A Long Term Plan

Before the 2010 general election, David Cameron promised that there would be no top-down reorganisation of the NHS. We now know that – contrary to the Conservatives’ pre-election promise – the government has been implementing the most extensive changes to the NHS since it was set up. Not only this: these changes, which at first sight appear disjointed, can nonetheless be seen collectively as part of a long-term scheme, evident from at least the mid 1980s, to redefine the values of the NHS and change the way that we organise and pay for our healthcare system.

For example, the Financial Times in late 2012 unearthed a review of ‘Longer Term Options’ from the Cabinet Office drawn up during Margaret Thatcher’s first term in government. These plans included the dismantling of the NHS and its replacement by a system of compulsory private insurance, with state-funded healthcare only available for the poorest patients.

Since then, suggestions for how to move towards such a system appear in a number of reports. For example, the Adam Smith Institute, a think tank promoting libertarian and free market ideas, set out a series of proposals almost 30 years ago. Some of these measures were to “allow the deeper penetration of private money and expertise into healthcare”. Others involved radical change in the organisation and financing of health services.

What follows gives some indication of the think tank’s proposals in 1988 (indicated in green, below)  and the ways in which these have since been implemented by successive governments (e.g. through the Health and Social Care Act (HSC Act) of 2012) or in recent plans by NHS England (e.g. the Five Year Forward View).  The Health of Nations report saw some of these measures as more realistic than others, while some were viewed more as stepping stones towards a final goal. However, these proposals help to highlight how, subsequently, the private sector has been given ever-increasing access to NHS funding, and how the NHS is gradually being shifted towards a very different, insurance-based system.

As a former director of Department of Health Commissioning told potential investors in 2010, “In future, the NHS will be a state insurance provider, not a state deliverer”.

Changes in the NHS following The Health of Nations proposals 

  • Proposal: Introduce more of an internal market within the NHS. The internal market was introduced by the Conservative government in 1991 but rejigged by New Labour in the early 2000s. In practice it meant creating a split between those who were to provide an NHS service (such as an NHS hospital) and those (such as a Health Authority or Primary Care Trust) who were to buy the service. Following the HSC Act (2012), the NHS has been further ‘marketised’, with purchasers (usually Clinical Commission Groups (CCGs) or their Clinical Support Units increasingly buying services from non-NHS providers.
  • Proposal: Introduce competitive tendering for NHS services: Competitive tendering began in 1983 under the Thatcher government with the outsourcing of the residential care of frail elderly and disabled people, and outsourcing of catering, cleaning and facilities management to private companies.  Contracting out of services expanded from 2000 under New Labour, and included some clinical services (such as out of hours’ care) and pathology services. The HSC Act (2012) made it compulsory for NHS commissioners to put clinical and non-clinical services out to competitive tender.
  • Proposal: Introduce payment by results. In 2003, New Labour introduced a new payment system in which service purchasers began to pay service providers for each patient seen or treated (rather than a lump sum for a given number of cases), according to set tariffs. It created a system in which the money follows the patient – an important step towards implementation of personal health budgets for NHS patients and a private insurance based system.
  • Proposal: End or reduce the direct involvement of government ministers in the management of the NHS. This shift away from government responsibility for the NHS is particularly evident following the passing of the HSC Act (2012). NHS England, for example, the body that overseas CCGs (among other things), is an independent body, at arms length to the government. Most importantly, the Act also abolished the Secretary of State for Health’s powers of direction over NHS bodies and providers and the duty to provide a comprehensive NHS.
  • Proposal: Make hospitals independent of central government. In 2003 New Labour introduced legislation that meant hospitals and primary care trusts that gained foundation trust (FT) status were no longer under the control of the Department of Health. Although not-for-profit, FTs are in effect, businesses. Their assets no longer belong to the state and they are required to behave like commercial companies, in competition with each other. They can set their own pay-grades, enter into contracts with private providers and borrow from the private sector. They do not have to co-operate with any national planning of health services. The prime measure of their success is financial viability, rather than quality of patient care. As a result of the HSC Act (2012), all NHS hospitals must now aim to become FTs.
  • Proposal: Buy in services such as hip replacement surgery from the private sector to clear waiting lists. New Labour set up privately owned, Independent Sector Treatment Centres (ISTCs) in 2003 to carry out planned surgery (such as hip replacement) and diagnostic tests for NHS patients. Although the rationale was to reduce NHS waiting lists, the scheme also fitted with government ambitions of introducing competition and patient choice. Contracts were signed with private companies to carry out work at a fixed overall price, which meant they were paid whether they carried out the work or not. They were also paid at a higher rate than NHS providers to cover expenses such as corporation tax.
  •  Proposal: Raise capital for new facilities from the private sector, with private consortia designing, building and operating hospitals:  The Private Finance Initiative (PFI) brought the private funding of public facilities under John Major’s government in 1992, but the first PFI-funded hospital was built during a New Labour Government. No longer able to borrow from the Treasury for new facilities, individual NHS Trusts are now paying twice as much in interest on debt through PFI contracts with private consortiums.  PFI contracts also usually involve exorbitant costs for the provision of services such as maintenance or cleaning.  With PFI contracts extending for as long as 60 or more years, some NHS Trusts are paying almost 12 times as much as the initial sum borrowed by the end of the contract, and forced to cut services and staff to try to remain financially viable (see our page on PFI for more detail).
  • Bring in outside expertise from commercial companies to run NHS facilities, starting with non-medical services such as the management of administrative staff and personnel officers. This process is evident, for example, with the introduction of Commissioning Support Units.
  • Proposal: Charge patients for visiting their GP, or for hospital accommodation and food. Once seen as likely to be hugely unpopular with the electorate, there is now increasing public debate about charging for some services and treatments (in addition to existing charges for dentistry, prescriptions etc.)
  • Proposal:  Reduce costs by increasing ‘staff flexibility’: give unit managers the power to set local pay levels and conditions of work. The 2014 report from NHS England, The Five Year Forward View, proposes “local leadership” and “local flexibility in the way payment rules, regulatory requirements and other mechanisms are applied”. 
  • Proposal: Replace regional health authorities with Health Management Units (HMUs), “not too far removed from private insurance and management bodies”, which provide total health care services for their patients in the most cost effective way. The funds for premiums are publicly provided, but the same competition and incentives operate”. The HSC Act (2012) saw the introduction of Clinical Commissioning Groups (CCGs) – groups of General Practices working together to design and buy local health services, including planned hospital care, community health services, mental health and learning disability services, rehabilitation care and urgent and emergency care. CCGs replaced Primary Care Trusts and, across England, now control about two thirds of the NHS budget. They were introduced on the government promise that they would put clinicians, mostly GPs, at the heart of decision-making in the NHS. In practice, much of this work (although not the accountability) is being handed over to Commissioning Support Units (CSUs). CCGs have been seen as the precursor for HMUs (the public sector equivalent of Health Maintenance Organisations in the USA). The Five Year Forward View suggests further developments with, for example, Multispecialty Community Providers bringing together federations of GP practices with other clinicians to provide all out-of-hospital care for patients registered with them.
  • Proposal: Bring choice, competition and private resources into NHS services while avoiding the problems of universal private insurance through introducing a voucher system: each individual would receive a health voucher from the state, equivalent in value to the average per capita sum currently spent on providing health care. The voucher would be put towards the purchase of private health insurance or exchanged for treatment within the public sector health system. From 2012, patients with long-term conditions have been able to apply for a personal health budget (PHB), a fixed amount of money allocated by their CCG to spend on healthcare. There are also plans to extend the use of PHBs more widely. While PHBs may give some patients a degree of choice about their care, they can also be seen as part of a transition towards an insurance-based model of care provision, where a fixed sum of money is given to patients to spend on their health needs OR to take out private health care insurance. More recently, the Five Year Forward View, which places great emphasis on patients managing their own care, sees the introduction of Integrated Personal Commissioning (IPC) to provide a ‘year of care’ budget for combined health and social care that patients will manage themselves.

As the Conservative MP Oliver Letwin wrote in 1988, it might not be possible to transform the NHS into an insurance-based system in a single leap, but it could be achieved in stages:

“One could begin, for example, with the establishment of an NHS as an independent trust, with increased joint ventures between the NHS and the private sector; move on next to the use of ‘credits’ to meet standard charges set by a central NHS funding administration for independently managed hospitals or districts; and only at the last stage create a national health insurance scheme separate from the tax system”.


1. Early papers setting out long term plans:

Oliver Letwin, John Redwood (1988) Britain’s biggest enterprise: Ideas for radical reform of the NHS. Written for the Centre for Policy Studies. http://www.cps.org.uk/files/reports/original/111027171245-BritainsBiggestEnterprise1988.pdf

Madsen Pirie, Eamonn Butler (1988) The health of nations. The Adam Smith Institute. http://www.adamsmith.org/sites/default/files/images/stories/The%20Health%20Of%20Nations.pdfhttp://www.keepournhspublic.com/pdf/GuidetotheNHSreforms.pdf

Oliver Letwin (1988) Privatising the world. London: Cassell

Other sources

Jacky Davis, Raymond Tallis, 2013,  NHS SOS: How the NHS was betrayed – and how we can save it. Oneworld Publications, London

Colin Leys and Stewart Player, 2011. The Plot Against the NHS. Merlin Press, Pontypool.

Monbiot G. A death foretold. www.monbiot.com/2011/05/16/a-death-foretold/

Allyson Pollock, 2005, NHS plc. London: Verso.

Jenny Shepherd, 2014, How to commercialise and cut health and social care without anyone noticing. https://www.opendemocracy.net/ournhs/jenny-shepherd/how-to-commercialise-and-cut-health-and-social-care-without-anyone-noticing

The NHS as a health insurance provider, not a service deliverer: (www.powerbase.info/images/f/fe/Apax_Healthcare_conference_2010.pdf)

(updated June 2015)

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