The scale of the government’s structural overhaul of the NHS is proving to be far greater than initially thought, with up to 30,000 jobs now at risk. With internal battles to make savings and fill capacity gaps, NHS leaders are already turning towards the management consultancy firms whose business is booming.
The most recent figures from the Trussell Trust estimate that NHS bodies spent over £570m in 2023-24, a substantial decrease since the pandemic but still 83% higher than the pre-pandemic level of £310m.
Previous restructuring within the NHS has resulted in a significant increase in the use of management consultants to support managers during a change process, and at a considerable cost.
Alongside the 2013 NHS shakeup, led by the then health secretary Andrew Lansley, spending on management consultants doubled from £313 million in 2010 to £640 million in 2014, or £915 million at today’s prices.
Why now?
In reality, there is a straightforward political rationale for employing management consultants in the NHS, and the reasons remain the same: politicians’ desire to expedite their chosen policy, the need to quell internal resistance, the enforcement of financial efficiencies, and the delegation of the execution of difficult decisions.
Over the last decade, austerity was a key driver; the NHS was left to respond to the government’s unachievable productivity targets, which often resulted not in efficiency savings but in budget manoeuvring, workforce economies and delayed investment in buildings and equipment.
Once again, a huge financial challenge is forcing NHS leaders into crisis management.
A recent Lowdown investigation discovered that Integrated Care Boards nationwide have set collective savings targets totalling approximately £8 billion. However, public information on how these significant savings will be realised is limited.
This is all familiar territory for the consulting firms. NHS England has already prompted their involvement in the Integrated Care Systems (ICS), which face the most severe financial problems—nine at the latest count.
The HSJ reported the ICSs in the “investigation and intervention” programme to be:
- Black Country
- Cheshire & Merseyside
- Greater Manchester
- Lancashire & South Cumbria
- Mid & South Essex
- Nottingham & Nottinghamshire
- Shropshire, Telford & Wrekin
- South East London
- South Yorkshire
Accountability
Since the scandalous government contract awards during the pandemic, the NHS has been pressured to ensure that management consultants provide value. However, with the demise of NHS England, it is unclear who will take over this role. Up until now, it has been the body publishing guidelines and scrutinising contract arrangements. However, it has also been driving firms’ involvement in supporting ICSs – and this double role invites further public cynicism about standards of governance and accountability.
PA Consulting and PwC were two firms contracted to help develop financial recovery plans for some ICSs, and NHS leaders can fast-track the contracting process using an existing NHS framework agreement.
Concerns have arisen, though, regarding potential conflicts of interest in some of the arrangements, as some consultancy firms had prior or ongoing engagements with the same systems.
Outlook?
In addition to financial management, consultancy firms are helping the government advance their themes of technological development and sickness prevention, so they already seem to be embedded in the delivery of the new government’s policy agenda.
‘In our work within the NHS, three key themes have emerged as key catalysts for a preventative approach: strengthening collaboration, engaging communities, and embedding digital solutions.’ – James Davis – PA Consulting preventative healthcare expert
The Management Consultancies Association (MCA) is the voice of the UK consulting sector and states:
“As an industry, we favour transparency and accountability. Many of our member firms prefer contracts that only pay them in full when they achieve outstanding results. All of them are committed to our Consulting Excellence scheme which sets out our principles of client service and value and ethical behaviour.”
Effective?
Critics argue that the fees paid to management consultants do not justify the costs. Research from the University of Bristol suggests that so far the higher spending on management consultants has not lived up to the promises of improved efficiency, and has added extra costs.
“Greater use of external management consultants was shown to reduce efficiency in the trusts by 3.5% to 8%, depending on the standard measure used, and while a small number of trusts did see slight efficiency improvements, the resounding overall effect was negative.”
Overreliance on Consultants?
In the book The Big Con: How the Consulting Industry Weakens Our Businesses, Infantilizes Our Governments, and Warps Our Economies by Mariana Mazzucato and Rosie Collington. The authors incorporate scholarly studies that assess the long-term impact of consulting practices on organizational innovation and accountability. They argue that an over-reliance on external consultants can erode internal capabilities within businesses and governments, leading to diminished innovation and a lack of accountability.
In response to critiques about the government’s spending on private consultants, the MCA emphasised that consultancies collaborate with the government to enhance public sector productivity and innovation, enabling public entities to “do more with less.”
An in-house alternative to commercial consultancy
As an alternative, some point to internal, not-for-profit models as a more sustainable solution. The Strategy Unit, a 35-person NHS team, operates as an internal consultancy offering data analysis, strategic advice and evaluation services across the health system. Staffed by NHS employees on NHS salaries, the unit competes for project funding, with all surplus reinvested into the NHS. Unlike private firms, it publishes its work openly, avoids upselling, and refuses contracts that don’t represent value to patients. The unit’s model combines the commercial discipline of needing to win work with NHS values and offers what its director calls “the best of both worlds”—a scalable, ethical alternative to the typical consultancy model.
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