NHS Wholly Owned Subsidiary Companies

Steve Barclay Excerpts

Tuesday 6th March 2018 Westminster Hall

[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.

[Liz Twist]

rose—

[Stephen Barclay]

I will happily give way to the hon. Lady in due course.

That is not about exploitation; it is about empowering members of staff. They get higher pay in the short term in return for a less generous pension. The hon. Member for Stockton North might disagree—

[Judith Cummins]

Will the Minister give way?

[Stephen Barclay]

I signalled that I will give way to the hon. Member for Blaydon. She called the debate, so she should go first.

It is not accurate to say that this is simply about exploiting people if their base salary is increasing from £19,000 to £25,000, as it is in that trust. One can look at the wider bundled package of benefits and total remuneration, but one cannot describe a salary increase of £6,000 as exploitation.

[Liz Twist]

The Minister is raising an issue of great concern to me, which I have discussed with the chief executive of the foundation trust, so this is not coming as news to him. If we move away from a structured pay system and give additional salary payments over and above allowed recruitment and retention bonuses, we are laying the trust or the organisation open to the claim that they are not providing equal pay for work of equal value. A huge amount of work went into creating “Agenda for Change” to avoid exactly that problem and to address recruitment and retention.

[Stephen Barclay]

The hon. Lady is ignoring the fact that that already happens in the NHS, for existing trust staff: some staff opt out of the NHS pension, and not all the staff who TUPE-ed across in this arrangement were in the NHS pension. Once again, those on the Labour Benches want to deny the choice and options that apply to NHS staff.

[Judith Cummins]

I thank the Minister for giving way, because he has heard me twice now, but I welcome the opportunity. Does he not agree that the difference between then and now is that NHS trusts now are being forced down the path of wholly owned subsidiary companies because of financial constraints? It is not good enough for the Government simply to stand by and watch that happen.

[Stephen Barclay]

Again, that is a complete misrepresentation. The trust itself has pointed to the benefits of the arrangement. Let me give a concrete example of how the arrangement is delivering to the trust savings in the interests of patients.

Under the previous delivery system, local pathology samples were sometimes lost and delayed—that is not in the interests of patients. The QEF brought in a revised system of procuring all sample containers and issuing those to GPs across the region before delivering samples to the hospital pathology laboratory hubs within four hours. The trust forecasts that that will deliver significant benefits—indeed, other trusts are interested in the services. By operating on a more commercial model, therefore, not only has the trust improved how it deals with samples and prevented those samples from being lost as in the past, but it has put in place a system that is better for patients and attractive to GPs in other trusts who now want to contract the services.

[Dr Poulter]

The Minister is slightly at odds about the point being made. The point is not how it is open to the trust to procure the best clinical services but how, later, through a company, staff might be re-employed on a lower salary. Clearly, trusts already have flexibility through “Agenda for Change” to start people on a higher pay point, but I wondered more generally whether my hon. Friend supports national pay bargaining and “Agenda for Change”.

[Stephen Barclay]

The Chancellor made his support for the “Agenda for Change” programme clear in the Budget. My hon. Friend is aware of the commitment that the Chancellor made to fund that outwith the spending review 2015 process. That is a matter of record and one my hon. Friend is well aware of. The point being made, however, is that the flexibilities are popular with staff within the trust. Again, that is not simply a matter of me saying that; it is reflected in the staff survey of those working at the trust.

[Several hon. Members rose—]

[Stephen Barclay]

I will happily take interventions, but first I will finish this point, addressing the previous issue. The recent staff survey was extremely positive: 86% felt part of the Gateshead Health NHS Foundation Trust group. Furthermore, the figure for those with a positive response to the level of pay was 15% higher than the NHS comparator. The idea that the arrangement is exploiting people when the staff survey shows them to be 15% more approving than in other areas is again not a fair representation of the case.

[Karin Smyth (Bristol South) (Lab)]

In the short time remaining, I would like to move the Minister on to the issue of accountability for public money. Following a freedom of information request, in the case of Yeovil we understand that the benefit to the trust is several million pounds-worth of income, which is a lack of income from the Treasury—I have written to the Minister about this and I will be grateful for an answer. Is the Government’s position that they would be happy to forgo the expected income to the Treasury so that those companies can be set up to undercut wages?

[Stephen Barclay]

As I set out in my reply to the hon. Lady, the Department has been clear that setting up a subsidiary is not a vehicle to avoid VAT—that is not acceptable. In the autumn, we sent out guidance to make that clear. As a former Treasury Minister myself, I assure her that Treasury Ministers would take a very close interest if they felt that an abuse of VAT was taking place.

The reality is that commissioners and regulators are responsible for ensuring that NHS providers act in the best interests of patients and taxpayers. We would expect providers to work closely with their employees in any developments.

[John Grogan (Keighley) (Lab)]

Will the Minister give way?

[Stephen Barclay]

I am conscious of the time, but I am very keen to take an intervention from the hon. Gentleman.

[John Grogan]

The Minister is being very generous. Clearly there is a substantial difference of view here, but would he agree that given that public money is involved, it is very much in the public interest that the business plans that the trusts are producing for the wholly owned subsidiaries are published and public, so that they can be scrutinised? In the case of the Airedale trust in my constituency, we discovered that 60% of the savings on purchasing are in VAT. Those figures should be in the public domain, so people can see what is being done with public money in their interests.

[Stephen Barclay]

The slightly puzzling issue here is that the savings accrued from the subsidiaries are for the benefit of the local health economy, of the trust. This is a subsidiary company 100% owned by its host trust. The more efficient the subsidiary is, the better it is at dealing with things such as its pathology—not only do we avoid samples being lost, but we run a more efficient system in a more commercial manner, which brings more money into the healthcare economy and gives the flexibility to compete effectively in the local job market for maintenance staff and others.

The benefits of those arrangements accrue to the trust that owns 100% of the subsidiary. That is why, under legislation of the previous Labour Government—correctly in my view, but clearly not in the view of the Labour Members—the local trust is empowered to empower in turn the local members of staff. That is then reflected in the staff survey, which shows a more favourable result in this trust.

[Rachael Maskell]

I am grateful to the Minister, who has been generous with his time, but does he not acknowledge that the failing finances of the NHS are forcing trusts down that route? I am meeting the Minister next week to talk about York Teaching Hospital’s failed finances. That is the driver of the changes and, therefore, the fundamental issue still has to be addressed.

[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.

[Liz Twist]

I thank the Minister for giving way—the only way I can get a response in is by intervening. I have a few separate points. First, on the Labour legislation, is it not strange that the subsidiary companies have only started to appear in this form since 2014? As my colleagues said, that is a reflection of the fact that we have a shortfall in funding for the NHS. Secondly, I want to mention the path lab example the Minister gave. As I said in my speech, there is no reason why existing NHS staff in the NHS trust cannot make the improvements—they do all the time—

Motion lapsed (Standing Order No. 10(6)).