What are wholly owned subsidiaries?
Wholly owned subsidiaries are an organisational and governance form that NHS providers can legally adopt to manage part of their organisation. In setting up a wholly owned subsidiary, NHS trusts retain 100% of the shares in the company, ensuring that the organisation, staff and the relevant funding remains within the NHS family. Contrary to some assertions, they are not a new concept in the NHS. The legislation enabling trusts to create wholly owned subsidiaries has been in place since 2006, introduced under the last Labour government and it is only recently that concerns have been raised about their use.
Who can set up a wholly owned subsidiary?
Currently, only foundation trusts, as legally independent public benefit corporations, have the statutory power to set up subsidiary companies on their own. There has been growing pressure for the same freedom to be extended to NHS trusts but, at present, NHS trusts can only set up a wholly owned subsidiary with permission from the secretary of state.
When did wholly owned subsidiaries start being established?
Trusts have been actively setting up wholly owned subsidiaries since 2010 and they have been operating without controversy for a considerable period of time. However there has been an increase in the number of wholly owned subsidiaries being established in the NHS in recent months. This is in response to a new strategic direction in the NHS requiring trusts to support new models of service delivery, pursue system collaboration and integration and deliver operational productivity improvements. Trust leaders are clear that the use of wholly owned subsidiaries is a key tool in enabling them to respond effectively to these new requirements. Their use of wholly owned subsidiaries deliberately builds on the best practice that has developed over the last eight years.
Wholly owned subsidiaries are an organisational and governance form that NHS providers can legally adopt to manage part of their organisation.
How do trusts decide to set up a wholly owned subsidiary?
Trusts undertake extensive due diligence before deciding to create the wholly owned subsidiary. Trust leaders tell us that they discuss this at trust board meetings a number of times, explore alternative options and consider legitimate staff concerns carefully before a decision is made. Trusts recognise that embarking on this is a serious endeavour, and will always seek to ensure it is the most appropriate form for the function it will deliver.
Wholly owned subsidiaries are a legal and organisational form. The detail of each subsidiary – its precise purpose, its method of operation and the functions it discharges – will be specific to the trust and context concerned.
It is therefore inaccurate and misleading to say that the establishment of wholly owned subsidiaries in a new phenomenon or being pursed to avoid VAT, privatise the NHS, or to reduce terms and conditions for NHS staff.