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Unions are working together to protect NHS workers under threat from being outsourced to new “Wholly Owned Companies” or “Subcos.”

These are the latest idea from cash-strapped trust management trying to cut costs of support services by dodging VAT liability. They are also seeking to make “savings” from paying inferior terms and conditions to new employees, potentially establishing a 2-tier workforce.

NHS trusts in several parts of the country, but most especially the South West, North West and Yorkshire, have since the second half of 2017 been looking at transferring non-clinical jobs into the new subsidiary companies. Unions have warned from the outset that even if transferred staff are at first covered by TUPE regulations that appear to protect their terms and conditions, such moves can swiftly undermine them, and may well employ subsequent staff on separate terms inferior to the hard-won national Agenda for Change agreement.

This latest fragmentation (at a time when NHS England is continually talking about “integration”), is likely also to affect patient care by adding yet another management structure, and making it even harder to recruit and retain the necessary workforce to maintain standards.

Health Campaigns Together is eager to work with union branches and regions in the fight to stop this latest attack on the unity of the NHS. We share the unions’ concern that even companies that begin as “wholly owned” subsidiaries of Trusts will immediately be outside the NHS and could later evolve into partnerships with the private sector, or be sold to private for profit companies.

This page brings together information on subcos to enable branches to strengthen their awareness and campaigning, and ensure stewards and activists have the most up to date information.

We urge branches to contact local campaigners who can help to develop broad-based and popular local campaigns confronting NHS Commissioners, Trusts, and local councillors and MPs. If your branch wants any assistance in finding nearby campaign support, please contact us at healthcampaignstogether@gmail.com.

See below

UNISON vows to step up fight against wholly owned subsidiaries

Delegates at UNISON health conference in Brighton have voiced their anger over trusts’ moves to transfer staff and create two-tier workforces, with wholly owned subsidiary companies to provide support services.

Conference voted to fight their spread.The practice is widely regarded as backdoor privatisation of health services – putting at risk the pay and conditions of thousands of NHS staff, particularly low-paid women, Black and disabled workers. The importance of the issue was reflected in the fact that nine bodies contributed to the the composite motion being debated.

One delegate argued that wholly owned subsidiary companies represented “the biggest threat of privatisation seen in a generation.”

Trusts are exploiting a loophole in UK tax law to establish the new companies, arguing that the move will allow them to save money on VAT. While these companies are owned by the trusts, they are no longer part of the NHS and NHS staff are seeing their jobs outsourced to limited companies. UNISON is particularly concerned that most NHS trusts that have set up these companies have introduced non-Agenda for Change contracts for new starters, while denying them access to the NHS pension scheme.

Adrian O’Malley of the service group executive told delegates: “This is yet another attack on lowest-paid staff. Another way of privatising services. Another way to bring in a two-tier workforce. We have to send a message to any managers considering setting up these companies that we are 100% part of the NHS and will fight to remain so,” he said. “We have got to stop this blatant attack on our terms and conditions.”

He added that in his region of Yorkshire and Humberside wholly owned subsidiaries was “taking off with a vengeance”, with seven or eight trusts, including his own, considering setting them up. But the union is combating these moves with the threat of taking industrial action, he added.

“While they are considering business cases, we are preparing our members for strike ballots. We have a right to strike to keep our NHS status.”

Jean Boswell, of Sheffield community health branch, told delegates: “We’re concerned about how fast this is moving. This is a direct attack on lowest-paid members of staff, moving them away from Agenda for Change and introducing a two-tier system. We do believe that this use of wholly owned subsidiaries is entirely cosmetic and won’t improve efficiency or productivity. But it will exploit future staff. And low-paid workers are first on the front line with diminishing terms and conditions.

“We know we have a fight on our hands, but working together we can resist.”

Delegates agreed to:
  • continue to support regions and branches in campaigning against the establishment of wholly owned subsidiaries – and to prioritise this work in the coming year;
  • encourage branches and regions to work together to resist the spread of these schemes;
  • safeguard the interests of the union’s members threatened by the creation and existence of such companies;
  • work with the Labour Party to reform the tax loophole;
  • campaign for all members who work for such subsidiaries to be employed on NHS terms and conditions, including access to the pension scheme;
  • continue to be vigilant against employers in Wales, Scotland and Northern Ireland exploiting the same loophole.
While UNISON will deal with the new companies if necessary, the conference said that “everyone working for the NHS should be employed by the NHS” and that the union would campaign for their return to direct NHS employment at the earliest opportunity.

NHS trusts are spending millions outsourcing staff to private companies, says UNISON

NHS trusts across England are spending millions of pounds outsourcing staff to new arms-length private companies, says UNISON in a PRESS RELEASE dated April 16.

Using a Freedom of Information (FoI) request, UNISON has revealed that NHS trusts are shelling-out huge amounts of money on consultants. These companies are advising trusts on the setting up of wholly owned subsidiaries, to which staff are then outsourced.

UNISON says that these new companies appeal to NHS trusts because they can reduce their VAT payments, and cut the pay and pensions for any new staff recruited. The health workers that are being transferred tend to be the lowest paid within the NHS, such as porters and cleaners.

Only 22 out of 31 NHS trusts that UNISON approached complied with the FoI request – published to coincide with the start of its annual health conference – but the amount spent by just 15 of them is already in excess of £3.2 million.

Topping the list of high-spenders is Clatterbridge Cancer Centre in Birkenhead, which spent more than £661,000 establishing a wholly owned subsidiary.

The Royal Free London NHS Foundation Trust and Gloucestershire Hospitals Foundation Trust have both already spent a minimum of £400,000 setting up subsidiaries. Meanwhile, Airedale NHS Trust in Yorkshire spent an estimated £343,000 outsourcing staff.

To put some perspective on the amount spent by some of these trusts, UNISON has found that the £3 million outlaid to date on transferring staff could have paid the annual salary of around 200 extra hospital cleaners*.

UNISON head of health Sara Gorton said: “The amount of public money being frittered away on transferring NHS staff to private companies is a disgrace, especially at a time when there’s such a huge squeeze on resources.

“These wholly owned subsidiaries are creating a two-tier workforce where new staff are likely to be far worse off in terms of their pay and pensions. There is also no evidence that these new companies improve efficiency or productivity.

“Porters, cleaners and other staff chose to be part of the NHS team, not to be contracted out and treated like second-class employees.”

Notes to editors:
– * Based on an NHS cleaner currently on band 1 (spine point 2) who is earning an annual salary of £15,404. UNISON believes this is of particular concern with research showing that a lack of cleaners is associated with a greater incidence of MRSA.

– Last year Oxford University published a paper on the incidence of MRSA and its links to cleanliness on wards. Thereport said: “…we can draw on the findings of a study that introduced an extra cleaner to two matched wards for six months each, using a crossover design, and found a 27% reduction in infections with MRSA, with the benefit disappearing after removal of the cleaner (S. J. Dancer et al., 2009). This is directly relevant to our finding that outsourced cleaning employs fewer staff.”

– ** Salisbury NHS Foundation Trust is involved with three subsidiary companies – Salisbury Trading Ltd (providing linen services in the trust), Sterile Supplies Limited (a joint venture with Steris – formerly Synergy – that provides sterilisation and disinfection services), and Wiltshire Health and Care LLP (formed with the Royal United Hospitals Bath NHS Foundation Trust and Great Western Hospitals NHS Foundation Trust).

The 9 trusts that failed to respond to the FoI request are: Guy’s and St Thomas’s NHS Foundation Trust; Central and North West London NHS Foundation Trust; Northumbria Healthcare NHS Foundation Trust; City Hospitals Sunderland NHS Foundation Trust; Bolton NHS Foundation Trust; University Hospital Southampton NHS Foundation Trust; North Tees and Hartlepool NHS Foundation Trust; the Mid Yorkshire Hospitals NHS Trust; Calderdale and Huddersfield NHS Foundation Trust.

– The information on Royal United Hospitals Bath NHS Foundation Trust is freely available on its website and so no FoI was necessary.

No to Sub-Co!

By Sara Gorton, UNISON Head of Health (in Health Campaigns Together newspaper No.10 - April 2018: page 11).

Tory under-funding of our NHS has had many damaging consequences. The latest is the alarming number of trusts in England seeking to set up wholly owned subsidiary companies.These new organisations, that are often being used to deliver services such as estates and facilities, are set up at arm’s length but still owned by the trust.

Trusts are saving money in part by exploiting a tax loophole that allows them to avoid VAT, but also by planning to employ new staff on non-NHS terms and conditions with no access to the NHS Pension Scheme. Most regions of England are now affected by this new drive, with UNISON raising particular concerns in the South West and Yorkshire and Humberside where a significant number of trusts are proposing to transfer hundreds of staff outside the NHS.

The trusts are all paying “advisers” to assist them, resulting in money leaking away from patient care. Some trusts have refused to make public their business cases and one has refused to consult with its staff reps, despite the obligations placed on trusts by the NHS Constitution.

The vast majority of trusts plan to employ new staff on less favourable contracts and so far none have secured access to the NHS Pension Scheme for new starters, even though UNISON has been advised that they should be able to. So it is hard to see this initiative as anything other than a blatant bid to make staff pay for the financial crisis in the NHS.

One of the benefits claimed is that it will enable greater staffing flexibility and will leave trusts free to focus more on delivering healthcare. But this ignores the fact that all staff are part of one NHS team that works best when it is pulling together for the same organisation. A two-tier workforce is in no one’s interest and yet this is exactly what is being created. The NHS can ill afford the further damage to teamwork and morale that comes from employing transferred staff on different pay, terms and conditions from new starters.

UNISON believes this is yet another fragmentation of our NHS and, unless trusts give firm guarantees that new companies will never be flogged off to the highest bidder, a potential step towards full privatisation. Past experience of privatisation shows that any savings from such exercises will be entirely short term, if indeed they materialise at all.

UNISON is working hard with Health Campaigns Together, the Labour Party and other unions to fight these developments. In its 70th year our NHS needs to be brought back together not pulled further apart.

Lies, Dishonesty and Boards that Should Go

By Richard Bourne, Socialist Health Association blog March 4.

Trusts around the country are setting up wholly owned companies to deliver services so they can take advantage of taxation changes this allows.

This great VAT saga shows the NHS at its very worst. Bullied from above, local managers believe the hype from consultants. They can’t write a proper business case but still launch a project in secret, refuse to consult with staff, totally mislead the staff and public about the real intentions, refuse to give information claiming everything is commercially confidential and plough on regardless – all with the active collusion of a Regulator that is supposed to stop such poor behaviours. Those involved continue to refuse even to respond to FoI requests. Questions in both Commons and Lords get stock answers saying this has nothing to do with Ministers – it’s local decision making – nothing to see here.

Unison has been active in opposing the outbreak of wholly owned companies for 18 months. On the face of it this represents money for nothing – the same staff doing the same job in the same way with the same managers but with “savings” in £millions from tax changes. No increase in productivity, no innovation, no efficiencies at all – just a tax scam. The staff loose out by moving out of the NHS and become collateral damage, but this does not matter as they are not nurses or doctors – that may come later.

Tactically the Trusts also get to break out of the national pay and conditions and can pay new staff and even promoted old staff on worse terms and conditions. This alone should set red lights glowing somewhere.

Oh, and two fingers up to any local plan about working together, collaboration and that guff – this is every Trust for itself – they even all claim that they will be selling services to each other.

And big issues like the consequences of transferring ownership and control over public assets to a private company (even one which for now is wholly owned) have simply been ignored or lied about.

Facts as opposed to the lies, are slowly emerging. To take one well documented example. Late in 2016 a Trust did preliminary work with outside consultants on going down the wholly owned companies route. In December 2016 in secret the Board agreed to go ahead using a particular model solution pitched to them by the consultants.

They did not look at the overall strategy involved and failed to look at other options. This offer was too good to be true and others had done it; so why not? The “Business Case” to the Board was laughable being a few pages of platitudes and 63 pages of tax advice.

The Trust worked on in secret, despite being under a very clear duty to engage with the staff on a decision which affected hundreds of them.

Eventually, late in 2017, they had to come clean and start TUPE consultations, but they consistently refused in every forum to consult or engage with staff on what was being proposed – they would only talk about the consequences. They knew their whole case was entirely bogus.

In public the Trust simply avoided telling the truth. They maintained throughout that what they were doing had to do with somehow professionalising the facilities management services.

Strangely the Trust had never reported its concerns with these services before they were sold the VAT dodge. They never engaged with staff to see how they could improve services at all.

The Trusts maintained the fiction that this was nothing to do with tax as they had been instructed to do. They gave a presentation to staff which had a dozen slides but none of them even mentioned VAT or tax. They signed a secrecy agreement with the consultants they used. But because information was coming out of other Trusts doing the same thing, but slightly more honestly, they were caught out anyway.

After enormous pressure from Unison the Trust finally revealed at least some of its documents but only after it was already implementing its decision.

What the documents showed was what everyone already knew – the savings almost all came from changes in taxation. Savings from other sources such as reducing pension rights or bringing in a two tier workforce were tiny in comparison.

This was and is all about tax. All about a Trust in severe financial straights doing anything to make savings. Doing what it was told. It was more afraid of external intervention for not trying hard enough than it was afraid of the outrage from its own staff.

Utterly dishonest from start to finish. But with active collusion from NHS Improvement – the Regulator which knew exactly what they were doing and why, even if they now refuse to release the information and ignore FoI requests.

We know from parliamentary answers that NHSI signed off the deal. We also know the relevant CCG opposed it and appealed to the Trust not to go ahead – yet again the lie is that everyone was in agreement.

A disgrace from start to finish. Staff disillusioned, staff relations soured for years to come, further fragmentation of the NHS and a wholly uncertain cloud over the future ownership and control of vital NHS assets.

And NO SAVINGS. Anything saved in one place is lost to the exchequer in another – it's our money and we get no benefit at all. No Board that agrees to this kind of subterfuge and secrecy is fit to stay in place. But they will.

Letter from Yorkshire Health Campaigns Together and Keep Our NHS Public to Leeds Teaching Hospital Trust on Subco plan


Dear Board member,

We are disturbed and disappointed to hear that LTHT has started informal consultations with facilities staff regarding transferring them into a Wholly Owned Company (WOC) or “SubCo”.

While recognising that there are financial drivers around saving on VAT payments and intense national pressure to go down this route, we are extremely concerned that this will:
  • accelerate the breaking up the NHS and the loss of a publicly owned, managed and delivered NHS on which we can all rely when in need.
  • be used as a channel to divest NHS land and buildings in haste and without any guarantee that the proceeds will be ploughed back into the NHS.
  • be unfair to staff who take pride in working for the NHS and find themselves shunted out against their wishes, in contravention of the ‘The Leeds Way’ (“our values . . .we live them day to day”): “we will treat others how we would wish to be treated”; “we are all one team with a common purpose”; “more can be achieved when staff are happy and proud to come to work”; “in order to deliver excellent high quality care . . . . we need to have the very best staff working together towards the same goals”.
  • be surrounded by significant uncertainty whether promises made about protecting staff terms and conditions via Transfer of Undertaking (Protection of Employment regulations) for up to 25 years are both sincere and deliverable.
  • increase the risk of creating a two tier workforce, with inherent instability as new staff are taken on under different terms and conditions.
  • open the Trust to criticism of illicit tax dodging (highlighted by Christopher Young, Finance Director at the Department of Health) as a consequence of what might turn out to be a pointless and expensive exercise if the tax loophole is closed, as is likely.
  • turn out to be an expensive mistake through the SubCo adding a layer of governance, a new management interface and increased operating costs (with the Trust having to offer risky performance guarantees if the SubCo is encouraged to bids for contracts)
It appears to us that any hope a SubCo will ‘grow the business’ (as some have suggested) and help support frontline services is likely to prove unfounded. Nationally, over time, it will lead to a casualised workforce without a public service ethos (not good for patients), as well as posing a threat to the NHS pension scheme by taking large numbers of workers out of this. There is also a clear danger that at some stage a SubCo could be bought out by the private sector.

We urge all Board members to resist being pushed down the route of outsourcing facilities into a WOC/SubCo, and to listen and respond to the views of staff and their trade unions. We would also ask for transparency with the public and bodies such as Leeds Health and Wellbeing Board and the Scrutiny Board (Adults and Health) regarding any business case for a SubCo that has been or might be developed, since decisions made now for short term benefit will have long term repercussions for the people of Leeds, not just NHS staff.

A huge strength of the NHS is that it belongs to all of us, but the corollary of that ownership and shared risk is that all should have a right to be consulted about changes which threaten the sustainability and integrity of the service. As a start you might ask the Trust Executive to address some of the key questions below. This situation is really a test for Boards, as Roy Lilley observed: “staff are not commodities, they are assets. Dodging debt to transfer good hearted people out of the NHS, into a limited liability, VAT tax-dodge company is not good management. It is disingenuous to say that they will be part of the NHS but not in it, or to claim that the employees will be able to 'do more' when they're already doing all they can”.

Robustness of projected tax savings
  1. Bearing in mind the warning against tax avoidance schemes in September 2017 by the Department of Health Finance Director, has the Trust received confirmation that these tax saving arrangements are permissible and robust from the relevant authority (e.g. HMRC and LCC)?
  2. Is the Trust aware that the largest public in-sourcing to date, UnitingCare in Cambridgeshire, collapsed and the National Audit Office and NHSE investigations both noted that one of the major reasons for the collapse was a significant misunderstanding of its VAT position which increased annual costs, post-contract signing, by £5m/year? Does the Trust consider there is any risk of a similar situation here?
  3. What is the breakdown in projected tax savings between VAT and other forms of taxes?
  4. Are these projected savings, net of increases in tax liabilities that may be incurred by the SubCo arrangements e.g. corporation tax, capital gains and stamp duty?
Staff terms and conditions
  1. Has the Trust conducted an Equalities Impact Assessment, given that this is recognised in court as the best way to ensure its General Duty under the 2010 Equalities Act is met, and particularly given the substantial equal pay claims that have arisen as a result of other SubCo where increased pay flexibility/shift to so-called market rates appears to have given rise to gender and other inequalities in pay? If not, why not?
  2. Will transferring staff be given written guarantees specifically that they will remain covered by Agenda for Change pay, terms and conditions, as it develops through national bargaining over time, over the lifetime of their employment, and how can these guarantees be meaningful given the weakness of TUPE legislation?
  3. Has the Trust approached the Department of Health to request permission for new SubCo staff to join the NHS pension scheme, permission which DH guidance suggests may be granted if sought? If not, why not?
Robustness of other financial assumptions
  1. What proportion of the projected tax savings are dependent on transferring the Trust’s legal rights over any assets (including buildings) transferred to the SubCo and will the SubCo have to pay the same capital charges to government on those assets, as LTHT currently does?
  2. What restrictions has the Trust placed on the SubCo selling, assigning the lease, or subletting any property transferred to it from the Trust, to a third party such as a private healthcare provider? (i.e. what restrictions has the Trust placed on such further transfer of interests, beyond the standard minimalist restrictions in commercial leases)?
  3. What assessment has the Trust made of the impact of the SubCo on its financial risk rating and net surplus?
  4. Does the Trust expect to raise private patient income from any of these arrangements?
Governance and accountability

Does the Trust plan to consult with the local Council and local community in Leeds on any proposal to outsource facilities staff? If ‘no’, on what statutory basis have you concluded that such consultation is not required? If yes, will a full business case be made available not just to LTHT Board members but to unions, staff and the public, as it has been in other Trusts (e.g. Northumberland)?

Yours sincerely

Dr. John Puntis, Chair of Leeds Keep Our NHS Public, secretary of national Keep Our NHS Public

Gilda Peterson, Secretary Leeds Keep Our NHS Public & Yorkshire Health Campaigns Together

Motion to UNITE POLICY Conference 2018


This conference is alarmed that public sector bodies such as Councils and NHS trusts are setting up subsidiary companies and transferring large numbers of staff in to them.

Conference notes that under the current climate of cuts and underfunding, managers of NHS trusts have in the last year increasingly looked to this form of privatisation in order to take advantage of a VAT loophole that enables the trust to pay less tax. Furthermore it is shocking to many to learn that the NHS must pay VAT.

Privatisation means that staff are having their terms reduced: this sometimes applies to the current transferred staff and always to any new starters. This tearing up of nationally-agreed terms creates inequalities and a less safe working environment. This form of privatisation is threatening to tear up our public services very quickly. It reduces accountability without it being clear to tax-payers that their services are being privatised. It undermines the work that has been done by the workers and unions together to improve working conditions and public safety.

Conference notes that the labour movement has had some success in holding these privatisation schemes back and believes that it is urgent that this work is continued and built upon. These schemes should not carry on under the radar, creating a framework for further privatisation, while the demise of Carillion is in the public domain demonstrating that only the public sector can guarantee public services.

This conference calls on the Executive Committee to:
  • Support our members in public services to build joint union campaigns with full UNITE support whenever the threat of privatisation loom
  • Prioritise publicity of these campaigns throughout the union so that all members are aware of this threat to our public services
  • Work through the Labour Party to work towards a fairer taxation system to protect our public services
  • Lobby the government for a review of all public services outsourcing, to place a moratorium on any new privatisation schemes and to include the NHS in the list of public bodies that do not pay VAT
  • Raise this issue with the TUC to ensure the widest possible response and protection of our public services
Bristol Area Health Sector branch SW001408

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