Agenda item

To receive a report from the Deputy Chief Executive (S151) Officer on the Crediton GP Surgery additional Loan.

The Cabinet had before it a report * from the Deputy Chief Executive (S151) to consider an additional long-term loan to the Redlands Primary Care in Crediton. 

RESOLVED that:

1. Delegated authority be granted to the Deputy Chief Executive (S151) to top-up c£70k of the original loan taking the outstanding balance back to the original £2.175m.
2. An additional loan to the GP Practice of £150k be APPROVED.
3. Both loans are repaid by June 2048 on an annuity basis at a commercially fixed interest rate, subject to the completion of legal due diligence and documentation be APPROVED.

Note: *Report previously circulated

The Cabinet had before it a report * from the Deputy Chief Executive (S151) considering an additional long-term loan to the Redlands Primary Care in Crediton. 

The Cabinet Member for Parish and Community Engagement outlined the contents of the report with particular reference to the following:

• The report set out plans to make an additional loan to the Redlands General Practice (GP) in Crediton.  This was split into two parts, one relending the amount the surgery had repaid to date out of the original loan, c£70k. The second element was an increase to the overall loan balance of £150k, taking the total to £2.325m.
• The original loan of £2.175m was lent for the development of a new GP surgery in partnership with the practice and the National Health Service (NHS) back in 2021. An additional loan, again topping back up the balance repaid, was lent in June 2024 to support the build of a new pharmacy at the site.  The latest loan was to help the surgery as the costs of the pharmacy were higher than expected.
• These were commercial loans attracting an interest rate higher than the Council could attract with normal temporary investments. The Council had security of first call against the pharmacy but was ultimately backed by NHS funding. The terms and conditions would be very similar to those applied to the first loan, with external legal support drafting the loan agreement.
• The support given to the local community through both the surgery and pharmacy was considerable, therefore the Council believed it was appropriate to help in this situation.  

The Cabinet Member for Governance, Finance and Risk provided Members with information in regard to the background, noting involvement in the original loan and participation in the Patient Participation Group. The merge of the two Crediton surgeries had led to senior partners retiring, leaving the remaining partners with legacy debt. The practice had sought to consolidate this debt and move to a modern model where new GPs could join without having to buy into the partnership financially. This approach aimed to stabilise finances, attract more GPs, and support the co?located pharmacy, enabling the practice to operate as a single, strengthened service for Crediton.

Discussion took place with regards to:

• Was the original loan fully supported by the NHS, which protected the Council interest at the time and was this the case for the additional loan. It was confirmed that it was.
• It was highlighted that the report was not presented by the Cabinet Member for Finance, Governance and Risk as the report was clear that it was a Treasury Management matter.
• Why were the interest rates being withheld from Members under the banner of commercial sensitivity. It was explained that the matter had been commercially sensitive as the loan had been made to an external commercial body rather than a bank or similar institution and this had justified the need for confidentiality.
• What was the interest earned to date on the existing loan arrangement?   and had that interest been paid in full; and what was the total principle that had been repaid to date?
• Approximately £70,000 of the additional lending would enable the repayment of personal loans from retiring GP partners. How would funding the retirement arrangements of Individual practitioners meet the test of being in the best interest of the Council’s residents across the whole district, and in particular how would the Council justify the use of the capital and what precedent did it set for the future requests of the similar nature? It was explained that assurance was given that the GP surgery had remained fully up to date with all repayments since the loan was issued in 2021, paying the correct amounts on time. In total, the surgery had repaid approximately £70,000, the balance they now sought to top up alongside an additional £125,000 from a top?up loan in 2024. Overall, they had paid close to £200,000 since taking out the loan, which would have been refinanced and extended by the proposed new lending.
• How common it had been nationally for councils to provide financial support to GP surgeries, and whether this had been the only surgery in Mid Devon to receive such support. It was explained that this was unknown.
• Why the Council, rather than another body, had been providing this support, given financial pressures across the NHS and local authorities. It was confirmed that the Council’s loans had been fully backed by NHS England through the GP surgery.
• Whether other models existed such as private?sector loan arrangementsfor GP surgeries seeking financial assistance. It was explained that any future request would have been considered on its own merits and assessed against its individual business case. In this instance, the business case had been judged as sound both as a treasury investment and because the original loan had enabled the construction of a new surgery that benefited the community.
• What was the rationale for using Council funds to help cover payments related to retiring partners, noting concern about why the loan had been needed for that purpose after reviewing the report?It was explained that the issue related to the retirement of former partners and the consolidation of existing debt. When the original loan had been agreed, the Council had stepped in to support the surgery while awaiting delayed NHS funding, which later arrived. The intention had been to consolidate the debt into a single, manageable arrangement, not to fund individual retirements.

RESOLVED that:

1. Delegated authority be granted to the Deputy Chief Executive (S151) to top-up c£70k of the original loan taking the outstanding balance back to the original £2.175m.
2. An additional loan to the GP Practice of £150k be APPROVED.

3. Both loans are repaid by June 2048 on an annuity basis at a commercially fixed interest rate, subject to the completion of legal due diligence and documentation be APPROVED.

(Proposed by Cllr G DuChesne and seconded by Cllr S Keable)

Reason for Decision:

The proposed loan was to be undertaken on a commercial basis with the Council due to earn a higher return than if this sum was lent on the market. All costs incurred, although minimal due to the existing relationship, would be met by the Surgery.

Note:  (i)Report previously circulated

(ii) Cllr N Bradshaw abstained from voting.