Myth 4: These changes represent the privatisation of the NHS

The Government's Claim:

We will never privatise the NHS. The NHS will always be there for everyone who needs it, funded from general taxation, and based on need and not ability to pay.

The Rebuttal

This is a platitude, and the reply is not related to the accusation. The accusation "privatisation of the NHS" means the privatisation of the provision of healthcare, the method of paying for that healthcare is irrelevant (but, as explained below, GPs will be allowed to charge). 

Any Qualified Provider*

[*The government has recently changed the name from Any Willing Provider to Any Qualified Provider.]

The policy of Any Qualified Provider means that a private provider can be used instead of an NHS provider. The patient will not necessarily know the difference and is unlikely to be told that the provider is not part of the NHS. Indeed, some private providers will use the NHS logo for the part of their company that performs NHS work and so patients will be duped into thinking that they are part of the NHS.

An NHS provider is owned by the state and any surplus from activity will be re-invested into more NHS treatment. A private provider will pay their surplus as dividends to their shareholders, and therefore patients will get less care for the same amount of money when compared to an NHS provider. Further, NHS providers use the surplus from one service to subsidise other services that cost more to provide than the NHS pays. When a private provider replaces an NHS provider the result is that the NHS provider will get less income, and ultimately the service will close due to lack of funding. It may not be just one service, since there may be several services dependent upon the surplus.

The Department of Health's Co-operation and Competition Panel acknowledge this in a recent report of competition in the NHS (section 20):

Providers that are successful in attracting patients will be able to earn revenues that, in the case of NHS Foundation Trusts for example, can be reinvested in other services. Providers that do not attract sufficient patients face the prospect of being unable to meet their financial obligations.

This says that NHS hospitals that fail to attract patients will close. An NHS hospital will fail to attract patients if the patients are enticed away to private hospitals. Since this will mean that the service will be provided by a private provider, this can only be described as the National Health Service being privatised.

There is already evidence that AQP is being used to privatise care. Pulse magazine report that in March 2011 there are areas in the country where care pathways are deliberately awarded to private companies (as opposed to allowing patients to choose their provider):

NHS Oldham is also looking to split care pathways among competing providers, starting in May. The PCT is to launch tenders for ophthalmology, sexual health and diabetes services in the next three months, and has awarded a contract to take on the entire budget for elective orthopaedic and rheumatology services to a private firm, Pennine Musculoskeletal Partnership. Dr Laitner [a GP in St Albans, and the shared decision making lead at QIPP Right Care, a Government-backed unit set up to spearhead the NHS’s £20bn savings drive] said a national rollout would create ‘a distinct alternative to hospital specialist care’.

The concerning aspect about these pilots is that Lansley constantly says that it is the patients who will choose "Any Qualified Provider" but these pilots show that the government is pushing for wholesale privatisation. Pulse quote Dr Laitner:

"I'm very comfortable that we test the market. This is about providing an integrated service and if the private sector can do a better job that's fine."

Dr Laitner is clearly indicating that the private sector will be used to replace NHS hospital care.

Hospitals taken out of public ownership

The NHS white paper says (section 4.21):

Our ambition is to create the largest and most vibrant social enterprise sector in the world. ... As all NHS trusts become foundation trusts, staff will have an opportunity to transform their organisations into employee-led social enterprises that they themselves control, freeing them to use their front-line experience to structure services around what works best for patients.

A social enterprise is not a public body, it is not owned by the state and hence is not owned by the public. The white paper suggests that a narrow section of the public will own the social enterprises (employee-led) but this can no more be described as "public ownership" than a de-mutualised building society. Indeed, social enterprises are exempt from Freedom of Information requests, showing that they are not public bodies. If a social enterprise hospital is not a public body then it can only be described as a private business. At best, the mechanism of changing hospitals into social enterprise can be called de-nationalising, but the most accurate term is privatisation.

Relaxation of "default provider"

The Spending Review 2010 says in section 1.87:

The Government believes that while it should continue to fund important services, it does not have to be the default provider.

And then it elaborates by saying:

the Government will look at setting proportions of appropriate services across the public sector that should be delivered by independent providers, such as the voluntary and community sectors and social and private enterprises.

This says that the government will specify that an arbitrary and fixed proportion of NHS services must be provided by healthcare providers other than the NHS. Further, the NHS white paper says (section 4.28) that the economic regulator, Monitor will:

require monopoly providers to grant access to their facilities to third parties

where the "monopoly provider" is an NHS hospital trust and the "third parties" are the "voluntary and community sectors and social and private enterprises" mentioned in the Spending Review.

In effect, the government will say that a fixed proportion of all services provided within an NHS hospital must be provided by private companies, and this is a form of privatisation.

In February 2011 David Cameron wrote an article for the Daily Telegraph entitled "How we will release the grip of state control". In this article Cameron announces that the government will allow any private provider (the voluntary and community providers have been dropped) to take over a public service.

We will create a new presumption ... that public services should be open to a range of providers competing to offer a better service. ... But everywhere else should be open to diversity; open to everyone who gets and values the importance of our public service ethos. This is a transformation: instead of having to justify why it makes sense to introduce competition in some public services ... the state will have to justify why it should ever operate a monopoly.

This is not competitive tendering, this is simply the case of a private company saying "we want to provide that service" and they will be handed the contract.

Pulse, the trade magazine for GPs, in an editorial comments on this by saying:

It is becoming clear that the possibilities Mr Lansley envisages for the private sector go far beyond what Labour had countenanced, when it had an any willing provider policy until shortly before the last general election, and beyond too what the Liberal Democrats had imagined when including the policy in their manifesto.

Both those parties wanted NHS providers to be thrust into competition with the private sector whenever a new service was set up. But the coalition Government looks set to go far beyond that, by arguing that private companies should be able to challenge for the right to run any existing public service if they can show they can offer better value for money. Nigel Edwards, acting chief executive of the NHS Confederation, called the plan ‘a game changer’ and speculated that private companies could challenge GPs for the right to take on their practice contracts.

Pulse go on to say that the government has largely lost the confidence of GPs because of Lansley's obsession with privatisation:

GPs were there to be led, but like some Pied Piper in reverse, the more the health secretary has played his tune the more the profession has been pushed into opposition. It doesn’t help that so many of the melodies seem familiar from the old-style Conservative playbook of privatisation.

Trust borrowing

The government intends to remove the Prudential Borrowing Code (PBC). The PBC is used to limit the commercial loans that Foundation Trusts can take out. The rationale of PBC is that it protects the taxpayers' investment in Foundation Trusts against the risk that FTs take on too great a debt burden and become financially unsustainable. Removing the PBC and a pledge in the NHS white paper (section 1.22) that the government will provide

no bail-outs for organisations which overspend public budgets

means that the only route for capital investment for trusts will be commercial loans and these will put the trusts in financial risk. In the future there will be no asset lock on Foundation Trusts (see below) meaning that a bank may require that a hospital has to sell part of its property to pay off a loan.

Removing Private Patient Income cap

Currently Foundation Trusts are restricted to the amount of private work they can perform. When a trust is authorised as a Foundation Trust the regulator, Monitor, sets the Private Patient Income cap. This is set to the percentage of income that the trust earned from private work in 2002/03. The new Foundation Trust is not allowed to exceed this cap. This does not prevent the trust from doing more private work, but if they do get more private income they have to increase their NHS work proportionally. This means that the trust will always be focused on NHS work.

Removing the cap will mean that Foundation Trusts will be able to develop more private work without a corresponding increase in NHS work. Since private work is potentially lucrative, this will lead to creeping privatisation of NHS hospitals as the hospital does more and more private work.

It is interesting that the Private Hospitals Alliance (H5) are against the removal of the PPI cap.

Removing the Asset Lock

The National Health Service 2006 section 45 applies a lock to all the assets of a Foundation Trust:

An NHS foundation trust may not dispose of any protected property without the approval of the regulator

(The regulator is Monitor.)

This clause says that a Foundation Trust cannot sell off its property, instead it has to first seek the approval of Monitor who may decline to give their permission. The government intends all hospital trusts to be Foundation Trusts, and expects every Foundation Trust to become a social enterprise. A social enterprise can merge or take over another social enterprise, but the asset lock means that if this happens to a (former NHS) hospital trust, the new owners will not be able to sell off the trust's property.

The Health and Social care Bill will repeal this clause (section C148(9)). This means that it will be possible for (former NHS) hospital trusts to merge and for there to be sales of assets. Furthermore, the government is happy for private companies to run NHS hospitals and repealing the asset lock clause will allow those companies to sell off NHS assets.

Charges for NHS care

The Bill will give GPs discretion about charging for NHS services. Clause 22 inserts a new clause 14S into the National Health Service Act 2006, this clause says:

Additional powers of consortia

14S Raising additional income
(1) A commissioning consortium has power to do anything specified in section 7(2)(a), (b) and (e) to (h) of the Health and Medicines Act 1988 (provision of goods etc.) for the purpose of making additional income available for improving the health service.
(2) A commissioning consortium may exercise a power conferred by
subsection (1) only to the extent that its exercise does not to any
significant extent interfere with the performance by the consortium of
its functions.


The important section of the Health and Medicines Act 1988 is 7(2)(h) which says: a commissioning consortium will have powers

(h) to make such charge as he considers appropriate for anything that he does in the exercise of any such power and to calculate any such charge on any basis that he considers to be the appropriate commercial basis.

This is very explicit. GP consortia will be allowed to charge for some services on a commercial basis so long as "does not to any significant extent interfere with the performance by the consortium".

Charging is not restricted to GPs, the Bill also allows Foundation Trust hospitals to charge for accommodation. Clause 150 of the Bill says:

150 Private health care
(1) In section 44 of the National Health Service Act 2006 (private health care), omit—
(a) subsection (1) (restriction on provision of private health services),
(b) subsection (2) (cap on private income),
(c) subsection (2A) (special provision for mental health foundation trusts),
and
(d) subsections (3) to (5) (interpretation etc.).
(2) For the title to that section substitute “Power to charge for accommodation etc.”.

Let's go back to the National Health Service Act 2006 and make the changes:

44 Power to charge for accommodation etc.

(6) According to the nature of its functions, an NHS foundation trust may, in the case of patients being provided with goods and services for the purposes of the health service, make accommodation or further services available for patients who give undertakings (or for whom undertakings are given) to pay any charges imposed by the NHS foundation trust in respect of the accommodation or services.

(7) An NHS foundation trust may exercise the power conferred by subsection (6) only to the extent that its exercise does not to any significant extent interfere with the performance by the NHS foundation trust of its functions.

As you can see, much of the section has been removed. All that remains are the two sections above and the section has been renamed.

Section (6) says explicitly: "[foundation trust hospitals] may make accommodation available for patients who [will] pay any charges imposed by the NHS foundation trust in respect of the accommodation or services." While this does not say that FT hospitals must charge for accommodation, it does say that they may charge.

This is clearly a case of privatising the NHS. The NHS will no longer be used as the default provider, and indeed, Cameron has said that he wants private providers to take over NHS services. NHS hospitals are expected to become social enterprises which are not public bodies and they will be able to sell off their assets. GPs will be allowed to charge for NHS services and Foundation Trust hospitals will be allowed to charge for accommodation. Trusts will also be able to treat as many private patients as they wish, and since there will be no limit this would mean a trust could decide to treat only private patients.

All of this combined means that the NHS is being slowly privatised.
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