HSJ EXCLUSIVE Successful SHAs encouraged to lend to poorer ones in radical proposal

Published: 14/07/2005, Volume II5, No. 115 Page 5

Thousands of jobs are likely to be lost across the health service as NHS organisations fight to achieve financial balance.

HSJ has learned that the English NHS is struggling with a combined shortfall of around£750m, which will mean significant job losses in an attempt to claw back money. Several senior sources have suggested that more than 8,000 jobs could be lost.

Following a meeting of strategic health authority chief executives and Department of Health directors, a plan has been devised under which SHAs that are currently in credit will be encouraged to lend money to their poorer counterparts.

No decision has been taken on the proposal. The DoH is in negotiations with the best-off SHAs about how to motivate them to lend significant sums, with suggestions that they could be paid 10 per cent interest on the loans.

The DoH has drawn up a list, sent to chief executives two weeks ago, which classifies the financial performance of England's 28 SHAs into three groups.

HSJ has been told that the first group is made up of six SHAs that have 'no hope' of achieving financial balance by March 2008, the period covered by the government's spending plans (see panel). Those in the first group will need 'significant help to stop the bleeding and pay off debts', according to one senior SHA source. Their more successful counterparts could loan them up to£200m.

The second group, comprising 11 SHAs, have to make savings in the region of£250m.

Under the proposals, SHAs would not be given any extra cash to do this, but have been told that they need to cut back dramatically to address their combined historic and recurring debts, and hit the£500m NHS efficiency savings target demanded by the government by 2008.

It is from these first two groups that the significant job losses will come. Senior sources are predicting that the numbers of redundancies from the second group alone could top 8,000.

The last 11 SHAs have been identified as the most financially stable and successful. The DoH wants this group to provide up to£200m to the worst-off SHAs.

HSJ understands that the DoH is currently negotiating with these SHAs. The favoured option is to offer the 11 SHAs in the third group a significant return on their investment of 10 per cent per year.

One source close to the negotiations told HSJ that without this incentive there would no reason for SHAs to lend money.

'Otherwise why should SHAs that are under-funded [in their financial allocations from the DoH] but have good financial performance lend to those that are over-funded?' A DoH spokesman said NHS chief executive Sir Nigel Crisp had made it clear that organisations needed to get their finances under control.

He added: 'In a small number of cases where people do not think it will be possible to achieve financial balance we want to make sure any brokerage system is well managed, fair and efficient. There have been discussions about how to achieve this, but no decisions taken yet.' And he stressed: 'Any brokerage scheme we develop with the NHS would be entirely voluntary.'