Foundation trusts will be given financial incentives to take over failing NHS trusts under proposals to be set out in the government’s forthcoming election manifesto.

This will start at the equivalent of 1 per cent of the failing hospital’s turnover and will be phased out over five years.

The first trusts likely to be offered for takeover are the eight that are currently defined as “underperforming”

The “incentives” effectively form a subsidy for running the trust’s services and will be offered alongside partial debt write-offs and a new fast track reconfiguration process - giving foundations the authority to rationalise services that are not financially sustainable or clinically safe.

A senior Labour party source told HSJ the manifesto commitment had been drawn up through discussions with foundation trust chief executives, some of whom are eager to take over the 20-30 NHS trusts that are thought will never make it to foundation status.

The Labour source said ministers were keen to present the policy as one that will end a “two tier” NHS, with high performing foundation trusts existing alongside struggling or failing trusts.

The first trusts likely to be offered for takeover are the eight that are currently defined as “underperforming” in the Department of Health performance regime. These include Hinchingbrooke Health Care Trust and Barking, Havering and Redbridge Hospitals Trust. One per cent of their turnovers would represent subsidies of approximately £1m and £3.8m respectively.

Hinchingbrooke Healthcare Trust is currently part of a tendering exercise to find an organisation that would run it under a franchise.

Last week, a list of five private sector bidders was shortlisted to three. Peterborough and Stamford Hospitals Foundation Trust joined the list as part of a partnership with Serco Health.