NHS Wholly Owned Subsidiary Companies

Alex Cunningham Excerpts

Tuesday 6th March 2018 Westminster Hall

[Liz Twist]

I most certainly do agree, not just for pensions but also for terms and conditions.

What is the problem with these companies? First, it is that they come at a price, which for the most part is met by the staff who work for them. Secondly, the VAT saved by trusts with these companies is not new money coming into the NHS—the money that trusts save will be lost elsewhere in public services. Already, the Department of Health and Social Care has reminded trusts by letter that they should not engage in any activities that may be construed as tax avoidance, and the loophole could be closed in the future. Thirdly, the establishment of wholly owned subsidiaries leaves the services open to privatisation in the future, continuing the fragmentation of our NHS.

[Alex Cunningham (Stockton North) (Lab)]

The North Tees and Hartlepool NHS trust set up a limited liability partnership last week. Even according to its own published material, it provides no guarantee of job protection beyond a few months and will create a situation with different employees on very different terms and conditions. Is this not all about Government cuts? Does my hon. Friend not agree that we could see even more staff transferred into this sort of arrangement in order to meet the Government’s cuts agenda?

[Liz Twist]

I most certainly do agree. I think this is the start of a very worrying process, not just for facilities management stuff but potentially for other staff.

--- Later in debate ---

[Liz Twist]

I very much agree. It is a very dangerous precedent that does not respect the rights of those staff.

[Alex Cunningham]

Further to that point, is my hon. Friend aware that the question and answer document produced by the North Tees and Hartlepool NHS Foundation Trust says that NHS staff transferred into the new company can expect a pay rise this year, but nothing is guaranteed in the future? They are already seeing their future conditions eroded, unless the new company awards them the pay rise they will get under the current system.

[Liz Twist]

That is absolutely correct, and I have raised with my local trust the potential move away from NHS pay rises.

The main way trusts can make savings is by employing the new staff on worse terms and conditions, which means lower pay rates, less holiday, inferior sickness schemes and no access to the NHS pension scheme. As colleagues said, even transferred staff may be moved on to the worse terms and conditions over time. Trusts are doing that to the lowest-paid workers, who are essential to keeping our hospitals going.

--- Later in debate ---

[The Minister for Health (Stephen Barclay)]

It is a pleasure to serve under your chairmanship, as always, Mr Hollobone. It is also good to see a number of Members from across the House in the Chamber to debate this important issue. I congratulate the hon. Member for Blaydon (Liz Twist) on securing this debate. I am pleased to be able to join her in discussing an issue that is of concern and interest to many in the House.

I understand that Gateshead Health NHS Foundation Trust established its wholly owned subsidiary company, QE Facilities, in 2014 to provide estates, building and engineering services to the trust and cleaning services to the new emergency care centre building. QE Facilities is a separate legal entity, which operates along commercial lines. It has separate governance arrangements and the ability to employ its own staff and deliver services to other organisations on a commercial basis. As the hon. Lady said, a number of staff from the Queen Elizabeth Hospital in Gateshead transferred under TUPE rules to the new organisation in December 2014. I will respond to her points.

A number of hon. Members raised the concern that what happened amounts to privatisation, but I must point out that the legislation enabling NHS organisations to create subsidiaries of this sort was put in place by the Labour Government in 2006. If it is privatisation, it is privatisation enabled by Labour legislation, and I do not think that is the way Ministers described it to the House at the time. The subsidiaries are also 100% owned by the trust, so they are within the NHS family.

It is right that the board of the Queen Elizabeth Hospital was able to use the powers enacted by the previous Labour Government. It did so because creating a subsidiary is, in its view, the most effective and efficient way of maintaining the trust’s hospital estate, which includes several new buildings. Again, that is consistent with the previous Labour Government’s approach, which was to allow local trusts to determine the best manner of managing their own estates.

[Alex Cunningham]

I do not care which Government provided the enabling legislation. Surely the Minister agrees that the intention was never to undermine the working terms and conditions of people within the NHS just to enable trusts to cut the amount of money they need to spend?

[Stephen Barclay]

I will happily address that. The hon. Member for Bradford South (Judith Cummins) also made that point and said that this is about exploitation. The hon. Member for Stockton North (Alex Cunningham) may not care whether the legislation was introduced by a Labour Government; I was merely drawing hon. Members’ attention to the fact that when the legislation was passed it was not described as privatisation. It is obviously a leap to describe the legislation as enabling privatisation when the subsidiaries are wholly owned by the NHS.

[Alex Cunningham]

I am grateful to the Minister for giving way again. The North Tees and Hartlepool NHS Foundation Trust said in its question and answer document that such an organisation could be taken over by another organisation—in other words, it could be privatised. This is one step along the way to the potential privatisation of all those services.

[Stephen Barclay]

The trust has stressed that the organisation remains in public ownership. Let me deal with the hon. Gentleman’s substantive point—it was also raised by the hon. Member for Bradford South— that this is about exploitation. I discussed that point with the trust ahead of the debate.

Previously, the trust had difficulty in attracting and retaining quality maintenance staff because the salaries paid in the local market were about £19,000 per annum. Under the subsidiary company, multi-skilled craftspeople are employed at about £25,000 per annum, plus a performance bonus, attracting better-qualified staff and ending retention issues, in exchange for the fact that they do not have access to the NHS pension.

--- Later in debate ---

[Stephen Barclay]

I do not know whether we are moving away from the subject to a wider debate about finance, but the Chancellor’s Budget settlement makes the Government’s finance commitment clear. The fact is that the issue of subsidiary companies is about using the resources of the NHS in the most efficient manner. That is the view not just of the Government and of the previous Labour Government, but of the trust itself. It is delivering a better outcome for patients and delivering savings—I repeat, the savings accrued go to the benefit of the trust that owns 100% of the subsidiary. It is a shame that those on the Labour Benches seem to want to deprive staff of choice and opportunity. Staff are benefiting, and that is reflected in the staff survey.

I hope that in responding to the debate I have allayed a number of the concerns of the hon. Member for Blaydon about the setting up of subsidiary companies by trusts. I am sorry that there is such concern about the legislation put on the statute book by the previous Labour Government and that it is being deemed to be a form of privatisation.

[Alex Cunningham]

Does the Minister think it is fair for one of two different people in an organisation to receive a defined benefit pension scheme with a 50% contribution and the other to get 3% into a defined contribution scheme worth a fraction of the other in pension terms?

[Stephen Barclay]

Within the NHS as a whole—nothing to do with subsidiaries—there is a range of treatment of staff on pensions. First, there are the legacy pension arrangements for staff in previous schemes and, secondly, people opt out of existing pension arrangements in the NHS. Again, it is a complete mischaracterisation of this debate on subsidiaries to suggest that there are differences. The point, however, is that there are also differences in pay, as has come out of this debate: the maintenance staff for whom the trust is paying a premium can be paid so because of the subsidiary.