Back-door Privatisation: the rise of the spin-off company in the NHS

There have been a growing number of reports of cash-strapped hospital trusts announcing plans to develop private companies to employ non-clinical staff. Trusts are enthusiastic about this approach as a way to save money and reduce deficits. There are two ways money can be saved:

  • through the VAT system - a private company working for the NHS is covered by different tax rules and can claim back any VAT it is charged from the Government;

  • and, by changing the pay and conditions of staff - the companies will not be obliged to employ new staff on NHS pay and conditions but will instead be able to offer very much worse terms of employment.

Long-term protection removed for lowest paid staff 

The staff involved in these new companies include porters, administration staff, catering and maintenance staff, already some of the lowest paid in the NHS. Unison has highlighted several drawbacks for staff in these new companies: long-term protection of pay and pensions for those transferring to new companies is weak, plus new staff will be employed on less favourable contracts with no access to the NHS Pension Scheme. Unison also notes that it has an impact on staff that transfer: "all it takes is one change to the way the company operates and existing staff could find themselves at risk too. And once such companies have been set up it is far easier for trusts to transfer other non-clinical staff and services in future."

In an article in The Guardian, Sara Gorton, Unison's head of health, said: “There’s a worrying rash of NHS trust owned subsidiary companies spreading across England. This outsourcing by stealth throws up huge concerns. Most significantly it creates a two tier workforce, where new staff are far worse off in terms of wages, sick pay and pensions… It is a nonsense that there is an active tax incentive for organisations to treat staff in administrative and support functions as second class employees.”

There are a lot of unanswered questions over the set up of these companies, particularly in regard to accountability and the long-term plans for the companies.

19 providers already have subsidiaries

In February 2018, research conducted by the HSJ found more than 3,000 estates and facilities staff are already employed by eight subsidiaries set-up and owned by trusts.  The majority have been transferred from the parent trust. The journalists also found that trusts had plans that could see a further 8,000 transfer to subsidiaries. 

In total, HSJ's analysis identified 19 providers that have already set-up a subsidiary company to manage their estate, plus another 16 that have told staff they are considering the move.

A full list of these trusts can be found here.

Companies formed under the radar

These companies have been developing under the radar for some time now; Guy's and St Thomas' FT spun out the company Essentia in 2013 to run its estates and facilities, Gateshead Healthcare NHS Trust set up QE Facilities in April 2014 and Northumberland, Tyne & Wear (NTW) NHS Foundation Trust's NTW Solutions was incorporated in November 2016, according to Companies House. More recent companies include, Barnsley Hospital NHS Trust Barnsley Facilities Ltd, set up on 1 September 2017 to incorporate its staff in the areas of procurement, estates, facilities, security and resilience and health, safety and fire services and AGH Solutions Ltd set-up by Airedale NHS Foundation Trust to cover many services at Keighley Hospital due to be up and running in February 2018. AGH Solutions Ltd will employ around 325 staff.

NTW NHS Foundation Trust will transfer assets including 600 employees and leaseholds to NTW Solutions. According to a Guardian article, the 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.

No staff consultation at Yeovil Hospital

At Yeovil District Hospital, the decision was made some time ago to set-up a spin-off company to employ 360 support staff; the company, known as Simply Serve, was set up in July 2017. A month long consultation process was reported to have taken place, with a final decision taken at a meeting on 20 December 2017. The 360 support staff will be transferred to Simply Serve on 1 February 2018.

Unison representative reported that they were not allowed to speak at the December meeting and Unison has reported that the hospital board has refused to consult with staff representatives. The hospital management says that the new company will "mirror" NHS terms and conditions, including pay settlements, for a minimum of five years.

Gloucestershire goes ahead despite opposition

In October 2017, Gloucestershire Hospitals NHS Foundation Trust announced plans to create a new subsidiary company to deal with non-clinical support staff as part of a plan to deal with its £47 million maintenance backlog. This would involve an estimated 900 hospital staff in Gloucestershire being transferred to a separate commercial company.

The trust is in financial special measures and needs to reduce an annual budget deficit of more than £14 million. The trust believes that the new company would save around £35 million over ten years, through "improved utilisation, better performance management and VAT recovery."

campaign is underway in Gloucestershire against the trust's plans for the transfer of around 750 staff; this was dealt a blow in March 2018 when the board of the trust confirmed that staff would be transferred 1 April 2018. Unison, Unite the Union and the Royal College of Nursing issued a joint statement noting that "the Board of the Trust has ignored the views of the 900 staff who signed the petition specifically opposing the plan, and the fifteen-page consultation response which was submitted by all three unions outlining in detail the reasons for our opposition."

Royal United Bath puts idea on hold

In Bath, the Royal United Bath Hospital Trust was investigating setting up a subsidiary company that would be wholly owned by the Royal United Hospitals Bath NHS Foundation Trust to employ about 500 of its support staff such as porters, catering staff, administration staff and trades people. In this case the trust in Bath is reported to be currently engaging with staff over the plans. In March 2018, Unison reported that the idea was on hold.

In January 2018, the York Teaching Hospital NHS Foundation Trust was reported to be considering the setting up of a private company to employ its 979 staff in the facilities and estates department, including cleaners, porters and maintenance technicians.

Idea abandoned in Bristol

Although most of the companies set up by trusts identified by the HSJ received little media attention and consequently not much opposition, things are now changing. In January 2018, Southmead Hospital in Bristol part of North Bristol Trust announced that it was considering setting up a spin-off company to employ the non-clinical staff in the hospital trust in an effort to save money. However, following a campaign by the unions and other campaign groups, plus a backlash from the staff themselves, the trust has dropped the plans.

Staff, unions and politicians were very concerned about the plans. Workers at Southmead Hospital told the Bristol Post “the move would be ‘NHS privatisation by the back door’,” and Bristol South MP Karin Smyth, told the paper that “taking the jobs outside the NHS would mean people working at the hospital would end up being paid less with worse conditions.”

The plans in Bristol would have affected all non-clinical staff currently employed by the North Bristol NHS Trust, which includes Southmead hospital. The board had reportedly paid £12,000 for a feasibility study.

Accountability and conflict of interest issues

As well as the issues surrounding pay, pensions and working conditions for staff, the setting up of seperate companies also throws up numerous issues around acountability and conflict of interest. In February 2018, the HSJ reported that a director of Essentia, spun-off from Guy's and St Thomas' FT in 2013, had a “clear potential conflict of interest” as the director was also its estates director.

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