"The NHS is being hollowed out from within; that's not efficiency." Photo: Getty
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NHS reform and the hollow marketisation myth

A metamorphosis is taking place; a mutation of the NHS from a public service into a lucrative marketplace.

When the chief executive of NHS England produces a 39-page, 15,000-word rescue plan for the health service that, a senior doctor later told me, “doesn’t even mention the real problem in the system”, you know something is up.

Not that it’s any great surprise. Simon Stevens isn’t likely to agree with my source that the real problem in the NHS is a prevailing ideological dogma that “private is good and public is bad” among top brass, nor that the aggressive marketisation programme currently underway is all based on a myth. The private healthcare man turned NHS-saviour has only been in his post for seven months after 10 years at global giant United Health Group, and old habits die hard.

But the real paradox at the heart of Stevens’ five-year plan is that he calls for ruthless efficiencies and then turns a blind eye to the sort of “grotesque financial waste” that consultant clinical oncologist and National Health Action Party (NHAP) co-leader Clive Peedell says is crippling the system.

Peedell says: “Wasteful internal markets, commissioning support units, management consultancy fees, the cost of procurement of clinical services, profit-taking by private providers, the cost of fragmenting pathways due to outsourcing components to private contractors, and PFI deals bankrupting our hospitals; they are draining billions from frontline care in our NHS”.

A metamorphosis is taking place; a mutation of the NHS from a public service into a lucrative marketplace. None of this is particularly new – but since the Health and Social Care Act kicked in two years ago, trusts have been legally obliged to compete with private providers over contracts, and take on the extra administrative costs of doing so. Allyson Pollock, professor of public health research at Queen Mary University of London, says: “It’s quite clear that the government wants to contract out as much as it can before the general election, but there’s no data about the costs for trusts such as lawyers and management consultants in doing this”.

And after a slow start, the scrum has really kicked in now. Campaign group NHS Support Federation has recorded five times more contracts coming onto the market between July and September this year, a cool £2bn’s worth, than in the first three months of life under the Health and Social Care Act when only £266m was up for grabs. Bound by competition laws, NHS trusts find themselves in the position of having to spend tens, maybe hundreds of thousands bidding to carry on running services they already deliver, or, even worse, to then lose out to private providers that have cherry-picked the contracts and put all of their corporate weight behind winning them.

Take Cambridgeshire and Peterborough for example, where a million pounds of taxpayer money was wasted on the procurement process of older people’s healthcare and adult community health services before the CCG finally decided that Cambridgeshire and Peterborough NHS Foundation Trust should carry on running the service.

Why are such tremendous burdens being overlooked by Stevens? Or the hideous levels repayments for the same PFI loans he advocated when he had Tony Blair’s ear back in the noughties? Why no mention of the £4.5bn a year that Calum Paton, Professor of Public Policy at Keele University, conservatively estimates is the cost of administering an internal market he describes as “costly and of dubious effectiveness”, or the extortionate legal fees just being in that market forces trusts to stump up?

GP and anti-privatisation campaigner Dr Bob Gill says: “A market doesn’t work in healthcare; the administration of it just drives up costs. The NHS is being hollowed out from within, assisted by people from banking and the private sector who are dumbing down the service and delivering everything as cheaply as possible. That’s not efficiency”.

Neither is, Gill argues, a system in which a hollowed-out NHS has to pay when those private companies fail in their duty. Private companies like Vanguard Healthcare, which had its contract with Musgrove Park Hospital in Taunton terminated after a series of post-surgery complications, leaving Musgrove medical director Dr Colin Close admitting, “any financial responsibility would rest with us”.

How is all this playing out? Kathryn Anderson is a nurse at the Royal Free Hospital and NHAP general election candidate – in Iain Duncan Smith’s constituency. She says that far from bringing in greater efficiency or care, these new wasteful costs are having the opposite effect in the wards. “All that money comes from the frontline,” she says. “It comes from nurses and HCAs and doctors’ pay, and from drugs that don’t get purchased. You can’t run the NHS and expect it to perform if you flush the money out of the system, it just doesn’t work. We see this every day and it’s getting worse”.

The Conservatives are keeping very quiet about all this, perhaps wisely. With one hand Lansley and Hunt have enforced pay freezes on frontline staff claiming the pot is empty, and with the other, enforced an extortionate tendering process that has wasted vital funds. Just the cost of the top-down reorganisation alone, which a senior Tory MP recently described as the party’s “biggest mistake” in government, is estimated at £3bn.

On the pretext that the NHS is an egregious waste of public money – despite the fact that in 2012 the UK spent less on healthcare as a percentage of GDP than any other G7 country – the system has been altered from within. The result is a conduit to a £100bn-a-year pot with an NHS stamp on the side, which through some alchemy turns taxpayer money into private profits.

Stevens’ five-year plan is full of hope and some entirely sensible ideas to improve the system. But with no mention of any of the debilitating costs of running the new marketised system, which Unite head of health Rachael Maskell says could be as high as £1bn by the time of the election, nor the outcry from the profession about marketisation which the BMA itself is campaigning to see reversed in law, it seems a little hollow to say the least.

Benedict Cooper is a freelance journalist who covers medical politics and the NHS. He tweets @Ben_JS_Cooper.

Photo: Getty Images
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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR