Two foundation trusts had chief executives ‘off payroll’, Department of Health discovers
By David Hencke | 14 April 2014
“There were some 65 board members or senior staff with significant financial responsibilities engaged off payroll in foundation trusts” – Submission, Department of Health
More than 2,400 senior NHS officials were identified as working ‘off payroll’ in an unpublished review by the Department of Health.
Exaro can reveal the astonishing figure as the ministry prepares to submit a report to Danny Alexander, chief secretary to the Treasury, on what action is being taken to clamp down on the practice in the UK’s National Health Service.
Alexander ordered that review after Exaro revealed how the Student Loans Company paid its then chief executive, Ed Lester, off payroll – through a personal-service company.
Under the Treasury review of 2012, the Department of Health carried out a survey of 8,000 people at board level in the NHS bodies. It found fewer than two per cent, or 160 people, were working off payroll – on an average of £700 a day.
The Treasury then issued guidance that government departments and their arm’s-length bodies should put all board-level officials and those with significant financial responsibility on the payroll to curb the potential for “artificial tax minimisation”.
Only in “exceptional circumstances” could such officials be off payroll, and even then “should not exist for longer than six months.”
Assurances should also be sought about the tax arrangements of any official who was engaged off payroll for more than six months with a day rate above £220 or an annual salary of £58,200.
The Treasury asked the Department of Health to carry out a further survey in the NHS to assess compliance with the guidance, but this time not limited to board-level officials.
The survey found that as of June last year the NHS was paying 2,403 people off payroll, including 200 board members or senior officials with “significant financial responsibility”.
It also identified 148 cases where assurances about tax had been sought, but not received.
The figures are set to be included in the report that is to be sent to Alexander within weeks. But Exaro unearthed them in evidence submitted by the Department of Health to the House of Lords personal-service companies committee, which has been investigating the use of off-payroll arrangements.
The department was especially concerned about such arrangements in NHS foundation trusts, where its powers to intervene are limited.
A submission by the department to the committee said: “There were some 65 board members or senior staff with significant financial responsibilities engaged off payroll in foundation trusts, including two chief executives, one of whom was engaged via a personal-services company.
“This individual was in receipt of an NHS pension, and the off-payroll basis of the engagement potentially conferred both tax advantages and evaded rules on pension abatement applying within the NHS pension scheme to people whose employer paid for them to receive an unreduced pension.
“The survey also suggested that there were some 99 instances in 24 foundation trusts where assurance regarding tax and [national insurance] obligations had not been received.” Since then, further assurances have been provided in 58 of the cases.
In total, 51 such trusts were said not to be compliant, as of June 2013, with Treasury guidance on off-payroll arrangements. That number has since reduced to 30.
Alexander wrote last September to Jeremy Hunt, health secretary, “expressing concern about the apparently continuing high level of off-payroll engagements at senior levels in the NHS.”
As Exaro revealed last month, Hunt asked the Trust Development Authority (TDA), which provides guidance on governance to NHS trusts, and Monitor, which regulates the running of NHS foundation trusts, to investigate further.
But Hunt has already told Alexander that compliance with the Treasury guidance “had to be balanced against the need to avoid potentially destabilising organisations that are making good progress under their current leadership.”
He also argued for “some flexibility” so that trusts with “significant quality problems” could quickly bring in “the right people”.
The department “will argue that, on a case-by-case basis, the maximum off-payroll engagement period may very exceptionally need to be extended.”
David Hencke was named ‘Political Journalist of the Year’ in the British Journalism Awards 2012 for his exposure for Exaro of civil servants who were able to minimise their tax bills by working ‘off payroll’.