Introduction
Underneath Part 40 of the NHS Act 2006, the Secretary of State could give monetary help to any NHS basis belief ( FT ) together with public dividend capital ( PDC ), loans, grants or different funds. The Secretary of State may assure the fee of any quantity payable by an FT below an externally financed growth settlement. He has comparable powers to offer monetary help to NHS trusts below Schedule 5 of the NHS Act 2006.
As required by part 42A of the NHS Act 2006 (as inserted by part 163 of the Well being and Social Care Act 2012), this doc gives steerage on how the Secretary of State could train his powers to offer monetary help to NHS trusts and FTs (“suppliers”).
This steerage doc gives particulars on how monetary assist will be accessed by suppliers from the Division of Well being and Social Care ( DHSC ). It ought to be learn along side the NHS steerage on capital, income and operational planning printed by NHS England ( NHSE ).
Money assist for income necessities
Money assist for income necessities and cashflow wants is out there for mandatory and important expenditure to guard continuity of affected person companies. Suppliers must reveal their income money necessities to NHSE . This assist will take the type of PDC the place there isn’t a set compensation schedule however there’s a dividend payable on the present dividend fee.
The place money assist for income and cashflow necessities is drawn, the worth of the assist might be added to suppliers’ net-asset place within the 12 months it’s drawn to cowl the chance value of unplanned money diverted to assist the supplier in that 12 months. No adjustment is required in subsequent years.
Because of the uplift in income funding, the necessity for money assist for income necessities has turn into more and more uncommon and is barely anticipated to come up the place suppliers have money difficulties.
Making use of for income money assist
The present month-to-month course of for accessing income assist will proceed. Suppliers ought to contact the NHSE group accounting and techniques group to debate their necessities and submit income assist requests at nhsenglandcash.providerrevenuesupport@nhs.web.
This implies submitting requests and supporting data to NHSE . The deadline for submitting requests is 4 to five weeks earlier than the month-to-month fee date and might be confirmed on a month-to-month foundation. As soon as NHSE has validated the requests, they are going to be submitted to DHSC for approval and issuance of PDC on the Monday earlier than the 18th of every month. Suppliers might be required to signal a memorandum of understanding ( MoU ).
Alongside monetary assist, DHSC and NHSE will contemplate what different monetary or non-financial interventions are acceptable to enhance the supplier’s monetary scenario below the circumstances. If suppliers apply for income money assist, they have to work with NHSE to enhance their monetary place. DHSC reserves the fitting to connect further situations to any financing issued.
Working capital services
The first route for income money assist for suppliers going through distinctive monetary difficulties ought to be the month-to-month PDC course of. Nonetheless, we could contemplate particular requests from solvent suppliers for short-term working capital services. This can take the type of a repayable working capital facility with an curiosity cost. Suppliers ought to communicate to their NHSE regional group who will liaise with the NHSE Group Accounting and Programs group in the event that they require a facility.
As a pre-requisite, a supplier should present proof of the short-term nature of the money requirement and a particular compensation date of the mortgage principal and curiosity inside one 12 months. If there are any issues over the power of the supplier to repay the principal and curiosity due, DHSC reserves the fitting to transform the applying right into a request for money assist for income necessities. Within the occasion of default, any such facility might be transformed into PDC as money assist for income necessities.
Money assist for capital necessities
System capital assist enhances the NHS capital regime below which built-in care techniques ( ICSs ) have been given reasonably priced capital departmental expenditure restrict ( CDEL ) envelopes for system pushed operational capital. All capital expenditure have to be managed throughout the CDEL allocations given to ICSs . DHSC and NHSE can’t approve requests for monetary assist past what’s reasonably priced in ICS CDEL envelopes.
This implies any capital assist request should have written affirmation it has been prioritised by the related ICS in settlement with the NHSE regional group and that it stays reasonably priced throughout the techniques capital allocation earlier than it will likely be thought of for approval.
System capital assist is for money solely, which might be offered by DHSC as PDC . This capital assist is for suppliers with operational necessities the place the expenditure is unaffordable (in money phrases) to particular person organisations. (See standards and proof requirement for additional particulars.)
Suppliers’ capability to finance the expenditure from personal money reserves or depreciation might be assessed. If acceptable, suppliers could also be given a mortgage as an alternative of PDC or requested to finance the expenditure from their very own money balances.
Standards and proof requirement for system capital assist
A broad define is ready out under of areas of spend for which funding has been traditionally issued for. This isn’t an exhaustive record. We don’t anticipate suppliers to incur disproportionate value to proof functions.
Particular goal:
tools alternative
fireplace security
estates and/or infrastructure works
backlog upkeep
IT failure
some other ICS prioritised works
Evidenced by:
Care High quality Fee ( CQC ) studies
) studies present or impending breaches to well being and security laws and/or statutory necessities
studies from exterior security or advisory our bodies
asset life exceeding accepted trade requirements the place that is giving rise to vital and quick affected person, employees and customer security dangers
description of penalties if assist was not offered
letter of assist from ICS
Making use of for system capital assist
The place a supplier has prioritised capital expenditure throughout the system capital allocation, which is reasonably priced in CDEL phrases, and the place the supplier considers it has inadequate money to finance the expenditure from its personal money reserves, then the supplier will be capable to submit an utility to NHSE for consideration at england.capitalcashqueries@nhs.web. Software templates and additional steerage might be distributed by NHSE to all suppliers who’ve a capital requirement prioritised of their ICS capital plans. Nonetheless, suppliers ought to contemplate the extent of money held earlier than making use of for capital money assist to evaluate whether or not the expenditure will be financed internally by way of present money reserves. Escalation routes can be found the place there may be an instantaneous want.
Earlier than functions for capital assist are submitted, suppliers ought to work with the NHSE regional group to ascertain ICS stage affordability of the required assist. Capital assist consumes CDEL useful resource and can, subsequently, rating towards the ICS capital envelope within the regular means. Multi-year schemes might be thought of the place there may be affirmation from the ICS that these are reasonably priced and might be prioritised inside future 12 months ICS allocations.
NHSE will consider functions contemplating components which embrace however aren’t restricted to:
ICS and regional affordability
and regional affordability ICS prioritisation
prioritisation assertion of want
deliverability
suppliers monetary and money place
a capital supply and utility of funding assertion
Suppliers receiving capital assist should monitor the supply and success of the schemes to make sure that the aim of the award is being met. NHSE and DHSC will request data on the supply of the schemes, equivalent to proof of spend. Suppliers might be notified of the precise necessities within the MoU .
As soon as an ICS has prioritised a request and NHSE has confirmed the supplier can’t afford to self-finance, PDC could also be accessible for profitable functions topic to DHSC approval.
Mortgage financing
DHSC could contemplate making loans accessible within the regular course of enterprise on a case-by-case foundation. Suppliers should reveal:
the affordability of mortgage and curiosity repayments
lack of ability to self-finance the expenditure from personal money reserves
that the CDEL requirement is clearly reasonably priced throughout the ICS envelope
Some widespread functions that capital loans could also be requested for are set out under. This isn’t an exhaustive record. Suppliers ought to contact the NHSE regional group within the first occasion relating to any requirement for a capital mortgage and no functions ought to be submitted to NHSE capital and money group with out establishing regional ICS stage capital affordability.
Capital loans could also be repayable over any interval as much as 25 years, topic to the time period not exceeding the helpful financial lifetime of any underlying asset or funding. Loans might be offered at nationwide mortgage fund charges of curiosity that are under market charges. Rates of interest are utilized on the date of signing the mortgage settlement.
Particular goal:
smaller scale operational capital funding together with bridging loans
Additional particulars
That is non-strategic spend to assist complement self-financed funding. This permits suppliers to carry ahead spend and finance repayments from depreciation.
Bridging loans permit suppliers to start out capital funding earlier than surplus land is bought. The proceeds are used to repay the mortgage.
Relying on the timing of the disposal, the mortgage could allow suppliers to handle the CDEL affect of spend for giant capital schemes throughout multiple monetary 12 months and any credit score generated because of the disposal could also be retained centrally.
Availability of capital and bridging loans are topic to ICS CDEL affordability and might be thought of on a case-by-case foundation.
Bridging loans can be accessed for strategic capital functions – for instance, as enablers to STP capital or New Hospital Programme schemes.
Particular goal:
merger and acquisition assist
Additional particulars
There isn’t any central capital price range to assist merger and acquisition exercise. This might be funded from ICS capital envelopes the place prioritised.
The place the success of a merger is contingent on further capital funding, suppliers should request or safe this funding earlier than continuing with the merger. Additional particulars will be discovered within the NHS steerage on mergers.
Intra ICS money transfers by way of DHSC
DHSC can facilitate money transfers between suppliers inside an ICS . That is when a supplier repays PDC for DHSC to re-issue that PDC to a different supplier. Requests have to be made to DHSC by way of NHSE and may embrace:
particulars on the aim of the transaction
approval from each finance administrators
assist from the system and area
Be aware that money transfers shouldn’t be made instantly between suppliers and have to be transacted by way of the PDC route outlined above.
Late drawing of PDC and loans
Suppliers ought to draw any authorised PDC and mortgage financing on the time of want and never delay drawing till the ultimate months of the monetary 12 months, particularly if the spend has already occurred. This can assist scale back the large variety of attracts at present processed at year-end and enhance the service DHSC and NHSE can present by lowering missed, incorrect and duplicate funds throughout this busy interval.
Reprofiling capital attracts into future years
Suppliers shouldn’t assume or plan for an computerized proper to reprofile spend. Any determination by DHSC to approve such requests might be topic to nationwide CDEL affordability. Requests for reprofiling ought to be submitted as quickly as doable to the NHSE capital and money group as soon as suppliers have labored with the NHSE regional group to ascertain ICS stage affordability. Delayed requests might not be authorised and suppliers danger shedding the CDEL cowl and financing accessible for his or her scheme.
Financing from exterior the DHSC group
Capital funding financed from exterior the DHSC group consumes CDEL useful resource and can, subsequently, rating towards the ICS capital envelope within the regular means. Suppliers ought to search recommendation from NHSE and DHSC earlier than agreeing to off-balance sheet proposals.
FTs in misery and, in distinctive circumstances, NHS trusts, could borrow from non-public sector sources or different governmental our bodies or departments provided that the transaction delivers higher worth for cash than financing by way of DHSC . FTs in misery and NHS trusts should search prior approval from DHSC by way of NHSE . Equally, DHSC has the facility to offer ensures to suppliers’ exterior borrowing.
Nonetheless, in all these circumstances, as a result of non-government lenders face increased prices, it’s unlikely that there might be a worth for cash case for borrowing exterior of the DHSC group. The rates of interest utilized by DHSC that are under market charges are Nationwide Mortgage Fund ( NLF ) charges. Particulars of NLF charges are printed by the Debt Administration Workplace. Due to this fact, borrowing from DHSC is the cheaper possibility for suppliers.
Exterior borrowing can also be decrease worth for cash for taxpayers as suppliers are funded for finance prices (curiosity and dividends) by DHSC . This implies curiosity funds on exterior loans characterize a leakage from the DHSC group and a loss for taxpayers.
Exterior borrowing preparations which can be deemed novel, contentious or repercussive would require HM Treasury approval.
PDC dividend coverage
Public dividend capital
Public dividend capital ( PDC ) is a novel type of authorities financing offered to public sector organisations. PDC is recorded on the Assertion of Monetary Place ( SoFP ) of suppliers and is an asset of the Consolidated Fund.
Following a evaluate of the dividend fee, it is going to stay fastened at 3.5% and suppliers ought to proceed to plan on this foundation till suggested in any other case.
The foundations governing PDC for NHS belief and NHS FTs are offered within the NHS Act 2006. This permits for the usage of PDC as originating capital for NHS trusts, and preliminary PDC for NHS FTs . The Act additionally units out the Secretary of State’s powers in figuring out the situations below which PDC will be issued. Consequently, with the consent of the Treasury, the Secretary of State could decide, in respect of an NHS belief:
the dividend which is payable at any time on any PDC issued, or handled as issued to an NHS belief or NHS FT below the 2006 Act
issued, or handled as issued to an NHS belief or NHS below the 2006 Act the quantity of any such PDC which have to be repaid at any time
which have to be repaid at any time some other phrases on which any PDC is issued, or handled as issued
PDC is the DHSC funding in every supplier that, though repayable, doesn’t have an outlined compensation schedule, so usually is just not repaid. Due to this fact, new issuances of PDC particularly for nationally directed schemes are sometimes called “grants”. However for accounting functions, it seems within the supplier’s taxpayer’s fairness part of the Assertion of Monetary Place. As PDC has a broad definition in laws, DHSC , with the settlement of HM Treasury, can determine the way it ought to be handled and managed.
PDC dividend cost
DHSC group accounting guide ( GAM ) can have the newest calculation and in-year updates of the PDC dividend cost.
The Secretary of State requires that suppliers pay a PDC dividend based mostly on a cost of three.5% on precise common related web property, together with subsidiaries (however not consolidated NHS charities), in the course of the monetary 12 months as decided within the draft and/or unaudited accounts submitted to NHSE . Any distinction between the quantity of PDC dividend paid (in September based mostly on month 3 ( M3 ) and March based mostly on month 9 ( M9 )), and ultimate dividend expense (draft accounts), for the monetary 12 months have to be recorded as a receivable or payable within the SoFP .
As soon as decided for the draft accounts, the PDC dividend expense is just not recalculated to take account of any modifications in web property which may be recognised because of the audit of the accounts, or as a consequence of calculation errors subsequently recognized in respect of prior years.
The PDC dividend payable (or receivable) is barely adjusted in audited accounts to appropriate for errors within the calculation of the PDC dividend itself made within the draft accounts for that reporting 12 months.
Following the implementation of IFRS 16 from 1 April 2022, related lease property and liabilities ought to be included throughout the dividend calculation. Peppercorn leases might be handled akin to donated property. Due to this fact, the PDC dividend affect of peppercorn preparations will align to the therapy of donated property.
The related web property embrace and excludes the next:
Related web asset calculation Worth Complete public dividend capital and reserves (together with GBS and NLF balances) X Much less: Internet e book worth of donated (together with peppercorn leases) and grant funded property (X) Much less: Charitable funds (earlier than any consolidation changes for charitable funds) (X) Much less: Common each day cleared balances in GBS or NLF accounts (X) Much less: Belongings below building aid for nationally directed schemes (X) Add: Money assist for income necessities PDC drawn in-year X Complete related web property X
Explanatory notes
Common money balances
The adjustment to web related property calculation in respect of the Authorities Banking Service ( GBS ) have to be calculated on the idea of common each day cleared balances. In apply subsequently, GBS values aren’t deducted from 1 April and 31 March web related property calculations as spot values at these dates. Reasonably, common web related property together with GBS for the 12 months is calculated, after which the common each day cleared GBS balances deducted from that determine to reach on the related web property quantity for the calculation of the dividend.
Nationwide Loans Fund deposits are thought of to be analogous to GBS balances for the calculation of related web property and should even be calculated on a median each day foundation.
Belongings below constriction ( AUC ) aid
The aid is solely on the discretion of DHSC , in session with NHSE , however is focused at giant nationally directed schemes which create materials income impacts for suppliers. These suppliers that obtain this aid might be knowledgeable instantly and eligible schemes might be notified instantly in writing and might want to make changes to their PDC dividend calculation as set out within the instance on this steerage. Suppliers shouldn’t assume AUC PDC dividend aid in plans except they’ve been notified in writing that their scheme is eligible.
AUC aid will be claimed previous to full enterprise case ( FBC ) approval on early enabling works (both self or PDC financed) or on charges funding that construct up the asset. Nonetheless, continuation of the aid is topic to suppliers acquiring related enterprise case approvals in good time and complying with approval situations set by NHSE and DHSC .
Whereas this can present short-term aid for suppliers engaged in giant nationally directed infrastructure initiatives, it’s important that recipients make provision in plans to start out making PDC dividend funds on the worth of the property from the purpose they’re introduced into use for the needs supposed and are reclassified from property below building. There might be no additional aid from PDC dividend funds at this level and any supplier that fails to make acceptable provision won’t be thought of for aid on any future initiatives. DHSC reserves the fitting to gather any below funds of dividends in future years.
The DHSC Capital Supply PMO and the New Hospital Programme will seize and monitor progress on all schemes in receipt of AUC PDC dividend aid. Within the occasion of great delays to both (a) deliberate completion of initiatives (b) acquiring FBC approval if claiming AUC pre- FBC , DHSC will elevate enquiries with the scheme and this couldhave implications for PDC aid accessible to the scheme in future.
If any specified AUC have been on the stability sheet previous to DHSC awarding the aid, suppliers ought to make a gap adjustment throughout the PDC dividend calculation to take away it as at the start of the monetary 12 months. That is the efficient date that the aid applies from.
Income PDC dividend
The place money assist for income and cashflow necessities is drawn, the worth of the assist have to be added to suppliers’ net-asset place to cowl the chance value of unplanned money diverted to assist the supplier in that 12 months.
PDC dividends proceed to be collected in the identical means in September and March. Every time a supplier attracts income assist PDC , the gross worth of income assist PDC drawn is added instantly to the supplier’s web property. This can improve the general dividend fee due, to recoup the chance value which might be collected within the subsequent PDC dividend fee which covers the date of the draw. The extra dividend applies to the monetary 12 months that the income money assist is drawn and an adjustment ought to solely be made as soon as for every draw.
If a supplier attracts money assist once more in subsequent years, the income PDC drawn for that 12 months solely ought to be added to net-assets. Suppliers shouldn’t make any changes to present 12 months opening web asset place in respect of income PDC drawn within the prior 12 months.
Instance calculation of general dividend fee
Instance calculation £’000 Opening capital and reserves (together with GBS and NLF balances and previous to consolidation of charitable funds) 123,000 Much less: Opening donated and granted property web e book worth 3,000 Much less: Opening adjustment to take away all related property below building (NBV) in receipt of AUC aid 5,000 Complete Opening related web property [A] 115,000 Closing capital and reserves (together with GBS and NLF balances and previous to consolidation of charitable funds) 130,000 Much less: Closing donated and granted property NBV 8,000 Much less: Closing adjustment to take away all related property below building (NBV) in receipt of AUC aid 5,000 Add: Money assist for income necessities PDC drawn in-year 5,000 Complete Closing related web property [B] 122,000 Common related web property (together with GBS and NLF ) [(A+B)/2]=[C] 118,500 Much less: Common each day cleared/accessible GBS balances and NLF deposits over the 12 months [D] 20,000 Common related web property for PDC dividend calculation [C-D]=[E] 98,500 Complete PDC dividend expense [E*3.5%] 3,448
Different technical data
The place a supplier exists for under a part of the monetary 12 months, the ultimate calculated PDC dividend ought to be pro-rated to mirror the variety of months the supplier was in existence. The place a supplier is shaped on or after 1 April, opening web related property ought to be calculated after the switch in of property and liabilities from any predecessor our bodies. For suppliers ceasing to exist on or earlier than 31 March, closing web related property ought to be calculated earlier than the switch of property and liabilities to any successor our bodies.
