Win against NHS subsidiaries

Unite has claimed victory in the ongoing fight against subsidiaries being set up by NHS Trusts after yet another Trust dropped plans to set up a wholly-owned subsidiary to avoid paying VAT.

University Hospitals of Leicester NHS Trust announced it had abandoned its plans after NHS Improvement said it was unlikely that the proposals would be approved by the new health secretary Matt Hancock.

“This is very good news that the NHS trust in Leicester has backed down over its plan to set up a hived-off tax avoiding subsidiary,” said Unite national officer for health Colenzo Jarrett-Thorpe.

“This is a significant victory in our campaign to stop these entities being formed which, we believe, could lead to a Pandora’s Box of Carillion-type meltdowns – with the adverse knock-on effects on jobs and patient services.”

The news follows another recent victory at Wrightington, Wigan and Leigh NHS Foundation Trust, when, after protests and strikes from Unite, the Trust likewise scrapped plans to set up a wholly owned subsidiary.

In February, Bristol Trust also dropped similar plans after pressure from Unite and other health unions.

NHS Trusts have in recent years moved to set up these subsidiaries so that they can register for a VAT exemption in the same way their commercial competitors are allowed to do. Without setting up a subsidiary, NHS Trusts simply can’t compete on a level playing field with private companies vying for NHS work.

But in the process, wholly-owned subsidiaries leave NHS staff open to cuts to their pay, terms and conditions, since new workers would not be governed by Agenda for Change pay rates.

Unite has argued too that cutting pay and terms and conditions for staff hived off to subsidiaries would also harm recruitment efforts at a time when the NHS is haemorrhaging workers.

Action now call

In January, Jarrett-Thorpe wrote to the then-health secretary Jeremy Hunt about subsidiaries.

“There have been several examples from Circle to Care UK and now the collapse of Carillion of how the agenda of outsourcing has led to the fragmentation of NHS services, serious breakdowns for services to patients and the quality of care, to the cost of patients, staff, NHS services and, ultimately, the taxpayer,” the letter read.

“The increasing tendency of NHS trusts to create wholly-owned subsidiaries in the form of private limited companies could lead to a flood of dozens of Carillion-type situations across England, if serious action is not taken by the government immediately.”

While Unite has welcomed that the Department of Health and Social Care announced recently that it was consulting on this issue with a view to strengthen ‘central oversight’ of wholly owned subsidiaries, the union believes more must be done.

“We want Matt Hancock to enforce a moratorium on the further creation of other wholly owned subsidiary companies while this consultation is taking place and for those that are in the process of being created to be paused while the consultation takes place as well,” Jarrett-Thorpe said.

Unite is also calling on the government to compel HMRC to close the tax loophole, so NHS trusts are not forced to consider outsourcing NHS services. The union is moreover calling for a review of procurement and commissioning by NHS trusts in England.

“The review should aim to establish a fair and transparent ethical outsourcing procurement and commissioning framework which will avoid the mistakes of the past,” Jarrett-Thorpe said.

The latest news that University Hospitals of Leicester NHS Trust would be dropping its plans to set up a wholly-owned subsidiary comes as Unite members last week (July 25) protested the creation of subsidiaries in York and Chesterfield.