October 2014

Secretary of State’s Guidance under section 42A of the National Health Service Act 2006 Procedures, criteria, terms and conditions for providing loans, public dividend capital or guarantees of payment to Foundation Trusts and NHS Trusts

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Title:

Secretary of State’s Guidance under section 42A of the National Health Service Act 2006

Author: Directorate/ Division/ Branch acronym / cost centre

Finance & NHS/Group Financial Management/Provider Finance/14602

Document Purpose:

Guidance on the procedures, terms and conditions for providing loans public dividend capital or guarantees of payment to Foundation Trusts and NHS Trusts

Publication date:

October 2014

Target audience:

NHS Trust Chief Executives and Finance Directors, Foundation Trust Chief Executives and Finance Directors, Monitor, NHS Trust Development Authority, NHS England

Contact details:

Scott Medley

Skipton House

80 London Road

London,

SE1 6LH

You may re-use the text of this document (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit www.nationalarchives.gov.uk/doc/open-government-licence/

© Crown copyright

Published to gov.uk, in PDF format only.

www.gov.uk/dh

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Contents

1. Introduction ...................................................................................................................... 4

2. Range of finance available to FTs and NHS Trusts ......................................................... 5

3. The Independent Trust Financing Facility ........................................................................ 7

4. Department of Health ...................................................................................................... 8

5. Criteria for issuing loans in the Normal Course of Business ............................................ 9

6. Terms for new loans in the Normal Course of Business ................................................ 10

7. Criteria for deciding whether to provide Interim Support ................................................ 11

8. Terms for Interim Support .............................................................................................. 12

9. Criteria for deciding whether to provide Planned Term Support .................................... 13

10. Terms for Planned Term Support .................................................................................. 14

11. Strategic Investments .................................................................................................... 15

12. Guarantees of payment ................................................................................................. 16

13. Other terms and conditions for Loans, PDC and Guarantees ....................................... 17

14. Breaches of the terms of financing ................................................................................ 19

15. Special Administration ................................................................................................... 20

16. Finance for Special Administration ................................................................................ 22

17. Arrangements for applying for and issuing finance ........................................................ 23

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1. Introduction

1.1. Under Section 40 of the NHS Act 2006, the Secretary of State may give financial

assistance to any NHS Foundation Trust (“FT”) including Loans, Public Dividend

Capital (“PDC”), Grants or other payment. The Secretary of State may also

guarantee the payment of any amount payable by an FT under an externally

financed development agreement. He has similar powers to provide financial

assistance to NHS Trusts under Schedule 5 of the NHS Act 2006.

1.2. As required by section 42A of the NHS Act 2006 (as inserted by section 163 of the

Health and Social Care Act 2012), this document provides guidance on how the

Secretary of State may exercise his powers to provide financial assistance to FTs. It

also provides guidance on how he may exercise his powers to provide financial

assistance to NHS Trusts. It covers the type of finance that the Secretary of State

may provide as financial assistance, the processes for requesting financial

assistance in respect of both FTs and NHS Trusts, criteria for deciding whether and

how to provide such financial assistance, and the terms and conditions that may be

applicable to the different forms of finance that may be provided.

1.3. This guidance covers all forms of financial assistance referred to above with the

exception of Grants, which are subject to different rules for which additional

guidance may be separately provided.

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2. Range of finance available to FTs and

NHS Trusts

2.1. From April 2013 onwards the Secretary of State may provide loans (“Loans”) to

support the normal business activities of FTs’ and NHS Trusts (“Normal Course of

Business”). Loans are the default form of finance for FTs and NHS Trusts in the

Normal Course of Business.

2.2. Loans given in the Normal Course of Business will generally be used to fund capital

expenditure and/or genuine short term working capital requirements of Trusts that

cannot generate sufficient internal funding resources for this purpose in the short

term, but are able to demonstrate longer term viability and an ability to repay. For

example, this might be a Trust with a major capital project that can only be funded

over a number of years.

2.3. In addition, the Secretary of State may provide Loans and/or Public Dividend

Capital (“PDC”) to support FTs and NHS Trusts in financial difficulty subject to the

development of an appropriate recovery plan (“Recovery Plan”) designed to

underpin the recovery and future sustainability of an FT or NHS Trust through, for

example, targeted efficiency programmes, transformation or reconfiguration of

services and/or a merger with another organisation.

2.4. Interim support (“Interim Support”) will be provided in the absence of, and to support

the development of an appropriate Recovery Plan. Any Interim Support will be

subject to significant ongoing scrutiny by the Department of Health to ensure

development of the necessary plan in a timely fashion. Where a Recovery Plan has

been developed and agreed, longer term financial support (“Planned Term

Support”) may be made available. Subject to successful delivery, such support is

expected to provide sufficient certainty and stability to aid recovery.

2.5. PDC may be provided to an FT or NHS Trust, where it requires finance to ensure

viability but where a Loan in the Normal Course of Business is not considered

sustainable. In these circumstances, the Secretary of State may require the Board

of a recipient Trust to agree to additional terms and conditions linked to its

operational management. These conditions are likely to include, but not be limited

to, the use of particular procurement routes, commitment to implement best practice

as a part of its recovery plan and agreement to other matters which will be

individually discussed with each applicant.

2.6. The Secretary of State may also provide finance, in the form of Loans or PDC, to

FTs or NHS Trusts for strategic investments in the public interest.

2.7. The Secretary of State may also use his powers under Section 40 of, and Schedule

5 to, the 2006 Act to provide financial assistance in the event that an FT or NHS

Trust enters special administration (Special Administration).

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2.8. FTs and NHS Trusts may apply for the Secretary of State to guarantee (Guarantee)

the payment of any amount payable under an externally financed development

agreement. In general, this is only likely to apply in respect of major capital projects.

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3. The Independent Trust Financing Facility

3.1. The Independent Trust Financing Facility (ITFF) has been set up by the Department

of Health to provide independent professional advice to the Secretary of State in

respect of decisions taken on the provision of financial assistance provided to FTs

and NHS Trusts in the Normal Course of Business, and where it is required for

sustainability as part of a recovery process. The ITFF will not provide advice on

Planned Term financial support for FTs and NHS Trusts that are in Special

Administration.

3.2. The ITFF operates as a committee (Committee) with an independent chairperson.

Membership of the Committee will include Members and/or Officers with relevant

expertise who are independent representatives from FTs and NHS Trusts and/or

bring appropriate commercial skills to the process.

3.3. The Committee will be constituted so that it is able to provide advice on an

independent and transparent basis, and without conflicts of interest.

3.4. The Committee will provide advice on whether applications for financial assistance

meet the criteria set out in this guidance. It will also advise on the appropriate terms

and conditions that might be applied to loans, in line with the criteria set out in this

guidance.

3.5. The investment appraisal undertaken will be appropriate to the size and level of

risk of the underlying investment (for example, a more detailed appraisal may be

required for larger or riskier investments).

3.6. The ITFF will work closely with Monitor, the NHS Trust Development Authority

(NTDA) and NHS England (NHS England). It will consult Monitor, the NTDA and

NHS England on the Secretary of State’s behalf where required by this guidance.

3.7. Monitor and the NTDA may be required to support the ITFF in giving advice on how

to protect the value of taxpayers’ investment in FTs and NHS Trusts respectively. In

particular, the ITFF may request advice from Monitor or TDA as to the risk to the

value of individual investments, and any possible actions that may be taken to

mitigate the risks that have been identified.

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4. Department of Health

4.1. The Department of Health (Department) will consider applications for funding in line

with the principles set out in this guidance. Decisions will be made on the basis of

an investment appraisal and will, among other things, have regard to generally

accepted principles used by financial institutions and also reflect the principles and

rules laid down in Managing Public Money guidance issued by HM Treasury.

4.2. In general, the Department will refer applications to the ITFF for its independent

advice; however it may not do so where, for example, the public interest is

overriding or where there are practical considerations which outweigh potential

benefits.

4.3. The Department may accept advice provided by the ITFF in support of a decision,

but is not obliged to do so.

4.4. The Department will only agree to provide financial support that it considers to be

affordable from the overall budget – the Departmental Expenditure Limit (DEL).

4.5. Decisions will comply with HM Treasury’s Green Book. In some cases, the

Department is required to obtain HM Treasury’s approval, for example, where

investments exceed delegated limits or are novel, contentious or repercussive.

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5. Criteria for issuing loans in the Normal

Course of Business

5.1. The Secretary of State can provide loans for capital investment and to support

working capital requirements in the Normal Course of Business. A Loan will only be

provided where there is a reasonable expectation that it will be repaid in accordance

with the terms on which it is made.

5.2. The appraisal will assess an FT or NHS Trust’s ability to service its liabilities,

including the additional financial obligation being entered into, taking into account

risk factors which might impact on its ability to make repayments. These risk factors

might, for example, include changes in demand for services, changes in

commissioning policy, the likelihood of project cost overruns or the ability to deliver

ambitious cost improvement programmes.

5.3. Loans to NHS Trusts will normally be made in consultation with NTDA. The

Secretary of State may also consult Monitor or the NHS England (NHS England) on

whether to make a loan. In some circumstances, he may also request NHS England

or Clinical Commissioning Groups (CCGs) to provide assurances regarding the

certainty of future revenues as a condition of providing loan.

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6. Terms for new loans in the Normal

Course of Business

6.1. The following factors will be considered when determining terms and conditions of

loans:

The level of risk represented by particular classes of investment;

The importance of allocating the finance available for investment in NHS services

efficiently; and

The desirability of avoiding distortion to competition between different providers

of NHS services over time.

6.2. Appropriate terms will be determined for repayment of the principal, including

whether this should be by equal instalments, in full at maturity or subject to another

arrangement.

6.3. Capital investment loans may be made in the Normal Course of Business for any

period up to 25 years but subject to the term not exceeding the useful economic life

of the underlying asset or investment.

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7. Criteria for deciding whether to provide

Interim Support

7.1. The Secretary of State may provide transitional financial support (“Interim Support”)

to an FT or NHS Trust in financial difficulty, but only in such circumstances that he

is advised by the ITFF, and other interested parties such as Monitor and NTDA, that

this is necessary to support the continued delivery of services for a period during

which an assessment of the underlying problem is carried out. This will normally be

a precursor to longer-term planned investment in support of turnaround or

reconfiguration.

7.2. Interim Support may include support for an FT or NHS Trust to develop a detailed

recovery plan where the FT or NHS Trust is judged unable to finance the cost from

its own internal resources. This may additionally include interim support where a

merger, acquisition or separation proposals are being developed.

7.3. Notwithstanding this, the Secretary of State also recognises that, in exceptional

circumstances, unplanned, temporary emergency finance in the form of PDC may

be required to maintain the continued delivery of services on an Immediate basis

both prior to, and without the benefit of, advice from the ITFF and other interested

parties such as Monitor and NTDA. It is expected that this would normally be

formalised by the retrospective submission of an application for Interim Support.

7.4. FTs and NHS Trusts are expected to manage the delivery of contracted services in

accordance with financial plans agreed at the start of the year. It is expected that a

negative variation against plan will be recognised at an early stage by Trust

management, and mitigations to avert potential financial difficulty should be put in

place as soon as possible. The Monitor and NTDA regimes aim to support this

objective and the involvement of Monitor or NTDA is likely to be in the event that

external assistance is required to execute a turnaround, or negotiate a

reconfiguration of services. In principle, it should not therefore be necessary to

apply at a late stage for unplanned temporary emergency finance.

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8. Terms for Interim Support

8.1. Interim Support may be provided in the form of either Loans or PDC depending on

circumstances. Interim Support will only be provided for a finite period.

8.2. An FT or NHS Trust in difficulty will be expected to progress plans to deal with

outstanding problems within an agreed timeframe including the development of a

Recovery Plan. Monitor and TDA in partnership with the Department of Health are

expected to oversee the development of plans to ensure that they are progressed

as quickly as possible. These plans are should be subject to external assurance by

Monitor and NTDA as to their viability.

8.3. DH, with or without advice from The ITFF, may consider that Interim Support should

be subject to specific terms and conditions for example requiring the delivery of

milestones set to assess progress made in both identifying, and then dealing with

the cause of a Trust’s financial difficulty. These milestones will be subject to at least

quarterly review.

8.4. Any PDC provided as part of Interim Support solutions will only be considered on

the presumption that Trusts will firstly access financial assistance in the form of

Loans where the proposed Loans are affordable under section 5 of this guidance.

PDC will only be considered if Loans are judged unaffordable over the projected

term of the loan.

8.5. The advice of the ITFF will normally be sought in all cases of Interim Support. In

some cases, urgent requirements may be such that ITFF advice is not available

within the required timescale. In such cases, temporary arrangements may be

agreed on the basis that they will only extend to the point at which an application

can be made and ITFF advice sought on any on-going funding requirement.

8.6. While detailed Recovery Plans are unlikely to be in place in cases of Interim

Support, Trusts will be expected to deliver any milestones set pursuant to

Paragraph 8.3, to deliver their annual financial plans to budget and to maintain

appropriate levels for quality and service.

8.7. Any unexpected material variation and/or deviation from plan will require a clear and

full explanation of causes and remedies by the Trust concerned. Repeated

variations and failures to meet plans are not expected from effective Trust Boards

and will result in a need for that Board to demonstrate how such a lack of

effectiveness will be addressed. In these circumstances, Monitor or the NTDA

would consider the further use of their enforcement powers.

8.8. A failure to deliver plans and/or comply with operational management conditions

applied including those relating to procurement, estates efficiency and temporary

staffing costs may ultimately lead to the appointment of a Trust Special

Administrator as set out in Section 15 of this Guidance.

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9. Criteria for deciding whether to provide

Planned Term Support

9.1. Longer term financial assistance will be considered where Trusts have clear and

robust Recovery Plans to return to a sustainable position over a reasonable and

realistic time frame. In these cases, longer term financial assistance will be

considered on a planned basis over an agreed term.

9.2. Planned Term Support will only be considered where there is a realistic Recovery

Plan which demonstrates how an organisation will be viable and sustainable on an

ongoing basis and/or where making the investment is likely to be in the taxpayer’s

overall interests. Recovery Plans will be expected to carry substantial assurance

from Monitor or the NTDA that the Trust can deliver the forecast improvements to its

financial performance.

9.3. It is also important that the Trust in question is considered to have the resource and

ability to deliver the Recovery Plan. Other than in exceptional circumstances,

Planned Term Support will only be agreed if Monitor, for FTs, or the NTDA, for NHS

Trusts, supports the Trust application.

9.4. Decisions will be based on a commercial appraisal process, having regard to

generally accepted principles used by financial institutions. Appraisals will be based

on HM Treasury Green Book guidance. Planned Term Support will only be provided

if it is judged that the FT or NHS Trust has presented a convincing and credible

recovery plan that will result in improved financial performance and represents

value for money.

9.5. Decisions will also be based on an assessment of the FT or NHS Trust’s ability to

make the necessary changes to deliver recovery outside special administration.

This may include an assessment of the leadership and clinical team, the

organisation’s recent performance, and whether or not relevant stakeholders

support the plan.

9.6. In making a decision, the overall affordability of proposals to the department and the

respective organisations, as well as the overall sustainability of the providers and of

the regional health economy, will also be considered.

9.7. NHS England’s advice may also be sought as part of a decision on whether to

provide Planned Term Support. In particular, their advice on whether the provider is

expected to meet required clinical standards and whether the plan is consistent with

local demand for the provider’s services. Some investments may be contingent on

assurances from NHS England or CCGs regarding future commissioning intentions.

9.8. Care Quality Commission’s (CQC) advice may be sought on whether providing

finance is compatible with ensuring the quality and safety of services for patients.

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10. Terms for Planned Term Support

10.1. Planned Term Support may be provided to an FT or NHS Trust in the form of either

a Loan or PDC to deliver capital investment or restructuring. In some cases, PDC

may be agreed to restructure a provider’s balance sheet as part of a wider

Recovery Plan

10.2. A package of finance and set repayment terms will be provided in order to maximise

the returns on the taxpayer’s investment.

10.3. Where loans supporting capital investments are considered as part of a Planned

Term Support package, they may be provided for any period but subject to the term

not exceeding the useful economic life of the underlying asset or investment.

10.4. When appropriate, Planned Term Support will be provided in instalments based on

an agreed drawdown schedule.

10.5. The terms for providing Planned Term Support may include requirements to deliver

any milestones set out in the recovery plan within an agreed timeframe.

10.6. Adherence to Recovery Plans will be expected at all times from Trusts in receipt of

planned term support. Ongoing delivering their annual financial plans to budget and

maintaining levels for quality and service will also be expected in all cases.

10.7. Material variations and/or deviation from Recovery Plans will require clear and full

explanation of causes and the development of a remedial plan by the Trust

concerned. In these cases the Trust will need to demonstrate a clear plan supported

by the internal capability to deliver such plan in order to continue to receive Planned

Term support.

10.8. An inability to recover from a material variation may result in further Planned Term

Support being withdrawn and the Trust returning to Interim Support arrangements.

In such circumstances a rapid assessment will need to be made of the options

leading to a further Recovery Plan and of the ability of the Trust Board to deliver

such revised plan.

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11. Strategic Investments

11.1. The Secretary of State may occasionally agree centrally led initiatives to provide

finance for strategic investments which deliver benefits for the public, but which

would not qualify for, or could not be made on equivalent terms to, a Loan in the

Normal Course of Business.

11.2. The Secretary of State may provide finance for a strategic investment where this

was in the public interest but where the full benefits would not be captured by a

purely commercial investment appraisal.

11.3. For example, strategic investments which delivered wider benefits than those

captured by an individual provider or its patients. This might be the case for

investments which deliver benefits for the health system as a whole.

11.4. Similarly, strategic investments in a potentially valuable, but unproven, service,

delivery model or technology. For example, it might be beneficial to provide proof of

concept for the health system. However, it might not be possible to make the

investment as a loan for normal business if there was a significant risk that it would

not be repaid.

11.5. Strategic investments will only be made where they deliver overall benefits based

on a cost-benefit analysis and value for money. Key assessment considerations

may include: whether social benefit exceeds social cost, whether or not there are

better ways to achieve the desired objectives, and the opportunity cost of the

resources involved.

11.6. Finance for strategic investments will be provided in the form of PDC or loans

depending on the nature of the investment.

11.7. In the case of strategic investments driven by public interest, the advice of the ITFF,

may be requested, but will not normally be needed unless part or all of the finance

is to be provided through loans.

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12. Guarantees of payment

12.1. FTs and NHS Trusts may apply for the Secretary of State to guarantee the payment

of any amount payable under an externally financed development agreement. In

general, the Secretary of State will only consider providing a Guarantee of payment

in relation to major capital projects.

12.2. The Secretary of State will only provide a Guarantee of payment where there is a

reasonable expectation that it will not be called upon. He will make these decisions

on the basis of an appropriate investment appraisal to assess the FT or NHS Trust’s

ability to make the payments. The appraisal will take account of risk factors which

might alter an FT or NHS Trust’s ability to make the payments such as changes in

demand for services or cost overruns.

12.3. Guarantees of payment will only be provided if there is a reasonable expectation

that the FT or NHS Trust will be able to make the investment more efficiently

through an externally financed development agreement than through other

arrangements such as a Loan. This assessment will take account of the option

value of different arrangements.

12.4. NHS England’s advice may be sought before deciding whether to provide a

guarantee. In particular, their views on likely demand for services. In some cases,

NHS England or CCGs may be requested to provide assurances regarding

commissioning intentions as a condition for being able to provide a Guarantee of

payment.

12.5. Monitor’s or the NTDA’s advice will be sought on the provider’s ability to make the

payments before deciding whether to provide a Guarantee.

12.6. Any Guarantee will specify the contractual forms and acceptable commercial terms

for agreements. Guarantees will only be issued on behalf of FTs or NHS Trusts and

not to companies owned, or part owned, by FTs or NHS Trusts.

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13. Other terms and conditions for Loans,

PDC and Guarantees

13.1. Where appropriate, other terms and conditions will be applied to Loans, PDC or

Guarantees in the form of representations, warranties and covenants, in line with

those typically used in commercial agreements. These terms and conditions will be

applied where needed to protect the value of the taxpayer’s investments or protect

the taxpayer from liabilities. The additional terms may include financial covenants to

protect the value of an investment including:

Requirements to maintain a particular financial structure such as a minimum

debt service cover ratio;

Limitations on incurring additional debt and/or preferring other creditors; and

Cross default clauses, negative pledge of assets clauses and/or restrictions on

raising additional secured debt.

13.2. Other terms may include management, control and ownership covenants to prevent

actions which could endanger an investment, including:

Restrictions on mergers, consolidation, investments or the giving of guarantees;

and

Restrictions on disposals of assets or investments (including transactions with

associates or subsidiaries).

13.3. The terms may include requirements to report or disclose information in relation to

an investment where needed in addition to other reporting requirements.

13.4. Under the terms for finance, instalments of finance may be withheld or repayments

accelerated if an FT or NHS Trust fails to make a scheduled repayment or

otherwise breaches the terms of an agreement, for example, by failing to deliver an

agreed plan.

13.5. Other operational and/or financial terms and conditions (T&Cs) may be required on

a case by case basis to support the implementation of an appropriate turnaround

plan. Any such T&Cs that are applied will be aligned and commensurate with the

actions taken by Monitor and NTDA, to strengthen the governance, management

and performance, both clinical and financial, of a Trust that is unable to otherwise

deliver contracted services of the standards required within an agreed financial

budget.

13.6. Where a Trust is in receipt of interim or Planned Term support, the Secretary of

State may also require that a Trust Board agrees to terms and conditions covering

the operational management of the applicant, including but not limited to the

implementation of specific proven strategies aimed at reducing costs and/or

releasing cash. For example among other things, these could include:

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the adoption of a shared services solution;

proposed estates management

an agreed procurement strategy;

Use of collaborative procurement routes

Controls on the remuneration of Trust senior management

Reductions in the use and cost of temporary staffing

an energy conservation programme; and/or

surplus land disposal.

13.7. A list giving examples of these Terms and Conditions will be published separately

and updated from time to time as may be appropriate. The Secretary of State

reserves the ability to apply other terms and conditions to this support.

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14. Breaches of the terms of financing

14.1. If an FT or NHS Trust breaches the terms of its financing, the Secretary of State

may, at his discretion, decide to continue to provide finance on modified terms,

withdraw any remaining instalments and refuse further finance, or accelerate the

repayment of finance.

14.2. Monitor or the NTDA’s advice (for FTs and NHS Trusts respectively) will normally

be sought before taking action in the event that an FT or NHS Trust commits a

serious breach of the terms of Interim or Planned Term Support.

14.3. The response will depend on the severity and reasons for the breach. It would be

more likely for additional conditions to be applied for serious breaches for example,

failure to implement the actions set out in a recovery plan or failure to make a

scheduled repayment.

14.4. It would also be more likely for additional conditions to be applied if the FT or NHS

Trust breached the terms of finance as a result of circumstances which were

reasonably foreseeable or within its control.

14.5. Action on breaches of any other Terms & Conditions will be considered on a case

by case basis. Any decision on actions related to the provision of finance will take

into account a Trust’s continuing ability to provide services in a safe manner.

14.6. Repeated variations and failures to meet plans are not expected from effective Trust

Boards and will result in a need for that Board to demonstrate how such a lack of

effectiveness will be addressed. In these circumstances, Monitor or the NTDA

would consider the further use of their enforcement powers.

14.7. In extremis, ongoing and repeated failures, whether financial or operational, may

result in withdrawal of Support by the department, which could in turn lead to the

appointment of a Trust Special Administrator as set out in section 15 of this

Guidance.

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15. Special Administration

15.1. Monitor may place an FT into the Trust Special Administrator’s Regime (‘Special

Administration’) if it is, or likely to become, unable to pay its debts or there is serious

failure to provide services that are of sufficient quality (section 65D(1) of the NHS

Act 2006). The CQC may also compel Monitor to place an FT into Special

Administration where there is a serious failure in the quality of the provision of

services (section 65D(1A) of the NHS Act 2006). In the case of an NHS Trust, the

Secretary of State may, on advice from the NTDA, place an NHS Trust in Special

Administration if he considers it appropriate in the interests of the health service

(section 65B(2) of the NHS Act 2006). This may capture serious failures in financial

performance or in the quality of the provision of services , or a combination of both.

15.2. The aim of Special Administration is to protect NHS patients and the public from

failing or unsafe services to ensure high-quality, sustainable services are delivered

locally for all patients. It is intended that Trusts will be placed into Special

Administration only under exceptional circumstances.

15.3. The Secretary of State is able to provide finance if an FT enters Special

Administration. This finance will be used to ensure the continued provision of

services during the Special Administration process.

15.4. At the end of the Special Administration process for an FT, Monitor will decide

whether to approve the Trust Special Administrator’s final report containing

recommendations about the future of the Trust and its services (notwithstanding

this, the Secretary of State retains the powers to veto the report on the limited

grounds specified in section 65KB(1) of the NHS Act 2006). In the case of an NHS

Trust in Special Administration, the Secretary of State must decide what action to

take in relation to that Trust and its services once the Trust Special Administrator

has submitted the final report to him..

15.5. It is the duty of the Trust Special Administrator to develop and submit final

recommendations about the Trust in Special Administration, independently of the

Secretary of State, Department or any other government entity. In the case of an

NHS Trust or FT, the Trust Special Administrator may, for example, recommend a

restructuring of the Trust in Special Administration to place essential NHS services

on a sustainable footing, or closure of the Trust and transferring services to the

management of other Trusts . Where the Secretary of State has accepted the Trust

Special Administrator’s report in the case of a FT in Special Administration or

decided what action to take in relation to an NHS Trust in Special Administration

and such a recommendation has been made, the Secretary of State is able to

provide finance to implement the report.

15.6. Where appropriate, financing may be provided to support other types of formal

interventions by NTDA or Monitor. In these cases, the additional funding will be

provided directly to Monitor and NTDA and will be used only to pay the costs of

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intervention and the development of robust remedial plans. These costs do not

include revenue costs or the costs of the on-going provision of services which

remain subject to the other arrangements set out in this document.

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16. Finance for Special Administration

16.1. In cases where Trusts are placed into Special Administration, and as part of formal

interventions by Monitor or NTDA, principles under which finance will be provided

will be set out. Interventions teams will be expected to establish these principles at

the outset of the process.

16.2. Trust Special Administrators and implementation teams will, under normal

circumstances, make provisions to seek an opinion from the Secretary of State as

to the terms and conditions that might be applied to financing before final proposals

are developed.

16.3. Following Special Administration, the Secretary of State may agree to provide PDC

to restructure a provider’s balance sheet as part of a wider restructuring plan.

Finance may also be provided to deliver capital investment or restructuring after

special administration. This finance may be in the form of PDC, or, where residual

bodies are able to repay the debt, through loan financing as set out in section 4.

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17. Arrangements for applying for and

issuing finance

17.1. Foundation Trusts should apply directly to the ITFF Secretariat for loans in the

Normal Course of Business. NHS Trusts should, in the first instance, apply to the

NTDA for loans in the Normal Course of Business. The NTDA will then decide

whether to apply to the ITFF for a loan on the Trust’s behalf.

17.2. Both FTs and NHS Trusts should apply to Monitor and the NTDA respectively for

Interim or Planned Term Support. Monitor or the NTDA will be responsible for

progressing all applications for Planned Term Support to the ITFF on FTs’ and NHS

Trusts’ behalf.

17.3. The ITFF will set out more information on the procedures for applying for finance

and the requirements for business cases on its website.

17.4. The ITFF will publish any other information as may be required by current

legislation.