In response to the Health Secretary's recent announcement that £13.4bn in NHS debt is to be written off, Rob Whiteman, CIPFA CEO said:
"The write off of £13.4bn in NHS debt announced by the Health Secretary while not unexpected, is welcomed.
"As highlighted by the NAO in February this year, there was ‘no realistic prospect of this debt ever being repaid’ and the department had already indicated that options to address this were being reviewed. Today’s announcement confirms that all interim loans will be converted to equity, with the assurance that adjustments will be made to ensure Trusts’ surplus/deficit positions will not be negatively impacted by the write off.
"Much of this debt was incurred as a result of Trusts encountering financial difficulty, and while this welcome move will ease the pressures of making repayments on these loans over the coming years, and may put many Trusts on a more sustainable financial footing going forward, it does not address the underlying issues which caused the debt to be incurred in the first place. The announcement today confirms that should future assistance be required, it will be provided in the form of equity rather than loans."
Notes to editors:
The debts to be written off include both interim revenue and capital loans incurred as a result of financial difficulty, but does not include normal course of business loans.
These interim loans and the interest they attract are to be frozen as of 1 April 2020 and converted to equity in the form of Public Dividend Capital (PDC).
PDC attracts a dividend of 3.5% of the average relevant net assets of the Trust.
The Health Secretary's announcement can be found here.
CIPFA, the Chartered Institute of Public Finance and Accountancy, is the professional body for people in public finance. CIPFA shows the way in public finance globally, standing up for sound public financial management and good governance around the world as the leading commentator on managing and accounting for public money.