HIGHLY PAID DIRECTORS SINK CASH IN TAX HAVENS

Firms profiting from NHS Scotland’s recruitment crisis have links to tax havens and pay their directors up to £184,000, a Ferret analysis has revealed.

When NHS boards struggle to find doctors, nurses and other medical staff they use private recruitment agencies. But recruiting this way can cost up to twice as much as the budget for a vacant post, according to NHS Ayrshire and Arran’s annual accounts.

Some of the recruitment firms are ultimately owned by companies in tax havens like the Cayman Islands and Hong Kong – and their directors are highly paid.

Campaigners said the revelations were “depressing” and “appalling” and that agency fees were “sucking the blood out of the NHS” to the ultimate detriment of patients.

NHS boards say they are trying to reduce their spending on agency staff but are struggling to recruit, while the Scottish Government said agency staff should only be used as a last resort.

Overall Scotland’s NHS boards spent £152 million recruiting private agency staff in 2017-18. In total the Scottish NHS spends over £6.5 billion a year on all staffing, more than half its budget.

NHS spending on agency staff 2017-18

Health board 2017-18 agency spending Agency spending as a proportion of salary and wage bill
Shetland £3,506,000 15%
Dumfries and Galloway £11,646,000 9%
Orkney £1,570,000 7.3%
Highland £16,202,000 5.5%
Grampian £21,498,000 4.6%
Lanarkshire £16,219,000 4%
Ayrshire and Arran £11,208,000 3.4%
Fife £8,469,000 3.3%
Borders £2,785,000 2.9%
Lothian £20,518,000 2.6%
Tayside £10,074,000 2.4%
Forth Valley £4,471,000 2%
Greater Glasgow and the Clyde £23,822,000 1.8%

Source: Health board annual reports

The biggest spenders on agency staff in absolute terms were the largest health boards covering Scotland’s major cities. NHS Greater Glasgow and Clyde spent £24m, NHS Grampian £21.5m and NHS Lothian £20.5m.

As a proportion of their total wage bill though, rural trusts tended to rely more on agency workers. Around 15 per cent of NHS Shetland’s staff spending went through agencies as did nine per cent of NHS Dumfries and Galloway’s and seven per cent of NHS Orkney’s.

In its annual accounts NHS Shetland said that retaining and recruiting staff “is the most significant risk to both the delivery of quality services and sustainable recurring financial balances.”

It added: “The use of agency and locum staff to fill essential clinical posts continues to be a financial cost pressure and (presents) challenges in maintaining continuity in a patient’s pathway.”

Most health boards, including NHS Shetland, are trying to reduce spending on agency staff through measures like recruitment drives, building up their in-house bank of staff and requiring senior management and clinicians to approve the use of agencies.

However, at several boards agency spending increased between 2016-17 and 2017-18. At NHS Lothian, it went up from £19m to £20.5m; at NHS Lanarkshire it went from £15m to £16.2m and at NHS Dumfries and Galloway it rose from £10.7m to £11.6m.

Most of this money goes to recruitment firms approved by NHS Scotland’s procurement body NHS National Services Scotland (NSS). These companies are paid when they fill a vacancy.

Locum fees are sucking the blood out of the NHS. BILL FERNIE, CAITHNESS HEALTH ACTION TEAM

Among them is Maxxima, a London-based firm which is ultimately-owned by a company called Indigo Cayman Limited Partnership, based in the Cayman Islands.

The owners of this company, its accounts reveal, are “funds advised by affiliates of Towerbrook Capital Partners, a transatlantic advisory and investment firm”. It does not identify the funds.

Towerbrook is a US-based investment firm whose co-chief executive, Ramez Sousou, donated £525,000 to the Conservative Party between 2007 and 2016.

The Cayman Islands have been labelled a “tax haven” by Oxfam. According to the Tax Justice Network: “Cayman offers a low-tax, regulation-light environment for financial players from around the world, particularly Europe and the United States”.

Another recruitment firm approved by NSS is DRC Locums. It is ultimately-owned by a Hong Kong registered company called Syndicated Investor Group.

According to a global database of company ownership called Open Ownership, the owners of Syndicated Investor Group are “unknown”. The Ferret asked DRC Locums who owns them but did not receive a reply.

According to a Telegraph report in 2015, DRC Locums was owned by James Caan, star of the TV show Dragon’s Den. Company records show he stopped being a director of the company in January 2018.

Oxfam also regards Hong Kong as a tax haven. The Tax Justice Network describe it as “one of the world’s fastest growing secrecy jurisdictions or tax havens today”, adding that it has been reluctant to sign up to global transparency standards.

Recruitment firms like these often pay their directors high salaries. DRC Locums highest paid director received £184,000 in 2018-19. Another firm called Total Assist Recruitment paid its five directors £702,000 between them.

Bill Fernie is chair of the Caithness Health Action Team campaign group in the Highlands. He described the levels of spending on agency staff as “appalling” and argued that they affect the level of care patients get.

“Locum fees are sucking the blood out of the NHS and we see it in the reduction to our maternity care locally due to the changes that have been made and a huge increase in travel for patients and families to go to Raigmore hospital in Inverness over 100 miles away,” he said.

Luke Hildyard, director of the High Pay Centre, said: “This is a depressing finding. While it’s important to recognise recruitment challenges, it ought to be possible to appoint doctors and nurses without leaking thousands of pounds of public money to the Cayman Islands.

“Public procurement should be a powerful tool for economic development and social justice but in this case it looks like the exact opposite.”

The co-chair of the Keep our NHS Public campaign group, paediatrician Dr John Puntis, blamed NHS Scotland’s recruitment crisis on the Westminster government cutting Scotland’s funding.

“Although health and social care policy and funding is a devolved matter,” he said, “the Barnett formula automatically adjusts the amount of public expenditure allocated by Westminster to Scotland to reflect changes in spending levels allocated to public services.”

He added: “The waste of resources in having to employ agency staff is often a reflection of work pressures and difficulty with staff recruitment and retention in a health service that has had its annual incremental increase in budget viciously reduced as public services have been made to pay for the banking crisis.”

Puntis said this was an example of “how the private sector feeds off the NHS to the ultimate detriment of patients”. The NHS should be properly funded, staff should be supported and publicly owned staff banks should be built up, he suggested.

Time and time again we’ve seen that outsourcing staff and services delivers worse results. It costs more, harms our services and undermines workers. CAT HOBBS, WE OWN IT

Cat Hobbs, director of nationalisation campaign, We Own It, thought that NHS staff should be recruited and employed in house. “Time and time again we’ve seen that outsourcing staff and services delivers worse results. It costs more, harms our services and undermines workers. It’s time to end the scandal of outsourcing for good,” she said.

The Ferret’s findings also prompted MSPs from Labour, the Liberal Democrats and Conservative Party to criticise the Scottish Government.

Labour’s Neil Findlay MSP said: “Tax-avoiding private companies are profiteering from and exploiting our NHS. Private finance and profiteering have no place in our NHS.

Labour’s Neil Findlay and LibDems’ Alex Cole-Hamilton.

“Let’s kick out the profiteers, protect the principals of our National Health Service and ensure that Bevan’s vision of free and quality healthcare survives the SNP’s repeated failures.”

Liberal Democrat health spokesperson, Alex Cole-Hamilton MSP, said: “There are obviously situations where locums can play a valuable part in covering short term gaps in the workforce but this news will do nothing to reassure members of the public that NHS resources are being prudently managed.”

Cole-Hamilton added that Audit Scotland spot checks on locum firms have revealed evidence of incomplete time sheets and incorrect payments. “It is time to end the waiting times scandal and reduce the reliance on agency staff by seriously expanding the workforce and investing to transform mental health services,” he said.

Miles Briggs MSP, Scottish Conservative shadow health secretary, said: “These figures show that the independent sector has been propping up the SNP’s health service for years. That makes the SNP’s position on the matter totally insincere and illogical – the nationalists are guilty of startling hypocrisy.

“The sad fact is that even with the independent sector bailing them out the SNP’s mismanagement of the health service is causing patients to suffer unnecessarily,” Briggs added.

The Scottish Government stressed it was committed to a publicly owned and operated health service. “NHS Scotland spends just around two per cent of its annual staffing budget on the use of agency staff,” said a spokesperson.

“We’ve been clear with health boards that they should always prioritise recruitment of permanent staff to vacant posts and only use agency staff as a last resort when temporary staff are required.”

The spokesperson added: “The use of agency staff allows NHS boards to ensure that local vital clinical services are maintained while recruitment is ongoing. When agency staff are required, we have a framework contract in place to help manage the cost of medical and nursing agency. Agencies on this supply staff at NHS pay rates.”

NHS Lanarkshire said it uses agency staff as a last resort to fill temporary gaps in its rotas and ensure safe and effective patient care. “As with other health boards across the United Kingdom, we are experiencing challenges with the recruitment of medical staff in some specialties due to a reduced supply,” a spokesperson said.

An NHS Ayrshire and Arran spokesperson said they were trying to reduce spending on agency staff but, at times, they were necessary to ensure safe services.

Maxxima, DRC Locums, NHS National Services Scotland and the other NHS boards mentioned did not respond to requests to comment.

Author

  • Joe Lo, investigative reporter for The Ferret

2 comments

  1. The Ferret has done a good job exposing the links between recruitment agency providers to the NHS and offshore tax haven jurisdictions like the Cayman Islands. Thankfully the agencies providing temporary staff only represent around two percent of overall costs.

    But it’s not just recruitment agencies that have offshore links.

    Consider therefore the example of a house builder – property developer and how they could avoid tax. Well one way to avoid tax would be for an associate offshore company to buy the development land. Then when the housing development is to proceed the offshore company sells the land to the developer company at a greater price than what it paid for the land. Thus the offshore company make profit at the expense of the on shore company. QED the onshore company pays less tax.

    It’s a bit more complicated than that but is this something that could have happened in Dumbarton. Well maybe that’s something the local sleuths could investigate and rich vein to explore.

    Indeed, in looking at the huge country estates that own so much of Scotland it might come as a shock to realise just how much of our land in Scotland is owned by offshore companies registered in the Cayman Islands.

    And that for many folks is one of the big issues arising out of the Scottish Government wanting to sell forty or so acres of National Park to Flamingo Land – where in due course, the land ownership could well be transferred to an offshore company.

    Or what about the sale of let us say the glass steel and concrete cathedral to shopping that is the St Enoch’s centre. Built initially with the public minded amenity planning obligation of it having to include, the aforesaid ice rink was soon ripped in favour of more shopping area, Was it a Trojan Horse awaiting a change of use – well who knows, not the public anyway. Getting permission for one thing, and then getting a change of use later. It’s a tried and tested concept and how could anyone suspect that locally this is something that could happen at Flamingo Land.

    But let us stay with St Enoch’s shopping centre and think about how you would buy and sell a property like this. For most folks buying a house they would buy the house and pay the Stamp Duty Land Tax which on properties like St Enoch’s would be huge.

    But for building developments like St Enoch’s what if an investment trust ( that owns the development ) sells the investment trust to another investment trust. How does that type of thing work out when shares attract stamp duty at a much much lesser rate than what would be payable on a hundred million plus property sale.

    Again there are rules about these things and it can become very complicated but it might surprise folks just how much of this might be going on on our doorstep. Development land in Dumbarton, Flamingo Land, the large country estates just up the loch, the day trips shopping to the Glasgow St Enoch’s shopping centre – all tickety boo and in order of course!

    But the Panama papers expose’ of a few years ago certainly suggested that offshore company ownership is an enormous issue availed of by the great and the good – and maybe the Ferret, could do a bit more research.

    Meanwhile we in Dumbarton and environs can continue to live in our bubble of the three wise monkeys.

    Tioraidh an-drasda!

  2. I just passed the former Langcraigs Care home in Townend Road which from which West Dunbartonshire Council evicted the elderly residents, sent them off to the back of beyond at Crosslet (eleven cars waiting to get out of Argyll Avenue today and still no traffic signals to assist the old folk across the road safely to the bus stops on the (too) fast moving A82 dual carriageway. The company who bought the home from the Council have now demolished it and embarked on rebuilding it. The new place looks far bigger than what they bought for less money than another bidder offered, about £200,000 less for a housing development. Are all the necessary permissions in place to do this? Which committee dealt with this? And will those who were the buyers at the outset be updating the price for the building they have now knocked down? I think the monkeys are all on the Council, who look to have been taken for mugs. Editor

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