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NHS trusts transferring staff into subsidiary companies to cut VAT

Posted on 15/02/2018 by


Labour warns of impact on staff and standards of ‘back-door privatisation’

Nineteen trusts have transferred non-clinical NHS staff into subsidiary companies, via a process previously described as akin to “back door privatisation”, and another 16 have plans to do so, an investigation has found.

The Health Service Journal research, published on Wednesday, suggests that 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 around 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, even if they have been guaranteed the same working conditions.

New staff employed by the subsidiary companies may not be employed on NHS terms and conditions, and may no longer be guaranteed NHS pensions.

Philip Hunt, Labour’s health spokesman in the Lords, has previously described the move as a “back door to privatisation”. He cast doubt on the benefits to the NHS of what he said was a questionable process.One of the main benefits to trusts is reducing their VAT bills. But Labour and trade unions have warned that they open the door to driving down wages, pensions and conditions of thousands of NHS staff – and therefore service standards.

Lord Hunt 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, the more worrying is the likely impact on staff.

“Whether by design or not, thousands of NHS staff are essentially being forced out of NHS employment, with considerable uncertainty about their future. Long term, this is a blatant attempt to undermine national pay bargaining.”

The 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, six of which have already established the necessary legal entity.

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 deliver £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: “Whilst 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.

“NHS Improvement is working across the sector to ensure best practice is adopted and that legislation and guidance is adhered to.”

HM Revenue and Customs said it would work with trusts to ensure VAT recovery rules were correctly applied.

Source: TheGuardian