TP: There seems to have been a big expansion in PFI contracts (Private Finance Initiative), in recent years. What is the reason behind this?
JL: Well, PFI never happened under the Tories. The Tories devised the policy but they were never prepared to go as far as New Labour to placate the private sector and allow them to sign these deals with no risk to them whatsoever. The only piece of legislation New Labour passed in 1997 that pertained to the NHS, was a short Act: the National Health Service (Private Finance) Act 1997 which stipulated that in any PFI scheme that went broke, the debt would be picked up by the Secretary of State for Health.
There has been an escalation in the number of PFI schemes set up. The only thing that seems to have stopped this is the sub-prime mortgage crisis.
The sub-prime mortgage crisis undermined the key insurers that used to provide further risk avoidance for the private sector. The insurers in the US lost their credit ratings and so were unable to offer insurance for these schemes any longer. As you may be aware, presently PFI schemes account for £11 billion pounds worth of the NHS and these schemes are set to cost the NHS a massive £62 billion over the lifetime of their signed contracts.
So these private contracts cost the NHS a lot more than their true value?
Oh yes, massively more. PFI costs the NHS a lot more than if it were to just borrow a straight mortgage for the same amount of money.
There are many additional downsides to PFI. There is the alienation of staff from their own building. For example they are not allowed to put an eyechart on the wall. There is also a demoralising effect on staff. They are told from day one, in no uncertain terms, that the hospital is not their building, it belongs to a private consortium.
You will generally find that PFI hospitals have a reduced number of beds, compared with the hospitals they replace, and as such are relatively small compared to the local level of demand.
PFI schemes seem to have come to a natural end at the moment. Even the Tories have begun to be critical of their cost. The problem is that, under the new government, this means there will be no new hospitals built as the government won’t be putting in any extra money. One of the difficulties in campaigning against PFI was that you appeared to be the awkward individual opposed to the building of a new hospital. This was not the case, of course. We simply argued that if a new hospital needed to be built there were plenty of cheaper ways to pay for it than signing a contract with a private company.
For the benefit of our readers, could you please explain a little about how Social Enterprises work and the rationale behind them?
The theory behind them is that they are non-profit businesses. In other words, they allow the workers (of frontline services) to work together in an autonomous unit, outside of the bureaucracy and red tape of NHS management and structures, and able therefore to ‘innovate’ and ‘improve services’ without having to wait for all kinds of bureaucratic processes. That is the theory. They will obviously have to bring in a surplus every year, as that is part of the way in which they function. The surplus would not be delivered to shareholders. In every other respect, the process would run like a business.
A major criticism is that it is very hard to see anything working as a co-operative, in a progressive sense, if the very foundations of the process are being pushed through by ‘little Hitler’ managers with no regards for the actual views and wishes of the staff they allegedly represent. The people who are exercising what Lord Darzi called the ‘right to request’ for the formation of social enterprise are, in every case that I have come across so far, senior managers who detect a personal interest in having the freedom to, for example, set their own pay scales. The controls would still be in their hands and they would try to drag the whole organisation behind them. Wherever staff have been balloted, 80-90% have been against the concept of Social Enterprise. They are concerned that outside of the NHS, they would lose their NHS pensions and payscales, as well as their NHS status, career structures and training opportunities, etc.
I understand that the idea behind ‘Foundation Hospitals’ is to give hospitals more autonomy over how they spend their money and to reward hospitals that do well whilst penalising those that perform poorly. That sounds very much like a free-market approach to healthcare. It seems unfair as a hospital situated in a deprived area will face greater pressures on its services. A hospital situated in a deprived area will be serving a population with different, and possibly greater health needs, than a hospital situated within an affluent area. Can you comment?
We have an example from not long ago. The hospital and primary care trusts within four of the six boroughs of South-East London had very large deficits. At the same time, in the two remaining boroughs of south-east London, there were two Foundation trusts who between them were sitting on surpluses equal to the deficits of the remaining trusts within the area. Being Foundation Trusts, they were under no obligation to share their surpluses or to participate in any way in helping to resolve the problems found elsewhere in the NHS. It really is an ‘I’m alright Jack’ type of approach to running the NHS. Far from developing the collaboration and co-operation in these matters, it actually carves up the NHS into a competitive market.
What can the public and NHS staff do to campaign against cuts and the encroachment of the private sector?
In terms of the break up and privatisation of primary care services, or Transforming Community Services as it is known, people need to know it is happening. Much of this occurs in relative secrecy, without any proper consultation. The privatisations implemented thus far, were done without any public consultation. We need to be able to ‘smoke out’ where it is happening locally and reveal the scale of it, the significance of the services under threat and the role these threatened services play in the community. Once local people realise this and once NHS staff realise that people are willing to support them, there should be a lot of resistance.
The public have more scope to fight against the privatisation of their community services than most of them realise, and at the same time, less knowledge of how to fight this than most campaigners realise. The key thing for campaigners, such as politicians and trade unions opposed to the privatisation of community services, is for them to make sure they disseminate the information they have into the public domain.
For example, back in the 1980s, when we were fighting against the privatisation of hospital cleaning services, LHE discovered, to our horror, that the Trade Unions were only issuing material relating to the impact of privatisation on wages of health workers. At that stage, they had little to say about what the consequences of privatisation would be on the hospital services themselves and the patients using them. Conversely, most members of the public viewed the issue the other way around. Though they may have been sympathetic towards healthcare workers, for them the main question was whether or not they would have a cleaner hospital. We had to fill the gap, spelling out how privatisation undermined standards of patient care and put the whole of the public at risk, not just the health workers whose jobs, wages and working conditions were under attack.
In the run up to the General Election, all three major parties preached the need to make cutbacks to public spending and hence public services. Can you propose an alternative solution to that advocated by the political mainstream?
I would start by actually proposing three different cutbacks, which I believe would be a step in the right direction. First of all, I would sack all of the management consultants running rampant through the NHS. At the last estimate I recall, they cost the NHS about £500 million a year. Quite a significant contribution could be made just by cutting back on these people who seem to have contributed little or nothing of value for the huge investment that has been made in them. Furthermore, damage done to the NHS could be reversed. Not least in the fact that a lot of the relatively well paid managers in the NHS who employ the management consultants seem to have abdicated much of their decision making responsibility and avoided thinking for themselves, relying on management consultants to fulfil this role. It’s like hiring the organ-grinder, but getting fobbed off with his monkey.
The second thing, I would do is to renegotiate PFI. The issue of PFI needs to be revisited in order to bring down some of the enormous costs of the scheme. These deals were all negotiated with interest rates of upwards of 5-7% in years past when they were much higher. Nowadays the government can borrow at a much lower rate, around 0.5%. It is ridiculous for the costs of PFI to still be so steep, especially so as a couple of the major banks involved in PFI are now owned by the taxpayer. We’ve gone and bought the banks and we are now paying out to those banks, and will be doing for as much as the next 30 years for some of these PFI schemes. UNISON for example, have called for the nationalising of PFI, which isn’t necessarily all that radical a policy. We’ve already nationalised the banks, so why not PFI?
The third thing is that there is a whole layer of additional bureaucracy in the NHS, centred around what is known as ‘world class commissioning’. In many areas of the NHS, a whole raft of what are called ‘commercial directors’ were recruited. The NHS ran for nearly 60 years without the need for a single commercial director and now we have them all over the place. They don’t bring anything of any benefit to the NHS whatsoever. The whole ‘world class commissioning’ idea has been an entire waste of time and money. Anyone directly employed in this matter should either be sacked or given some sort of useful job somewhere in the NHS that could actually benefit patient care.
Those are three cuts and between them well over a billion pounds could be saved each year.
On a wider level, the PCS (Public and Commercial Services trade union) has been making the point that the government has been sacking tax collectors, sacking the very people who are supposed to be gathering the money that is to be spent on running public services.
Each tax collector on average generates £600,000 a year for the Inland Revenue. By cutting back on the number of tax collectors, this has resulted in a large gap in taxes not being collected because key people are not being asked to pay and many who are evading payment are not being actively pursued. This process should be reversed. Rather than allegedly trying to streamline the civil services, as the previous government claimed to be doing- attacking the people who collect this money to pay for public services- we should do the opposite and recruit more of these people.
Mark Serwotka, general secretary of the PCS, made that point that if current levels of taxes were collected properly, you wouldn’t even need to increase taxes by a large amount to bridge the public spending gap that we now face.
So at times bureaucracy could save money?
Bureaucracy isn’t necessarily a bad thing if it means that there are officials who know what they are doing and systems that allow them to work well. If this means that we need people to go out and bang on some doors and collect taxes from some rich people who are not paying, then why don’t we do just that?
Instead of the Daily Mail foaming at the mouth at a handful of social service ‘skivers’ or illegal immigrants, who they claim are the problem, why don’t we have a little bit more anger about the extremely wealthy who are evading paying their fair share of tax.
In fact, what we have at the moment are government owned banks employing a whole handful of people who go out and advise industry on how they can avoid paying tax. Lloyds TB and other banks have divisions of advisors whose job it is to advise wealthy people on how to pay less tax. This is all paid for by us. We are paying the government to pay the banks to employ people to go out and advise the rich on ways of paying less tax and hence create a bigger gap in the money available for government spending. How mad is that!
Indeed, not that’s not the kind of story you read in the pages of the mainstream media. I understand that a few years ago you published a book titled: ‘Health Policy reform. Driving the wrong way.’
That was five years ago. The book was looking at the spread of market style policies- the type of policies that I object to being carried out in the UK- and examining the extent to which they were being promoted around the world.
I am talking particularly about the developing world and how organisations such as the World Bank and USAID are able to shape government policy by deciding whether or not countries are deemed to be credit worthy. They can decide whether or not to issue loans. The World Bank is committed to the idea of the contract culture rather than public service culture, preferring the expansion of the private sector rather than having government run public services.
About 18 months ago, some research was conducted by Professor Chris Ham of Birmingham University, who once advised Tony Blair on matters of health. Professor Ham’s research investigated the extent to which the model of ‘commissioning’ healthcare could be shown to work on a global scale. He went around the world picking out examples, similar to those used in my book, and he came to the same conclusion which is that there is no evidence anywhere that Healthcare Commissioning actually works.
Through examining different healthcare systems around the world, have you come across one that seems to have found an optimum way of doing things?
At the point that I wrote this book, in 2005, I would probably have mentioned the Scandinavian model. The sad thing is that we have had a rash of right wing governments in Scandinavia who have begun to adopt similar policies to those of the New Labour government.
What they did in Denmark was to create unattainable targets for an underfunded public sector to reduce waiting times. When these targets couldn’t be met, the argument was made that private sector providers needed to become involved, paid for from public budgets. This is just like the UK, where an artificial expansion of the private sector has been achieved not through its growth in a free market but through the use of government patronage and public funds (NHS budgets) to ensure guaranteed profits.
So sadly, the countries I would have been pointing to in many ways as a model of satisfactory and relatively democratic healthcare are not necessarily still a good model.
I believe you’ve written a book more recently.
Yes, it’s called ‘The NHS after 60- For Patients or Profit.’ It came out in 2008 for the 60th anniversary of the NHS. The book charts the history of the NHS since 1948 with the heaviest focus being on the last 20-30 years. A few years ago, I started doing some teaching sessions on health policy at Coventry University. I used to be able to cover the whole history of the NHS in a 90 minute lecture. Now I cannot even cover the last 10 years within an hour and a half because there have been so many rapid changes which are of great significance.
Between 1948-1978, the model was pretty much intact and when a Tory government in 1961 was persuaded by Enoch Powell, to build a new generation of hospitals across the country, nobody even thought about using private finance.
Margaret Thatcher started to really change things in the 1980s and brought the notion of markets into the ideological debate. We fought against Thatcher’s market reforms, calling it a slippery road to privatisation: but Margaret Thatcher never privatised a fraction as much as Tony Blair. Now Blair’s market is likely to be a launchpad for more privatisation.
Dr John Lister is the Information Director of London Health Emergency (LHE). Founded in the autumn of 1983, LHE is the country’s biggest and longest-running pressure group in defence of the NHS.
Dr Lister is also an Associate Senior Lecturer in Health Journalism at Coventry University and is the author of numerous publications on the topic of health policy. His latest book The NHS after 60: for patients or profits? was published in 2008.
Dr Tomasz Pierscionek is a junior doctor working in the North East of England. He is co-editor of the London Progressive Journal and has recently become a board member of the global health charity Medact.
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This post was written by Tomasz Pierscionek