As another health trust prepares to offload its services to a 'SubCo', Richard Bourne looks at an under-reported threat to the NHS.
The privatisation of the delivery of publicly funded services has been a feature of the era of neoliberalism since the ’80s. There is a growing consensus that this approach has not delivered what was claimed and in many areas such as the NHS the policy is being reversed.
But alongside outright privatisation another feature of the era of markets, and quasi markets, we’ve seen the growing use of arm’s length bodies to organise and deliver publicly funded services. Examples are housing associations, academies and foundation trusts or even the giant NHS England – the biggest quango ever. It also led to public bodies setting up wholly-owned subsidiary companies – ‘SubCos’ – operating under company law.
Some SubCos are set up to get around legislative obstacles. Some examples show commendable motivation such as allowing the buy out of a PFI Contract, reducing the cost of drugs, allowing more affordable rental properties to be favoured, or offering better deals for energy supply. Amongst local authorities there is the start of a trend to bring outsourced services back in house. But too often this transfer back is to a Subco not to the authority itself.
In the NHS there has been a major outbreak of SubCos set up simply to avoid payment of VAT on property related matters. While guidance published last year could limit their use, many SubCos already exist, having been set up without proper consultation with the thousands of staff involved. [Unison research last April found 15 NHS Trusts had spent in excess of £3.2 million setting up subsidiary companies.]
It might be that use of a Subco is a pragmatic tactic to achieve a short-term goal. But, and it is a big but: the strategic and longer term damage caused by this obsession with setting up companies across public services must be challenged as it threatens proper governance of public services.
It is often claimed that a Subco allows greater flexibility over staff terms and conditions – as if that is a good thing. But in practice this always means the higher paid get more whilst the lower paid get less. Hard won national agreements for good terms and conditions are being deliberately undermined by the SubCos – necessitating huge union campaigns to challenge the moves.
There is a very serious agenda at play about denigrating publicly provided services. It is based on the old myths about ‘private good, public bad’. Its based on spurious claims that private companies are more innovative or more efficient than public bodies or better able to attract staff.
Of even greater concern is the attack on democratic decision making. For a long time central government has been hostile to local government. Funding has been dramatically cut, services have been forced out through outsourcing or enforced competition and powers have been limited. Local democracy has gone backwards. The narrative emerges that local authorities cannot be trusted with delivering services, so that they have to be privatised or delivered by semi-privatised SubCos.
Openness and transparency over decision making should be fundamental to the oversight of how public money is spent. But SubCos can simply pretend to be companies and so they claim commercial confidentiality and refuse to provide any information to allow scrutiny by staff representatives and the public and even MPs.
Once a Subco is established it almost inevitably develops its own norms and culture and these are rarely if ever properly aligned to the public body that owns them. Having been set up for a specific purpose they then go off in other directions or start new ventures claiming they have to have autonomy.
Once a Subco is established it develops a life of its own – and may well start to do things that the democratically elected members not be happy with. Yet local people have no control. The nuclear option of ending the Subco or sacking the board would be disruptive of the service and so is avoided.
As the move is made from the era of markets there should be a move to a new era based on better foundations such as stronger public accountability, coproduction of services, new models of ownership, democratic decision making, cooperation and collaboration amongst service providers
Thinking again about new forms of ownership is now a central part of Labour policy. Key to this has to be stronger empowered local authorities which plan and organise the public services for the population they serve. Service delivery must be predominantly through proper publicly accountable bodies not SubCos.
We must resist privatisation and outsourcing – while also rejecting the creation of more national monoliths, quangos and arms-length bodies. It’s time to bring services back under proper public, local control and accountability.
Richard Bourne is former chair of the Socialist Health Association.
Staff at Bradford Teaching Hospitals NHS Trust are currently preparing to take industrial action after the announcement of the privatisation of services to a new subsidiary company.
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