Department to review 6% interim loan interest charge ​

The 6% rate was introduced as part of the finance reset in 2016 to incentivise struggling trusts to turn around their finances. Trusts in financial special measures that deliver three months of NHS Improvement-agreed targets are charged less than 6% on further loans. Generally, a rate of 1.5% or 3.5% is levied on other trusts.

Overall, since the system of interest-bearing loans for interim cash support was introduced in 2016, trusts have paid £183m in interest to the Department of Health and Social Care.

The 6% rate has attracted criticism for penalising trusts with the greatest financial difficulty. Mr Dalton said he was convinced the system of control totals, sustainability support funds and other support measures implemented since 2016/17 was the right thing to do. But there was support at the centre to look again at the higher interest rate as part of a financial review.

He told a Common Public Accounts Committee hearing on NHS sustainability and transformation: ‘We do need to review it. The distressed loans that have been given to some of our largest trusts are in the hundreds of millions of pounds. As part of the look at this that we have committed to, it would be absolutely right to consider the rate of interest and the nature of the financing.

‘Effectively, trusts need that financing so that they can pay their staff and pay their bills, so I think there is a legitimate question about their ability to pay the principal, as well as the interest rate on it. I do not think that people enter into those loans without cause. We need to have that conversation that we have all committed to.’

The Department’s director general of finance, David Williams, added that the rate was not applied across all trusts that were in financial special measures.

‘Of the 12 trusts currently in financial special measures, eight that have shown at least three months’ worth of improvement against plan are now being financed at a lower rate,’ said Mr Williams. ‘Only four [of those trusts] are still attracting the 6% rate for new borrowing.’

Loans to two trusts that have exited financial special measures have been refinanced at a lower rate ‘as part of the incentive to encourage people to sign up to a recovery plan and then deliver it’, he added.

By the end of February, trusts had paid £85m in interest (£54m for trusts and £31m for foundation trusts); £74m in 2016/17 (£45m for NHS trusts and £29m for foundations); and £24m in 2015/16 (£15m and £9m, respectively).

According to the Department, the interest paid is not lost to the NHS. ‘It is paid to the Department but is channelled back into the NHS through the annual funding provided to the NHS through the NHS England mandate.