Trusts offered lower interest on bailouts to hit finance targets

The move is another incentive for trusts to deliver their control total for the year, as the department seeks to stay within its parliamentary spending limit.

Dozens of providers with financial deficits are reliant on “revolving” loans to ensure staff and invoices can be paid. These operate like an overdraft facility and carry an interest charge of 3.5 per cent.

The revolving loans can often be repaid and replaced by a longer term loan at a later stage, carrying an interest rate of 1.5 per cent.

According to emails seen by HSJ, the DH has offered to automatically convert the revolving loans to those with lower interest rates at the end of January, providing trusts are forecasting to meet their year-end control total and are not in financial special measures.

The DH said year to date performance will also be considered.

More than 60 trusts made use of revolving working capital facilities in 2015-16, totalling £1.4bn, with around £1bn repaid within the year.

It is likely that a similar number will be using the facilities this year, but the total amount drawn will be lower due to additional income received through the £1.8bn sustainability and transformation fund.

Incentives already offered to trusts that can meet or improve on their control total include STF bonus payments and potential preferential access to capital funding. Payments from the main STF also offer a strong incentive for trusts to meet their financial plan.

HSJ asked the DH about the risk of trusts submitting overly optimistic forecasts, triggering the loan conversion, but then missing their control total, and whether measures were being taken to prevent this.

A spokesman said: “To be clear, we expect trusts to meet their control totals.

“We are not just basing this proposal on forecasts but also on year to date performance. Trusts will need to demonstrate performance broadly in line with their plan for the offer to be signed up.”