NHS Trusts exploiting tax loophole risk creating a two-tier workforce

The Government must deliver real improvements to how services are funded rather than relying on tax avoidance schemes which barely paper over the cracks, writes Karin Smyth MP.



Last year’s General Election was an election unlike any other; the historic fault lines along which elections are usually won and lost vanished, and long-held allegiances shifted massively – if temporarily.

Public opinion strengthened behind a foggy notion of “getting Brexit done”, and concern for traditional core issues such as the economy eroded. But one cornerstone issue remained high on the agenda for both major parties and the electorate – the NHS.

I have long warned of the real and pronounced risks that Conservative policies pose to the fabric of our NHS, risks which will be even greater still with a new-found majority. The problems caused by the underfunding of our NHS over the past decade haven’t gone away because the Conservatives won the election – and won’t be remedied even with promised investment. From funding and outcomes to transparency and governance, the Tories have been a disaster for our NHS.

Before I became an MP, I worked in the NHS, helping to plan and deliver services, including new hospitals. I know all too well that the issues that make the press are often just the tip of the iceberg of the colossal challenges the health service face. That’s why I’ve been focussed on exposing some of the major issues threatening the NHS, in my Bristol South constituency and more widely, and why I will continue to do so.

Today in Westminster, I’ve secured an important debate on a concerning practice that is being adopted by many NHS Trusts across England. It’s one that’s also likely to become more widespread and problematic as the government’s “Long Term Plan” for the NHS is implemented.

A tax loophole through which some VAT can be reclaimed by Trusts to pay for other priorities is being used by NHS Trusts to fill the shortfall that chronic underinvestment has caused.

A consequence of Trusts exploiting the loophole is that they do so through creating artificial subsidiary companies. These companies are theoretically under control, but they have been known to get into conflicts with the NHS owner. Shamefully some have exploited their private status to attack terms and conditions of employment.

While the short-term gain for NHS Trusts appears lucrative, other parts of our health service not gaining from this tax loophole are at a disadvantage. This is the very opposite of collaborative and flies in the face of everything the NHS Long Term Plan is about.

Often, NHS staff in these Wholly Owned Companies are employed on different terms and with less job security than they otherwise would be through traditional channels. So, when we take a step back and realise what this money is funding, the argument against using such schemes gets even stronger. Because all this system does is help create a two-tier (or in some cases three and four tier) workforce within our health service.

The skeleton of our NHS is a complex one, but we simply cannot have a system in place where hardworking staff are given different rights to others doing the same job elsewhere.

Not only is this an unsustainable way to fund the health services we all rely on, it sets a dangerous precedent that other parts of the public sector look set to follow. There’s a lack of accountability and transparency and this acts as a double-edged sword in terms of value for taxpayers.

If the government is serious about investing in our NHS as we were promised in last month’s election, they should deliver real improvements to how services are funded rather than relying on tax avoidance schemes which barely paper over the cracks. The government may have a mandate, but it must deliver on the promises it made less than one month ago.

Karin Smyth is a Labour Member of the House of Commons for Bristol South.