Health Secretary Matt Hancock has announced that over £13 billion of NHS debt will be scrapped as part of a wider package of NHS reforms. The debt will be written off as of March 31.
The Health Secretary made the announcement during the now daily coronavirus press briefing from Downing Street yesterday evening (April 2). 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.”
This move is part of a package of major reforms to the NHS financial system, designed in a collaboration between the Department of Health and Social Care and NHS England, which will begin from the start of the new financial year.
It is launched in combination with a simpler internal payment system to help NHS Trusts in dealing with the coronavirus (COVID-19) response, which was agreed with NHS England last week.
This change will mean 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 surgery or walk-in clinics due to the virus.
While many NHS Trusts manage strong finances, under the existing rules, some took out loans to plug financial gaps in their day-to-day (revenue) or capital (infrastructure) budgets.
107 Trusts have an average of £100 million revenue debt each, with the two Trusts with the highest debts reaching a combined total of over £1 billion.
The debt to be written off consists of a combination of interim revenue debt, which includes capital loans and interim capital debt. The loans that have been historically issued as ‘Normal Course of Business’ will be retained.
NHS Chief Executive, Sir Simon Stevens, says: “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 about every local area’s capital budget for 2020/21.
