On the 25 October 2017 Airedale NHS Foundation Trust Board gave approval to proceed with the formation of a wholly owned subsidiary for Estates, Facilities and Procurement Services. The subsidiary is named AGH Solutions Limited and went live on 1 March 2018 with the transfer of 319 staff.

Airedale NHS Foundation Trust will submit Document “AG” which outlines the reasons for this decision and includes a redacted business case.

Recommended –

(1)       That the reasons why Airedale NHS Foundation Trust agreed to form the wholly owned subsidiary, AGH Solutions, be noted.

(2)       That the ambitions of AGH Solutions, including employing more people from the local community and using more local community businesses in the supply chain, be noted.

(David Moss – 01535 294826)

The Director of Operations, Airedale NHS Foundation Trust, presented a report (Document “AG”) which detailed the reasons for the establishment of a wholly owned subsidiary for Estates, Facilities and Procurement Services, which had come into effect on 1 March 2018.  Members were informed that the Trust had increasingly had to think differently in order to sustain quality within a tight financial environment and to be imaginative in how it delivered savings.  A number of options had been considered, however, the Trust Board had been persuaded to establish a wholly owned subsidiary, which would be owned by the Trust and they would retain the key decision making.

Members then made the following comments:

·         The projected revenue saving was £2.5 million in year 1.  What was the current situation?

·         The procurement aspect seemed sensible and exciting.

·         What was the Trust’s highest risk and what had the Board done to mitigate this?

·         What were the risks in the operating climate?

·         New staff would have different terms and conditions.  Were there any guarantees?

·         Would there be any risks going forward?

·         Why were the new Service Level Agreements (SLAs) more restrictive than previously and why were new ones required?

·         How much work had been put into the potential impact on patients?

·         Had any key staff been lost?

·         The work undertaken by the Director of Operations in respect of the Children’s Cardiac Centre in Leeds was praised.

·         Would the Trust remain responsible for the new company’s debts?

·         Could the commercial focus be increased without taking this course of action?

·         Was there the potential to realise additional income?

·         Had the terms and conditions and pensions been transferred with the staff?

·         Would the new staff have a choice in relation to pensions?

·         What about tax issues?

·         Were conflicts of interest being managed with regards to the TUPE (Transfer of Undertakings (Protection of Employment)) Regulations and pension issues?  How was it being ensured that there would be transparency in the process?

The Director of Operations, Airedale NHS Foundation Trust and the Director, AGH Solutions, reported that:

·         The projected revenue saving was made up of different components.  The NHS had a set of procurement rules, however, the new company could work with other organisations, as it was not restricted in the same way.  It was hoped that opportunities could be given to local people, as the subsidiary had flexibility and freedom.  New staff would be offered different terms and conditions and could not be offered the NHS pension.  Overall the Board could make savings and a reinvestment.

·         The Trade Unions had not agreed with everything and the best compromise had been achieved.  The Trust could now outsource to companies that were not on the NHS register.

·         There had to be a separation between the Trust Board and the subsidiary, however, it had been insisted that the company had a People’s Strategy and was aligned to the Trust’s core values.  The Board also maintained certain rights over key issues.  Sessions had been undertaken with Trade Unions and it had been agreed that the terms and conditions of staff that transferred would be guaranteed for 25 years.  Pay awards offered to NHS staff would also be matched.

·         Existing staff would have a 25 year guarantee, however, new employees would have new terms and conditions.  The subsidiary had the flexibility to offer the market rate.

·         The company had started with 321 employees and there were nine other similar companies with over 100 staff, which had all grown since being established.

·         It was incredibly challenging to keep up to date with the detail of services with no oversight and staff had found it difficult to obtain access to good management support.  All 321 employees would have good access and a SLA, which would benefit the service.  All SLAs had been considered prior to being signed off and the establishment of the subsidiary had allowed them to be more explicit and contain a deeper level of assurance.  Alerts to issues would be raised earlier and the Trust Board was confident that this would help the company achieve and not detract from the service. 

·         No staff had been lost and there had been a great deal of engagement undertaken throughout the process.  Staff survey levels had improved.  The Trust genuinely cared about its staff, however, it had not always got things right.  Many concerns had been raised and the Trust had gone over and above the TUPE process.  Some staff were satisfied, but others were unsure.

·         The Trust would remain responsible for the debts and a unitary pay agreement was in place.  This was a significant part of how the Board would hold the company to account.  A key issue in the business case had been the exit plan and what would happen if the change did not go well, therefore, the Board would be closely monitoring the company.  The company could not secure loans on the Trust’s assets and Directors could be removed at any point. 

·         The commercial focus could have been increased, however, companies had to meet exacting standards to be included in the NHS Framework.

·         There were some areas where the company was looking to expand, however, a smooth transition was required for the first six to twelve months before the intended growth was undertaken.  

·         The company was looking to repatriate services back in.  Staff were employed under an Agenda for Change condition and the Trust could not offer different hourly rates.  The company would be more flexible and would not employ staff on this basis.

·         Not everyone had an NHS pension and new employees would have a National Employment Savings Trust (NEST) pension.  There was a risk involved and the Trust had focussed on a strategy for people.  The Company Board would have to work hard in order to retain its staff.

·         Part of the recovery benefit was VAT retrieval and the Board had questioned itself as to whether they would have established the company without this aspect.  The delivery of a new governance model was not new to the Trust Board and it was clear in relation to the Articles of Association and what decisions could be taken.  How the Company Board was held to account by the Trust would be monitored monthly.  The company had been established with the intention of managing governance well.

A representative of UNISON was present at the meeting and addressed the Committee explaining that the relationship with the Trust and NHS employers was very important and affected the whole of the country.  He stated that change had been ideologically driven and front line jobs had been affected.  These public facing roles were important for the welfare and recovery of patients.  The status of working for the NHS was important to these people and if removed they would feel rejected, therefore, the roles should be kept within NHS employment.  The Trust had a duty to postpone the plans and consult with Local Authorities, as there were other ways to reap the benefits.  The representative of UNISON acknowledged the financial pressures of the Trust, but indicated that a public consultation should have been undertaken.  A petition signed by over 3000 people had been submitted to the Trust Board, but the Union believed that it had been ignored.  Members noted that the Union was concerned that there would be major issues in relation to workforce employment and terms and conditions, which would result in a culture change.  The 25 year guarantee did not have any meaning in law and the Chair of the Board who had made the promise had left.  The representative of UNISON stated that there was insufficient transparency in relation to the savings, new employees would not contribute to the NHS pension scheme so it may become unviable and there would be a two tier workforce consisting of Agenda for Change staff and new employees.  He reiterated that he believed that the Trust had a public duty to disclose the information and that other options should be considered.  In conclusion he requested that Airedale NHS Foundation Trust be asked to stop the process and look at other options.   

Resolved –

That the Committee be kept updated on the progress of the wholly owned subsidiary for Estates, Facilities and Procurement.

ACTION: Director, AGH Solutions/Director of Operations, Airedale NHS Foundation Trust