Whipps Cross University Hospital is set to benefit from a £26million cash injection to clear its debts.

London’s 31 Primary Care Trusts (PCTs) have taken the ground-breaking decision to work together on a proposal which, if it goes ahead, will see the historic NHS debt across the capital wiped out.

This is welcome news for Whipps Cross University Hospital Trust, whose enourmous defecit was among the factors which nearly led to its closure last year. But the hospital was saved following a tireless campaign by patients and staff.

Chairman of NHS Waltham Forest (the renamed PCT) Cllr Afzal Akram said: “This strategy is great news for local people and shows that the health needs of people living in our borough are being recognised.

“Ensuring all of the capital’s hospitals and PCTs are financially stable with no historic debt is essential.

"This is why we are working with our PCT colleagues to address the historic debt.”

If put into practice, the proposal will see PCTs each investing a proportion of their funding over the next two years and foregoing the return of a similar amount of topslice – which was a proportion of PCT funding held by NHS London, the capital's strategic health authority (SHA) to manage risks during the period of financial recovery across London.

The collective fund will consist of the non-return of the £304 million top-slice and a non-returnable levy of 1.3 per cent on PCT funding for two years to fund the historic debt of £275 million.

The non-returnable levy will be applied to all PCTs except the five still repaying debts.

This action will draw a line through NHS debt in London and ensure all PCTs and hospitals can move forward to developing services on an even keel.

Unless action is taken, it is estimated that debt for trusts across London will reach £579 million in 2011.

Finance Director at NHS London, Paul Baumann, said: “PCTs should be congratulated for taking this bold and decisive action.

“Failure to deliver this proposal would mean that a number of organisations would be unable to deliver the improvements promised in healthcare for London and healthcare across London would remain patchy. By taking this action PCTs will have much greater leverage to demand better performance from their providers.

“This decision has not been taken lightly by the PCTs and they are determined to ensure that there is no return to this deficit position in the future.”

In order to secure the funding to clear the historic debt, each trust will be expected to demonstrate improved performance and a robust plan to achieve sustainable financial balance to a newly established Challenged Trust Board bringing together PCT and SHA leaders.

PCTs will discuss the proposal and make a decision on whether it should be implemented at their own board meetings from December 8 to 19.

NHS Waltham Forest will make an announcement following its board meeting on December 16.