Bradford Hospital Trust is seeking to offload much of its non-clinical work to a wholly-owned subsidiary, including all its estates, facilities and clinical engineering services.
Judith Cummins, Bradford South MP, however has condemned the move by the trust saying it will worsen employment rights and make it “much easier to privatise the running of essential services.” Ms Cummins has written to Matt Hancock, Secretary of State for Health and Social Care, and the CEO of NHSI in an effort to reverse the trust’s decision.
The trust says it is carrying out a full programme of consultation with the staff.
In contrast, in early April Rotherham NHS Foundation Trust shelved its plans for a subsidiary following widespread opposition from unions, staff and the local MP John Healey. The trust had employed management consultants Grant Thornton to support setting up the subsidiary.
The formation of these subsidiary companies is widely viewed as a back-door form of privatisation, which could lead to a worsening of employee rights and the creation of a two-tier workforce.
In 2018, a backlash against their formation led to NHS Improvement issuing new guidance. Plans for the subsidiaries now have to be scrutinised and approved by NHSI; Bradford Hospital Trust says that the NHSI has agreed its plans and given it the go ahead.
Hospital trusts have been 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.
A recent article in the HSJ, on King’s College Hospital Trust and its subsidiary KFM, however, reveals just how complicated and even absurd the whole situation can become between a trust and its subsidiary. It throws into question of whether this approach is a valid response to reduce a deficit.
In 2017/2018 King’s College Hospital Trust had one of the largest deficits reported of £132 million and in 2018/2019 it is expected to rise to £146 million. In 2016 it set up the wholly-owned subsidiary company KFM and transferred around 60 employees.
Details from King’s College Hospital Trust accounts for 2017/2018 reveal that it recorded nearly £10 million in income from KFM. The income was from the sale of equipment to KFM, including scanners, however the £9.9 million KFM used to buy the equipment was obtained via a loan from King’s College Hospital Trust, itself.
KFM only has contracts with the trust and charges the trust £97 million a year for these services. KFM also charges the trust for use of the equipment that it has just bought off the trust. Furthermore, KFM is financially dependent on the trust, with King’s College Hospital Trust having agreed to a “revolving loan facility” with KFM of £30 million. This is due to be repaid in full in March 2027 and interest is paid at the Bank of England base rate plus 2%.
The KFM/King’s College Hospital trust situation also highlights issues around accountability and conflict of interest with the subsidiary companies; until recently several board members of KFM were also finance directors of the trust.
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