Privatisation and the NHS

This post breaks a loose rule I have of not writing here about policy issues that directly relate to my work. But it’s a sufficiently broad issue, and also sufficiently important, that it’s worth setting it out. In real life I see often otherwise switched-on, politically alert people talking about the supposed ‘privatisation’ of the NHS, and this line is even increasingly taken by mainstream opposition politicians (something that I and other professional policy types find greatly dispiriting). This post outlines why this conspiracy theory is both incorrect and also deeply unhelpful — there are abundant Bad Things going on in respect of the NHS, and this is exactly the wrong time to be concentrating fire on a figment. (And for the benefit of those not alive to such nuances, we’re talking here about the NHS in England, not in Scotland, Wales or Northern Ireland.) It’s intended for non-NHS-policy types — policy people working in the field will be familiar with all of this.

Part one: what do we mean by privatisation?
As ever, our first step must be to define our terms. In doing so, we quickly see that ‘privatisation’ can be taken to refer a variety of things. Let’s consider them in turn.

The most obvious form of privatisation is to take a public organisation and sell it to private shareholders, as was done for instance with British Airways. So, what would that look like for the NHS? It could mean that the NHS is put into a corporate structure and shares in that company sold. Obviously, that hasn’t happened. It could also mean that the NHS is sold off as a range of institutions — individual hospitals, commissioning organisations and so on. Again, that hasn’t happened (although see the next item for a variation on this).

Even if one of those fates befell the NHS, would that alter how the NHS works, ie as a service funded by taxation, (mostly) free at the point of use? Not necessarily — indeed, very likely not at all. Plenty of privatisations have resulted in privately owned companies with statutory obligations to provide public services in specified ways — the railways and Royal Mail are both examples. In those cases, while we might argue legitimately about the quality of the service, the basic mechanics of using it have remained the same.
Some might argue that proposals to dispose of NHS assets no longer required is an example of the second variation of this form of privatisation. It isn’t. It’s just selling stuff. Once disposed of, the assets leave the NHS. Whether it’s wise or not is another debate, but it’s not privatisation.

Another way we might understand privatisation in the context of the NHS is the appointment of private providers — whose shares may be available to the public for purchase, or equally may not — to provide certain contracted services. Now, this certainly happens, and is increasing — but slowly, as the King’s Fund sets out. But this is more commonly, and properly, referred to as outsourcing.

Importantly, in this type of arrangement it is also possible to appoint a publicly-owned organisation to provide the service, as has been done on our nominally privatised, but more accurately outsourced, railway system. On the railways, the Department for Transport determines the service to be provided, and external providers bid for the contract. The infrastructure is publicly owned, and the trains mostly privately owned — but under fairly tight supervision by the DfT, which is closely involved in decisions about what rolling stock gets purchased and run on what services. The public Directly Operated Railways was occasionally brought in to run a franchise when a private sector one has failed (although the government’s ‘operator of last resort’ is now also a private company, or more accurately consortium — but still there to do as directed by the government). If anything, this shows that describing our railways as privatised at all is a bit of a con — really they are fundamentally public in planning and (to a substantial degree) ownership, with a heavy measure of outsourcing.

In the NHS, outsourcing is done in several ways. Private companies provide some community services (wheelchairs have recently gone to private providers in a big way), offer NHS eyesight and hearing tests on the high street (Specsavers et al), and provide general practice services — your GP surgery is, and always has been, a private contractor to the NHS. This is not to mention the large scale outsourcing of social care and, of course, the large and longstanding role of private pharmacists. Remember also that the contracts can be let both to other public bodies, and to charities (and indeed some well established NHS providers are charities, from Great Ormond Street Hospital down to small, specialised community providers).

In principle, there is only one rational response to outsourcing: so what? The terms of the service are still determined by the relevant public body, and it is provided to the public on the same basis as before. In practice there may of course be many concerns — the theoretical benefits of competition, private sector know-how and specialist providers being able to bring benefits to service users may not be realised, while concerns about a profit-making company having to find its slice from the same pot of public money as before may be. But that’s all a matter of detail, not principle. The slow growth of private business operations of this sort in the NHS cannot sensibly be characterised as privatisation, and as an expansion of outsourcing they’re modest, particularly when viewed in light of the numerous longstanding strands of private sector operations within the NHS.

It’s also necessary to observe here that the continued growth of outsourcing in the NHS, slow though it is, is not assured. In social care, private providers are increasingly handing contracts back to local authorities because the public funding available is too small for them to be able to deliver the service and turn a profit. Underfunding in the NHS has led it to exhibit some of the same characteristics as social care, albeit with 5–10 years’ delay, and it’s likely that private providers will be less and less attracted to the NHS if it continues to be underfunded. Certainly the only experiment with outsourcing hospital management resulted in the private company handing the contract back on the basis that it was unsustainable for them at the level of funding on offer. But more — much more — about underfunding later.

Sticking with privatisation for now, a third variety we might identify, and which is sometimes alleged to be going on in the NHS, would be to abolish the NHS as a tax-funded service, and instead oblige all citizens to take out private health insurance. This is how many countries operate their comprehensive healthcare systems, and is successful when done properly. But nobody is seriously suggesting it, and when Nigel Lawson was Chancellor he commissioned work to look at it and concluded that the practical differences compared to funding the NHS through taxation were so minor as to mean the upheaval required to make the switch couldn’t be justified. It should be said that this is a subject of health policy lore — as it pre-dates the internet I’ve never read anything arising from this work, if indeed it was ever published, but it’s occasionally repeated by those with long memories and sounds eminently plausible (albeit it might have become a bit garbled in the telling, who knows). Whether Lawson commissioned the research or not, pivots from a ‘Beveridge’ (tax funded) system to a ‘Bismarck’ (compulsory insurance) one seldom happen, precisely because the upshot in terms of how actual patient care gets organised would be so minimal, despite the massive upheaval.

There’s one further phenomenon we might brand privatisation, and that’s a deliberate strategy to oblige people to rely on their own resources by running down and withdrawing NHS services. Certainly people are being pushed towards that by the decision of governments since 2010 to underfund the NHS relative to any and all of GDP, population growth and rising demand. We’ll return to this in part three.

However, those who allege that the NHS is being privatised tend to point either towards things more properly characterised as outsourcing or allege that the government wishes to switch to a private insurance system, sometimes conflating the two by claiming the former as a symptom of the latter. This argument alleges that a set of people (the government, or part of it) are planning secretly to undertake a course of action counter to what they say they intend to do (see for instance Jeremy Hunt’s unequivocal statement that he intends the NHS to continue to be tax-funded and free at the point of use). Their theory, in short, is that there is a conspiracy going on. So on the odd occasion when I am challenged on my use of the term ‘conspiracy theory’ to describe allegations of NHS privatisation, I am surprised that the choice of language is questioned: a conspiracy theory is exactly what it is.

Part two: why the conspiracy theory doesn’t stack up
It’s a fairly quick task to outline why the conspiracy theory is not convincing — indeed, while I expected this section to be the core of this article, it has in fact come out at just two paragraphs. If it were right to say that the NHS is being privatised… it would have been privatised by now. The Conservative Party has been in office for seven years; say what you like about them, but they know how to privatise things. If that was their intent, it would have happened. But, as we’ve seen, it hasn’t.

To engage a little more closely with the conspiracy theorists’ views, they tend to allege that whatever changes the government is cooking up, they are paving the way for privatisation. Hence Lansley’s politically disastrous reforms were critiqued in this manner. But they have been in force for four years now, and as we have seen the growth of private companies’ activities in the NHS, while not zero, has been modest at most. More currently, it is alleged by some that the introduction of Accountable Care Systems is a further bridge to privatisation, on the grounds that they will be contracted out to private companies in the manner of Accountable Care Organisations in the USA. To understand fully why this is a clodhopping error, we must turn to what’s actually happening in the NHS.

Part three: what’s actually happening — underfunding
From the point of view of people who work in health policy, by far the most infuriating thing about the privatisation conspiracy discourse is that it obscures and distracts from the many problems that really are facing the NHS as a result of political decisions. Indeed, it’s not going too far to say that it is letting the government get away with things, as political fire is being diverted to the mirage of privatisation where, unsurprisingly, it never lands a genuine blow. One might also observe that the discourse exhibits a classic characteristic of conspiracy theories, in that it often entails drawing at best semi-correct inferences from publicly available but inadequately understood information, and then making logical leaps that overlook other readily available facts.

So, what are the Bad Things that are really happening with the NHS? Fundamentally, there’s one seriously Bad Thing, and a further Good Thing that’s Gonna Go Bad, as Tammy Wynette didn’t quite sing. The truly Bad Thing is that the NHS is quite simply being underfunded. For all that the government might claim that in the 2015 spending review it gave the NHS the money it asked for (which it didn’t really, unless you measure it in pretty much the most bizarre way imaginable), NHS spending is set to shrink over the review period relative to population, GDP and actual demand. The ‘above inflation’ funding increases promised and sort-of delivered by the Coalition were calculated with reference to consumer inflation, which is completely irrelevant to healthcare. And it is not contested that social care funding has been cut even more steeply since 2010, having been inadequate to begin with.

Plenty of people observe that the NHS has been resilient in the face of slower funding growth than it has ever known before, and to an extent that’s true. But the limits of its resilience have now been breached, and the impact on patients is growing ever more noticeable. The NHS is in breach of its key performance targets, including A+E waiting times and referral-to-treatment times for elective surgery. Local health economies are desperately scrabbling for savings. Need a new knee? You might be forced to lose weight or stop smoking before getting surgery, not because it’s clinically essential but because it saves some cash up front. Need care in your own home? If your needs are particularly complex, you may now be forced to move into a nursing home instead — again, because it’s cheaper, not because there’s any clinical reason why the care in your own home can’t be provided. Need transport to get to a treatment centre? It’s more and more pot luck whether it will be provided for you. Want to be discharged quickly from hospital? Want to be discharged safely from hospital? Want to be seen quickly in A+E? Want to be treated on a ward, not in a corridor? Cross your fingers and hope you’re lucky. In some places, to be fair, you still will be.

The answer to a lot of these problems may be to go private. Need a wheelchair? Buy it yourself, it’ll be quicker. Want to stay in your own home? Pay for your own round-the-clock care. Want that surgery more quickly? Fork out for it. Largely, this is a non-calculated consequence of those cutbacks due to underfunding: those who can afford to get round the problems will do so. However, there are signs of NHS England actively guiding people to fall back on their own resources to save the NHS money, with their mooted plans to restrict prescriptions for over-the-counter medicines. Those are just high level proposals at the moment, but the principle of a central policy drive to oblige people to rely on their private resources feels significant, and undoubtedly flows directly from the inadequacy of the 2015 funding settlement.

One major obstacle to a shift to an adequate funding settlement is the view that the NHS is inefficient. This is held by the Treasury, and unfortunately trotted out by many political pundits with unhelpful regularity. In truth, the NHS achieves outcomes as good as any healthcare system globally, and better than most, relative to the resources it is given. Many systems achieve more for their patients; but they are all better funded. While it may be true that there are efficiencies to be found from, for instance, more effective scheduling and management of appointments (often an irritation that patients encounter and remember), these efficiencies add up to tens of millions of pounds’ worth or maybe hundreds at most. An adequate funding settlement would involve tens of billions more. Worse still, finding greater efficiencies is in practice extremely hard without outright cutting services. The restrictions on care at home, for instance, probably do add up to a more efficient use of resources, but they are achieved by fundamentally compromising the care available to patients — they are efficiencies only in as much as the reduction in the amount put into the system slightly outstrips the reduction in the amount the system puts out in response. Endless pursuit of efficiencies in this sort can only result in considerable reductions in what the NHS actually provides for patients.

Part four: what’s actually happening — structures and systems
So, under-funding is the major threat facing the NHS. But that doesn’t tell us what’s happening in terms of STPs, ACSs and all the other things that the conspiracy theorists cite in support of their analysis. To understand these, we need to start with the Lansley reforms, in terms of both what they neglected to do, and a major unintended consequence.

Firstly, here’s what I mean by what the Lansley reforms neglected to do. It’s been apparent for many years that the profile of our population is changing: more people are living longer, in terms of both the demographic bulge of the ‘baby boomers’, and our increasing success in keeping people alive. Many big killers are now somewhat less big killers, while many preventable illnesses are now more effectively prevented: the population has, to a degree, got wiser about smoking and diet. That said, the growing population of increasingly elderly people will still have illnesses that need treating — either things that might have killed them in an earlier generation, or things they might not have lived long enough to develop in an earlier generation. The greater part of the NHS’s spending goes on people with long term conditions, mostly older people, and of course they are users of social care too. In short: demand for care is going up, and the types of care needed are changing. It’s no longer enough to take people into hospital, treat them and send them home (or fail, in which case they die); now, many people have one or more long term condition, for which the appropriate treatment is care and support in their own home, through which they can remain independent and maintain a decent quality of life.

It has therefore been an orthodoxy in health policy circles for a couple of decades now that we need to undertake a big shift in both the volume and the types of care available. Keeping people well and living independently requires much more support close to home, from GPs, social care and other community services; if it’s done really well, admissions to hospital (and length of stay) will start to drop, meaning that in principle we’ll need less hospital capacity. But successive governments have struggled to implement this, mostly through lacking the political will to harness the extra tax revenue it will need and, to a degree, to invite local upset by closing down some hospitals that are no longer needed because of the shift of care from hospital to the community. The Blair and Brown governments oscillated between trying to address this and writing it off as too hard; under the Coalition, Lansley essentially didn’t bother. Instead he undertook a reconfiguration of the NHS along his preferred lines which, of itself, didn’t immediately change care very much at all.

However, this brings us to the major unintended consequence of the Lansley reforms. One of his more sensible ideas (albeit it had complex implications) was to take the NHS out of political control, separating its management out from the Department of Health and therefore from the direct control of ministers. Instead, its central management would be by the NHS Commissioning Board, which would work within a set of broad parameters set by ministers — but the specifics of how it achieved the aims set in those parameters would be down to the Board, not diktat by politicians. As soon as it assumed its full operating responsibilities, the NHS Commissioning Board rebranded itself much more approachably, as NHS England.

Lansley’s reforms, intended to create a market-led NHS of local decision-making, free from the supposed dead hand of central bureaucracy, therefore ended up creating a powerful new centralised technocracy, beyond the day-to-day control of the government, in the form of NHS England. Let me emphasise: Jeremy Hunt, the Secretary of State for Health, does not control NHS England. This soon proved significant, as NHS England fairly quickly set about addressing the long-neglected need to shift how the NHS operates to meet the needs of its current and future population of increasingly old people, living longer but not necessarily healthier.

The initiative for doing this was the Five Year Forward View, published in 2014 (though it had other purposes too, not least setting out a minimum figure for necessary funding — the one the Conservatives kept saying they’d met). Implementation of this is a complex affair and still ongoing. Ultimately the NHS was required to devise Sustainability and Transformation Plans on 44 local footprints. These areas have now been transformed into Sustainability and Transformation Partnerships — effectively a new and rather useful semi-regional tier of management in the NHS (which Lansley could have achieved by, say, merging the 150 or so Primary Care Trusts he inherited into 44 big PCTs, rather than splitting them up into 210 Clinical Commissioning Groups). The acronym STP can refer either to the Plan or to the Partnership that is implementing it.

But there’s more. Under Lansley, the NHS continued to operate under a market structure: commissioners (Primary Care Trusts, later Clinical Commissioning Groups) existed to spend the NHS budget by buying services from providers (hospitals, community health organisations, GPs and so on). This meant that — crudely put — nothing should happen in the NHS that there wasn’t a contract for. To critics, this resulted in a rather fragmented system that wasn’t joined up — being a collection of complex individual contracts — and certainly didn’t join up around patients. The vision of the Five Year Forward View is that instead of working through transactions and competing for resources, the different parts of the NHS should collaborate to build structures of care that work for people. The STPs are mostly a pretty decent size of area for this collaboration to work effectively, and produce more joined-up care.

That’s the idea (again, crudely put) of an Accountable Care System: care is organised by the different hospitals and other services collaborating together, with a clearly defined organisation taking the lead and supplying the budget, but not organising it through a complex web of commercial contracts like before. Crucially, there is no purchaser-provider split: the organisation with responsibility for planning care is a provider or group of providers organisations. The STPs are intended to transform into these Accountable Care Systems (ACSs), and ultimately Organisations (ACOs).
Here it’s important to make clear that these ACOs needn’t be private or public; it’s a way of describing how the planning is done, not who owns the assets or how the care is funded. Privatisation conspiracy theorists get confused by the fact that this model is used in the privately funded American system, and assume it’s about funding and ownership. It’s not. But for now, full ACOs are some years off in the NHS anyway, and ACSs are best understood as a looser, halfway-house sort of version of them.

The conspiracy theorists also often focus in on STPs and ACSs, alleging variously that they exist to make cuts, ACSs will be contracted out to the private sector and so on. In fact, once you know what they’re for, they look rather different. As for whether ACSs / ACOs will be contracted out to the private sector, by far the more likely outcome is that they will ultimately become statutory bodies like CCGs, PCTs and so on before them. That won’t happen quickly, as major new legislation on the NHS won’t happen for years — partly because of the Brexit legislative logjam, and partly because the Lansley reforms gave such initiatives a bad name. Currently, the NHS is reorganising itself into ‘collaborative’ mode using legal structures designed to lock in a ‘competitive’ mode. That’s one reason why it all appears rather obscure — the structures involved are often semi-statutory workarounds bodged out of existing structures. The up-side of this is that, hopefully, the NHS itself will come up with a set of structures that achieves what it needs, which eventually politicians will then codify, rather than politicians imposing their ideologically preferred structure and leaving the NHS to deal with it.

It should also be clear by now that, far from paving the way for privatisation, the current changes are in fact dismantling the internal market. As soon as the NHS itself was given responsibility for how it operates, it politely and quietly wrote off the internal market as a 20-year failed experiment. Even Jeremy Hunt has acknowledged this, again quietly but still with remarkable openness for a Conservative secretary of state. Throughout the above, it should also have become clear that it’s important to understand that all this is being driven by NHS England, not ministers and the Department of Health.

None of this is to say that NHS England is straightforwardly marvellous and everything is rosy. It’s a powerful, centralised body, and often acts like it. It has already established a pattern of pushing ahead with its own agenda, without consultation or engagement with patients until after the fact (eg current proposals on ‘low value’ medicines), and also of slow delivery (commissioning policies for instance). To a degree this is necessary to get things moving on the big-picture problems that should have been tackled ten years ago, but that’s not always a fair excuse.

This lack of transparency and accountability has spilled over into STPs, giving the impression that they are secretive (which they have been) and therefore part of some dark plot (which they’re not). Sometimes NHS England is guilty of having a tin ear on comms, too: STPs have a terrible, obscure, wonkish name (as do ACSs), to compound their poor engagement — it’s understandable that they look a bit suspect at first glance. NHS England also let itself down with its now notorious, homophobic comms around PrEP.

All of which is infuriating, because the bulk of the substance NHS England comes up with is often sound, but let down by the 20%, say, that proper engagement could have really made a difference on. It has more work to do to bake early and effective patient engagement into its business as usual work. The flip-side of these complaints is that NHS England is a powerful independent body in charge of the NHS; the role of its CEO is comparable to that of the governor of the Bank of England, as a major but non-governmental figure in public policy. Both of its CEOs so far have been undoubted heavyweights willing to stand up to the politicians.

For completeness, it’s worth saying that some aspects of the Five Year Forward View approach are looking a bit questionable, and would be even if it were properly funded. It’s not at all clear we can really reduce hospital capacity all that much, although we can certainly shift more care into community settings (including primary care, ie GPs) — NHS England has sensibly placed extra restrictions around the circumstances in which hospital beds can be closed, but doing that is fundamental to many STPs making their sums add up, The mechanics of the Sustainability and Transformation Fund — dedicated money associated with providers hitting certain financial benchmarks — are also now arguably driving perverse behaviours (£)to the detriment of patients. Plus of course there’s the final kicker: if the NHS continues not to be properly funded, STPs will indeed turn into the vehicles for service reductions that their critics have alleged — but even so, this does not add up to privatisation, and is more a matter of stopped clocks being right twice a day than any analytical acuity on the part of the conspiracy theorists.

You can and should get upset about the government’s negligent stewardship of the health and social care system without getting hung up on arid debates about ownership. If you fall into that trap, your understanding will be clouded by dogma and you will fail to engage with what’s happening. And by doing that, you will let the politicians who have made decisions to underfund the NHS and social care off the hook, by accusing them of a dastardly plan to privatise the NHS that they simply haven’t hatched.

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