Unite has hailed ‘a significant victory’ in its campaign to stop NHS trusts in England setting up wholly owned subsidiaries designed to avoid paying tax.

Unite, with 100,000 members in the health service, welcomed the announcement by NHS Improvement that trusts should ‘pause’ any current plans to create new subsidiaries or change existing subsidiaries.

NHS Improvement, the body that oversees trusts, said it would be consulting on a new regulatory approach next month and will then be issuing new guidance.

The news came as Unite members at East Kent Hospitals University NHS Foundation Trust and York Teaching Hospital NHS Foundation Trust were gearing up to take strike action next week in separate disputes about being transferred to a subsidiary company.

Unite has waged an extensive campaign against these wholly owned subsidiaries as they could lead to job losses and salami slicing of service provision.

Unite is concerned that trusts are forming these wholly owned subsidiary companies in England so that they can register for VAT exemption and compete on a level playing field with commercial competitors who register for VAT exemption for their work in the NHS, when NHS trusts can’t.

Unite national officer for health Colenzo Jarrett-Thorpe has written to NHS Improvement chief executive Ian Dalton saying that the creation of these subsidiaries is not ‘the correct prescription for financial efficiency in the NHS’, after years of budgetary constraint which has put the NHS in England ‘under serious and unprecedented pressure’.

Unite is calling for:

  • HMRC to close the tax loophole, so NHS trusts are not forced to consider outsourcing NHS services to private limited companies in the form of wholly owned subsidiaries.
  • NHS Improvement on behalf health and social care secretary Matt Hancock to immediately call a moratorium on the further establishment of private limited companies by NHS trusts in England, even with trusts that have gained board approval.

In his letter Colenzo Jarrett-Thorpe added: “The increasing tendency of NHS trusts to create wholly owned subsidiaries in the form of private limited companies could lead to a flood of dozens of Carillion type situations across England. “We believe any VAT tax saving could ultimately turn into fool’s gold, if the tax loophole is closed by HMRC.”

Commenting on NHS Improvement’s intervention, Colenzo Jarrett-Thorpe said: “We regard this as a significant victory in Unite’s long-running campaign to stop the creation of such subsidiaries – and then to reverse them.

“We believe this is in the best interests of patient safety and our members who wish to remain employed by the NHS and not outsourced to an outfit where their pay and employment conditions could be seriously eroded.

“Clarity is needed from the NHS Improvement statement yesterday on wholly owned subsidiaries since this may be able to help resolve the industrial disputes in East Kent and York regarding employee transfers to wholly owned subsidiaries on 1 October.”

Tees Esk and Wear Valley NHS Trust has become the latest trust in a growing number that has decided to abandon plans to set up such a subsidiary.
Unite members will be taking industrial action in East Kent between 24-28 September and in York where there is a 48 hour stoppage between 27-29 September.

ENDS

Notes to editors:

For more information please contact Unite senior communications officer Shaun Noble on 020 3371 2060 or 07768 693940. Unite press office is on: 020 3371 2065

  • Unite is represents workers in Britain and Ireland with members working across all sectors of the economy. The general secretary is Len McCluskey.