good Looks Like framework and focusing on levelling up as an initial priority

In 2022 to 2023, we will begin to allocate funding directly to ICSs before the start of the financial year rather than asking them to bid for it. Initially this will prioritise the need for levelling-up tech capabilities and will then move to a fair shares basis once sufficient progress has been made. We will move as rapidly as possible to give systems control over a significant majority of the funding available.

We will work with colleagues in government and NHS England and NHS Improvement to explore whether the capital and revenue mix of funding can be made more flexible and ICSs given more certainty about the amount of funding for tech that will be available to them in future years.

Aligning financial, payment and other NHS policies with good tech investments

This section describes the policy areas that can impede tech investment, the changes currently underway to address this and other policy areas that could be updated to create stronger incentives for tech investment. These areas are: ensuring compliance with minimum standards on interoperability and cyber security; encouraging uptake of established technologies that are not yet used widely enough across the NHS; and promoting ‘cutting edge’ innovation and adoption of emerging digital technologies. We will undertake work in all three areas to establish which changes are desirable. Several questions are included in this section.

Please tell us what you think about these and other parts of this section.

Historical policies affecting tech investments

Historical NHS financial and payment policies and mechanisms that impeded optimal tech investment include:

  • requirements to meet organisational financial targets - these can discourage organisations from undertaking digital projects with wider system benefits, for example shared care records
  • activity-based payment for acute services - this impedes reimbursement of new technologies which are not priced under the national tariff and can hamper digital pathway improvements, for example virtual consultations, remote monitoring
  • other policies that do not recognise or support tech investment, or not as well as they should - the result is a lack of incentives directed at promoting digital transformation

Changes in financial and payments policies 2021 to 2022

Policy changes implemented in 2021 to 2022 have tackled these barriers, in particular the moves to:

  • ‘system by default’ and system financial envelopes - these should encourage system-wide evaluation and co-ordination of proposed digital projects and cross-organisation sharing of benefits
  • blended payments for service providers - acute providers’ income will no longer depend on performing a defined set of nationally-priced activities. Over the next few years, the tariff system will move from the COVID block contracts towards the Long Term Plan vision of blended payments, which will increase scope for local digital innovation


Do you agree that these changes to the financial architecture and payment system will remove the disincentives for digital investment? Are there other disincentives that need to be addressed?

Changes in other policies to create positive incentives

Other national policies could create stronger incentives for good tech investment by:

  • ensuring compliance with minimum standards on interoperability and cybersecurity
  • encouraging uptake of established technologies that are not yet used widely enough across the NHS
  • promoting ‘cutting edge’ innovation and adoption of emerging digital technologies

Ensuring compliance with minimum standards

All tech investments must meet the required standards of interoperability and cybersecurity to protect patient safety and privacy. We will consider improving compliance by:

  • clearly specifying these standards and integrating them into the CQC inspection regime
  • tougher management of vendors, for example making compliance a condition of inclusion on procurement frameworks, requiring evidence of compliance rather than self-certification
  • publishing examples of good practice and non-compliance by vendors on critical standards
  • helping service providers to negotiate and manage contracts with vendors so they can hold vendors to account for meeting critical standards

Encouraging uptake of established technologies

In cases where there has been wide variation in performance across NHS systems and providers, benchmarking and target-setting have proved successful in encouraging all providers to move towards top quartile performance. We will therefore consider doing the same where there is variation in uptake of core digital platforms, such as electronic records, by:

  • developing practical digital benchmarking tools for systems and providers based on reliable digitisation metrics, similar to the Model Health System
  • embedding targets for digitisation in the wider set of national targets and reporting tools applied to systems and organisations, such as the templates used to collect data on recovery trajectories

Promoting adoption of emerging innovations

These are technologies likely to yield significant benefits that are not yet established. Priorities to promote under this heading include:

  • new products that can be used by patients to self-manage or that allow clinicians to monitor or care for patients remotely
  • technologies that support clinicians to provide better patient care, including artificial intelligence

In the past, uptake of such innovations has often been supported by targeted national funding or central purchasing. This hasn’t always worked, particularly after the national support has ended. We are considering using the following incentives to promote adoption:

  • Expanding the MedTech Funding Mandate to include digital innovations that are supported by good evidence and have required MHRA and NICE approvals.
  • Aligning targeted financial incentives such as Primary Care Network Contract Direct Enhanced Service (DES) with adopting technology-enabled models of care.
  • Creating national infrastructure which allows digital health technologies to be provided to patients, included in their medical records and suppliers to be reimbursed.
  • Encouraging local financial arrangements that enable take-up of such technologies, for example risk-sharing models that manage the distribution of costs and benefits across organisations within a system, by providing case-studies and templates.


Do you agree with the categorisation of digital innovation priorities and the different approaches proposed for supporting uptake of digital innovations?

Work is needed in all three areas to assess:

  • whether the proposed policy changes will make a material difference
  • the magnitude of potential benefits to patients
  • whether policy changes are needed elsewhere to maximise the benefits
  • any likely unintended consequences


We would like to hear your views on these proposals. Please tell us what you think of them and how they can be improved.

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