NHS Finance


Trusts struggling financially penalised with 6% interest rates

NHS providers placed in Financial Special Measures are being hit by interest rates as high as 6%, according to a new report.

The report, published by the Healthcare Financial Management Association (HFMA) in conjunction with former health secretary Alan Milburn and consultancy PwC, says that at the end of 2016-17, the total debt accumulated across NHS trusts and foundation trusts was £4.9bn, with an associated interest cost of £169m.

Around 42% of providers had debt associated with working capital or revenue support from the department of health and social care (DHSC), with over half in deficit.

By Q3 of 2017-18, 139 trusts reported a year to date deficit, with 11 in Financial Special Measures.

The authors of the report warn that trusts experiencing “significant financial challenges” face being further financially penalised, with interest rates rising to 6% for those in Financial Special Measures.

For some trusts, this could mean that the debt burden is likely to become unsustainable, “with little to no prospect of it ever being repaid.”

At Q3 last year, five trusts had year to date deficits in excess of £50m, with one already past £100m for the year.

Last week, NHE reported that the NHS ended the 2017-18 with a deficit of almost £1bn - £464m more than anticipated.

Whilst the organisations in the private sector that borrow cash have a possibility of being allowed to fail, with debts being restructured to a more manageable level or entering insolvency, there is no equivalent mechanism in place in the NHS, meaning that organisations continue to accrue debt that they are unable to pay, attempts to turn around its financial performance are hampered, and the money is unlikely to be repaid to the DHSC.

The report argues that the current “complex system of funding flows” does not support the proposed new models of more integrated care introduced in the Five Year Forward View, and so is in need of change – a recent survey revealed that 76% of HFMA members agree that the current financial structures in the NHS are not fit for purpose.

It recommends that long term funding allocations and contracts should be introduced across the NHS, with a long term financial settlement for the NHS being replicated within the system to give local health economies the ability to plan and invest for the long term.

It also recommends that the capital funding system be redesigned, with a prohibition on future capital to revenue transfers, and a National Restructuring Fund should be created with clear access rules and prioritisation criteria aimed towards the development of out of hospital assets and infrastructure needed to deal with the challenges of future care needs.

Thirdly, it suggests internal restructuring of debt between NHS organisations, arguing that the signifiant and growing proportion of internal lending that has built up through funding historical deficits places additional pressure on the financial performance of trusts that are already in difficulty.

Instead, it argues that this debt should be converted to equity and the future approach to providing working capital funding for providers in deficit be approached in a similar way.

NHE has approached the DHSC for comment.

Top image: ljubaphoto


Enjoying NHE? Subscribe here to receive our weekly news updates or click here to receive a copy of the magazine!


There are no comments. Why not be the first?

Add your comment


national health executive tv

more videos >

latest healthcare news

Lancashire County Council to pay £200k in legal costs after Virgin Care legal battle

17/08/2018Lancashire County Council to pay £200k in legal costs after Virgin Care legal battle

Lancashire County Council has agreed to pay £200,000 in legal costs to two NHS Trusts after their decision to hand a £104million cont... more >
Former inadequate West Midlands maternity unit upgraded by CQC

17/08/2018Former inadequate West Midlands maternity unit upgraded by CQC

Walsall Manor Hospital’s maternity services have been given an improved rating from the health inspectorate following assessments made in J... more >
Major hospital stalled by Carillion collapse will go ahead under government funding deal

16/08/2018Major hospital stalled by Carillion collapse will go ahead under government funding deal

The construction of a major Midlands hospital that had its future cast into doubt following the collapse of infrastructure giant Carillion has be... more >

editor's comment

25/09/2017A hotbed of innovation

This edition of NHE comes hot on the heels of this year’s NHS Expo which, once again, proved to be a huge success at Manchester Central. A number of announcements were made during the event, with the health secretary naming the second wave of NHS digital pioneers, or ‘fast followers’, which follow the initial global digital exemplars who were revealed at the same show 12 months earlier.  Jeremy Hunt also stated th... read more >

last word

Hard to be optimistic

Hard to be optimistic

Rachel Power, chief executive of the Patients Association, warns that we must be realistic about the very real effects of continued underfunding across the health service. It’s now bey... more > more last word articles >

the scalpel's daily blog

The NICE impact on falls and fragility fractures

10/08/2018The NICE impact on falls and fragility fractures

Falls should not be an inevitable part of ageing – and their snowball effect means the consequence of falls are far from limited to just hospital admissions, says Professor Gillian Leng, deputy chief executive and director of health and social care at NICE Almost a third of over-65s in the UK have a fall at least once a year, with a... more >
read more blog posts from 'the scalpel' >


Listening to the frontline

15/08/2018Listening to the frontline

Professor Wendy Reid, executive director of education & quality and national medical director at Health Education England (HEE), shares insig... more >
Medication without harm

15/08/2018Medication without harm

The World Health Organization’s (WHO’s) Third Global Patient Safety Challenge, ‘Medication without harm,’ is ambitious, b... more >
Stepping up the fight against AMR

15/08/2018Stepping up the fight against AMR

Professor Mark Baker, director of the Centre for Guidelines at NICE, explains what the organisation is doing to support the fight against antimic... more >
Population health for the 21st century

15/08/2018Population health for the 21st century

NHS Partners Network (NHSPN) chief executive David Hare discusses the themes covered at his organisation’s Confed18 panel debate on populat... more >


Duncan Selbie: A step on the journey to population health

24/01/2018Duncan Selbie: A step on the journey to population health

The NHS plays a part in the country’s wellness – but it’s far from being all that matters. Duncan Selbie, chief executive of Pu... more >
Cutting through the fake news

22/11/2017Cutting through the fake news

In an era of so-called ‘fake news’ growing alongside a renewed focus on reducing stigma around mental health, Paul Farmer, chief exec... more >
Tackling infection prevention locally

04/10/2017Tackling infection prevention locally

Dr Emma Burnett, a lecturer and researcher in infection prevention at the University of Dundee’s School of Nursing and Midwifery and a boar... more >
Scan4Safety: benefits across the whole supply chain

02/10/2017Scan4Safety: benefits across the whole supply chain

NHE interviews Gillian Fox, head of eProcurement (Scan4Safety) programme at NHS Supply Chain. How has the Scan4Safety initiative evolved sin... more >

health service focus

View all News