• NHS Providers backs trusts’ use of subsidiary companies
  • Dozens of trusts have created companies for non-clinical staff
  • Plans have caused controversy in some areas

Critics of trusts creating wholly owned subsidiary companies are being “inaccurate and misleading” in their arguments against the trend, NHS Providers has said.

The body, which represents NHS trusts, believes the companies help attract key staff, deliver VAT savings and increase oversight of previously low priority back office services.

It has published a briefing note today saying trust leaders “are clear that wholly owned subsidiaries are a key tool” to deliver current strategic requirements.

Last month, HSJ reported how thousands of NHS staff are being transferred to new subsidiary companies.

So far 19 trusts have set up a wholly owned subsidiary and another 16 are in the process or considering doing so.

The companies mainly provide non-clinical services such as estates and facilities management, catering and outpatient pharmacy services.

Such companies do not have to hire new staff on Agenda for Change terms and conditions, and can claim money back on VAT.

This has been criticised by Unison and some politicians as a way of undermining national pay bargaining and VAT payments to the Treasury.

Yesterday, shadow health secretary Jon Ashworth wrote to Jeremy Hunt asking him to block moves by trusts to establish wholly owned subsidiary companies and review guidance on tax requirements for trusts and foundation trusts.

However, Saffron Cordery, policy and strategy director at NHS Providers, told HSJ it was inaccurate and misleading to say the establishment of wholly owned subsidiaries is used to avoid VAT, privatise the NHS or reduce terms and conditions for NHS staff.

She said: “There are many reasons why trusts decide to go with this model. It’s a deeper and broader issue than the one-stop slogan about privatisation and undermining pay.”

Not being subject to Agenda for Change means trusts can be more flexible in their pay and pension offer to new staff, she said – such as people who want more of their pension contribution paid into their salaries.

This can help trusts hire staff for more commercial roles in hard to recruit areas such as estates, procurement, and facilities management, she said.

Ms Cordery said wholly owned subsidiaries were an alternative to outsourcing and ensured profits were reinvested into the NHS.

She said the increase in companies being set up follows an “imperative” on trusts to make efficiency savings.

Legislation enabling trusts to create wholly owned subsidiaries has been in place since 2006.

FTs can set up wholly owned subsidiaries on their own, while trusts need permission from the health and social care secretary.