News / Debt, cash and PFI targeted

The Department of Health could provide loans totalling hundreds of millions of pounds to help put trusts on a sustainable financial footing as they aim for foundation status.

Health secretary Andrew Lansley said 80% of trusts yet to become foundations have financial issues. He outlined plans to increase liquidity, cut historic debt and make private finance initiative schemes more affordable.

 ‘We need to be honest about the problems – burdensome debt and onerous PFI payments – and transparent about how we go about fixing them.’

A National Audit Office report on the foundation trust pipeline analysed the tripartite formal agreements (TFAs), which set out a route map to foundation status for each NHS trust. It found financial issues were a barrier to foundation status in 80% of cases (90 trusts).

Specific problems cited were: the level of efficiency savings (58%); other capital issues (38%); working capital and liquidity (37%); financial position (32%); loan debt (21%); and PFI affordability (19%).

Mr Lansley’s proposals appear to concentrate on liquidity, debt and PFI. Earlier the Department announced the foundation trust financing facility could make loans to speed up the disposal of surplus land and aid reconfiguration.

While individual organisations must sort out their problems with other local bodies, the Department would step in ‘where the underlying issue is not of their making, where they face difficulties through no fault of their own’, said Mr Lansley.

‘We will provide ongoing support to the small number of hospitals struggling with PFI deals to ensure that local services are protected, and one-off transparent loans to help recapitalise hospital trusts and enable them to sustain high standards of care and service,’ he added.

To be eligible, trusts must meet four criteria: their problems must be exceptional; the issues must be historic and the trust must have a clear plan to manage resources in the future; they must deliver high annual productivity savings; and they must deliver clinically viable, high-quality services – including low waiting times and other performance measures.

The Department would not divulge how much it expected it would be lending; it had to go through the process of assessing each trust’s needs.

There were pointers in the NAO report. It said a Department analysis of 2009/10 figures, for the (then) 99 pipeline trusts, showed that up to 36 trusts did not meet Monitor’s liquidity risk rating.

The report said the Department calculated the trusts would need loans totalling £376m in order to meet Monitor’s minimum liquidity requirement if their financial situation did not improve.

The Department had been in discussions with the Treasury about whether the Department, rather than commercial banks, could offer access to the loans. This would reduce borrowing costs to trusts. This has already happened, with the recently authorised University Hospital Southampton NHS Foundation Trust given a loan of £10m, according to the NAO.

In August, the Audit Commission said that in 2010/11, 16 NHS trusts received additional income totalling £90m for strategic change or business support, and that the additional income for 12 of these trusts was greater than their reported break-even position.

Mr Lansley offered support for managers making difficult decisions about the future of local services in partnership with local people. But he warned he would not hesitate to remove management teams unable to make the hard choices to ensure their organisation was clinically and financially sustainable.