Three foundation trusts in England have set up firms with the intention of taking thousands of support staff off NHS books

This article is more than 2 years old

This article is more than 2 years old

Health trusts have been accused of taking a first step towards privatisation by transferring the employment of support staff to new subsidiary companies.

At least three NHS foundation trusts in Yorkshire, the West Country and northern England have set up firms with the intention of taking thousands of workers off the NHS’s books.

It means that a staff member whose employment is transferred to the new companies will no longer be an NHS employee, even if they have been guaranteed their current 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.

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The plans have angered Labour and the unions, who say they open the door to driving down wages, pensions and conditions of thousands of NHS staff, which will inevitably drive service standards down.

Philip Hunt, Labour’s health spokesperson in the Lords, said the new firms are a “back door to privatisation” and are being watched carefully by other foundation trusts looking for ways to cut their wage bills.

“Trusts will be free to screw down wages and pensions and when the contract has to be renewed, there is no guarantee that it won’t go to another private company who can take more extreme measures,” said Lord Hunt.

The former health minister and chief executive of the NHS Confederation said that the foundation trusts were keen on the plans because establishing the new companies allowed them to reduce their VAT payments.

“It seems perverse that NHS bodies are spending energy reducing VAT payments when HMRC itself has stated that the cost will come out of public expenditure,” he said.

The Department of Health is aware of the accusations amid concerns from senior cabinet figures that the Conservatives are losing to Jeremy Corbyn’s Labour on public services.

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Jeremy Hunt, the health secretary, told Andrew Marr on Sunday: “I believe good public services are the moral purpose of a strong capitalist economy.”

The board of Airedale NHS foundation trust voted on Wednesday to set up a “subsidiary organisation” to run facilities, estates and purchasing at its hospital in Keighley, West Yorkshire.

It would take over employees from services including cleaners, porters, procurement, parking and patient transfers. The trust has confirmed that workers will no longer be NHS employees but will instead be employed by the company.

A spokesperson for the trust said the new company will engage with recognised trade unions on terms and conditions for new staff members.

Gloucestershire Hospitals NHS foundation trust is giving “very serious consideration” to setting up a wholly owned subsidiary that will give “VAT benefits” to the trust.

Deborah Lee, the chief executive, wrote to a Unison official this month saying that setting up a company in November could reduce costs through “VAT flexibilities”.

She wrote: “Based on our business case, the establishment of a subsidiary company (employing around 900 of our staff) could create savings in the region of £3.5m per annum or 10% of our annual savings requirement – £35m over the 10-year life of a contract.

“Realising the benefits afforded to us through VAT flexibilities means we can spend less with HMRC rather than less on patients or staff employment. The only other way of securing this VAT benefit is if we were to outsource or privatise the services in question.”

The trust promised that staff transferring to the new company would have their terms and conditions protected but admitted that it was “part of their thinking” that new contracts would be used for staff newly recruited into the subsidiary company.

A spokesman for the trust said: “Many public sector organisations have taken the opportunity to structure themselves in ways that enable them to realise the opportunities open to commercial organisations in respect of VAT recovery.”

Northumberland, Tyne and Wear NHS foundation trust has set up NTW Solutions Ltd, a wholly owned subsidiary company, to transfer assets including 600 employees and leaseholds. A business case for the new company said new pension arrangements would be needed for new staff joining the company as well as new terms and conditions.

A spokesperson for the trust said the company was subject to the same VAT legislation as any other limited company. “There are no plans to change the terms and conditions for these employees. New employees will be employed on different terms and conditions and cannot access the NHS pension scheme.”

A Department of Health spokesperson said trusts must ensure staff can be reassured that the NHS terms and conditions still apply where appropriate, adding: “NHS Improvement is working with the trusts to ensure adherence to relevant legislation and guidance, as well as ensuring best practice in working with employee representatives and unions on these issues is shared and adopted across the sector.”