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18.10.18

NHSI wants business cases for wholly-owned subsidiaries in new consultation

NHS Improvement (NHSI) has opened up consultation on proposals over how wholly-owned subsidiaries (WOS) are approved and regulated, requiring NHS providers to submit a business case when setting up subsidiary companies.

Under the proposed changes, NHSI is changing the way it approves subsidiaries so that it can “ensure only business cases that create value for the sector proceed,” opening up WOS as a legitimate option for trusts again.

Trusts will need to submit a business case to show that setting up a WOS yields value beyond VAT savings, with NHSI potentially blocking unsatisfactory business plans.

This comes after trusts were told by NHSI to halt all plans to establish subsidiaries last month, ahead of the consultation being launched.

The month-long consultation has been welcomed by NHS Providers, which argued a “clear set of rules” is needed in order to provide clarity for trusts.

It warned that without NHSI’s approval approach based on these clear rules, the consultation “risks setting the bar too high” for providers to justify the need for WOS.

NHS Providers also said that the process must also ensure that trusts who were asked to pause their plans for subsidiaries aren’t required to start from scratch as a result of the proposals, which would be an unnecessary waste of public money.

Its chief executive, Chris Hopson, said: “Wholly owned subsidiaries in the NHS are not new. Following legislation passed by a Labour government in 2006, trusts throughout the country have established and run WOS successfully for many years without controversy.

“There are many reasons why a trust may choose this path. They have never just been about making savings on VAT.

“This NHSI consultation is helpful. It clearly acknowledges that trusts can and should have the option to set up these entities when there is a proven need.”

He continued: “Trusts are now operating under huge pressure. Wholly owned subsidiaries can be an appropriate and legitimate response to meeting these challenges. Misleading claims that these entities are about privatisation and tax avoidance overlook the sound business case behind subsidiaries which can help keep services, and staff within the NHS.”

In March NHS Providers defended the subsidiary companies, but soon after, in May, East Kent Hospitals University NHS FT was criticised for its plans to transfer over a thousand staff to a new WOS company.

Not everyone has backed their implementation, with Lord Philip Hunt, Labour’s shadow health spokesperson, writing about the damage they’ve caused in NHE’s May/June issue.

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Image credit - Chris Radburn/PA Wire/PA Images

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