Foundation trusts have secured loans worth more than £1bn from the Department of Health, HSJ can reveal, prompting concern about the impact of increased debts on foundation trust independence.
The foundation trust finance facility, an advisory committee within the DH, has agreed a credit limit with more than 40 trusts. £725m of the £1.1bn loan facility had been drawn down by the end of 2010-11.
The loans, disclosed following a freedom of information request, are medium- to long-term and help FTs to invest in capital programmes.
Figures show the amount borrowed increased by more than 50 per cent from 2009-10 to 2010-11.
The number of foundation trusts has grown in this period, but not proportionately to the increase in loans.
Cambridge University Hospitals had the biggest loan facility, worth £71m. Typical projects approved elsewhere over the past six months include £7.7m to build and equip a radiotherapy suite in Gloucester and £20m for Central Manchester University Hospitals to extend and refurbish its intensive care unit.
The lack of clarity on a failure regime for trusts has resulted in confusion over how lenders could recover their loans from failed trusts, making them unattractive to commercial lenders outside of established frameworks like the private finance initiative.
One foundation trust finance director said the DH had tried to encourage commercial lending to the sector but “commercial lenders won’t touch FTs because there isn’t a failure regime”.
“If you are not allowing the lender to take control of the asset in the event of failure they won’t lend to them,” the director said.
The DH announced last month that the Health Bill would be amended to clarify the position regarding the failure regime. Under its original proposals, commissioners would have “designated” services – and by extension, assets – which would be protected from closure, and therefore from sale to pay debts.
HSJ understands the new plans would shift responsibility to sector regulator Monitor to decide which services should be protected if and when a provider faced failure.
One of the designers of the FT system told HSJ the current situation was “a blow to [FTs’] aspirations to full independence” as they could not use their assets as security against loans.
Foundation Trust Network chief executive Sue Slipman said the FT finance facility “acted in an independent and balanced manner”. But she warned reforms in the bill could “make its role much more complex” – especially if the facility took over from the DH the role of holding taxpayer equity in trusts.
It could also end up dealing with the restructuring of services in trusts about to fail, Ms Slipman said, adding: “In these circumstances foundation trusts would want it to be structurally, as well as culturally, independent [from the DH].”
One finance director at an FT told HSJ: “The FTFF has a number of possible advantages as a lender to the FTs. The organisation understands the business of the NHS and has a mature assessment of risk in the NHS and so is able to offer rates that reflect that assessment.
“On the down side, there is a danger that FTFF could be perceived as lender of last resort or a crutch for failing organisations and this must not be the case.
“I have found the FTFF extremely professional, very commercial and our dealings have been beneficial to the Trust.
“If the FTFF could be allowed to operate with a degree of independence and against transparent lending criteria I think that the NHS might be able save meaningful sums currently spent on commercial banking facilities.”
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- BASINGSTOKE AND NORTH HAMPSHIRE NHS FOUNDATION TRUST
- CAMBRIDGE UNIVERSITY HOSPITALS NHS FOUNDATION TRUST
- CENTRAL MANCHESTER UNIVERSITY HOSPITALS NHS FOUNDATION TRUST
- Department of Health and Social Care (DHSC)
- DORSET COUNTY HOSPITAL NHS FOUNDATION TRUST
- Foundation Trust Network (NHS Providers)
- Foundation trusts
- GLOUCESTERSHIRE HOSPITALS NHS FOUNDATION TRUST
- Health Bill 2011
- HEATHERWOOD AND WEXHAM PARK HOSPITALS NHS FOUNDATION TRUST
- Milton Keynes University Hospital NHS Foundation Trust
- Private finance initiatives (PFI)
- Sue Slipman