• University Hospitals of Leicester Trust could not establish a subsidiary company as it was unlikely to get approval of the health and social care secretary
  • Chief executive John Adler described it as a “setback at local level”
  • The trust will need to “look again” at its overall financial plan

A large teaching hospital trust in the East Midlands has dropped plans to set up a subsidiary company after being told by NHS Improvement that the new health and social care secretary Matt Hancock would be unlikely to approve it.

University Hospitals of Leicester Trust was planning to invest £5m into its estates and facilities services, including increasing the salaries of approximately 200 lowest paid staff. Overall it was expecting more than 1,700 of its staff would be affected by the changes.

The limited liability partnership would have managed estates, facilities and procurement services, as the continued provision of services through existing arrangements was deemed unsustainable, the trust said earlier this year.

However, UHL’s chief executive John Adler said that NHS Improvement informed the trust “following clarification of the position at national level”, that its planned subsidiary could not be established “without the express approval of the secretary of state for health and social care”.

“NHS Improvement also said it is unlikely that such approval would be given,” Mr Adler said. “Although the requirement for national approval differs from our own legal advice, we have to respect the position taken by our regulator.”

HSJ revealed last month that the Department of Health and Social Care and NHS Improvement are planning to launch a consultation about wholly owned subsidiary companies in the NHS, amid a drive to gain stronger “central oversight” of how and why trusts establish them.

Mr Adler described the development in national policy as a “setback at local level”, which will require the trust to “look again at our investment plans and indeed our overall financial plan for the coming year”.

“We had pursued the creation of a wholly owned subsidiary partially in order to create the financial headroom to invest in services, particularly cleaning and maintenance,” he said.

Mr Adler added the trust has no plans to contract out these services.

Wrightington, Wigan and Leigh Foundation Trust also cancelled its plans last month to transfer more than 900 workers, including porters, cleaners and catering staff, into a wholly owned subsidiary, WWL Solutions.

Wigan Council offered the trust a one off payment of around £2m to cancel the plan.

An NHS Improvement spokesperson said: “NHS trusts are required to secure secretary of state approval for the creation of wholly owned subsidiaries for income generation purposes, and report any plans to NHS Improvement. The proposals put forward by the trust did not fall in line with current legislation. We are continuing to work closely with the trust to understand its financial position.”