Interest will cost NHS £1m

8:55am Friday 26th January 2007

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Oxfordshire's largest hospital trust will pay out £1m in interest next year after NHS managers were forced to convert its debt into a £20m loan at commercial rates.

Oxford Radcliffe Hospitals NHS Trust finance director Chris Hurst has admitted that the five per cent annual interest will be an "added pressure" on the cash-strapped organisation.

The trust has a £19.5m deficit from the last financial year, and is expected to incur a further £9m debt by the end of March this year.

The NHS policy forcing trusts to take out loans comes at the end of a year when ORH managers have had to take drastic measures to reduce costs, and has been criticised by MPs and health watchdogs.

Liberal Democrat Dr Evan Harris, MP for Oxford West and Abingdon, said: "The Government's insistence that the top priority for trusts is financial balance on commercial terms before the next General Election means that £1m which should be spent on patients will now be spent paying banks.

"Given it was the Government's obsession with forcing trusts to meet political targets at all costs that caused the deficit in the first place, it's the Department of Health that should be paying the interest not doctors and nurses here in Oxford."

Dr Peter Skolar, chairman of the Oxfordshire Health Overview and Scrutiny Committee, said: "This is what happens when you get people to balance their books by the end of the financial year.

"It's incomprehensible to me how anyone who wants to improve the NHS can lumber it with the targets and structures at its centre.

"The problem is that ministers think they're running a business. I'm sorry, the NHS is not there to make a profit. It's there to provide a service.

"The decision to hand over interest rates to the Bank of England was a resounding success. Please give the NHS to people who know how to run it."

In June last year, the ORH announced it would be cutting 600 jobs and axing 130 beds across its four hospitals to help it back into financial balance.

As a result, managers expect to save £34.3m by the end of March - although they will still have an underlying £28.5m deficit.

Mr Hurst said the debt had to be turned into a loan in line with the Government's wish for all hospital trusts to take on foundation status - making them more commercially viable and in charge of their own finances.

He added: "We've managed to get it down to about £20m, but it means we will have to operate at a surplus next year because we will need the cash to pay it off.

"The interest is an added pressure for us. Next year we will have to pay £1m in interest."

* Mild winter weather has helped the Oxford Radcliffe Hospitals NHS Trust save about £600,000 on its energy bill as it used less electricity and gas than expected.