Karl Marx warned that “History repeats itself, first as tragedy, second as farce.” However, he was referring to similar events, not the literal repetition of the same failed policies by the same party (and several of the same people) 25 years later.
But that seems to be what Keir Starmer and his Health Secretary Wes Streeting are intent upon doing to the NHS in their so-called ‘reforms’: and while this may be farcical, it’s far from funny.
Today’s Labour government seems hell-bent on rebuilding the expensively constructed competitive health care market of the mid-2000s. Moreover, like Tony Blair’s government, Keir Starmer’s ministers are again determined to postpone or avoid any radical action to tackle the problems of social care.
Tony Blair promised in Labour’s 1997 manifesto to scrap the Tories’ “complex internal market,” in which hospitals had to compete to win contracts from health authorities and fundholding GPs. The manifesto declared that “The result is an NHS strangled by costly red tape, with every individual transaction the subject of a separate invoice,” and also insisted “Labour is opposed to the privatisation of clinical services which is being actively promoted by the Conservatives”.
However, as we now know, New Labour under Blair and Brown soon changed course on both of these issues, opting instead to drive far further and faster than Thatcher’s Tories, creating an even more complex competitive market system that was no longer “internal” to the NHS, but widened to include private providers. And of course they also began the privatisation of clinical care.
Wes Streeting, following the New Labour hymn sheet, is now again insisting that the key to improving performance is competition. He wants to drag the NHS back to the kind of market system created at great expense in the mid 2000s, when community health services were floated off as ‘social enterprises’ or contracted out to private for profit companies, and local Primary Care Trusts were required to show their expertise in stimulating a local health care market, in line with “world class commissioning”.
Streeting is promising that the NHS will “compete with itself,” with “patient choice” once again placed at centre stage, and a return to ‘payment by results’ – a cost per case system to maximise the involvement of private providers. The Times quotes “a health department source” saying “a bit of healthy competition between providers is crucial for driving waiting times down and productivity up.”
But again it seems NHS trusts will be competing with each other for contracts, while the private sector has its own special channel of funding opened up, in a grotesque repeat of the failed experiment with Independent Sector Treatment Centres in the 2000s. Ministers last month signed a new agreement with the private sector committing to long term contracts to treat elective patients – in return for the private sector increasing investment and expanding its own facilities. The agreement also commits to including the private sector in local NHS planning and decision-making – something Tory ministers were willing to rule out.
But in so far as the new system does create any actual competition, it is not guaranteed to turn out well. New Labour found out the hard way that competition can only create ‘winners’ if there are also losers. With limited budgets, any increase in spending on the private sector squeezes the resources available for NHS trusts to deliver their more complex and demanding mix of services.
And any reward for successful trusts can only come at the expense of trusts that are struggling to cope, depriving the patients in their catchment areas of any real choice of where to get prompt and safe treatment.
The only reason these policies appeared to significantly improve NHS performance under New Labour was that from 2000 onwards, they were accompanied by record levels of rising real-term investment in the NHS, with spending increasing by up to 10 percent per year after 2001. This was the key to the increase in capacity: the number of NHS nurses in England rose by over 40,000 and the number of doctors by 20,000—double what had been promised.
However Wes Streeting has convinced himself that it was the “reforms” rather than the funding that did the trick: and so he is now openly digging back up many of the worst aspects of New Labour’s policies, despite a tightening financial squeeze that is forcing trusts and commissioners to aim for major savings this year and next.
Even before the election last summer Streeting was assuring Telegraph readers that Labour would go “further” than Tony Blair in making use of the private sector in a bid to ease NHS pressures (perhaps he had forgotten that Blair famously wanted to put the whole NHS up for tender).
Streeting certainly showed that he has misunderstood the changes achieved in the 2000s as he claimed: “I first called for the NHS to use spare capacity in the private sector to bring down waiting lists two and a half years ago. … The last Labour government did this and delivered the shortest waits in history.”
Streeting has been nothing if not stubbornly consistent in adopting this position, refusing at any point to engage or work with campaigners fighting in defence of the NHS, and surrounding himself with advisors who are avid fans of private sector involvement and market-style “reforms”.
Soon after the election The Lowdown warned Streeting had turned to the ‘usual suspects’ who could be relied upon to stick to Blairite formulae rather than learn the lessons of the last 25 years. These include Lord Darzi, whose report is routinely invoked to prove that the NHS really was ‘broken’ by the Tories, and former Health Secretary Alan Milburn.
Since leaving government Milburn has coined in millions from the private sector, running his own lucrative AM consultancy business, chairing PWC’s ‘health industries oversight’ board, and also acting as senior advisor to private equity group Bridgepoint Capital, owners of Care UK, which provides NHS services and runs a large care home chain. Somehow Milburn, who Streeting credits as a major influence, has now found the time to accept a post as lead non-executive director of the Department of Health and Social Care.
A third key advisor is Paul Corrigan, an academic who was involved with New Labour ministers in shaping NHS ‘reforms’ from 2001. And, following on the same logic, by 2012 Corrigan was urging David Cameron’s coalition government to adopt ‘reforms’ even more radical than Andrew Lansley’s Health and Social Care Act, and arguing for government to let the private sector take over failing hospitals … just as the disastrous experiment with private sector management of Hinchingbrooke Hospital took off, only to crash land a couple of years later.
Now Corrigan is once more in the magic circle of Streeting advisors working on the promised 10-year plan for England’s NHS, due in the summer. He has again been urging radical policies, warning that pumping more money into the NHS is “not feasible” while it fails to improve productivity.
Corrigan is also part of what appears to be a concerted drive towards more use of private capital as well as private providers. This is another echo of the Blairite strategy. Back in 1997 New Labour began within months signing the first deals to build hospitals using the costly Private Finance Initiative (PFI), invented by the Tories under John Major’s government.
Now Corrigan has insisted the NHS must no longer rely on “free capital” – and will have to borrow (and repay) private funding for investment in buildings and technology. The fact that this would inevitably require an already cash-strapped NHS to make more cuts elsewhere in order to repay the loans (and at interest much higher than the rates paid on government borrowing) was, of course, not mentioned.
However Corrigan does warn of the need to “tread cautiously,” and avoid the soaring costs of PFI. There is similar caution mixed in with the new report from the NHS Confederation, representing providers and commissioners, which urges ministers to “overhaul the ‘broken’ capital regime,” and consider the use of private capital to help tackle the huge £14 billion backlog of maintenance and invest in new equipment.
Launching the report NHS Confederation chief executive Matthew Taylor said:
“… despite the very welcome increase in capital spending announced in the Autumn Budget, more funding will be needed to address all the issues. One option to bridge this gap is to allow new routes for private investment. This does not mean throwing open the doors to private finance, but creating the environment where the NHS has more options for raising the vital funding it needs ….”
Most of the Confed’s report is focused not on private capital but on streamlining approvals and decision making. Not until Recommendation 15 out of 16 does the Confed propose:
“15. Change national policy and guidance to allow new routes for private investment (such as Mutual Investment Models).
“16. Support an attractive investment market through policy stability and a steady pipeline of projects.”
The first parts of the report concentrate on obstacles to Trusts using resources that in theory are already available to them, notably Capital Departmental Limits (CDEL). It notes:
“Contrary to the very purpose of its creation, CDEL has become a one-way valve that sees capital funds converted to revenue funds, but not vice versa. Changes to the government’s own fiscal rules at the October 2024 Budget should prevent this going forward – a welcome move to protect capital investment. … CDEL means that even trusts with available funding cannot spend it on capital projects.” (p26)
The Confed report also argues that two bodies set up by Andrew Lansley’s 2012 Health and Social Care Act, NHS Property Services and Community Health Partnerships are additional obstacles to progress:
“Combined, they own 15 per cent of NHS estate in England, mainly community and primary care premises. … The cost of void space is taking much needed funding out of local health systems. In 2023/24, NHS Property Services and Community Health Partnerships charged ICBs and trusts a total of £90 million for empty space in leased buildings”
The Confed urges Wes Streeting to “review the role of NHS Property Services and consider its abolition. This reform [abolition] would help to finish reversal of the Lansley reforms, which the Darzi review identified as one of the causes of the NHS’s current challenges.”
However the eyes of critics and analysts have focused on the Confed report’s clear call for renewed use of private sector funding:
“Private capital investment should once again be an option available to ICSs to address the capital investment cap. […] The NHS Confederation has proposed that using private investment … can help make up the difference raising capital funding, alongside making better use of existing assets ….”
The Confed notes that CIPFA [the Chartered Institute of Public Finance and Accountancy] has also argued that “reliance on ‘traditional’ capital funding is unrealistic; new models of investment should be explored including those involving public and private sector partners.”
Sadly it seems the Confed has already forgotten the harsh lesson from the collapse of major PFI contractor Carillion in 2018, which revealed that the claimed “transfer of risk” to the private sector in PFI deals was a deception: in fact all of the main risk remains firmly with the public sector.
Now, not long after the opening of the second of Carillion’s major uncompleted projects, the Midland Metropolitan Hospital in Smethwick, six years late, and only rescued by public sector funding, the Confed naively claims:
“As well as increasing the overall quantum of capital available, private investment models can streamline the investment process by transferring risk, at a cost, to the private sector.”
The Confed even claims that PFI seems to be a good deal compared with the “spiralling costs” caused by lengthy delays to projects in the New Hospitals Programme:
“… faster project initiation will help bring projects into service early and to avoid higher construction costs due to inflation. It is likely that previous private finance initiatives offered better value for money than the New Hospitals Programme…” (p35)
Indeed the Liberal Democrats have calculated that the extra delays to 18 NHP projects could result in their backlog of maintenance almost trebling from £2.1bn to £5.7bn before they are rebuilt. Many of these, like Torbay, are spending money each year prolong the life of buildings that need to be replaced.
The Confed call to open up access to private capital has also been echoed by NHS England chief executive Amanda Pritchard, and by Wes Streeting on Radio 4’s Today programme, although he was more cautious about any repetition of the costly blunders of PFI, which has meant dozens of trusts are making inflated, index-linked payments the 2030s, and some into the 2040s. He said:
“I’m actually very sympathetic to the argument that we should try and leverage in private finance. The big caveat I would add, however, is that, while I’m enormously proud of the record of the last Labour government, which delivered the shortest waiting times and the highest patient satisfaction in history, many of those PFI deals did lumber the NHS with an enormous cost that it continues to bear.”
Campaigners at the time argued that the way PFI deals were constructed, including contracts for support services and maintenance, meant that it would have been cheaper to have financed the projects through a straightforward mortgage, which at 6% would have led to a cost of roughly double the initial cost over 25 years.
But the cheapest way of all would have been then, as now, for the government to borrow the money – even if the Trusts are then required to pay it back or pay interest on it. As Richard Murphy noted in his Funding the Future website:
“If there are funds available to the private sector to invest in hospital infrastructure, there are just as clearly funds available to the state to do so: there is no shortage of buyers for government bonds out there. Right now, they’re being snapped up even though the effective interest rate on them is falling, as I noted here very recently. So, to claim that private money must be used makes no sense whatsoever. Cheaper public money is available.”
It’s not so much history repeating itself, more politicians trying yet again with the same policies and hoping for a better result: this is close to the common definition of insanity. Sadly with Streeting and others surrounding themselves with co-thinkers and courtiers eager to encourage them there seems little immediate chance of persuading them to change course.
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