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How Labour broke the NHS – and why Labour must fix it

Successive attempts by Labour and the Tories to update the service have done more bad than good. It's time to put the NHS in intensive care.

It is an awkward fact for many on the left that the partial privatisation of the English National Health Service – started by the New Labour government in 2003 and enthusiastically accelerated by the current Tory-led coalition – has been such an apparent success. When Tony Blair came to power in 1997 the service was struggling, particularly in terms of elective (non-urgent) care. Like all GPs, I often saw my patients having to wait up to 18 months for routine operations.

New Labour’s initial diagnosis was of inadequate resources: public spending on health as the party returned to power was roughly 5 per cent of GDP, substantially lower than in every other developed nation. Blair’s stated ambition was to bring this percentage up to the European average; more money, it was believed, would solve the problem. Labour set about the task with gusto. Gordon Brown’s first Budget in July 1997 heralded an immediate injection of £1.2bn into the NHS, with real-terms spending to rise year on year thereafter. At the same time, Labour began to dismantle some of the previous Conservative government’s experiments with “marketisation” – ending GP fundholding (under which some family doctors operated budgets on behalf of their patients) and re-emphasising collaboration over competition between different parts of the system. For me, as for most ardent supporters of a public-service NHS, they were optimistic days.

Yet by the time of the 2001 election, New Labour was facing accusations of failure to reform. Despite the extra investment in health, service improvements had been frustratingly slow to materialise and were incremental in scale. In addition, there was a worrying new trend. Just as they were doing with the education of their children, the increasingly prosperous middle classes were opting out of state health-care provision in ever greater numbers. Over a few short years it had become noticeably more common for patients in my reasonably affluent corner of southern England to declare they had enough spare cash, or had private insurance (often included in their employment package), and would like to use it to sidestep lengthy NHS waiting times. In an era when most of us swallowed Brown’s “no more boom and bust” myth, and there was a sense the good times might just keep rolling on, we appeared to be sleepwalking towards a US-style health-care system, where those with sufficient resources could get swift access to private treatment, leaving the rest to make do with what the public service could manage to provide.

The danger, as Blair realised, was in the medium to long term: the departure of the middle class would undermine the social contract on which the very idea of a national health service depends.

These were the considerations that led to the extraordinary spectacle of a Labour government adopting a policy direction not even the Tories had dared to explore. The NHS had to become so responsive and user-friendly that there would be no incentive for anyone to go elsewhere. In short, it must be able to compete with the private sector – and the way to do that, it seemed, was to make it “compete”.

To begin with, the Blair government’s approach was to “market-make”; and so, from 2003, successive waves of independent sector treatment centres (ISTCs) were opened throughout England. Run by private companies for profit, ISTCs were contracted (often on very favourable terms) to provide solely NHS elective procedures, creating extra capacity in the system to bring down waiting lists, and at the same time forcing existing providers to polish up their act if they wanted to hang on to any of their more “profitable” work. In parallel, the best NHS hospitals were able to apply for the new foundation trust status, which freed them from public-service constraints to operate more like private businesses.

Out of this market-making grew a new logic: that as well as deliberately inserting private provision inside the NHS, the health market should be opened to external competition. In 2009, in what transpired to be its dying days, New Labour introduced the “any qualified provider” (AQP) initiative, which allowed the private sector to undertake NHS work outside the ISTC programme. It is under AQP that the vast majority of my patients who require elective procedures now choose to spurn both our local district general and the ISTC in favour of referral to the nearby private hospital run by Circle.

The coalition government seized on the inroads made by New Labour. As well as cementing competition for work on a case-by-case
basis under AQP, Section 75 of their Health and Social Care Act 2012 makes it obligatory for commissioners to put every new NHS service (above a trivial size) out to tender. Analysis of data up to 2013 shows more than £12bn of NHS contracts were awarded to private companies during the first three years of the coalition.

On the face of it, the drive to compel competition has done what it was supposed to do (albeit at vastly increased administration costs, with contracts being negotiated, invoiced and monitored by armies of bean-counters on all sides). Much elective NHS care nowadays is provided within weeks, not months or even years. This is unquestionably good for patients. And fears for the future of the social contract have receded: where is the advantage in going private when you can get your operation paid for by the NHS at the same independent hospital?

The health insurance industry has adapted to the new realities, offering cheaper products that pay out only if the NHS should be unable to provide treatment within a specified time frame. With the fall in disposable income that has accompanied austerity, it is once again relatively unusual for my patients to request private referrals. One way or another, the NHS has remained the franchise to which most people look when they have an elective health-care need.

Why then is there a renewed row over NHS privatisation in the current election campaign? It has often been said (by both Labour and the Conservatives at different times) that patients don’t really care who provides their treatment, as long as it’s convenient, of good quality and funded out of general taxation. Surely Ed Miliband should be claiming credit for Labour having been bold enough to go where no political party had ever dared tread? And why is Andy Burnham, the shadow health secretary, publicly committed to repealing the Health and Social Care Act, with its compulsion to competitive procurement?

Burnham is resurrecting the language of the past, articulating a desire to see the NHS as the “preferred provider” of most services, and labelling the 100 days of this election campaign as the last chance to save this concept. Is this simply a belated restatement of an ideology that the left is now embarrassed to have renounced during its most recent years in government? An ideology, furthermore, whose time has been and gone?

The answers to those questions lie in the nature of the problems now facing the health service and how the privatisation agenda has created barriers to tackling them. This is where things begin to get complicated, which is why politicians generally shy away from trying to air them in the media, preferring to fall back on meaningless soundbites such as X billion pounds’ additional spending, or Y thousand extra doctors and nurses. Let me take you on a whistle-stop tour.

The first thing to appreciate is that commercial competition was a response to the NHS’s historically poor performance in providing timely access to mundane, high-volume procedures: cataract removals, joint replacements, gall bladder operations and so on. These elective cases are all discrete episodes: there’s a single problem and a definable clinical activity that will close the case. There are also readily quantifiable measures by which performance can be rated: most obviously, the length of the waiting list.

Markets can work well in this sort of scenario, particularly if risk can be mitigated by excluding complex, often very elderly patients in poor general health with multiple chronic diseases, who are more likely to experience unpredictable and expensive complications. The problem is, with every passing year, there are more and more of us living to become just this kind of patient – patients the private sector doesn’t want to do elective business with at NHS tariff prices, and for whom the old NHS is therefore the default source of help.

The second issue is that these elderly patients with multiple health problems are also presenting to the NHS’s other major arm – urgent-care services – in ever greater numbers. Their health is fragile and they are prone to frequent exacerbations in underlying chronic conditions such as heart failure or lung disease. Otherwise trivial illnesses can have a devastating impact – a simple urinary infection will, in a matter of hours, render a frail and elderly patient completely “off legs” and unable to look after him or herself. Social circumstances are often precarious, patients widowed or living with an equally vulnerable spouse, with far-flung and busy families unable to provide a rapid response should the home situation suddenly deteriorate.

When a patient of this kind becomes unwell, unless significant nursing and social care can be parachuted in at a moment’s notice to shore up community treatment (and at present they can’t) he or she is heading for hospital. Once the person is an inpatient, it can take an unconscionable length of time to help them rehabilitate, and for the social-care system to reinstate or augment a package of care that will allow them to be discharged. Beds get filled; beds get “blocked”.

The third factor is the changed face of NHS urgent-care services. There are all sorts of things one could say about this but here’s the fundamental point: when someone with anything more than a completely straightforward illness becomes unwell, at some stage you are going to need an experienced clinician to decide how to manage it. When I began in practice in 1990 there were only three places you could turn to if a crisis arose: your GP (day or night), the ambulance service, or A&E. The system was understood by virtually everyone and the vast majority of contacts went through their GP first. This, crucially, introduced a highly trained professional at the earliest stage of the process. GPs are thoroughly at home managing uncertainty and negotiating complexity, and we kept a vast amount of work away from hospitals.

Nowadays there is a plethora of other entry points into the urgent-care system – the NHS 111 helpline, walk-in centres, out-of- hours (OOH) services (now mostly provided by private companies) and minor injuries units. NHS 111 and, to a variable extent, the others employ either non-clinical staff operating a risk-averse computer algorithm, or clinicians who are junior and inexperienced. The net result is that the first time many patients encounter an experienced clinician is long after they’ve been admitted to hospital. The opportunity for community management, if it existed, has been lost.

These are the principal forces behind the flurry of declared major incidents this January, which led to hospitals up and down the country closing their full-to-bursting doors. Our own district general remained open – just – but in a continual state of black alert (which is every bit as bad as the name suggests). All elective surgery was abandoned and extraordinary measures were employed to free up every scrap of capacity.

If we want to do anything other than lurch from crisis to crisis, the whole system will have to be reconfigured. Hospitals, GP surgeries, community nursing, OOH, NHS 111, the ambulance service, walk-in centres and minor injuries units are all nominally NHS bodies and should, in theory, be able to work together to ensure only patients genuinely in need of acute hospital care are admitted. The problem is, in our present-day competitive NHS, each entity is trying to protect its budget and ensure its own performance meets the benchmarks by which it will be judged next time its contract comes up for renewal. Perverse and protectionist behaviour ricochets round the system, the easiest solution often being to admit a complex patient and let their care become the responsibility of the hospital. And that’s before you try to bring social care into the mix, which is integral to the project of supporting unwell patients in their homes but which historically has been provided by local government out of a completely separate (and even more pressured) budget.

It is in this incredibly complex and messy situation that Circle – the first private company to be awarded a contract to run an NHS district general hospital, at Hinchingbrooke in Cambridgeshire – announced recently that it will walk away. It’s not that a commercial company can’t run a modern acute hospital; there are half a dozen such private facilities in London (though nowhere else in the country is affluent enough to sustain one). It’s that the kind of money the NHS is offering is woefully inadequate to mitigate the risk to the private sector of unpredictable and ever more intense surges of demand, exacerbated by perverse behaviour elsewhere in the system. Circle is going back to running its controllable elective AQP business, licking the wounds that it has sustained from its adventure into the NHS acute sector.

We made a concerted effort in our area a couple of years ago to solve the problem with urgent care. Most of the big players – our district general hospital, all local GP surgeries, the ambulance service, OOH and the walk-in centre – joined together in an effort to run the newly recommissioned service. This would have aligned the interests of all parties better and should have led to some creative solutions. However, under Section 75 regulations the procurement had to be competitive, with each of the nine eventual bidders being judged on quasi-objective grounds that were rooted largely in process and that weighed only things that could readily be measured. Such is the fear of litigation under competition law that there is simply no latitude for commissioners to use common sense or professional judgement to prefer a bid on the grounds that it is a good idea and exactly what the local area needs. Our bid narrowly lost out to a company based several hundred miles away.

As well as this structural bar to commissioning joined-up working, competitive procurement is eroding the goodwill and loyalty that the NHS has historically enjoyed from its workforce. The firm that won the contract in our area now runs the out-of-hours service and urgent-care centre adjacent to A&E. It has struggled to appoint a local clinical director (the post is still vacant a year in). Many staff who supported out-of-hours provision for years have walked away, so alienated do they feel; each week, the company has to fly or chauffeur clinicians and drivers from elsewhere in the country just to keep what is at times a skeleton service going. Turnover is high and those local staff who continue to work under the new regime are weary of the constant appeals to step into the breach to fill rota gaps.

Staff and doctors who once willingly responded to requests for assistance leave their phones unanswered when they recognise the number of the rota administrator. A rich but unquantifiable resource, which might be called the public-service ethos in the NHS, has been squandered in front of our eyes. Even at this stage it may be too late to recapture it.

The deleterious effects of a competitive marketplace have been loudly argued by opponents of privatisation throughout the past decade. Yet according to one commissioner with over 20 years’ experience of health-
service procurement, no one in government had any vision of how the competition agenda might degrade integrated systems of care for patients with multiple diseases. The
focus was unrelentingly on improving elective care – the NHS’s low-hanging fruit – with fingers crossed in the forlorn hope that the changes being made wouldn’t destabilise the rest of the service.

Of the major parties contesting the forthcoming general election, it is Labour that seems to understand the issue, and it is this that underpins Andy Burnham’s pledge to repeal the Health and Social Care Act and to legislate to exempt the NHS from EU competition legislation. Integrated care is the only game in town and it can only be delivered within projected levels of spending by well-configured public services that have been freed from the fragmentary consequences of enforced competition. That said, Labour finds itself in an embarrassing position: the party that began privatisation has to explain why that process – which has, after all, resulted in improvements in the elective-care arm of the service – is simultaneously incompatible with meeting the present-day challenges the NHS faces.

The Conservatives, by contrast, are silent; the NHS was conspicuously absent when they announced their six key manifesto areas. Having gone into the last election promising no more top-down reorganisations of the service, and having then presided over arguably the most damaging such reorganisation in the history of the service, they may quite reasonably believe that nothing they say on the subject will be trusted. They may also have calculated that the complexity of the problem defies exploration in our soundbite-dominated culture and that saying nothing will allow them to continue business as usual, should they be re-elected. If so, that would be a cynical continuation of the approach that has created the mess we are all dealing with.

Burnham is right: this election does represent a fundamental decision point as to how our NHS will develop or degrade in the future. We need to know, well in advance of the poll, where each party stands on this important matter. And having declared its approach, whichever party goes on to lead the next government must somehow be held to keep the promises on which it has been voted into power.

Dr Phil Whitaker is an award-winning novelist. He writes the New Statesman’s Health Matters column

This article first appeared in the 27 February 2015 issue of the New Statesman, Russia vs the west

Jeremy Corbyn. Photo: Getty
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Lexit: the EU is a neoliberal project, so let's do something different when we leave it

Brexit affords the British left a historic opportunity for a decisive break with EU market liberalism.

The Brexit vote to leave the European Union has many parents, but "Lexit" – the argument for exiting the EU from the left – remains an orphan. A third of Labour voters backed Leave, but they did so without any significant leadership from the Labour Party. Left-of-centre votes proved decisive in determining the outcome of a referendum that was otherwise framed, shaped, and presented almost exclusively by the right. A proper left discussion of the issues has been, if not entirely absent, then decidedly marginal – part of a more general malaise when it comes to developing left alternatives that has begun to be corrected only recently, under Jeremy Corbyn and John McDonnell.

Ceding Brexit to the right was very nearly the most serious strategic mistake by the British left since the ‘70s. Under successive leaders Labour became so incorporated into the ideology of Europeanism as to preclude any clear-eyed critical analysis of the actually existing EU as a regulatory and trade regime pursuing deep economic integration. The same political journey that carried Labour into its technocratic embrace of the EU also resulted in the abandonment of any form of distinctive economics separate from the orthodoxies of market liberalism.

It’s been astounding to witness so many left-wingers, in meltdown over Brexit, resort to parroting liberal economics. Thus we hear that factor mobility isn’t about labour arbitrage, that public services aren’t under pressure, that we must prioritise foreign direct investment and trade. It’s little wonder Labour became so detached from its base. Such claims do not match the lived experience of ordinary people in regions of the country devastated by deindustrialisation and disinvestment.

Nor should concerns about wage stagnation and bargaining power be met with finger-wagging accusations of racism, as if the manner in which capitalism pits workers against each other hasn’t long been understood. Instead, we should be offering real solutions – including a willingness to rethink capital mobility and trade. This places us in direct conflict with the constitutionalised neoliberalism of the EU.

Only the political savvy of the leadership has enabled Labour to recover from its disastrous positioning post-referendum. Incredibly, what seemed an unbeatable electoral bloc around Theresa May has been deftly prized apart in the course of an extraordinary General Election campaign. To consolidate the political project they have initiated, Corbyn and McDonnell must now follow through with a truly radical economic programme. The place to look for inspiration is precisely the range of instruments and policy options discouraged or outright forbidden by the EU.

A neoliberal project

The fact that right-wing arguments for Leave predominated during the referendum says far more about today’s left than it does about the European Union. There has been a great deal of myth-making concerning the latter –much of it funded, directly or indirectly, by the EU itself.

From its inception, the EU has been a top-down project driven by political and administrative elites, "a protected sphere", in the judgment of the late Peter Mair, "in which policy-making can evade the constraints imposed by representative democracy". To complain about the EU’s "democratic deficit" is to have misunderstood its purpose. The main thrust of European economic policy has been to extend and deepen the market through liberalisation, privatisation, and flexiblisation, subordinating employment and social protection to goals of low inflation, debt reduction, and increased competitiveness.

Prospects for Keynesian reflationary policies, or even for pan-European economic planning – never great – soon gave way to more Hayekian conceptions. Hayek’s original insight, in The Economic Conditions of Interstate Federalism, was that free movement of capital, goods, and labour – a "single market" – among a federation of nations would severely and necessarily restrict the economic policy space available to individual members. Pro-European socialists, whose aim had been to acquire new supranational options for the regulation of capital, found themselves surrendering the tools they already possessed at home. The national road to socialism, or even to social democracy, was closed.

The direction of travel has been singular and unrelenting. To take one example, workers’ rights – a supposed EU strength – are steadily being eroded, as can be seen in landmark judgments by the European Court of Justice (ECJ) in the Viking and Laval cases, among others. In both instances, workers attempting to strike in protest at plans to replace workers from one EU country with lower-wage workers from another, were told their right to strike could not infringe upon the "four freedoms" – free movement of capital, labour, goods, and services – established by the treaties.

More broadly, on trade, financial regulation, state aid, government purchasing, public service delivery, and more, any attempt to create a different kind of economy from inside the EU has largely been forestalled by competition policy or single market regulation.

A new political economy

Given that the UK will soon be escaping the EU, what opportunities might this afford? Three policy directions immediately stand out: public ownership, industrial strategy, and procurement. In each case, EU regulation previously stood in the way of promising left strategies. In each case, the political and economic returns from bold departures from neoliberal orthodoxy after Brexit could be substantial.

While not banned outright by EU law, public ownership is severely discouraged and disadvantaged by it. ECJ interpretation of Article 106 of the Treaty on the Functioning of the European Union (TFEU) has steadily eroded public ownership options. "The ECJ", argues law professor Danny Nicol, "appears to have constructed a one-way street in favour of private-sector provision: nationalised services are prima facie suspect and must be analysed for their necessity". Sure enough, the EU has been a significant driver of privatisation, functioning like a ratchet. It’s much easier for a member state to pursue the liberalisation of sectors than to secure their (re)nationalisation. Article 59 (TFEU) specifically allows the European Council and Parliament to liberalise services. Since the ‘80s, there have been single market programmes in energy, transport, postal services, telecommunications, education, and health.

Britain has long been an extreme outlier on privatisation, responsible for 40 per cent of the total assets privatised across the OECD between 1980 and 1996. Today, however, increasing inequality, poverty, environmental degradation and the general sense of an impoverished public sphere are leading to growing calls for renewed public ownership (albeit in new, more democratic forms). Soon to be free of EU constraints, it’s time to explore an expanded and fundamentally reimagined UK public sector.

Next, Britain’s industrial production has been virtually flat since the late 1990s, with a yawning trade deficit in industrial goods. Any serious industrial strategy to address the structural weaknesses of UK manufacturing will rely on "state aid" – the nurturing of a next generation of companies through grants, interest and tax relief, guarantees, government holdings, and the provision of goods and services on a preferential basis.

Article 107 TFEU allows for state aid only if it is compatible with the internal market and does not distort competition, laying out the specific circumstances in which it could be lawful. Whether or not state aid meets these criteria is at the sole discretion of the Commission – and courts in member states are obligated to enforce the commission’s decisions. The Commission has adopted an approach that considers, among other things, the existence of market failure, the effectiveness of other options, and the impact on the market and competition, thereby allowing state aid only in exceptional circumstances.

For many parts of the UK, the challenges of industrial decline remain starkly present – entire communities are thrown on the scrap heap, with all the associated capital and carbon costs and wasted lives. It’s high time the left returned to the possibilities inherent in a proactive industrial strategy. A true community-sustaining industrial strategy would consist of the deliberate direction of capital to sectors, localities, and regions, so as to balance out market trends and prevent communities from falling into decay, while also ensuring the investment in research and development necessary to maintain a highly productive economy. Policy, in this vision, would function to re-deploy infrastructure, production facilities, and workers left unemployed because of a shutdown or increased automation.

In some cases, this might mean assistance to workers or localities to buy up facilities and keep them running under worker or community ownership. In other cases it might involve re-training workers for new skills and re-fitting facilities. A regional approach might help launch new enterprises that would eventually be spun off as worker or local community-owned firms, supporting the development of strong and vibrant network economies, perhaps on the basis of a Green New Deal. All of this will be possible post-Brexit, under a Corbyn government.

Lastly, there is procurement. Under EU law, explicitly linking public procurement to local entities or social needs is difficult. The ECJ has ruled that, even if there is no specific legislation, procurement activity must "comply with the fundamental rules of the Treaty, in particular the principle of non-discrimination on grounds of nationality". This means that all procurement contracts must be open to all bidders across the EU, and public authorities must advertise contracts widely in other EU countries. In 2004, the European Parliament and Council issued two directives establishing the criteria governing such contracts: "lowest price only" and "most economically advantageous tender".

Unleashed from EU constraints, there are major opportunities for targeting large-scale public procurement to rebuild and transform communities, cities, and regions. The vision behind the celebrated Preston Model of community wealth building – inspired by the work of our own organisation, The Democracy Collaborative, in Cleveland, Ohio – leverages public procurement and the stabilising power of place-based anchor institutions (governments, hospitals, universities) to support rooted, participatory, democratic local economies built around multipliers. In this way, public funds can be made to do "double duty"; anchoring jobs and building community wealth, reversing long-term economic decline. This suggests the viability of a very different economic approach and potential for a winning political coalition, building support for a new socialist economics from the ground up.

With the prospect of a Corbyn government now tantalisingly close, it’s imperative that Labour reconciles its policy objectives in the Brexit negotiations with its plans for a radical economic transformation and redistribution of power and wealth. Only by pursuing strategies capable of re-establishing broad control over the national economy can Labour hope to manage the coming period of pain and dislocation following Brexit. Based on new institutions and approaches and the centrality of ownership and control, democracy, and participation, we should be busy assembling the tools and strategies that will allow departure from the EU to open up new political-economic horizons in Britain and bring about the profound transformation the country so desperately wants and needs.

Joe Guinan is executive director of the Next System Project at The Democracy Collaborative. Thomas M. Hanna is research director at The Democracy Collaborative.

This is an extract from a longer essay which appears in the inaugural edition of the IPPR Progressive Review.

 

 

This article first appeared in the 27 February 2015 issue of the New Statesman, Russia vs the west