Exclusive: Trust bailouts rise to £2.7bn as more rely on loans

“Interim revenue support” payments to the provider sector increased by more than a third in 2016-17 compared to the previous year. The payments totalled £2bn in 2015-16 when around half of hospital trusts received support.

The figures reflect the fact that an increasing number of trusts are struggling to maintain adequate cash levels due to their recurring income and expenditure deficits. In some cases this has led to external suppliers refusing to provide services due to late payments.

The numbers also provide a stark reminder that despite official figures suggesting an improvement to the overall finances of the NHS, much of the trust sector is still in severe financial distress.

After recent changes to Department of Health rules, the support payments now take the form of loans that must be repaid with interest rates of between 1.5 and 6 per cent. 

Dozens of trusts started 2016-17 with large debts from the previous year, but instead of beginning to pay these loans back, their debts have grown substantially due to further loans needing to be drawn down.

Fifty-five providers have total debts of more than 10 per cent of their turnover in relation to these loans, with 10 trusts carrying debts worth more than 30 per cent of turnover (see table).

The reported provider deficit reduced to £791m in 2016-17, compared to £2.45bn the previous year, which was largely thanks to the £1.8bn of sustainability and transformation funding.

Generally a reduction in the reported deficit would suggest a reduced reliance on bailout cash, as there should be a broad correlation between cash levels and the reported income and expenditure position. But there may be several reasons why cash support increased last year despite the reported deficit reducing.

Payments from the STF were received later than expected by trusts, meaning some organisations had to draw down loans support instead.

Meanwhile, the cash levels at trusts not in receipt of bailouts may have increased to a greater extent than they declined at the trusts receiving support, meaning aggregate cash levels improved. 

Also, some of the technical accounting adjustments that helped improve the reported deficit position will have had no impact on cash levels.

One finance director, whose trust is in receipt of bailout support and spoke to HSJ on the condition of anonymity, said: “Cash doesn’t lie, and this just shows there is still a big problem.

“Our ability to be able to make surpluses is so small there’s absolutely no way I’m going to be able to pay our loans off.

“And then you’ve got other trusts which are now holding big cash surpluses, which is money that would potentially be very useful to areas which are struggling.”

HSJ has previously reported concerns that the new loan system creates greater disparity between successful and troubled organisations, and is akin to “kicking someone when they’re down”.

Trusts with bailout debt worth more than 30 per cent of turnover

Trust	Total bailout debt at April 2017 (£m)	Debt as % of turnover
North Cumbria University Hospitals Trust	131	56
Medway FT	130	51
Milton Keynes University Hospital FT	79	41
Sherwood Forest Hospitals FT	121	41
Hinchingbrooke Health Care Trust	41	37
University Hospitals of Morecambe Bay FT	104	36
The Princess Alexandra Hospital Trust	69	35
Tameside Hospital FT	55	33
Queen Elizabeth Hospital Kings Lynn FT	56	33
Wye Valley Trust	56	31
HSJ used turnover figures from 2015-16, as consolidated accounts data for 2016-17 have not yet been published by the DH.

Richard Murray, policy director at the King’s Fund, who has previously questioned whether trusts will be able to repay the loans, said: “Despite the improvement in the net financial position for NHS providers in 2016-17, this reveals the very substantial sums of money flowing between the department of health and trusts…

“If the STF was meant to place responsibility and control for financial sustainability with NHS Improvement and NHS England, this underlines just how far the department is still being drawn into providing cash to individual organisations.

“The degree of central intervention implied by the combination of the STF and these loans raises fundamental questions about the entire NHS system of financial flows – it was not meant to be this way.”

With the total debt (including monies owed from previous years) now at £4.7bn, an assumed average interest rate of 3.75 per cent would imply annual charges of around £175m per year on these loans.

As previously revealed by HSJ, trusts in financial special measures are forced to pay the higher rate of 6 per cent, with some providers such as Barts Health Trust thought to be paying around £10m in annual charges.

Sherwood Forest Hospitals FT, which ended 2016-17 with a £48m deficit, paid £1.9m of interest charges on its interim revenue loans last year. Paul Robinson, chief finance officer, said the trust had improved its position and delivered its financial target, but said the trust would only be able to start paying back its loans once it is making a surplus, and ”it is not expected that this will be achieved in the immediate future.”

The other trusts listed did not respond in time for our deadline.

A DH spokesman said: “As in previous years, staff have worked hard to make sure the health system is in a balanced position and finances are steadily improving, but we have been clear that the NHS needs to stick to its financial plans.

“Every year we provide, and publish the details of, extra financial assistance to support trusts in financial difficulty, which is only given if an individual improvement plan is agreed.”