Recommendation 3

Writing off the loans owed by struggling trusts does not solve the underlying problems facing these NHS bodies. We are concerned that the trust sector has not been in surplus since 2012–13. Despite increased one-off support from national bodies, trusts were unable to contain their combined deficit to NHSE&I’s ambition for 2018–19. 106 out of 227 trusts reported a deficit, and variation in the financial performance of trusts grew. The 10 trusts with the worst financial results reported a combined deficit of £844 million, up from £758 million in 2017–18. Struggling trusts are increasingly dependent on short-term measures to meet financial targets, including loans issued by the Department to pay for their day-to-day services. In April 2020, the Department announced that it would be writing off £13.4 billion of loans owed by trusts and replacing this with non-repayable public dividend capital. However, writing off loans itself does not tackle the underlying deficits of these trusts, and is not a substitute for a sustainable system of proper funding. National bodies do not yet seem to fully understand what is driving the deficits of these trusts 6 NHS capital expenditure and financial management and failed to outline how they will support those trusts most in deficit to become sustainable. Uncertainties around demand and service requirements going forward will put additional strain on the system, but COVID-19 should not be used as an excuse not to address underlying problems. Recommendation: NHSE&I should set out a plan with a timetable of steps aimed at getting the 10 most financially distressed trusts back to financial balance and report back to the Committee on that plan by December 2020.