London primary care trusts are to pay off the historic debt of trusts in the capital to prevent it reaching £579m by 2011.

Backed by NHS London, the PCTs are proposing establishing a collective fund to pay off the debts, consisting of £304m of 'topslice' funding held by the strategic health authority and a non-returnable levy of 1.3 per cent on PCT funding for two years.

The "topslice" was PCT funding held by NHS London to manage risks during the period of financial recovery across London.

The SHA said the impact of the investment from PCTs would be to shift hospitals with debt onto an even financial footing, allowing Healthcare for London to be implemented in all boroughs.

'Bold and decisive'

NHS London finance director Paul Baumann said: "PCTs should be congratulated for taking this bold and decisive action.

"Failure to deliver this proposal would mean that a number of organisations would be unable to deliver the improvements promised in Healthcare for London and healthcare across London would remain patchy.

"By taking this action PCTs will have much greater leverage to demand better performance from their providers.

"This decision has not been taken lightly by the PCTs and they are determined to ensure that there is no return to this deficit position in the future."

Financial challenge

All but five London PCTs are already free from debt and four more will complete their recovery programmes by 2010.

But there are currently six financially challenged trusts and another five that are unlikely to exit from debt before 2011.

Levy

The non-returnable levy will be applied to all PCTs except the five still repaying debts.

King's Fund chief economist John Appleby said the move was a "once in a lifetime opportunity for the NHS in London" but warned: "To ensure this measure won't be seen as rewarding poor financial management, NHS London must be satisfied that the root cause of the financial problems facing the handful of trusts receiving the bailout won't return in a few years' time due to underlying and persistent problems that haven' been resolved.

"Reform is needed for these trusts so they become more financially stable and don't rack up new debts - they will need robust plans in place to ensure they balance their books in future."