NHS trusts transfer staff to subsidiary companies to cut tax bills
Nineteen trusts have transferred non-clinical NHS staff into subsidiary companies, via a process previously described as akin to “backdoor privatisation”, and another 16 have plans to do so, an investigation has found.
The Health Service Journal research, published yesterday, suggests almost 3,000 estates and facilities staff are already employed by eight trust-owned subsidiaries, with the majority having transferred from the parent trust.
Of those in the pipeline that provided figures, the average number of staff being transferred is about 530, which if matched at all 16 trusts would equate to more than 8,000 staff.
Staff members whose employment is transferred to the new companies will no longer be NHS employees. New staff employed by the subsidiary companies may not be employed on NHS terms and conditions, and may no longer be guaranteed NHS pensions.
One of the benefits to trusts is a reduction in their VAT bills. But Labour and trade unions said the moves risked driving down wages, pensions and conditions of thousands of NHS staff – and therefore service standards.
Philip Hunt, Labour’s health spokesman in the Lords, has previously described the move as a “backdoor to privatisation”. He cast doubt on the benefits to the NHS of what he said was a questionable process.
He told the HSJ: “Apart from the ethics of a public body using considerable time and resources to reduce their VAT payments, with no benefit at all to overall NHS budgets, more worrying is the likely impact on staff … Long term, this is a blatant attempt to undermine national pay bargaining.”
The HSJ investigation found that out of 19 providers that have established an active subsidiary company, nine employ 100 staff or more. A further 16 trusts said they are considering – or are in the process of creating – a subsidiary.
Northumbria Healthcare NHS foundation trust, which has one of the more established subsidiaries, told the HSJ it had received significant VAT benefits on capital projects via its company.
York teaching hospital foundation trust, among 10 trusts at an early stage of considering the move, said the new structure could create £12m of VAT savings on capital projects over five years, plus recurrent revenue savings of £5.7m.
The Department of Health and Social Care said: “While we are clear that the NHS will remain free at the point of use both now and in the future, it is right that NHS trusts have the freedom to organise their own administrative functions to best meet local needs.