Debt-ridden hospitals charged steep interest

Last updated at 10:27 31 March 2006

Cash-strapped NHS bodies will be forced to borrow money at steep interest rates, it has emerged.

Strategic health authorities that are in debt will have to borrow money from an NHS bank to pay them off at interest rates of 10 per cent. This is far higher than high street rates and some fear this will plunge the hospitals into further debt.

The NHS bank previously lent money with no interest. But from April strategic health authorities will have to pay the 10 per cent rate. Those with surpluses can invest in the bank and receive 10-20 per cent interest to reward their prudence.

The model is expected to be extended across the country to cover all NHS organisations.

Health minister Liam Byrne defended the plans. He told BBC2's Newsnight programme: "Three-quarters of the NHS runs in balance or in surplus.

"But where those parts of the NHS are running in surplus and are willing to offer those surpluses to help other parts of the NHS out, then it is quite right that they should be rewarded.

"Those rewards can't come from thin air, they have to be paid for somehow. And that is why disincentives are offered to those parts of the NHS which are in deficit."

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