The government had to lend cash-strapped hospitals a record £2.825bn in the last financial year so they could pay staff wages, energy bills and for drugs needed to treat patients.
The Department of Health was forced to provide emergency bailouts on an unprecedented scale to two-thirds of hospital trusts in the 2015-16 financial year because they were set to run out of money, the Guardian can reveal.
Trusts in England were also loaned a further £530m for building projects and for new equipment such as scanners, bringing the total amount of additional funding provided during the year to £3.36bn, official NHS figures show.
The huge scale of “working capital loans” given to hospitals is disclosed in research undertaken by the House of Commons library on behalf of the Liberal Democrat health spokesman Norman Lamb. NHS finance experts backed the former health minister’s claim that the “astronomical” £2.825bn showed that hospitals were struggling because the service is receiving far less money than it needs.
The money was shared between 109 of England’s 156 acute trusts and one mental health trust. Barts Health NHS trust in east London, the biggest trust and also the biggest overspender last year, received the biggest loan – £191.9m – on top of its expected £1.5bn annual budget. It posted a £135m deficit last year despite receiving the £191.9m.
King’s College Hospital NHS foundation trust in south London got the second largest amount – £145.8m – while a third trust in the capital, London North West Healthcare NHS trust, was given the third biggest loan, £125.3m.
“These figures show the depth of the financial crisis within the NHS and the extent to which hospitals have become dependent on the Department of Health for emergency financial support to pay their staff and drug bills, and even to keep the lights on,” said Richard Murray, head of policy at the King’s Fund, the influential health thinktank. “The £2.825bn in loans is without precedent and underlines the unprecedented deterioration in the NHS’s finances during 2015-16.”
There are serious doubts as to whether NHS trusts, which ended last year £2.45bn in deficit despite an increase in the health budget, will be able to repay the £2.825bn they have borrowed. “Is it credible, given that most NHS trusts have been overspending, that trusts would ever be able to repay these loans? I think that’s highly unlikely,” said Murray.
Lamb, a health minister in the team of the health secretary, Jeremy Hunt, in the coalition government until last year’s general election, said: “These bailouts demonstrate the impossible situation in the NHS’s finances. £2.825bn is an astronomical sum. It reinforces the need for the government to confront this visible underfunding of the NHS.
“This in effect endorses after-the-event colossal overspending by acute hospital trusts, which reinforces the injustice in spending between physical health on one hand and mental health and social care on the other. They lose out because we continue propping up acute hospitals, which is a broken system of healthcare,” Lamb added.
Saffron Cordery, director of policy at NHS Providers, which represents NHS trusts, said: “The fact that some NHS trusts are having to ask for loans to make sure they can meet their day-to-day running costs, such as paying staff and utility bills, shows there is a fundamental mismatch between the money available to NHS trusts and what they are being asked to deliver. This widening need for loans is further evidence of increasing financial pressure that is beyond their control.”
A Department of Health spokesman said: “We know finances are challenging for some parts of the NHS. That’s why we’re investing the £10bn it asked for in its own plan for the future – including almost £4bn this year – and we’re helping hospitals to reduce expensive temporary staff and achieve efficiencies.
“Every year we provide – and publish the details of – some financial assistance to trusts for routine capital expenditure and working capital needs and to support those trusts in financial difficulty.”
The disclosure of the £3.36bn comes at the start of a pivotal week for the health service in England. NHS bosses will later this week outline a radical and controversial plan, which is being overseen by the Treasury, to “reset” its finances, intended to start the painful process of stopping hospitals overspending.
The clampdown will see NHS trusts being given demanding targets for the savings they have to make this year, and a handful of trusts and about 20 NHS GP-led clinical commissioning groups (CCGs) being taken into what NHS sources say is a new “financial special measures” regime. Chief executives of a handful of hospitals which have plunged deeply into the red will be given a short time to prove they can turn their trust around or face the sack, and some are expected to go.
The “reset” will be set out by the NHS England chief executive, Simon Stevens, and Jim Mackie, chief executive of the service’s new financial regulator, NHS Improvement. However, fears are growing that the widespread cost-cutting will lead to already understaffed trusts cutting posts in order to try to balance their books and thus put the safety and quality of patient care at risk. Hospitals will only be given access to a £1.8bn “sustainability and transformation fund” if they agree to make efficiency savings which some believe are unrealistic and will inevitably involve job losses.
Stevens warned hospital bosses last month to meet their savings targets, called “control totals”, or GPs, mental health and community health services would lose out on £650m of funding they expected to receive this year. NHS England has now decided to hold that money back as a contingency fund in case efforts to crack down on routine budget-busting do not deliver.
The “reset” is likely to be unveiled on the same day as the Department of Health publishes its annual accounts. They are expected to show that it only narrowly avoided busting its £120bn budget by several hundred thousand pounds after trusts were leaned on to do everything they could to make their accounts for 2015-16 look as healthy as possible, leading to claims that “creative accounting” had been used to spare Hunt the political embarrassment of his department busting its budget.
NHS trusts in England receiving the biggest Department of Health loans in 2015-16
Barts Health NHS trust £191.9m
King’s College Hospital NHS foundation trust £145.8m
London North West Healthcare NHS trust £125.3m
North Cumbria University Hospitals NHS foundation trust £97.5m
United Lincolnshire £77.7m
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