Health Secretary, Jeremy Hunt MP. Photo credit: Rt Hon Jeremy Hunt MP at DPA 2011 via photopin (license)

The NHS faces a ‘Pandora’s Box of Carillion-type meltdowns’, if trusts continue to set up subsidiaries to avoid paying tax, the UK’s largest union has warned.

Unite has written to the health and social care secretary Jeremy Hunt calling for an immediate moratorium on further private limited companies being established by NHS trusts in England.

Unite national officer for health Colenzo Jarrett-Thorpe said: “We believe this could be creating a Pandora’s Box of dozens of Carillion- type meltdowns among NHS trusts in England. This would have a detrimental effect on key health services and the employees that provide these services.”

The union is concerned that NHS trusts are forming wholly owned subsidiary companies so that they can register for VAT exemption and compete on a level playing field with commercial competitors who register for VAT exemption for their work in the NHS, when NHS trusts can’t.

Unite, which has 100,000 members in the health service, wants Her Majesty’s Revenue and Customs (HMRC) to close this loophole. The union understands that there are at least a dozen such subsidiaries in England.

In the letter to Jeremy Hunt, Colenzo Jarrett-Thorpe said: “We have been advised of situations from Yeovil to Gateshead that the purpose for NHS trusts establishing a wholly owned subsidiary company was so that it could register for VAT exemption and thereby compete on a level playing field with commercial competitors.”

Unite said that the creation of these private limited companies has had a significant impact upon service delivery and can be considered unsafe for patient care. They also seek to create a multi-tier NHS workforce where new employees with these subsidiaries are paid less than those on the Agenda for Change pay and conditions

The letter continues: “There have been several examples from Circle to Care UK and now the collapse of Carillion of how the agenda of outsourcing has led to the fragmentation of NHS services, serious breakdowns for services to patients and the quality of care, to the cost of patients, staff, NHS services and, ultimately, the taxpayer.

“The increasing tendency of NHS trusts to create wholly-owned subsidiaries in the form of private limited companies could lead to a flood of dozens of Carillion-type situations across England, if serious action is not taken by the government immediately.”

Unite has outlined a three-point plan that ministers should implement urgently:

  1. The government to compel HMRC to close this tax loophole, so NHS trusts are not forced to consider outsourcing NHS services.
  2. The health secretary and social care to institute an immediate moratorium on the further establishment of private limited companies by NHS trusts in England, even when organisations have currently started the process.
  3. A review of procurement and commissioning by NHS trusts in England – seeking the views of patients, employees, local authorities, stakeholders and the public – to establish a fair, transparent and ethical procurement and commissioning framework.

Over the past five years there has been a 34% increase in the number of for profit companies winning contracts to run NHS services or facilities.

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