• NHS Improvement will use regulatory powers to stop FTs creating subsidiary companies if plans are ‘high-risk’
  • Regulator publishes new guidance
  • NHS Providers criticises ‘unwelcome administrative burden’ 

NHS Improvement will stop foundation trusts from creating subsidiary companies if it considers the plan too “high-risk”, according to new guidance.

The move has been criticised by NHS Providers, which accused the regulator of “setting the bar too high” and introducing an “unwelcome extra administrative burden”.

Dozens of trusts have set up subsidiary companies in the last few years, often to deliver savings from non-clinical services and in some cases from VAT.

This has led to concerns from unions that the NHS is creating a “two-tier workforce”.

In August, NHSI announced a consultation into the use of subsidiary companies after the Department of Health and Social Care said it wanted to strengthen its oversight of the companies.

Previously, FTs could set up a subsidiary company on their own, while trusts needed approval from regulators.

However, in its new guidance, NHSI said all trusts would need to submit business cases for setting up subsidiary companies or making “material changes” to existing companies.

These business cases will be reviewed by NHSI, which will take between three and six weeks.

If the regulator rates those plans as “red”, it will use its regulatory powers to stop the plan – the guidance states.

“Green” or “amber” ratings will allow the trust to continue with its proposals, although this could be subject to “additional oversight and monitoring of transaction-specific risks post transaction”.

NHSI said it would review the guidance after a year.

Saffron Cordery, deputy chief executive of NHS Providers, said she was “concerned” the level of detail and steps outlined in the new review process go “a long way beyond” what is normally expected of trusts.

“The process NHS Improvement is choosing to adopt here sets the bar too high and introduces an unwelcome extra administrative burden into the sector,” she said.

“There is a danger that trusts will abandon innovative wholly-owned subsidiary plans and instead look to less preferable alternatives.”

“Many will also see this guidance as part of a worrying trend where the decision making power and autonomy of trusts and FT boards continues to be eroded with more and more control shifted towards the centre.”

Sara Gorton, head of health for Unison, said the guidance was a “step in the right direction”, but it “could have gone further”. 

”The guidance fails to ensure such plans are truly transparent and made public from the outset,” she said. 

”The new rules should be enough to stop most trusts from arbitrarily setting up new companies that cause more harm for staff and patients than good.

“But this will depend on NHS Improvement being serious and strict about enforcing the guidance.” 

Story updated at 3pm on 27 November to include comment from Unison.