The victory of Tony Blair’s New Labour government in 1997 came at a time of huge and growing waiting lists for care, with waits of more than a year commonplace and delays of over two years far from rare.
Yet the first three years of the new government remained locked in to the limited spending plans outlined by Tory Chancellor Kenneth Clarke, with only limited efforts to contain the waiting lists.
Only in 2000 did the policy change to one of large scale year-on-year increases in NHS spending designed to increase towards the average spending of comparable European countries. As a result after 50 years of limited growth, health spending as a proportion of Gross Domestic Product rose from just 6.3% in 2000 to 8.8% in 2009.
The increase in spending allowed for recruitment of additional staff, a substantial uplift in NHS pay linked to the Agenda for Change agreement finalised in 2004, the reopening of some beds and avoiding cash-driven closures – and the beginning of a serious drive to reduce delays in A&E (with a new target to treat or discharge within 4 hours set in 2004 and achieved in 96% of cases by 2005).
Similar targets were set for elective surgery waiting times, culminating in 2005 (when the waiting list numbered 856,000) with an election commitment to reduce the maximum wait to just 18 weeks from referral to treatment.
However the investment and the commitment came with extensive strings attached. The broad strategy was set out in the NHS Plan launched in 2000 by Health Secretary Alan Milburn. It combined measures to entrench and institutionalise the market system that Tony Blair had correctly condemned as ‘costly and wasteful’ and committed to scrap in the 1997, and to extend the scope of outsourcing well beyond the previous range of non-clinical support services, to include diagnostic services (new diagnostic and treatment centres) and elective hospital treatment as well as provision of so-called “intermediate beds”.
The New Labour approach was later summed up by Blair’s Pensions Secretary John Hutton in a 2007 speech to the CBI in which he argued that the “core” of the reform programme including “an open minded approach to who provides” – was being “built into the DNA of our public service infrastructure.”
But increasingly it became obvious that ministers were far from open minded; indeed they became ideologically obsessed with bringing in private companies and private hospitals as so-called “partners” – at the expense of sidelining and destabilising existing NHS providers.
The starting point on this new trajectory to privatising clinical care came in June 2000 when Alan Milburn, having taken over as Health Secretary from Frank Dobson, proudly signed a “concordat” with private hospitals, under which they would treat uncomplicated NHS waiting list patients during winter and other peak periods when local NHS trusts lacked the capacity to deal with combined emergency and elective demand.
This was initially welcomed by the BMA and of course by the private hospitals, but perhaps surprisingly criticised by the Tories as “hypocrisy”: Tory statements highlighted a doubling of NHS spending on private health care since 1997. It was opposed by the Labour left and campaigners, who warned of the slippery slope towards greater privatisation of elective care.
The problem then, as now, of course was that the funding to pay the private hospitals and the staff to deliver the treatment were taken from the trusts under the greatest pressure, and meant that there was no way for them to escape by investing in expanded NHS capacity.
Indeed it was later revealed that the scheme was a double blow to trusts’ finances, with treatment costs for NHS patients admitted to private hospitals a staggering 40% higher than the NHS. Hip operations costing an average £4,700 in the NHS had been charged at over £6,800 by private hospitals.
The concordat was a massive boost for a flagging private hospital sector, where bed occupancy had been commonly averaging 50-60%. By January 2001 Manchester’s BUPA Hospital boss Stephen Bird was delightedly reporting 100% occupancy, with the empty beds filled with NHS patients.
At the end of 2001 a further deal was announced, in which the NHS would commission 5,000 routine operations such as hip and knee replacements from BUPA’s 36-bed Redwood Hospital in Redhill, East Surrey: the deal involved the transfer of 27 NHS nursing staff from East Surrey Hospital, while all of the consultants listed as working at Redwood hospital were NHS employees, all but one from East Surrey Hospital.
No details were published on the cost of this project, but in South West London Kingston and Richmond Health Authority had calculated that to transfer 2,500 in-patient elective cases to the private sector would require 35 beds and cost £3,000 per case (£7.5m).
By contrast in Merton Sutton and Wandsworth it had been calculated that to keep 82 NHS medical beds open would cost £2.44m. And at St George’s Hospital it was calculated that for £5.6m NHS capacity could be increased by 56 beds (28 surgical, 28 medical).
Giving work to private hospitals was a very expensive ‘partnership’ for the NHS.
The NHS Plan was soon followed by an extension of the PFI principle to primary care, with the establishment of ‘NHS LIFT’ to fund the building of new surgeries and health centres, leasing them to GPs and Primary Care Trusts. While Milburn argued that this meant a £1 billion investment, in fact only £195m was government funding, the remainder coming from private sector sources seeking hefty interest rates and commitments that future projects in the area would also be financed through LIFT. The plan was opposed by UNISON and campaigners, but forged ahead regardless, although not on the scale anticipated by ministers.
By 2002 the New Labour project was widening to include plans to “franchise” the management of failing trusts to private management consultants, which ended up with a disastrous experiment with management consultants Tribal Secta taking over control of Good Hope Hospital in Sutton Coldfield in 2003.
Tribal’s press release predicted that “Good Hope should become the flagship for building a true private/public sector partnership approach to improving performance within the NHS… Ideally we want to reach a position where franchise support will no longer be required, and it can be ‘handed back’ to the trust’s management team in a stronger, more successful position.”
In fact Tribal undermined and weakened the existing management, ran up huge deficits, and eventually had to be bought out early in 2005 before they did more damage. The running of the hospital was handed back to the NHS (Birmingham Heartlands Hospital Trust).
Tribal successfully jacked up their own fees by 48 per cent in its first year – with the Tribal-supplied Chief Executive paid £225,000 per annum, well above the standard rate – while the Trust was reduced to dire financial straits, losing money at £1 million per month.
A 2006 Audit Commission report on the franchise agreement revealed a managerial shambles, with no financial strategy in place, and branded it as a costly failure. Flaws in the contract even meant the trust itself could not terminate it early or enforce penalty clauses.
Shortly after the deal ended radical cost-cutting measures – closing beds, wards and buildings, to make potential savings of £21 million a year – were needed to prevent a deficit of up to £47.5 million the following year.
All this was clearly lost on New Labour health minister Ben Bradshaw, who flatly denied that the contract had been a failure.
Nonetheless it was not until the experiment with privatised management at Hinchingbrooke Hospital was signed off by the Cameron government years later that the idea was tested again … to fail once more.
2002 also brought plans to allow the best-performing trusts to opt out of NHS structures to become “Foundation Trusts” (FTs). A furious campaign began against the plan, backed by campaigners, health unions, the BMA and former Labour ministers, which culminated in battles in the Commons and House of Lords.
Although only 63 Labour MPs voted against legislation to establish FTs (while the Tories abstained), the autumn of 2003 saw the policy roundly defeated at Labour Conference – and the scale of the opposition did substantially blunt the edge of Milburn’s initial plan.
FTs were at first intended to give wide new powers and privileges to ten or a dozen of the country’s top-rated ‘3- star’ NHS hospitals, although this was soon extended to lesser two-star trusts.
Former health secretary Frank Dobson and other former ministers correctly attacked the plan as a return to the type of market-style methods wheeled in by Margaret Thatcher’s government in the early 1990s, and which New Labour ministers was supposed to have swept away after 1997.
They pointed out that the new “freedoms” to be granted to FTs could only be at the expense of other NHS Trusts that were been excluded from the elite status. For example the initial plan was for FTs to be given extra freedoms to borrow, including from the private sector – but their borrowing would count against the total cash limits on the NHS, leaving other Trusts LESS capital for maintenance or new building.
FTs would be free to retain any cash raised from the sale of Trust property assets, prompting fears that some may embark on a new round of asset-stripping; Milburn had to add in a “lock” on NHS assets. They would also be free to set up private companies that offered managerial and other services inside or outside the NHS and which could bid to run neighbouring ‘failing’ Trusts under the government’s franchising scheme.
They would have freedom to vary the pay of their staff, giving scope in some areas to offer more to recruit staff with particular skills – subject only to vague restrictions on ‘poaching’ staff from other Trusts. And they would even be given a guarantee of independence from legal direction by the Secretary of State – raising serious questions over the extent to which they could be prevented from using these other freedoms in ways which threaten the survival of other Trusts.
However Milburn swiftly retreated from those warning that FTs would (like the first wave NHS Trusts in the Tory reforms) seek to expand their treatment of private patients and numbers of private beds. He insisted that they would be prevented from doing so, and eventually he was forced to agree to a cap on private patient income – locking FTs in to making no more than their pre-FT proportion of income, meaning growth could only come by also growing NHS work.
Milburn insisted Foundations would remain “part of the NHS”, controlled by ‘stakeholder’ members from the local community, who would elect representatives to comprise a majority of a Board of Governors. He was keen to divert attention away from the experience of the first foundation-style hospital experiment in Sweden, where a major hospital in Stockholm was privatised by its board in 1999 – against the wishes of the local authority and the government.
Campaigners responded arguing the real power would remain in the hands of an unelected management board, and the extent to which ‘stakeholder’ groups would be representative of the ethnic and social mix of the communities they cover was questionable.
Nevertheless some of Milburn’s colleagues, such as Ian McCartney, even argued that Foundation Trusts – supported as they were by the Tory Party and Thatcherite organisations such as the Institute of Directors and the Adam Smith Institute – somehow represented “popular socialism” and harked back to the “old Labour”, “socialist” values of “mutualism” and the cooperative movement.
Eventually the amended legislation was forced through the Commons with a majority of just 17.
The real dynamics unleashed by FTs was revealed later on by the Foundation Trust Network, which soon began arguing for an even greater separation from the NHS.
By 2005 they were demanding greater autonomy from government targets, a ‘hands off’ approach by the regulator (Monitor), the right to provide primary care services, removal of the cap on the number of private patients they were allowed to treat, and to be allowed to “develop a reach beyond health.” The Network even argued that patients’ needs could be met by adopting “the Debenham model of providing branded boutiques.”
Next instalment: 2004-2008, including the spread of private Treatment Centres, “payment by results,” the launch of Keep Our NHS Public – and lots more.
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