Is Department of Health Central Procurement Complying with Tax & Employment Rules?

We featured some questions here about the UK Department of Health (DH) and the central team that address procurement across the whole NHS network (not the team that actually do procurement for the centre of the Department, we should emphasise).

The questions related to the eProcurement strategy, and some potential conflicts of interest that have been highlighted by other software providers. (See the comments under that article for more interesting views!) But our investigations suggested that there are other issues for Pat Mills, the relatively new Commercial Director, to address. With Rob Knott having gone, he has the steadying influence and experience of DH procurement veteran John Warrington to call on, but other staff concerns to consider.

One is the length of time that some contractors have been working in the central team. Two in particular, who appear to have been in posts within the Department for at least three years - it may have been as long as six years, it has been suggested, but we have not verified that. They have worked for a consulting firm, of which they appear to be directors, and over the last three years that firm has been paid over £900,000 for their services (according to an FOI response).

The DH has past form in this area (see here), so Mills needs to ask whether this is really the "disguised employment" that Treasury and tax authorities get so upset about. Indeed, new measures announced in the recent Budget (see here) specifically addressed the issue of people who really should be treated as employees, with both the individuals and the employer paying National Insurance, but instead are paid via service companies and thus benefit from more flexible tax treatment via dividends.

The questions that would be asked by the tax authorities are things like - do the individuals work under the direction of the employing organisation? Do they use that organisation's premises, equipment, email addresses? Do they have job titles and set working hours? Could they sub-contract their work (that is an indicator of independence, not employment, by the way)?

Basically, if it looks like a duck and quacks like a duck, it's a duck. If it looks like you are filling a single role within the organisational structure, then you probably should be an employee. Now timescale is another point here. We know it is hard to find good permanent people, so we believe the authorities don't object too much to an interim filling a role for a few weeks or even a few months perhaps. But when the employment goes on and on, then really, the organisation has to be sure it is using a legitimate route.

We’d suggest that Mills needs to look at resourcing for his team as a matter of urgency – of course, he may be doing that already, and we do hope to speak to him directly soon. And whilst we don't want to denude the operational side of NHS procurement of talent, isn't the time right to consider bringing some of the capable procurement people from Trusts into the centre, even if just on secondment for a year or so, to get the central team onto a stronger footing?

Voices (2)

  1. LM:

    Peter,
    One of your more unusual postings.
    Q1: are you planning to publish your FOI and response?
    Q2: you have focused on two contractors, but it is clear that the vast majority of Carter’s team is made up of contractors/mercenaries – did your FOI expose how many? I hear it could be as many as 20-30?
    Q3: I remain confused when you describe the ‘team’ – is this PICD, Carter’s team, the e-procurement team, the DH’s Procurement team? Wouldn’t any/all contracts fall under the DH procurement team? Someone, somewhere has overall accountability?
    Q4: The consultancy you identified (employing the two contractors) could have been awarded a legitimate three-year contract following formal competition? Or did your FOI expose a succession of contract extensions over 3/6 years without any formal competition?

    1. Dan3:

      Did we see a response to these questions? I’d be keen to see the FOI query and response….at least

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