Blackpool Council has turned down an approach by hospital chiefs for a £10m loan.
Bosses at the cash-strapped town hall, which itself needs to find millions of pounds in savings, decided not to proceed following initial talks.
Blackpool Teaching Hospitals NHS Foundation Trust, which posted a loss of £12.4m last year, confirmed it had entered discussions with the council, insisting the approach was a normal part of managing its finances.
But the move has sparked major questions about pressure on Victoria Hospital’s budget.
Campaigners today said it was “absurd” the hospital would approach the council for the cash and said the move was indicative of the pressures the hospital is under from Government cutbacks.
Town hall bosses today declined to reveal why they had rejected a potential loan deal.
Council leader, Coun Simon Blackburn, said: “A decision was taken not to proceed when the discussion was at an early stage.”
Confirming the talks, Gary Doherty, chief executive of Blackpool Teaching Hospitals NHS Foundation Trust, said the Trust had “an obligation” to provide the best possible patient care “in the most cost effective way.”
He said: “The council can access low interest finance streams where they occasionally invest in local organisations if there is a benefit to Blackpool people.
“There was no formal loan request, we were simply exploring potential options.”
Mr Doherty added: “It is inherent upon us to look at all methods of financing expenditure.
“Blackpool Council is experienced in valuing and assessing assets of this type but are not in a position to partner Blackpool Teaching Hospitals on this occasion, therefore we will continue to finance our expenditure through the NHS Loan Facility as we currently do.”
The £12.4m deficit for the financial year 2013/14 came after the Trust posted surpluses of £3.2m in 2012/13 and £3.3m in 2011/12.
It suffered a widely-reported loss of £23.1m in 2010/11.
In its annual accounts, published earlier this year, the Trust reported borrowings totalling £43.6m.
The loans listed – the biggest being £25m – are repayable between now and 2037 with varying rates of interest between 1.4 per cent to 3.7 per cent.
Hospital chiefs said they had no plans to re-finance any existing loans, insisting the money sought from the council had not been earmarked for any project or service.
In January this year The Vic opened a new £16.4m entrance and multi-storey car park.
Cash was borrowed from the Department of Health and is being repaid from income generated by the retail units within the entrance, and receipts from the car park.
Although there is a “requirement” to make efficiency savings of £20.6m in 2014/15, the report stated: “The (Trust) directors have a reasonable expectation the Trust has adequate resources to continue in operational existence for the foreseeable future.”
News of the loan talks came after Coun David Owen, Chairman of Blackpool Fylde and Wyre 38 Degrees NHS Support Group, raised concerns that NHS organisations were being overburdened with debt due to Whitehall decisions.
Writing in The Gazette last week, he said: “PFI (Private Finance Initiative) contracts have chucked loads of money at investment houses to build health facilities which we all value and appreciate.
“However, these deals, with interest rates averaging eight per cent, are now sucking dry our hospitals and crippling the NHS.
“In contrast, prudential borrowing by the public sector is only four per cent. So why have politicians and ministers so punished the NHS in enforcing PFI out of some doctrinal preference for City cash?”
He added: “Keeping Victoria Hospital solvent until the spring is proving a greater strain than they have ever known.”
James Sorah, of Blackpool Against The Cuts, said: “It is one cash-strapped public institution asking another cash-strapped public institution for a loan, and it shows up the absurdity of Government policy.
“You have to ask, why are they cash-strapped – it is because of cuts to public services by the Government.”
Blackpool South MP Gordon Marsden said: “The financial pressures, despite what the Government says, and growing demands on the NHS are leaving many NHS trusts in a very difficult financial state.”
Mr Doherty said it was not unusual for any public sector body to “continually check revenue streams”.
Referencing the funding in place for the new entrance and car park, he said: “The loan is over a 25 year period and will be repaid through income generated by retail rental charges for the main entrance and car parking fees. These revenue generating streams are performing as planned.
“It is only good practice as an organisation to regularly ensure we have the best possible financial structures in place.”
And Mr Doherty said the council’s decision to turn down the request would have no impact on patient services.
He said: “As one of the busiest acute hospitals in the country, and a major foundation trust, there are always financial pressures on the business, this is true throughout the whole of the NHS.
“For this reason it is essential to ensure that we constantly evaluate and explore all financial options.
“We are not looking to re-finance any loans, so the fact the council is not entering into a partnership with the hospital trust on this occasion will have no effect on patient services.”
Blackpool Council has to find savings of £36m from its budget by 2016.