^{Posted on July 26, 2005}

The reinvention of failure

Existing health services are being deliberately destabilised to pave the way for an ideologically driven privatisation programme
By John Lister
Wednesday July 20 2005
The Guardian

How is it that with spending on the NHS now running at double the level of 1997, the service is running into an autumn crisis, with debts totalling at least 750m pounds, bed closures, theatres closed, services cut and estimates of 8,000 or more redundancies?

The answer lies in the breakneck process of “modernisation”, under which existing services are being deliberately destabilised to establish a competitive market system incorporating for-profit private providers, in place of a planned system of public healthcare.

Under John Major the NHS was buying less than 200m pounds worth of treatment from private hospitals a year. This will have increased 10-fold by 2007. Up to 15% of elective surgery will be hived off to private hospitals, leaving NHS trusts to cover the remainder.

Hospital buildings have also been privatised: private finance initiative schemes worth more than 5bn pounds have been completed since 1997 or are being built, and another 12bn pounds of projects are under negotiation - all of them locking trusts into costly, long-term leasehold deals.

But while New Labour ministers press relentlessly on, opposition is starting to coalesce. Last week in London a group of consultants, academics, MPs and trade-union officials met to plan a “save our NHS” coalition against these “stealth reforms”, which have little public support - a recent poll showed 89% against private provision of NHS care - and are little reported or discussed.

That is likely to change in the autumn as huge, unprecedented budget deficits - and cuts in services - begin to take shape alongside the new competitive health market.

Soon all patients must be allowed to “choose and book” elective treatment from a list including both NHS and private providers. Millions will be siphoned out of trust budgets into private-sector treatment centres: Brighton and Sussex University Hospitals NHS Trust stands to lose 85% of its elective orthopaedic work, worth 15m pounds.

The attempt by the health secretary, Patricia Hewitt, to claim the mantle of Nye Bevan in her defence of New Labour’s NHS reforms earlier this month - arguing that even Bevan “saw a role for the private sector” - should have drawn a gasp.

When Bevan nationalised the flagging network of voluntary and municipal hospitals in 1948 he made compromises that left some relics of the pre-NHS private sector intact - pay beds and private practice for consultants, and allowing GPs to remain as “independent contractors”.

But what for Bevan were concessions, to ensure the passage of ground-breaking changes, have for Hewitt become a point of principle. Billions are now diverted from NHS budgets to create a new, expanding private sector, which will now be free to poach staff from NHS hospitals. Hewitt’s first announcement in her new job was that another 3bn pounds was to be spent on services exclusively from private providers - with NHS hospitals forbidden to bid. Two modern NHS treatment centres are to be privatised, reversing Bevan’s modernisation. This is neither expanding capacity nor supporting patient choice, since existing high-quality NHS services will no longer be available in these areas.

Hewitt is also creating a new private sector in primary-care services, while GPs are encouraged to act more like businesses, and allowed to retain unspent surpluses from “practice-based commissioning”.

A survey of more than 40 countries shows that for 15 years England has gone furthest and fastest down the road of market-style reforms; but there is no evidence that these reforms improve efficiency or cut costs.

Thatcher’s 1990s marketising reforms, by fragmenting the NHS into purchasers (health authorities and GP fundholders) and providers (trusts), massively increased administrative costs and boosted the number of senior managers.

Throughout Europe and around the world, insurance-based systems with separate purchasers and providers cost more to administer than the NHS: admin costs in France and Germany are over 20% of health spending, while in the US almost a third of the $1.4 trillion spent on health goes on administration.

New Labour came to office pledging to scrap the costly internal-market system, and began to do so - only to turn rapidly back towards the current policy, creating a market in which the NHS competes on unequal terms with a private sector free to cherry-pick the most profitable specialities and treatments.

NHS productivity has been hampered by soaring costs of goods and services from the private sector. For every £1 spent on NHS staff in 1995, according to the Office for National Statistics, 71p was spent on procurement of goods and services from the private sector; by 2003 the figure was 1.15 pounds for every 1 pound on staff.

Hewitt’s plans to spend billions on buying in treatment from private hospitals and treatment centres will therefore increase costs - just as private-sector care, especially for-profit care, costs more in almost every country where it is purchased alongside public provision.

New Labour’s ideologically driven modernisation reinvents failed policies and ignores the evidence. Competition, which brought fragmentation, dislocation and widened inequalities under the Tories, is coming back as “payment by results” from next April; it is already destabilising local NHS hospitals, and will bring more closures. Foundation Trusts ape failed experiments that were dropped in Spain, brought soaring debts in New Zealand, and led to outright privatisation in Stockholm.

In Britain, what is called modernisation has already increased costs and overheads, demoralised and alienated staff, undermined planning - and done nothing to ensure equal access to local care. It cannot continue to go unchallenged.

John Lister is the information director of London Health Emergency, and lectures in health policy and journalism at Coventry University; his book Health Policy Reform - Driving the Wrong Way? is published this month.