Last month the Department of Health published guidance on how the Secretary of State may exercise his powers to provide financial assistance to NHS Foundation Trusts and NHS Trusts. It covers:

  • the range of finance available from the Secretary of State and financial assistance;
  • the processes for requesting financial assistance for both FTs and NHS Trusts;
  • the criteria that the Secretary of State must apply when deciding whether and how to provide financial assistance; and
  • the terms and conditions that may be applied to the different types of finance, financial assistance available.

The guidance covers all forms of financial assistance including loans and the provision of public dividend capital (“PDC”) but not grants for which separate guidance is to be provided.

The full range of finance that may be made available to FTs and NHS Trusts and some of the considerations that the Secretary of State will take into account in deciding whether to provide financial assistance are as follows:

  • Loans in the Normal Course of Business – these are loans which are generally provided to fund capital expenditure and/or genuine short term working capital requirements when internal funds for the purpose cannot be generated in the short term but the NHS Trust or FT can show longer term viability and ability to repay.
  • Loans or PDC to support FTs and NHS Trusts in financial difficulty subject to the development of a recovery plan (“Recovery Plan”) designed to underpin recovery and future sustainability of an FT or NHS Trust.
  • Interim support – transitional financial support to FTs or NHS Trusts in financial difficulty (either in the form of loans or PDC) where necessary to support the continued delivery of services for a period during which assessment of the underlying problem is carried out. Normally, Interim Support is a pre-cursor to longer term planned investment support, turn-around or reconfiguration. It may include support to develop the Recovery Plan where an FT or an NHS Trust cannot do so from its own resources. It may also include additional support where merger or acquisition proposals are being developed.
  • Planned Term Support – longer term financial support to be provided where there is a clear and robust Recovery Plan to return to a sustainable position over a realistic and reasonable time frame. Other than in exceptional circumstances, Planned Term Support will only be agreed if Monitor for FTs or the NHS Trust Development Authority (“NHSTDA”), for NHS Trusts, supports the application. The advice of NHS England and the CQC may also be sought before Planned Term Support is provided. Decisions for Planned Term Support are also based on the ability of an FT or NHS Trust to make the necessary changes outside Special Administration.
  • PDC may be provided to an FT or NHS Trust where it requires finance to ensure viability that where a Loan in the Normal Course of Business is not considered sustainable.
  • PDC or loans may be provided to FTs or NHS Trusts by means of centrally led initiatives of the Secretary of State to supply finance for strategic investments which deliver benefits to the public but which do not qualify for, or may not be made available on equivalent terms, to a Loan in the Normal Course of Business. Examples given in the Guidance are strategic investments which deliver benefits to the health system as a whole or investments in a potentially valuable, but unproven service delivery model or technology.
  • Special Administration – where the Secretary of State has accepted the recommendations of a Special Administrator’s report in relation to an FT or NHS Trust, he/she may use powers under section 40 (power of the Secretary of State to provide financial assistance) to provide financial assistance to implement the recommendations of that report for that FT or NHS Trust. In addition, finance may be provided directly to the NHSTDA or Monitor to fund other types of intervention where appropriate.
  • Guarantees of payment of any amount due under an externally financed development agreement.

The Department of Health has set up the Independent Trust Financing Facility (“ITFF”) to provide independent professional advice to the Secretary of State about decisions on the provision of financial assistance in the Normal Course of Business. The guidance states that advice of the ITFF will normally be sought by the Department of Health in all cases of Interim Support. The guidance states that the ITFF will not provide advice on Planned Term Support or for FTs or NHS Trusts in Special Administration.

Monitor and the NHSTDA may be required to support the ITFF in advising on how to protect the value of taxpayers investment in FTs or NHS Trusts respectively. The guidance also states that the ITFF may ask Monitor or the NHSTDA to advise on individual investments and actions to be taken to mitigate any identified risk of such investments.

The Department of Health will consider applications for funding based on the Guidance, an investment appraisal, generally expected principles used by financial institutions and reflect the principles and rules in “Managing Public Money” guidance issued by HM Treasury.

The guidance also provides that, where appropriate, other terms and conditions may be applied to Loans or PDC. Where the Trust is in receipt of Interim or Planned Term Support, the Secretary of State may also require a Trust Board to agree terms and conditions governing its operational management including implementing specific strategies to reduce costs and release cash. These could include: the adoption of a shared services solution, surplus land disposal or adopting agreed procurement strategies.