News / FTs feeling the pinch

The tough economic climate has led foundation trusts to predict a cut in income for the first time.

In its review of foundations’ plans for 2010/11, Monitor said that while the trusts’ forecast income will grow by 1.7% this year, over the three years of their plans they expect overall income to decline by 0.8%. Almost a third of FTs predict their financial risk rating will decline in 2010/11.

The regulator said FTs had also identified challenging cost improvement plans (CIPs). On average, trusts are looking to save 4.4% through CIPs in 2010/11 – 1.4% more than the previous high.

FTs’ gloomier outlook came hot on the heels of their consolidated accounts for 2009/10, which showed individual surpluses falling despite an increase in revenue.

The 129 foundation trusts that were authorised before 31 March 2010 generated total revenues of £27.9bn – an increase of 22.5% on the previous year, when there were 115 foundations.

The regulator said the increase was driven by new NHS foundation trusts authorised in year, price inflation and increased activity.

However, the 115 foundations authorised before 2009/10 experienced falling surpluses on aggregate – £356m after impairments, a fall of £132m. This was due to pressure on operating margins and higher depreciation and interest charges, largely attributable to the additional property, plant and equipment and borrowings associated with private finance initiative projects.

The overall operating surplus for all FTs before impairments was £1.052bn (3.8% of total income), compared with £1.042bn (or 4.6%) in 2008/09.

Concerns over the financial position and governance at Poole Hospital NHS Foundation Trust led the regulator to conclude it was in significant breach of its terms of authorisation. In 2009/10, the trust reported a deficit of £4.5m (before impairments) against a planned surplus of £2.1m.

Monitor has decided not to use its formal powers at this stage. However, it will review its future performance against specific milestones. 

‘The focus is now on the future and taking the actions necessary to ensure the continued provision of high-quality patient services from a secure financial platform,’ said David Bennett, Monitor’s interim chief executive.

The trust said it was determined to restore its financial health as soon as possible.