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The NHS is Britain’s beating heart – don’t let it flatline

After 30 years of meddling with the NHS, are we now at risk of destroying our most precious public s

I have hazy memories of my parents getting their first telephone. It was the late 1960s, and telecommunications was a public service. There was a waiting list but, in time, we got to the head of the queue. An engineer from the General Post Office installed the necessary equipment and we were connected - or at least, connected any time our neighbours weren't using their phone: ours was a "party line". I don't recall any grumbles about the tortuousness of the process, nor about having to share with the people next door. The sense of wonder at what was now possible must have mitigated any frustration. It was marvellous to be able to speak to relatives and friends from the comfort of home, without having to trudge to the phone box.

The National Health Service was viewed in much the same way. My father developed cancer when I was two years old. He was swiftly cured but irrevocably damaged, and he struggled thereafter with chronic ill-health. His illnesses had knock-on effects on various members of our family, myself included. Between us we saw a lot of the NHS. At the centre of it (to my eyes) was our GP, a good-hearted man with half-moon glasses and a somewhat distant manner. When he needed expert assistance, a referral would be made. Waiting times were sometimes long but were accepted with stoicism: the professionals we eventually saw did their best. Looking back, I recognise the profound comfort in those experiences for my parents, who had grown up knowing what medical care could be like - and its financial implications - before the advent of the NHS. No matter how threatening or scary things got, no matter what time of day or night, this health service was there to help and asked nothing in return.

In the mid-1980s, I entered medical school in Nottingham. Like most aspiring doctors, I knew what I was going to be: a public servant, working extremely long and often antisocial hours, the whole arduous endeavour sustained by a powerful sense of doing something important and worthwhile. I would be joining an unquestionable force for good, grouped under the fluttering blue-and-white standard of the NHS.

But even as I embarked on my training, society was changing under the Thatcher government. The emerging citizen-consumer was increasingly exasperated by the inefficiency of state monopolies; no longer could we tolerate waiting months to have something as commonplace as a phone line installed or repaired. Margaret Thatcher's solution was privatisation and exposure to market forces. British Telecom was sold off in 1984, two years after a licence had been granted to its first competitor, Mercury Communications. British Gas and British Petroleum soon followed. It was only a matter of time before government attention turned to the biggest state monopoly of them all.

I was nearing qualification as a doctor when the then secretary of state for health, Kenneth Clarke, published his 1989 white paper, Working for Patients. The huge, sprawling, multicellular organism of the NHS would be cleaved in two, hospitals becoming providers, wooing and responding to the demands of purchasers in a so-called internal market. Competition, survival of the fittest, would deliver a patient-centred NHS, something even the new breed of health service managers, ushered in by the 1983 Griffiths report, was failing to achieve.

The white paper was greeted with consternation in Nottingham. The city had two general hospitals. Each had the full complement of acute care services and they shared the emergency work, alternating days "on take" for admissions. Specialised departments were located at one or the other site. Co-ordinated by the health authority, they supplied virtually all hospital care for the local population between them, with little unnecessary duplication. Now they were to become independent trusts, no longer co-operating, but competing for each other's business.

The central dilemma with the model was: who, in practice, would the purchasers be? In any normal market, they would be the consumers. But in an era when most people's access to medical information was limited to the family copy of Home Doctor, patients could not realistically make informed decisions. The That­cher government's response was to invite GPs to become purchasers, controlling budgets on behalf of their patients. Generous management allowances and the freedom to reinvest savings provided incentives for uptake. Wave after wave of practices signed up, until eventually about 50 per cent of GPs - covering 60 per cent of the population - were fund-holders.

The Labour opposition was incensed by the scheme, arguing that it was creating a two-tier service. By this stage, I was working as a junior hospital doctor in a surgical speciality and the evidence was stark. The admissions office had a card system along the length of one wall, with a slot for each patient on the waiting list. The nearer a card moved to the left, the closer the admission date. Patients from fund-holding practices were flagged with red stickers. When any were in danger of exceeding the eight-week treatment time specified in the fund-holding group contract, they were simply bumped along, displacing those from non-fundholding practices who had already been waiting longer.

Unfair advantage

There were other perversities. A fund-holding practice's budget was set according to its activity in the year before entering the scheme. GPs routinely maximised referrals and prescribing in the run-up to budget-setting to ensure a decent allocation. It was not hard to make savings that could be reinvested. I spent a year working at a fund-holding practice in Oxfordshire in the mid-1990s. A consultant orthopaedic surgeon was contracted to run a clinic at the health centre every fortnight; patients had in-house physiotherapy and counselling. A handsome meeting room had been built and computers upgraded. Other practices opened branch surgeries; elsewhere NHS osteopathy and acu­puncture were made available. Fund-holding GPs and their patients had never had it so convenient or so good. Non-fundholding surgeries, such as the Oxford city practice I went on to join, were being left behind.

The 1997 election result was a great relief. True to its reputation as the party of the NHS, New Labour soon scrapped fund-holding and the internal market. Budgets were returned to health authority control in the form of primary care trusts (PCTs). I remember listening to the closing flourish of Gordon Brown's first Budget speech when he pulled from his metaphorical hat £1.2bn extra funding for the health service. Labour backbenchers sent up a raucous cheer, their reaction to the announcement reflecting my own surge of elation. Here at last was a government prepared to back the NHS with proper resources. The rhetoric of Blair's first term was about ensuring excellent health care for all, regardless of where you lived or who your GP was. New Labour, it seemed, was a party that understood our public service values.

National Service Frameworks (NSFs) began to spew from the Department of Health, dictating to doctors every aspect of the care they must provide for common, important conditions. I took the lead in my practice for the heart disease NSF; we welcomed it as a template against which to assess our standard of care.

All too soon, however, the rigid, controlling instinct of the New Labour regime emerged. The National Institute for Health and Clinical Excellence (NICE) was founded, its remit to abolish postcode lotteries in NHS treatment and further to promulgate a centralised vision of health care. Targets for hospital waiting and for access to GP care were imposed, spawning unintended consequences that inconvenienced or adversely affected more patients than they helped. The NSFs became incorporated into the 2004 GP contract as the tick-box-obsessed Quality and Outcomes Framework (QOF), straitjacketing doctors' ability to tailor treatment according to patients' individual needs. More and more managers were employed to survey and to audit and to enforce compliance with these various initiatives.

My GP colleagues and I have become press-ganged into the role of pill-pushers, the tyranny of QOF subjecting patients to bewildering and sometimes injurious choices of drug, irrespective of circumstances. The only way to practise holistically is to "exception-code" patients, removing them from QOF. But exception-code too many, and the managerial thought-police are quickly on to you - you're incompetent, you're a maverick, or even worse you are setting out to defraud. The distrust and disempowerment of dedicated professionals have been a kind of poison, choking off the immense goodwill that was the lifeblood of the NHS.

To compound matters, at some point during Tony Blair's second term, the decision was taken to revisit the Thatcher experiment. The language had to be distinct, so commissioners rather than purchasers would call the shots. And there could be no return to a two-tier service; all GPs were expected to become involved in the new, practice-based commissioning. Audaciously, Blair went where Thatcher had never dared to tread. The provider market was no longer to be internal: it was opened up to the private sector, treatment reimbursed at fixed-tariff rates. To kick-start the process, New Labour guaranteed returns to a number of independent-sector treatment centres (ISTCs), whose staff are often brought in from overseas, with qualifications, training and experience that are unfamiliar to local practitioners.

ISTCs have proved popular with many patients, who appreciate the plush facilities and short waiting lists that overgenerous block contracts have endowed. But, for the local NHS, there is uncertainty over clinical quality. One of my patients was given an inappropriate orthopaedic operation two years ago. The pieces are still being picked up by an experienced consultant at the local district general hospital. Nor is this an isolated case. Several other patients had to have camera examinations of their bowels repeated as part of a review of 1,800 procedures carried out at our local ISTC, following allegations of failure to diagnose cancer.

Even where quality of care is good, patients who have investigations that detect significant pathology then have to be referred on to consultants at the district general hospital, fragmenting their care and generating additional stress and anxiety, because ISTCs are not contracted or able to manage the conditions they diagnose. ISTCs have destabilised the existing NHS hospitals they rely on for safety-netting, cherry-picking patients at lowest risk and leaving the old providers to deal with complex, high-risk patients whose care is, as a consequence, more expensive. Training the next generation of doctors has been rendered problematic by the skewing of case-mix (patient categories) in medical teaching centres.

Franchised out

Allegedly to disrupt vested interests, New Labour also opened up general practice to the private sector. PCTs were compelled to award an increasing proportion of primary care contracts to commercial organisations. Under Lord Darzi's NHS Next Stage Review, every PCT was forced to commission a new "8-till-8" health centre - funded at levels a conventional practice could only fantasise about - the thinly disguised agenda being to expose existing surgeries to the white heat of (unfair) competition. The fluttering blue-and-white flag of the NHS to which I had once rallied has become a mere franchise, something to be waved by any organisation granted entry into the health-care arena, no matter its motivation.

In spite of the resources New Labour squandered to open up the provider market, practice-based commissioning proved an abject failure. By the time the policy was launched, PCTs had become mature, self-sustaining bureaucracies. With a few notable exceptions - where enlightened PCTs granted GPs substantial freedom of commissioning, and where some impressive innovations and efficiencies were achieved as a result - practice-based commissioning barely drew breath, smothered by managers unwilling to relinquish control.

The relief I felt last May when Labour was finally evicted was every bit as strong as that I'd experienced in 1997. Andrew Lansley appeared to be offering us the opportunity to reinvent the NHS as a modern public service - GP commissioning consortiums collaborating with consultants and other stakeholders to deliver joined-up, efficient, patient-centred care pathways. We had seen our efforts bear fruit in the few places where practice-based commissioning was allowed to flourish and there was an appetite to restore the public-service ethos that New Labour had so wilfully destroyed.

At what price?

Yet, in the months since the white paper was announced, clinician enthusiasm has been ever declining. Recent polls find only a minority of GPs continuing to back Lansley's plans and there has been an extraordinary convergence of concern among virtually every body representing the NHS, from unions such as the BMA, Unite and Unison, to the royal colleges of every medical and nursing discipline, to the NHS Confederation and various independent think tanks such as the King's Fund. There is anxiety about the pace and scale of the reforms, and disquiet about shifting responsibility for rationing on to doctors whose time-honoured role is to do their best for each patient. The show-stopper, though, is the picture that has recently emerged of Lansley's version of the provider market.

This is to remain external, with "any willing provider" (AWP) allowed to pitch for business under the NHS franchise. We have had more than enough experience with New Labour to appreciate the downsides, but the profession could probably live with AWP, relying on the commissioning process to factor in holistic care, were it not for Lansley's completely unexpected determination - smuggled into a brief mention when the Health and Social Care Bill was published on 19 January - to permit providers to compete not just on quality (as now), but also on price. The NHS regulator, Monitor, will be tasked with compelling this price competition. Far from collaborating with providers to design holistic, patient-responsive care programmes, GP consortiums will be bound by competition law and could face legal challenges, should they seek to work organically with selected organisations.

This surprise emphasis on price competition might at first seem reasonable, given the pressures on public spending. But the evidence strongly suggests that price competition lowers quality of care. One need only consider the NHS's single, disastrous experiment with it. Under the terms of the 2004 GP contract, PCTs were handed responsibility for commissioning out-of-hours care for patients, with no national tariff to adhere to. In order to win contracts, many commercial organisations bid low - either as a loss-leader to eliminate local, GP-led competition before increasing contract costs, or in the sincere belief that they could provide adequate care at bargain-basement prices.

In my own area we are all thankful that the PCT has continued to commission out-of-hours services from a not-for-profit company run and staffed by local GPs, which recently achieved second place nationally in a survey of quality. Elsewhere in the country, cut-price out-of-hours providers - by definition often dealing with patients with acute or life-threatening conditions - frequently depend on non-medical staff working to inflexible protocols, or on agency doctors who have little knowledge of local services, and whose language and communication skills can be markedly deficient.

At best, these apparently cheaper services consume more resources as inappropriate admissions multiply. At worst, patients needlessly suffer and die. All these services looked good on paper when the tenders came in. It takes a long time, and a lot of harm to patients, before deficiencies of quality become apparent; and it can be legally difficult to break a contract even when the provider seems to be failing.

Crossed wires

My family moved house recently. BT royally loused up the redirections we had commissioned on our old phone numbers. Innumerable operatives in call centres around the globe were unable to rectify matters, some simply hanging up when the going proved too difficult. In the end, even the high-level complaints manager we were allocated admitted it was beyond her power to put things right.

Disgruntled and nonplussed by BT's failure to make amends, we investigated switching providers, only to find that our contracts render any move prohibitively expensive. We are stuck, at least for the next year. Never mind, it really doesn't matter - it's only phones. But what if it did matter? What if this was a matter of life and death, or of life-enhancing care? What price would we then put on a health service that was there for us - not for profit - no matter how threatening or scary things were, no matter the time of day or night, and which asked nothing of us in return?

Phil Whitaker is a novelist and GP working in the south-west of England

This article first appeared in the 28 February 2011 issue of the New Statesman, Toppling the tyrants

MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

***

The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

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In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt