Health campaigners in Morecambe Bay are furious over revelations about a tax loophole which stacks the cards against NHS pharmacy providers. The University Hospitals of Morecambe Bay NHS Foundation Trust (UHMB) is currently proposing to sell off pharmacy services in Morecambe Bay (see previous reports).
An unfair loophole in VAT rules means pharmaceutical companies such as Lloyds and Boots don’t have to pay 20 per cent VAT – but NHS providers do – meaning publicly owned medical providers must pay tax where private corporations are exempt.
A contract for pharmacy services, worth in the region of £25 million, is currently up for grabs in Morecambe Bay. Campaigners found that in the advert (tender) which announced that pharmacy services in Morecambe Bay were up for sale, the tender explicitly stated that a “key business driver” for the sale was “VAT savings”.
On Wednesday campaigners from local group No Health Selloff at Morecambe Bay handed in a petition of more than 9,000 signatures opposing the pharmacy sell-off to John Hutton, acting chair of the UHMB Trust. Later that day Labour’s local parliamentary candidate Cat Smith told a public meeting at Lancaster Town Hall that:
“Since the introduction of this government’s Health and Social Care Act, the number of NHS contracts awarded to non-NHS providers has more than trebled. This leaves the future of our NHS in the hands of companies whose main objective is making profit for shareholders, rather than the provision of quality healthcare which is free at the point of use.”
Cuts and the government’s Health and Social Care Act have prioritised privatisation over service quality, putting NHS pharmacies at even more at risk. Since the Act came in to force, 70 per cent of health services put out to tender have gone to the private sector.
According to the union Unite, at least 31 NHS trusts have already chosen to use private companies to run outpatient pharmacy services and a further 18 are out to tender. Lloyds Pharmacy has been the biggest beneficiary of the tax loophole, having secured around 18 contracts to run hospital pharmacy services. Boots have won 5, Sainsbury’s 3 and the Co-op 5. Boots has further reduced its tax bill by moving its ‘base’ to Switzerland.
The VAT loophole means that tax exempt private corporations have an overwhelming competitive advantage when tendering, while taxpayer-owned public NHS services must pay tax again, increasing their costs and making it impossible for them to offer competing bids. It also means £millions of taxes lost to the public exchequer as more and more public contracts go to tax-exempt and tax-avoiding private corporations.
Corporate pressure is being exerted to maximise the number of NHS contracts being put out to tender and awarded before the loophole is closed – after which these contracts will become more expensive than the current services. Although Whitehall has managed to rush through legislation favouring corporations at the expense of the public, such as the Infrastructure Bill, within a matter of weeks, it is dragging its feet sorting out a tax anomaly that distorts the market in breach of EU rules and does real harm to the public. Hospitals are forced to accept the tender that is the cheapest on the day, regardless of how much the costs are likely to be adjusted upwards post-legislation.
Conservative MPs Eric Ollerenshaw (Lancaster and Fleetwood) and David Morris (Morecambe and Lunesdale) were both invited to the meeting at Lancaster Town Hall but failed to attend.
As I pointed out at Wednesday's meeting, at least three trusts have set up their own arms-length subsidiaries to take advantage of the VAT savings whilst keeping all the pharmacy service in-house.
Yesterday the trust's chief exec. wrote in her blog: 'We do intend to consider proposals from other organisations as to how we can continue to improve our outpatient pharmacy dispensing services. Once we have considered these proposals, we will weigh up the clinical benefits and then make a decision as to which is the right option for our patients based on the expert advice of our clinical leaders.'