NHS Finance

03.04.20

NHS to benefit from £13.4bn debt write-off

In efforts to relieve some of the financial burden on NHS providers in light of the ongoing coronavirus outbreak, Health Secretary Matt Hancock has announced over £13bn of debt will be written off from the healthcare service.

The debt write-off, set to have taken effect from April 1, 2020, forms part of a wider new NHS funding model designed to ensure the NHS has the necessary funding and support to respond effectively to the coronavirus outbreak.

Removal of much of the NHS’ burdensome historic debt will help provide not just the much-needed financial support during this unprecedented health challenge, but also lay out secure foundation from which the NHS can build towards longer term commitments set out last year to become more financially sustainable going forwards.

With the beginning of the new financial year, the debt write-off was just one of a number of new major reforms to the NHS financial system, designed in collaboration between NHS England and the Department of Health and Social Care. It coincided also with the launch of a simpler internal payment system to help NHS trusts in dealing with the coronavirus response, as agreed with NHS England last week.

The significant change means hospitals will get all the necessary funding to carry out their emergency response, despite many hospitals cancelling or limiting their usual services such as elective surgeries or walk-in clinics due to the virus.

Health Secretary Matt Hancock said: “As we tackle this crisis, nobody in our health service should be distracted by their hospital’s past finances.

“Today’s £13.4 billion debt write off will wipe the slate clean and allow NHS hospitals to plan for the future and invest in vital services.

“I remain committed to providing the NHS with whatever it needs to tackle coronavirus, and the changes to the funding model will give the NHS immediate financial certainty to plan and deliver their emergency response.”

While many NHS trusts operated with strong finances under the existing rules, a number had been forced to take out loans to plug financial gaps in their day-to-day revenue spends or capital infrastructure budgets, some due to past austerity measures.

A total of 107 trusts had an average of £100m in revenue debt each across England, with the two trusts with the highest debts reaching a combined total of over £1bn.

NHS Chief Executive, Sir Simon Stevens, added: “We’ve advocated for and support this pragmatic move which will put NHS hospitals, mental health and community services in a stronger position - not just to respond to the immediate challenges of the global coronavirus pandemic, but also in the years ahead to deliver widespread improvements set out in our NHS Long Term Plan.”

Under the new rules set out in a letter to all NHS Trusts, should hospitals need extra cash this will be given with equity, rather than needing to borrow from the government and repay a loan. The letters also include details on every local area’s capital budget for 2020/21, providing certainty to the NHS for the new financial year and enabling investment in vital longer-term infrastructure upgrades as soon as possible.

These budgets come on top of the capital facility the government launched in February to ensure the NHS has access to whatever extra capital investment it needs, without charges, to respond to the Covid-19 outbreak.

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