Subsidiary companies (Sub Co), spun off from the NHS, are back in favour as part of the effort to save money in the NHS. Sir Jim MacKey, NHS England’s transition CEO, told a recent meeting of health leaders that all NHS trusts should transfer support staff to wholly-owned subsidiary companies to reduce costs.
Sources told HSJ that the government wanted faster productivity improvement in the NHS, which is now more pressing due to increased defence spending and the global economic environment.
What are SubCos, and how do they work?
Often referred to as ‘back-door privatisation,’ Sub-Cos came to prominence from 2013 to 2017, when a flurry of these companies was set up by NHS trusts enthusiastic about this approach to saving money and reducing deficits.
This approach can save a trust money in two ways: through the VAT system, as 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, as the companies will not be obliged to employ new staff on NHS pay and conditions but will instead be able to offer much worse terms of employment, including reduced pension contributions.
When Sub Cos emerged, the trusts faced vehement opposition from employees and unions. They warned that long-term protection of pay and pensions for those transferring to new companies was weak, and it was possible to employ new staff on less favourable contracts without access to the NHS Pension Scheme.
Full article in The Lowdown, 24 March 2024
