- FT expected to meet control total after £20m revaluation of investment property
- But value of Chelsea Farmers Market has dropped by £7m
- Trust has previously been major beneficiary of sustainability funding, thanks to previous revaluations on same property
A specialist trust which has been a major beneficiary of the current financial regime is at risk of missing its “control total” by £27m, after an expected accounting adjustment was scuppered by delays to a rail project and Brexit uncertainties.
Royal Brompton and Harefield Foundation Trust was expecting to report a near breakeven position in 2018-19, after benefitting from an upward revaluation of Chelsea Farmers Market, an investment property it owns.
The value of the property was expected to rise by £20m, which would have scored within the trust’s income and expenditure position for the year.
However, according to a finance paper to the trust board on 27 March, there has been a downward revaluation of £7m.
It said: “Although currently running this substantial deficit, the trust’s control total for 2018-19 represents a close to breakeven result. This is because the 2018-19 plan assumed a revaluation gain of £20m on Chelsea Farmers Market (CFM), an investment property.
“Owing to delays in developments on Crossrail 2, it is now highly unlikely this gain will be recognised in the current financial year… Finally, the recently received draft valuation of CFM in its safeguarded state results in a reduction relative to a year ago of some £7m.”
Crossrail 2 is a major rail project planned for the capital, for which there have been development restrictions along the planned route that were expected to be lifted earlier.
Minutes from the trust’s February board meeting suggested the downward revaluation was also related to uncertainties around Brexit.
The impact will also filter through into the overall position of the provider sector, therefore adding to the expected deficit reported by NHS Improvement.
If the trust misses its control total, it would fail to qualify for £4m of “sustainability funding” relating to performance in the final quarter. However, it has already received £7m by meeting its year-to-date plans in the first three-quarters of the year.
It is the second time the FT has been significantly impacted by a revaluation of Chelsea Farmers Market. In 2017-18, it benefitted from an upwards revaluation of £61m, which enabled it to trigger a £51m of sustainability fund, against its original allocation of £8m.
Payments such as this have proved hugely controversial, as this was money that was originally earmarked for other trusts. However, these trusts did not meet their financial targets and, therefore, did not qualify for funding.
The intention behind this has been to focus all efforts on improving the headline financial position of the overall NHS. But critics say it has encouraged trusts to pursue one-off accounting benefits, rather than genuine efficiency savings.
The trust said: “Due to some final end-of-year calculations, we are not currently in a position to share our forecast year-end position.”
The board papers also said the trust had planned to sell the property, but has been advised to delay this due to there being “a limited market for the site and the expected sale price would almost certainly be subject to a substantial discount”.
Trust board papers
27 March 2019