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Blackpool Council set to approve a £27 million unsecured loan over 25 years to Blackpool Teaching Hospitals NHS Foundation Trust

Naomi Chambers, Professor of Healthcare Management at Alliance Manchester Business School, discusses Blackpool Council’s plans to approve a £27 million unsecured loan to Blackpool Teaching Hospitals NHS Foundation Trust. This follows Naomi’s appearance on yesterday’s BBC Sunday Politics programme on the same subject.

As the NHS approaches its 70th birthday on 5th July, what is going on? One developing story suggests that, as often with the NHS, truth can be stranger than fiction. 

Blackpool Council is set to approve a £27 million unsecured loan over 25 years to Blackpool Teaching Hospitals NHS Foundation Trust, in order to help the Trust to restructure its borrowings and enable additional investment in frontline services. This Trust, which actually runs three hospitals and community health services for people along the Fylde coast, as well as for the millions of holidaymakers who visit each year, was one of the earliest in the country to achieve the highly coveted Foundation Trust status. Today it struggles to keep up with demand for its emergency care, although its adult community health services are rated as Outstanding by the Care Quality Commission.

One interpretation of this gesture by the council is that it is a great example of public sector organisations supporting each other and of place-based leadership. Blackpool suffers from high levels of deprivation. Sadly, poverty and poor health go hand in hand.  A high performing local health service is an essential lifeline for this population. In addition, the hospital’s relatively remote geographical location means that securing top quality workforce is also an enduring challenge.

Set up by Blackpool Council to protect and create local jobs, the Business Loans Fund, paid for out of the Treasury’s Public Works Loans Fund, is being used to provide this money to the Hospital Trust. Since the Trust is indeed a big business, and probably the largest local employer, this appears to be a legitimate use of the Fund.

But isn’t this all a little odd? In approximate figures, the council’s budget is a mere £125 million per year in comparison with the Hospital Trust’s £411 million. What has driven the hospital to this? The simple answer is that the council can borrow money at a lower interest rate than other public bodies, including the NHS, can.

How common is this? Although central records are not available to know the extent of this practice, it isn’t the first time. In 2014, Northumbria Healthcare NHS Foundation Trust, under the leadership of CEO Jim Mackey, who went on to head NHS Improvement, borrowed £114 million from Northumberland County Council. This was to pay off the PFI contractors who had built Hexham General Hospital, enabling the Trust to save an overall estimated £67 million.

On the one hand, these examples demonstrate the positive impact of collegial relationships across local health and care economies, and the entrepreneurial flair of certain directors of finance, seeking to buttress the financial health of their organisations. But does it make any sense for one part of the welfare sector to have access to cash at lower rates of interest than another? And is this a good use of NHS finance directors’ time to finesse these deals rather than to focus on the core business of their organisations, that is the provision of safe, high quality, clinically effective and cost efficient care?

Going back to Blackpool, there is £100 million in the council’s Business Loans Fund. More than a quarter will therefore be used to bail out the local NHS. That is a lost opportunity to increase the local health and care pot of money, for example by making loans to private or social enterprises seeking to offer much needed social care to local residents, or  organisations wanting to provide public health initiatives to tackle the dire health inequalities that exist in that area.