There’s something rotten going on in the NHS – and you probably won’t have heard about it

People are desperate to balance the books and that's leading to unacceptable behaviour.

There is something rotten in our NHS when hundreds of Directors and senior managers are prepared to mislead their staff and the public so they can get the benefit of tax advantages that were never intended.

Desperation to try to balance the books when funding is totally inadequate is leading to unacceptable behaviour – termed elsewhere as lying about the control total. There is something deeply troubling when the so called Regulator (NHS Improvement) and the lobby organisation (NHS Providers) defend the Trusts and perpetuate the myths that this this is anything other than tax avoidance.

Since 2016 30 Trusts (and counting) have implemented or are planning to implement setting up Wholly Owned Companies (WoCs) which then deliver facilities management and estates services (and sometimes other services). That so many have done this is not a coincidence nor is it because poor services had been highlighted. This is nothing at all to do with better patient care. It was because this ruse brings £ms of tax benefits; this is free money; business as usual but with tax advantages. If all Trusts go down this route then the total will be around £1.5bn of additional income to these trusts that was never intended.

If the management of the NHS just stated honestly that they were taking advantage of a tax anomaly to get more money into the NHS then well done. But it isn’t like that.

Trusts are not supposed to behave like this and to set out to avoid tax may even lead to a challenge by HMRC. Well, the Trusts know this and have all had advice on how to minimise the chance of a challenge. That advice is clear enough – the case for change has to be wrapped up as if it was being undertaken for other reasons and crucially, to give the right impression, the new WoC has to employ new staff on non NHS terms and conditions. So the big downside is that now tens of thousands of staff are being moved out of the NHS and increasingly the old scourge of a two tier workforce will come back.

Despite the oft repeated claims about openness and transparency almost all of this has been taking place in secret right up to the point where establishing the WoC is inevitable. No consultation, no negotiations with staff on anything other than the TUPE consequences of a decision already made. No publication of an Outline Business Case that would set out objectively what was going on – that would just open the door to a proper examination of the case and show it was bogus.

However, it has been possible with a degree of persistence and recourse to FoI, to examine many of the business cases used by these Trusts. Each sets out a list of claimed benefits and either directly or indirectly it is possible to calculate that in every case the benefits from tax changes massively outweigh any other claimed benefit. Usually over 90% of benefits in the short term come because of tax changes. Of the remaining benefits it is often reasonable to assume that at least part of the gain, (for example better use of resources!) could have been gained without any WoC.

The evidence is blindingly obvious – almost all the short term cash releasing savings come from tax changes – that is tax avoidance. The rest is garnish and its portrayal is dishonest.

It is abundantly clear from these actual documented cases that without the benefits from tax changes these companies would not have been set up – there is simply not enough “other” benefit to make the hassle worthwhile. The Regulators should have stepped in and stopped this happening but they have just turned a blind eye. The non-executive directors at the Trusts should also have queried the secrecy and the subterfuge – but they didn’t.

In one Trust where over 90% of benefits came from tax changes there were repeated denials that this had any bearing on the decision being made and presentations to staff about why the WoC was set up did not mention “tax” at all. Public statements also failed to point out the true motivation – again this is dishonest.

This is laughable. If all Trusts go down the route and avoid tax then why bother to charge them the tax in the first place. Why do we have to allow staff terms and conditions to be attacked and spurious companies set up?

This is all taking place now in plain sight. It is a disgrace. We should not treat NHS staff like this and we have to be honest with the public these organisations are supposed to serve.

Richard Bourne is former chair of the Socialist Health Association.

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