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Cancelling £13.4bn of NHS Trust debt sounds pretty big.
But how radical is it?
First off - was originally briefed back in Jan 2020
https://twitter.com/Davewwest/status/1245751402871377926
But how radical is it?
First off - was originally briefed back in Jan 2020
https://twitter.com/Davewwest/status/1245751402871377926
You might be wondering - how come NHS Trusts (mostly hospitals) have debts anyway? Doesn't the government fund hospitals?
Good questions - welcome to the wacky world of NHS finances
Good questions - welcome to the wacky world of NHS finances
NHS Trusts are paid for the activity they undertake (surgeries, diagnostic tests etc.)
NHS England/Improvement (and previous regulators before that) set the 'national tariff' - how much Trusts get paid for each activity: https://www.england.nhs.uk/pay-syst/
NHS England/Improvement (and previous regulators before that) set the 'national tariff' - how much Trusts get paid for each activity: https://www.england.nhs.uk/pay-syst/
To try to make hospitals more efficient after 2010, regulators repeatedly reduced the national tariffs - meaning hospitals got paid less for each activity that they did
(See @sallygainsbury explainer: https://www.nuffieldtrust.org.uk/news-item/when-the-price-isn-t-right-how-cuts-in-hospital-payments-added-up-to-the-nhs-deficit)
(See @sallygainsbury explainer: https://www.nuffieldtrust.org.uk/news-item/when-the-price-isn-t-right-how-cuts-in-hospital-payments-added-up-to-the-nhs-deficit)
Now, initially, reducing the tariff did prompt greater efficiency: the NHS capped staff pay rises, found ways to increase productivity etc.
(See @instituteforgov analysis: https://www.instituteforgovernment.org.uk/publication/performance-tracker-2019/hospitals)
(See @instituteforgov analysis: https://www.instituteforgovernment.org.uk/publication/performance-tracker-2019/hospitals)
But not by enough to keep up with the reductions in the tariff - NHS Trusts started selling off assets, delaying maintenance spending, and taking out emergency loans from DHSC to try to balance their books
(In aggregate, Trusts are still in deficit, btw)
(In aggregate, Trusts are still in deficit, btw)
Hence, some hospitals now owe debts to DHSC.
These debts have been rising rapidly in recent years: https://www.bbc.co.uk/news/uk-england-49745970
These debts have been rising rapidly in recent years: https://www.bbc.co.uk/news/uk-england-49745970
Cancelling these debts would mean that NHS Trusts stop paying interest back to DHSC - in theory 'freeing up' money to spend on services
Interest rate on loans can be big, btw - up to 6%: https://inews.co.uk/news/politics/nhs-trusts-bill-interest-payments-government-debts-mount-571089
(DHSC say interest payments received do go back to the NHS but I'm not sure exactly how this works because...Whitehall accounting)*
* @sallygainsbury, @LawrenceDunhill and/or @DavidProviders may know
(DHSC say interest payments received do go back to the NHS but I'm not sure exactly how this works because...Whitehall accounting)*
* @sallygainsbury, @LawrenceDunhill and/or @DavidProviders may know
Anyhow, cancelling the debts would benefit some Trusts quite a lot.
@LawrenceDunhill worked out which earlier this year: https://twitter.com/LawrenceDunhill/status/1222459963169280001
@LawrenceDunhill worked out which earlier this year: https://twitter.com/LawrenceDunhill/status/1222459963169280001
But it's not totally clear whether any Trusts would have ever paid these loans back.
(Or of it's sensible for them to plan as if they will - particularly if the reason they borrowed was outside of the Trust's control (ahem, tariff reductions), rather than poor financial mgt!
(Or of it's sensible for them to plan as if they will - particularly if the reason they borrowed was outside of the Trust's control (ahem, tariff reductions), rather than poor financial mgt!
Any reason not to cancel the debts?
Arguably rewards poor financial mgt - the fact that not all Trusts are in deficit suggests poor financial mgt may have been a factor.
But almost half of Trusts were in deficit in 2018/19, I'm not sure that stacks up - pretty widespread...
Arguably rewards poor financial mgt - the fact that not all Trusts are in deficit suggests poor financial mgt may have been a factor.
But almost half of Trusts were in deficit in 2018/19, I'm not sure that stacks up - pretty widespread...
TL;DR - cancelling will help NHS finance teams, removing one headache when lots of pressing work on...
...but it's not clear Trusts would have ever paid this money back. Would any govt actually let a hospital go bankrupt?
Cancelling more of a recognition of pol reality /ENDs
...but it's not clear Trusts would have ever paid this money back. Would any govt actually let a hospital go bankrupt?
Cancelling more of a recognition of pol reality /ENDs
