The regulator’s consultation, which started on Wednesday, has proposed requiring trusts to submit a business case if they want to set up a subsidiary company.
Last month NHS Improvement told trusts to “pause any current plans to create new subsidiaries or change existing subsidiaries” pending the results of this consultation.
Unions have long claimed that subsidiaries are a means of avoiding tax and cutting pay and pensions of new staff, but supporters say they allow trusts to attract staff via adjustable terms and conditions.
NHS Improvement’s consultation document said: “We need to make sure that only those business cases that genuinely create value for the sector proceed.
“NHS Improvement cannot change the legal parameters for the creation of subsidiaries.
“However, we can more effectively test the extent to which proposals have been developed with full consideration of a number of risks and/or challenges.”
The regulator proposed that before setting up subsidiaries:
- Trusts should also consider alternative arrangements to ensure subsidiaries are the most appropriate structure
- Staff must be fully and actively engaged during the process to ensure their view is factored into the proposal
- Trusts must fully understand the economic risks to the model.
Chris Hopson, chief executive of NHS Providers, which represents NHS acute hospitals, community, mental health and ambulance services, defended subsidiaries.
He said: “Wholly owned subsidiaries can be an appropriate and legitimate response to meeting [funding] challenges. They are proven in delivering practical benefits for trusts, staff and patients, driving innovation and creating efficiencies.”
Trusts have used wholly owned subsidiaries to employ staff such as cleaners and porters and people overseeing facilities management for several years.
They have said there are advantages, such as having flexibility with pay, as subsidiary staff are not given wages according to the NHS Agenda for Change pay scales.
Health unions reaffirmed their opposition to these companies after the consultation was announced.
Unison's head of health Sara Gorton said: “There is no evidence that these private companies improve efficiency or productivity.
“They are being established to reduce trust’s VAT payments, and cut pay and pensions for any new staff recruited.”
Colenzo Jarrett-Thorpe, Unite national officer, said: “Unite will be making a vigorous and well argued response to the consultation.
“We believe that plans for wholly owned subsidiaries should be abandoned, as they are not the best way to maintain patient services and jobs. It is another avenue being used to privatise the NHS by stealth.”
