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Think Carillion is bad? Wait until you see what the government wants to do with the NHS

Proposals for the health service will put billions of pounds of contracts into the hands of similarly structured organisations.

It increasingly looks like the collapse of Carillion will not only cost the UK many millions of pounds but also endanger the delivery of vital public services and projects. And yet, even as the government scrambles to clean up the mess left by the contractor’s failure, it is currently proposing to allow NHS services to be put into the hands of companies which operate in the same way.

Carillion already has a raft of NHS Private Finance Initiative (PFI) and Local Improvement Finance Trust (LIFT) contracts in the NHS, including owning and operating 11,000 hospital beds in a dozen NHS hospitals in England and Scotland as well as several General Practitioner (GP) surgeries and community services.

Under the PFI, builders, bankers and service operators like Carillion, rather than government, raised money and entered into long term 30-year contracts with public bodies to pay back the debt. The extortionate costs to the taxpayer of this private borrowing are well documented. In the case of the NHS, which has been paying consortium members including bankers and shareholders a high annual charge for private finance, this is fueling serious financial difficulties in many hospitals and across the NHS. With money diverted to private pockets, beds and services have closed and staff have been reduced.

Carillion has gone bust. Reminiscent of RBS in 2008, after the bank bought Dutch rival ABN AMRO, Carillion has been on a spending and borrowing spree. It has not just been raising money to pay for PFI, it has been borrowing millions of pounds and spending heavily to buy up companies accumulating debts of £1.5 billion.  Now the Carillion days are over, leaving hundreds of subcontractors and tens of thousands of employees in the dark and at risk. The taxpayer is expected to bail out projects in the UK, and there are similar problems shaping up for projects in Canada and Africa .

Carillion’s website proudly boasts that the great advantage of public-private partnership (PPP) is risk transfer, but when the chips are down the risks revert to the public. The mainstream narrative blames public sector contracts, but Carillion’s annual reports disguise the real story: enormous transfers of wealth from public contracts to shareholders and investors, including those companies that were bought out. These sort of wealth transfers from the NHS to private sector operators play out in sickeningly real terms as underfunding, growing deficits, cuts and closures in services and beds and the current NHS crisis.

But what the public haven’t yet been told is that soon almost all NHS services could be delivered under a similar structure, tens of billions of pounds worth of NHS and social care budgets farmed out with neither parliamentary scrutiny nor public consent.

In 2013 all NHS property (except for NHS Foundation Trusts) was transferred to NHS Property Services, a Department of Health owned company. It is charging market rents and inflated property management charges to NHS trusts and some GP practices. These buildings were bought and paid for by the taxpayer or through public subscription many decades ago. Now NHS Property Services is being fattened up for the market. Government plans the sale and disposal of NHS assets to facilitate new PPP which will, in turn, help more failing companies like Carillion or boost big startup projects like Virgin Healthcare. 

Not content with selling off the family silver and lumbering the NHS with exorbitant PFI, Health Secretary Jeremy Hunt and NHS England’s chief executive Simon Stevens have a new plan. Accountable Care Organisations (ACOs) which are the “next big thing” for the NHS. The government plans to roll up billions of pounds of NHS and adult social care funding and award giant commercial contracts to these ACOs for ten to fifteen years. ACOs are non-statutory bodies and can be established as special purpose vehicles, just like PFI operators. ACOs can include private insurance companies, property companies, banks, equity investors, and private health care companies as well as NHS hospital groups and GPs.

ACOs are an American import. In the US ACOs include groups of doctors, hospitals, and other providers. They operate in the most expensive and unfair system in the world, dominated by private health and insurance companies. So why would the government want to introduce ACOs to our NHS?

Stevens, the former boss of large American health corporation UnitedHealth says that “accountable care organisations or systems…will for the first time since 1990 effectively end the purchaser-provider split, bringing about integrated funding and delivery for a given geographical population”.

Only that can’t happen because commercial contracting is established in primary legislation. Implementation of the split, first introduced by the NHS and Community Care Act 1990, was completed by the 2012 Act with the abolition of the duty to provide a health service, and with removal of primary care trusts (PCTs).

We all support integration of health and community services in principle, but how does integration happen when ACOs would further fragment staff, services and care through ever-increasing subcontracting? And how do we unite the areas when health and social care have different population and funding basis? Social care is means-tested and charged for and health care is free-leading to ACOs potentially blurring the boundaries.

There are several reasons to be concerned about the attack on the fundamental principles of the NHS that ACOs involve. A full appreciation of the changes is hampered by the government and NHS England not having explained clearly to the public exactly what is being proposed.

This is why myself and four others including Professor Stephen Hawking have begun legal proceedings against Stevens and Hunt, crowdfunding £176,000 through over 6,000 donations. Our challenge is on the grounds that without an Act of Parliament these plans are unlawful, that there should be proper public consultation and that the principles which say decisions about our NHS should be clear and transparent have been breached.

This is something which affects everyone in England and as we face the catastrophic fallout from the collapse of Carillion it should be unthinkable to introduce more outsourcing and more long term, private sector contracts, especially when it comes to something as important as our NHS.

Allyson Pollock is professor of public health and director of the Institute of Health and Society at Newcastle University, and the author of NHS PLC.

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Labour’s renationalisation plans look nothing like the 1970s

The Corbynistas are examining models such as Robin Hood Energy in Nottingham, Oldham credit union and John Lewis. 

A community energy company in Nottingham, a credit union in Oldham and, yes, Britain's most popular purveyor of wine coolers. No, this is not another diatribe about about consumer rip-offs. Quite the opposite – this esoteric range of innovative companies represent just a few of those which have come to the attention of the Labour leadership as they plot how to turn the abstract of one of their most popular ideas into a living, neo-liberal-shattering reality.

I am talking about nationalisation – or, more broadly, public ownership, which was the subject of a special conference this month staged by a Labour Party which has pledged to take back control of energy, water, rail and mail.

The form of nationalisation being talked about today at the top of the Labour Party looks very different to the model of state-owned and state-run services that existed in the 1970s, and the accompanying memories of delayed trains, leaves on the line and British rail fruitcake that was as hard as stone.

In John McDonnell and Jeremy Corbyn’s conference on "alternative models of ownership", the three firms mentioned were Robin Hood Energy in Nottingham, Oldham credit union and, of course, John Lewis. Each represents a different model of public ownership – as, of course, does the straightforward takeover of the East Coast rail line by the Labour government when National Express handed back the franchise in 2009.

Robin Hood is the first not-for-profit energy company set up a by a local authority in 70 years. It was created by Nottingham city council and counts Corbyn himself among its customers. It embodies the "municipal socialism" which innovative local politicians are delivering in an age of austerity and its tariffs delivers annual bills of £1,000 or slightly less for a typical household.

Credit unions share many of the values of community companies, even though they operate in a different manner, and are owned entirely by their customers, who are all members. The credit union model has been championed by Labour MPs for decades. 

Since the financial crisis, credit unions have worked with local authorities, and their supporters see them as ethical alternatives to the scourge of payday loans. The Oldham credit union, highlighted by McDonnell in a speech to councillors in 2016, offers loans from £50 upwards, no set-up costs and typically charges interest of around £75 on a £250 loan repaid over 18 months.

Credit unions have been transformed from what was once seen as a "poor man's bank" to serious and tech-savvy lenders where profits are still returned to customers as dividends.

Then there is John Lewis. The "never-knowingly undersold" department store is owned by its 84,000 staff, or "partners". The Tories have long cooed over its pledge to be a "successful business powered by its people and principles" while Labour approves of its policy of doling out bonuses to ordinary staff, rather than just those at the top. Last year John Lewis awarded a partnership bonus of £89.4m to its staff, which trade website Employee Benefits judged as worth more than three weeks' pay per person (although still less than previous top-ups).

To those of us on the left, it is a painful irony that when John Lewis finally made an entry into politics himself – in the shape of former managing director Andy Street – it was to seize the Birmingham mayoralty ahead of Labour's Sion Simon last year. (John Lewis the company remains apolitical.)

Another model attracting interest is Transport for London, currently controlled by Labour mayor Sadiq Khan. TfL may be a unique structure, but nevertheless trains feature heavily in the thinking of shadow ministers, whether Corbynista or soft left. They know that rail represents their best chance of quick nationalisation with public support, and have begun to spell out how it could be delivered.

Yes, the rhetoric is blunt, promising to take back control of our lines, but the plan is far more gradual. Rather than risk the cost and litigation of passing a law to cancel existing franchises, Labour would ask the Department for Transport to simply bring routes back in-house as each of the private sector deals expires over the next decade.

If Corbyn were to be a single-term prime minister, then a public-owned rail system would be one of the legacies he craves.

His scathing verdict on the health of privatised industries is well known but this month he put the case for the opposite when he addressed the Conference on Alternative Models of Ownership. Profits extracted from public services have been used to "line the pockets of shareholders" he declared. Services are better run when they are controlled by customers and workers, he added. "It is those people not share price speculators who are the real experts."

It is telling, however, that Labour's radical election manifesto did not mention nationalisation once. The phrase "public ownership" is used 10 times though. Perhaps it is a sign that while the leadership may have dumped New Labour "spin", it is not averse to softening its rhetoric when necessary.

So don't look to the past when considering what nationalisation and taking back control of public services might mean if Corbyn made it to Downing Street. The economic models of the 1970s are no more likely to make a comeback then the culinary trends for Blue Nun and creme brûlée.

Instead, if you want to know what public ownership might look like, then cast your gaze to Nottingham, Oldham and dozens more community companies around our country.

Peter Edwards was press secretary to a shadow chancellor, editor of LabourList and a parliamentary candidate in 2015 and 2017.