Guidance for wholly owned subsidiaries sets the bar too high
26 November 2018
- NHS Improvement has published an addendum to the transactions guidance outlining a new framework that changes the way subsidiaries are reported to and approved.
- The guidance will require all proposals to create subsidiary companies to be reported to NHS Improvement by trusts.
- NHS Improvement will then review those wholly owned subsidiary proposals which identify 'significant risk'.
- The guidance will require trusts to prove that they have engaged with staff, put plans in place to comply with any consultation requirements and have a workforce strategy.
- If a trust does not receive approval, it must delay establishing the subsidiary while it addresses the risks highlighted by NHS Improvement.
Responding, NHS Providers deputy chief executive, Saffron Cordery said:
"The guidance for overseeing the creation of wholly owned subsidiaries (WOSs) set out today by NHS Improvement rightly acknowledges that WOSs are an appropriate, legitimate and innovative way for NHS trusts to meet the challenges they face. Trusts can and should have the option to set up these entities where there is a proven need.
The guidance published today rightly acknowledges that wholly owned subsidiaries are an appropriate, legitimate and innovative way for NHS trusts to meet the challenges they face.
"Our response to the consultation on this guidance, like that of many other respondents, warned that the regulation and oversight of WOSs must therefore be proportionate and not undermine the benefits they can bring to the sector.
"We are concerned that the level of detail and the steps outlined in the new review process go a long way beyond what is normally expected of trusts and what is required for other transactions and commercial activities. There are many reasons why a trust may choose to establish a WOS. These go well beyond just making tax savings. The process NHS Improvement is choosing to adopt here sets the bar too high and introduces an unwelcome extra administrative burden into the sector. There is a danger that trusts will abandon innovative WOS plans and instead look to less preferable alternatives.
The process NHS Improvement is choosing to adopt here sets the bar too high and introduces an unwelcome extra administrative burden into the sector.
"Many will also see this guidance as part of a worrying trend where the decision making power and autonomy of trusts and foundation trust boards continues to be eroded with more and more control shifted towards the centre. Unitary trust and foundation boards, working as part of local systems, are fully and legally accountable for the services their trusts deliver for good reason – they are in the best position, by far, to ensure that high quality care is provided to the communities their trusts serve. The task of arms length bodies is to support and enable provider boards to fulfil these responsibilities, not unnecessarily restrict them from doing so.
The task of arms length bodies is to support and enable provider boards to fulfil these responsibilities, not unnecessarily restrict them from doing so.
"We welcome the commitment to eventually align the WOS review process with existing transactions guidance. But this should happen as soon as possible. Trusts need a clear understanding on these regulatory requirements.
"Finally, we are pleased that NHS Improvement remains committed to reviewing this process within a year. Trusts must play a full role in any such review.”
Read our on the day briefing which summaries the updated transaction guidance covering wholly owned subsidiaries.