Health shake-up causes increase in special tax deals, top civil servants’ union claims

By Steve Lodge | 27 June 2012

“There is a large population of deputy directors and programme directors in the NHS who were not included in the Treasury review”
 – Rob McCargow, managing partner, Cadence Partners

Rising numbers of NHS managers are working ‘off payroll’ despite a UK government clampdown on the practice, according to the union representing top civil servants.

And government reforms to the National Health Service are causing the increase, says the FDA. Formerly known as the First Division Association, the union represents 5,500 senior managers in the health sector.

As health trusts and authorities restructure in the shake-up, they are employing more executives and managers without deducting tax and national insurance at source, says the FDA.

Jonathan Baume, FDA general secretary, told Exaro: “This is definitely an issue. There is more of it.”

“As people leave primary care trusts and strategic health authorities, their jobs are being filled with contract staff,” he said.

And hospital trusts are making ‘off payroll’ appointments to fill positions as they struggle with the current pay freeze and higher staff turnover in the NHS, the FDA says.

Officials working ‘off payroll’ and being paid through personal-service companies are able to save thousands of pounds a year in tax compared with being employed. It also offers public bodies large savings on employers’ national insurance.

Rob McCargow, managing partner of Cadence Partners, a recruiter of interim NHS executives, said that ‘off payroll’ appointments made sense for health bodies that are being wound down because it avoids redundancy costs.

But he said that the “much greater usage” was in hospital trusts and other NHS providers looking at mergers and reconfiguring services. “The NHS is facing a massive period of change,” he said. “It has to get change skills from someone and management consultant firms would charge an arm and a leg.”

Rates for senior interim executives of £1,000 or more a day compares well with management consultants costing £3,000 to £4,000 a day, McCargow said.

The FDA said that it did not have figures for the increases in ‘off payroll’ arrangements observed by its members.

However, McCargow estimated there were “several hundred” senior and specialist management roles currently filled in this way in the NHS.

By contrast, the Treasury’s recent review of senior civil servants working ‘off payroll’ listed just 84 NHS roles out of 2,400 positions found across central government.

But the NHS figure for the review covered only board members of trusts and authorities, with 28 of the 84 being non-executive directors.

“There is a large population of deputy directors and programme directors in the NHS who were not included in the Treasury review,” said McCargow.

A spokesman for the Department of Health explained the omission of NHS senior managers below board level by saying: “The Treasury said that, to keep the survey of the NHS to manageable and affordable proportions, it should focus on the members of boards of NHS organisations only.”

The NHS says that it employs more than 1.7 million people, the largest workforce in the UK.

The spokesman added that the department “did not recognise” the FDA’s claims of increased ‘off payroll’ working among NHS managers.

He said: “The number of admin staff, managers and senior managers has fallen by nearly 16,000 since May 2010, creating savings that will be reinvested into front-line patient care.”

The Treasury review found that the Department of Health, not including NHS bodies, had 434 senior officials working ‘off payroll’. This was the highest number of any central government department.

The review was triggered after an investigation by Exaro, together with BBC2’s Newsnight, revealed in February that the Student Loans Company was paying its chief executive, Ed Lester, without deducting tax or employee’s national insurance under concessions granted by HMRC.

Exaro also revealed how one NHS finance director and another executive were paid £534,000 and £631,000 respectively ‘off payroll’ over three years.

Danny Alexander, chief secretary to the Treasury, told Parliament that the most senior public officials must in future be on the payroll and fully taxed at source. The new requirement would apply in all but exceptional, temporary cases.

Exaro revealed earlier this month how HM Revenue & Customs (HMRC) is using the results of the review to launch an investigation into the practice of civil servants working ‘off payroll’.

However, hundreds of council officials working ‘off payroll’ will escape the HMRC investigation because a review by local government was thwarted.

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