Government accused of 'kicking NHS when it's down' with high interest loans

NHS trusts with the deepest levels of debt are being charged high interest rates on Government loans, an investigation has found.

Financial experts last night likened the Department of Health policy to “kicking someone when they’re down” and said it would make it even harder for cash-strapped trusts to recover.

Last year the NHS recorded the worst deficit in its history, with debts of £2.45n recorded across the country’s hospitals.

Around three quarters of NHS trusts are forecasting a year end deficit, and dozens have received loans in order to ensure they can keep treating patients and paying staff.

But the trusts with the worst financial problems have been put under a “special measures” regime.

Now it has emerged that such hospitals have been forced to take out Government loans on far higher rates than those available to trusts with lesser debts.

Under the policy, the trusts on financial special measures are being charged interest rates of six per cent - up to four times higher than the rates offered to other hospitals.

The DoH has confirmed the policy, telling Health Service Journal it is designed to “reflect the additional risk in providing this finance” to trusts in special measures.

Dozens of trusts with income and expenditure deficits are drawing down revenue loans from the DH to maintain payments to staff and suppliers, but these usually carry interest rates of either 1.5 or 3.5 per cent.

But Barts Health Trust, which was placed in financial special measures last July, confirmed that it is being charged 6 per cent on a £54m loan, and 3.5 per cent on a further loan of £83m.

This means it will be paying more than £6m a year in annual interest, against an underlying deficit of more than £200m.

Richard Murray, director of policy at the King’s Fund, said: “This underlines just how keen the department is to make life in financial special measures as unpleasant as possible, thereby encouraging other trusts to live within their financial targets.

“However, for the struggling organisations already dependent on DH support, raising the hurdle in this way risks them simply coming back for more money when they cannot make the repayments. It feels rather like kicking someone when their down.”

Why is the NHS under so much pressure?

Brighton and Sussex University Hospitals Trust, East Sussex Healthcare Trust, North Bristol Trust

Gloucestershire Hospitals Foundation Trust are also paying rates of 6 per cent on DoH loans.

Between the four trusts, this equates to around £15m in annual interest payments.

A spokesman for the Department of Health said: “An interest rate of 6 per cent is charged only to providers who are in financial special measures. This is to reflect the additional risk in providing this finance during the process of reasserting the financial controls needed. Providers who do not agree their control total are charged 3.5 per cent interest.”