How is the NHS being Privatised?

Both the Coalition and current Conservative governments have denied that they have been privatising the NHS, pointing out that health care is still free at the point of use. Others, (such as the King’s Fund) have suggested that claims about privatisation are exaggerated.

These denials are misleading. According to the World Health Organisation,

“Privatisation is where non-government bodies become increasingly involved in the financing or provision of health care services”.

On this basis, the NHS is being privatised in a number of ways, a process that started at least as long ago as the 1980s but has been accelerating since the Health and Social Care Act of 2012 (HSC Act). The NHS, once an integrated and efficient public service, has been effectively privatised by a number of steps:

  1. creating an internal market,  splitting those who purchased services from those who provided them;
  2. privatising service provision;
  3. privatising the purchase of services;
  4. removing the purchaser/provider split.

What’s wrong with privatising the NHS?

There are numerous reasons why the NHS should not be privatised. For example, private companies’ first duty is to make profit for their shareholders, and this profit comes out of NHS funding. The competitive tendering process introduced by the HSC Act is not only massively expensive but wasteful as it introduces unnecessary overhead costs.  As a system, it undermines NHS providers. This is because private companies will focus on low risk, straightforward elective (planned) treatment and leave NHS providers to cope with complex specialist care. (Before competitive tendering, NHS providers used surpluses from one area to support the more expensive services they delivered.) On top of which, staff who have to move from NHS to private company employment generally face lower wages and worse terms and conditions, while fragmentation of the system means the bargaining power of the workforce is undermined.

Ways in which the NHS is being privatised 

  • The creation of NHS Foundation Trusts (FTs): Foundation Trusts are NHS organisations that have been granted a significant amount of managerial and financial freedom – they are no longer accountable to the Secretary of State for Health but to a board of governors. They have the freedom to set their own terms and conditions of service (including salaries), the freedom to decide local priorities, and the freedom to borrow and to set up joint ventures with the private sector. Legally, they are no longer regarded as public services but profit-seeking businesses (although profits are reinvested in the FT, and not handed out to shareholders). They can earn almost up to 50% of their income from non-NHS services (e.g. private patients).
  • The increasing number of private companies providing NHS services: There is a long history of bringing in private companies to provide services to the NHS (e.g. cleaning, residential care).  However, a radical shift took place after the Health and Social Care Act (2012). This Act brought about a massive restructuring of the NHS – a restructuring based on advice from a private management consultancy company, McKinsey.  The Act ordered the NHS to use the private sector: it made it compulsory for those services that potentially could be provided by non-NHS organisations to be put out to competitive tender. Private companies are now involved in a wide range of NHS services, from GP or out-of-hours care to diagnostic services (such as scans or blood tests), elective (or routine) surgery and ambulance services. In addition, private, multinational consultancy firms are being paid considerable amounts of taxpayers’ money for advising NHS providers, such as hospital Trusts, on managing their service.
  • The creation of a new market in ‘commissioning services’ (such as planning NHS services, managing contracts with health care providers, and designing the NHS of the future). Much of the work of commissioning, theoretically the responsibility of GPs, became the responsibility of Commissioning Support Units (CSUs). However, from 2015, commissioning services will have to be bought from a list of ‘preferred providers’ that will include some CSUs but is dominated by private, multinational companies. Apart from competing for work that was previously done by the NHS, these companies face conflicts of interest as they may be looking to provide health services while they are in charge of the local health budgets that pay for these.
  • Even before the organisational changes brought about by the Health and Social Care Act had a chance to settle, NHS England (NHSE) – without any public debate or mandate – decided that the NHS needed, again, to be extensively restructured.

The first indication of this was NHSE’s five-year plan for 2015-2020, which introduced new ways of delivering services, such as new ‘models of care‘ that provide further, far-reaching opportunities for the private sector. This five year plan is now being implemented by dividing the NHS in England into 44 local health economies or ‘footprints’, each of which had to produce a Sustainability and Transformation Plan (STP) showing how it will cut costs while improving care and integrating health and social care services.

STPs had to be drawn up at ‘at scale and at pace’ – or at breakneck speed – leading many ‘footprints’ to  call in private consultancy firms like PriceWaterhouseCooper to help them write their STP. In addition to the millions of pounds received in consultancy fees received, these firms also had the opportunity to slant plans to suit their own interests.

‘Footprints’, now called Sustainability and Transformation Partnerships (ST Partnerships), are required to introduce new ways of delivering services:  instead of working independently of each other, organisations within an ST Partnership are encouraged to ‘integrate’ (eg GPs with hospitals, mental health providers and local authorities). They way they are jointly organised to deliver services varies across the country but the three forms currently under development are:

 Accountable Care Partnerships (ACPs) – the simplest form and essentially  an alliance of NHS providers;

Accountable Care Systems, recently renamed as Integrated Care Systems (ICSs), bringing together commissioners, NHS and private providers, and possibly local authorities; and

Accountable Care Organisations (ACOs) in which an organisation (private or NHS) wins a single contract to commission as well as provide or subcontracts out almost most services within a defined area.

There has been considerable concern – not least from the House of Commons Health Select Committee – that ICSs and particularly ACOs provide new opportunities for the private sector. In response, NHSEngland appears to be back peddling: mention of ACPs (composed of just NHS providers) is a recent development.

  • The development of  subsidiary companies by NHS Trusts in response to underfunding and growing deficits. These companies are concerned with reducing expenditure, increasing income and, as they can be managed as a separate financial unit, can help protect Trusts from risk. They may be developed  in partnership with private companies,  but in any event are commercial structures and some fear, as separate units, may facilitate privatisation of NHS assets.

Some NHS staff (typically ancillary staff or staff working on procurement, but potentially clinical staff in future) are being transferred to subsidiary companies, at least initially on their existing terms and conditions of employment. However, new staff are likely to be brought in on lower pay, worse terms and poorer pension arrangements, creating a two tier system that is likely to undermine morale and does nothing to built a cohesive team.

 In addition, a subsidiary company be ‘tax efficient’ – unlike an NHS Trust, it can claim back the VAT it pays. This is akin to robbing Peter to pay Paul: it’s not a saving for the tax payer but reduces the money available to the Treasury.

  • The use of the Private Finance Initiative: For about twenty years, the Private Finance Initiative (PFI), and its sequel PF2, have been the main ways of funding major NHS projects. For example, if an NHS Trusts needs a new hospital, it sets up a contract with a consortium of bankers, builders and service suppliers who raise the finance through borrowing and issuing shares. The consortium then manages the construction of the new hospital and its maintenance, along with some other services (such as cleaning or security) for the length of the contract – possibly 40 to 60 years. The Trust then pays the consortium for the use of the building and the services provided, often at exorbitant cost, with NHS Trusts paying bankers and other PFI investors at least twice (and in some cases seven times) as much for each new hospital as they would if Trusts could borrow the necessary finances from the government. In addition, PFI deals usually involve NHS Trusts handing over their land to private consortia for them to build on: currently over 100 NHS facilities are owned by banks and other private investors. This land only returns to the ownership of the NHS at the end of the contract, decades or in some cases up to 100 years later. If an NHS Trust defaults on its PFI deal, the land and any buildings on it are retained by the PFI consortium.

It’s unclear at the moment whether the use of PFI will be extended, following the introduction of NHSE’s Five Year Forward View (FYFW) and its requirement for Sustainability and Transformation Plans.  For example, the FYFV wants to see the introduction of new models of care, some of which will require new premises in which to bring together a number of GP practices, as well as a range of services currently provided by hospitals and community services.  It is unclear at the moment who is going to put up the capital for these new premises, but the fear it could come from more PFIs. (see Sustainability and Transformation Plans.)

  • The setting up of a company (PropCo), also known as NHS Property Services Ltd, which now owns and manages much of the land and buildings previously owned by Primary Care Trusts before they were abolished. PropCo is currently publicly owned but could at any time sell all but one of its shares to private investors.
  • The commercial use of the NHS logo: Not many patients are aware of how many private companies are providing NHS services because these companies often use the famous blue NHS logo on their vehicles, signage, staff ID etc., and provide little to no indication that they are commercial companies.  According to the Department of Health, using the NHS logo will reassure patients that such contracted-out services are provided in line with NHS values. It is unclear how this can be the case, given that privately provided services will be shaped by the first priority of commercial companies – to make a profit for their shareholders.
  • The introduction of personal health budgets, which some see as a step towards patients making top-up payments, or towards opening up the NHS to private insurance companies;
  • A ‘revolving door culture‘ in the civil service, with a continual exchange of staff between the Department of Health or NHSE and private health companies and consultancy firms, like McKinsey or BUPA, so blurring the boundary between public and private sectors.
  • The inclusion of the NHS in trade and investment agreements, such as the Transatlantic Trade and Investment Partnership (TTIP) and the Comprehensive Economic Trade Agreement (CETA). If agreed, TTIP and CETA would give transnational corporations irreversible rights to operate without limit in the NHS and prevent any reversal of its privatisation. (See also our section on TTIP and the NHS.)

These measures are gradually transferring NHS assets, whether these are tangible (e.g. land or tax payers’ money) or less tangible (such as the value of the NHS logo), to the private sector. (See also our section on Marketisation.)

See also our page on private companies involvement in the NHS.

Further information

Patchwork Privatisation: A Report from KONP http://www.nhscampaign.org/index.php?mact=News,cntnt01,print,0&cntnt01articleid=36&cntnt01showtemplate=false&cntnt01returnid=80

https://www.opendemocracy.net/ournhs/alex-nunns/sir-david-nicholsons-latest-bright-idea-for-english-nhs

updated February 2018

Comments are closed.