• £2.81bn paid out to trusts as “working capital loans” in 2017-18 – a small increase on the previous year
  • Figures reflect the fact dozens of trusts are struggling to maintain adequate cash levels due to their recurring income and expenditure deficits
  • Cash bailout totals contrast with reported deficit for the provider sector

NHS trusts drew down almost £3bn of emergency cash from the government last year, as providers with continuing budget deficits struggled to maintain payments to staff and suppliers.

Analysis of monthly data published by the Department of Health and Social Care suggests that £2.81bn was paid out to trusts as “working capital loans” in 2017-18, which was a small increase of about £10m on the previous year.

The figures reflect the fact dozens of trusts are struggling to maintain adequate cash levels due to their recurring income and expenditure deficits. This has increasingly led trusts to delay payments to suppliers, which in some cases has prompted suppliers to cease deliveries.

The scale of the cash bailouts - which support revenue spending - could cast doubt on the reported improvement in trusts’ accounts since 2015-16.

Largely thanks to the £1.8bn “sustainability and transformation fund”, the reported trust sector deficit improved from £2.5bn in 2015-16 to £791m in 2016-17. The deficit for 2017-18 is due to be reported by NHS Improvement tomorrow, and is likely to be around £950m.

Despite the improvement of around £1.5bn since 2015-16, the amount of working capital paid out to trusts has reduced by just £300m. Around £3.1bn was paid out in 2015-16.

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HSJ looked at data published by the DHSC which details all payments of more than £25,000. The totals differ slightly from those published by the DHSC in its annual accounts, and exclude cash payments for capital projects and planned revenue support payments. The figures contained in the chart prior to 2015-16 include short term PDC payments, which have now been replaced by loans. The reported deficit figure for 2017-18 (£950m) is an estimate based on previous research.

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 policy experts at the Nuffield Trust think tank have argued that the underlying financial deficit within the provider sector is much greater than the reported figure.

The difference is partly explained by some of the one-off technical accounting adjustments that have helped improve the reported deficit position, but which have no impact on cash levels.

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

National leaders will also be wary that more trusts may have avoided drawing down working capital loans by delaying payments to suppliers, as happened at Barking, Havering and Redbridge University Hospitals Trust until it was forced to seek a bailout. If there are further cases of this kind, then the official financial performance figures could significantly flatter the true position.

HSJ revealed last year that one in four acute trusts routinely paid their suppliers late.

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

NHS Improvement and the DHSC were contacted for comment.