Yet the government is still hell-bent on breaking up the NHS and privatising it. What Thatcher did to long-term care in the 1980s – providing decent care only for the affluent and a basic, residual level of care for people with little or no income of their own – Brown is now doing to every level of the NHS in England. (This does not affect Scotland or Wales to the same degree – they have used their devolved powers to resist the marketisation mania.)

Piecemeal privatisers

The marketisers in the Department of Health would love to go as far as handing over some NHS hospitals to private companies. Their idea is that only competition, or the threat of it, can make any service efficient. But the political and financial risks of handing over hospitals to private companies are seen as too great – for now. Instead they are hiving off parts of hospital work – the lower-risk parts, with lower overheads – and giving them to the private sector.

So first, starting in 2002, some low-risk NHS elective surgery (mainly hip and knee replacements and cataract removals) was given to private firms via the so-called independent sector treatment centres (ISTC) programme. The firms in question were mostly foreign, and the sight of them making a lot of money from no-risk contracts galvanised the big UK private health care companies like BUPA and BMI into changing their business models to follow suit. NHS patients in England are now offered routine operations in any of some 150 private hospitals or clinics nationwide.

Second, hospital outpatient treatment of chronic illnesses like diabetes is to be transferred out of NHS hospitals into ‘polyclinics’ (now renamed as ‘neighbourhood health centres’), almost all of them privately built and operated and owned. Lord Darzi, the minister responsible, says 64 per cent of outpatient work could be transferred, offering ‘huge opportunities’ to the private sector.

On top of this, GP services are being transferred to corporate providers, either through handing new GP contracts to private companies, or through ‘entrepreneurial’ GPs forming joint ventures with private companies in ‘GP-led’ health centres. In some cities almost half of all GP surgeries are to be moved into such joint venture health centres. In many if not most cases this will involve privatisation in one form or another.

Last but very far from least, community health services are being privatised, in two stages. The roughly 400,000 community health professionals in England (plus their roughly 200,000 support staff) are mostly employed in primary care trusts (the local arms of the Department of Health). Now they are being told to resign and set up ‘social enterprises’, which will be given three-year contracts to provide the services. After that, the services will be put out to tender.

No prizes are offered for guessing what will happen when small, local ‘social enterprises’ of district nurses and speech therapists find themselves bidding for their own jobs against UnitedHealth, Atos Origin and other health industry multinationals. They will either become cash-focused businesses themselves, or go under and become employees of the companies that take over their work. Community health care will become a vast field of corporate profit-making.

Labour’s drive to destroy

What explains Labour’s drive to destroy the institution it is most admired for creating? A key part of the explanation has been the desperate desire of Blair and Brown and their allies to be seen as ‘pro-business’. Having decided that anything else was electorally fatal, they eventually became converts to the idea that business is indeed better than public service at ‘delivery’. Thatcher’s contempt for the civil service is more than matched by theirs, and the Department of Health is one of the clearest expressions of this. In 2006, out of the 32 members of the department’s top management, only one was a career civil servant. And in 2007, out of the 190 staff of the department’s commercial directorate, which has been driving the marketisation process, all but eight were drawn from the private sector.

As a result, in the Department of Health what is good for American healthcare multinationals like UnitedHealth is increasingly seen as being good for England. Even now, when markets have plunged us all into economic disaster, Brown and his allies remain in thrall to them, with the sad figure of health secretary Alan Johnson reciting the private sector’s mantras at every turn.

But are the marketisers wrong? Won’t competition make health services more efficient? Anyone who thinks this should start by reading Dr Louise Irvine\’s report from the GP frontline. And ask how it is that the USA, with no public health service, spends almost three times as much on healthcare as we do and yet has worse health outcomes.

A sixth of all Americans have no health cover. A million and a half lose their homes every year as a result of health care debts, while those who have cover spend a large part of their incomes on insurance and ‘co-payments’, often going without necessities to meet the cost. Note, too, that although the US private health industry is universally detested, it is so wealthy and powerful that it regularly succeeds in buying off the threat of reform.

Profits before patients

The underlying point is this: what is efficient in the sense of making money for shareholders is not ‘efficient’ for patients. To make profits out of an unavoidably labour-intensive industry means squeezing the workforce, cutting coverage, reducing quality, providing lower resources for aftercare after cherry-picking profitable treatments and neglecting others, declining to treat patients seen as ‘high risk’ or re-labelling cases as ones that attract higher payments (‘gaming’), charging ‘co-payments’, pushing profitable fee-paying sidelines like aromatherapy, alternative medicine and fitness training, and so on.

This dynamic is already at work in the NHS. As hospital trusts lose income to private providers they have to reduce staff. Unemployed NHS staff have to transfer to the private sector on private sector (invariably inferior) terms. Then, to stay competitive, NHS trusts have to reduce their terms of employment too. Rapid throughput of patients, at the hands of the lowest paid (and so least qualified) staff that hospitals or clinics can get away with, gradually becomes the norm.

As this develops, middle class pressure grows to be able to get better treatment by paying for it. The recent decision to let those with money pay for cancer drugs that will not be offered to everyone else is just the latest example. In some hospitals fees are already charged for properly personalised midwifery, in others for skin care. Those who can’t pay fees experience reduced consultation times with their doctors, the steady erosion of key services like physiotherapy, a reduced ‘skill mix’ on hospital wards and a loss of attention as hospitals seek to expand their income by taking more private patients – the list is long, and growing. A two-tier service is already emerging.

Is it too late to halt this historic betrayal – the destruction of a high-quality health service, available equally to all, by the very party that created it? We have never been invited to vote on this policy, and we must fight what the market evangelists have in store.

It should make what is happening clearer to the public too. Since 2000, the year of the NHS Plan, a central feature of government policy for the NHS has been the concealment of its real trajectory. At the acute healthcare conferences organised annually by private healthcare analysts Laing and Buisson, for example, ministers and top civil servants have for several years given detailed policy briefings to companies on new private sector healthcare opportunities, while Hewitt was constantly assuring journalists that NHS privatisation was ‘out of the question’.

Creeping privatisation

Nowhere has concealment of the government’s real aims been more rigorously applied than in the independent sector treatment centre (ISTC) programme. Ostensibly designed primarily to harness additional capacity from the private sector to reduce waiting times for elective (non-emergency) operations such as knee replacements and cataract removals, privately owned ISTCs – 23 of them, spread across England, plus one in Scotland – have in reality served as a bridgehead for market penetration of the NHS, the first time that NHS surgical care has been systematically handed over to for-profit providers.

So far this has meant ensuring adequate and financially risk-free levels of clinical activity, encouraging companies to set up in business to compete with NHS hospitals and treatment centres. It also involves significant and ongoing transfers of NHS staff. But because the NHS remains one of the most popular institutions in the country, replacing public with private services involves enormous political risk. How many MPs – including Conservatives, at least in marginal seats – would be prepared to declare that NHS treatment should increasingly be handed over to private companies, like the railways? Managing and mitigating that risk involves a wide array of mechanisms.

A key example is an exercise in spin called ‘integration’. In reality the only way the private ISTCs can carry out the number of elective procedures they have contracted to provide is to have NHS staff transferred to them. Originally, because they were supposed to bring in ‘additional capacity’, they were not allowed to employ anyone who had worked for the NHS in the previous six months. This rule was repeatedly diluted, either through secondment of NHS staff, or by applying it to an ever-shrinking number of specialties.

By September 2007 ISTCs could use NHS consultants for almost all surgical procedures. A key method in enabling this change has been calls by various bodies, notably the BMA consultant committee leadership, and the Healthcare Commission, to integrate ISTC facilities with those of NHS hospitals in the interests of patients.

While the overall threat of NHS privatisation is denounced, measures to ensure that NHS staff are transferred to the new private employers are supported. For example, the BMA’s Dr Paul Miller told a 2005 BMA conference that ‘as things stand, I would not accept an MRI scan or elective surgery from these ISTCs’ – yet the leadership firmly resisted a motion opposing the centres, arguing that ISTCs could bring about ‘a sustainable expansion of capacity’ and that NHS consultants should be allowed to work in them. A year later, commenting on the health committee’s report, Miller stated: ‘For the last three years, the BMA has been shouting from the rooftops about its concerns regarding ISTCs. I am particularly pleased to see the committee agrees that the Department of Health needs to go further in enabling NHS doctors to work and train in ISTCs, as I believe this will benefit standards and integration of patient care.’

Revolving doors

Political risk has also been managed through the development of a ‘policy community’ of insiders committed to marketisation. The rapid interchange of personnel between government and the private sector – policy makers, management consultants, and healthcare company executives – has been particularly glaring in health policy circles.

The example of Tony Blair’s senior health policy adviser, Simon Stevens, who left to become president for Europe of the giant US company UnitedHealth, is well known. Another example is the former special adviser to both the prime minister and the health secretary, Darren Murphy, who became director of corporate lobbyists APCO UK. APCO’s clients rapidly came to include all the companies involved in the ISTC programme. By February 2006 these companies had formed an ‘NHS Partners Network’, under the aegis of APCO, and had a meeting with Tony Blair where they were warmly welcomed into ‘the NHS family’.

Tom Mann, formerly head of the Department of Health’s ‘national implementation team’ which imposed the first ISTC contracts on sometimes highly reluctant primary care trusts, subsequently became chief executive of Capio, which won a large number of these contracts. Patricia Hewitt’s defection to the healthcare venture capital group Cinven, which now owns Bupa’s former hospitals, and Lord Warner’s to the health insurer AXA PPP, are only the latest in a long line. And within the NHS itself a new ‘national leadership network’ has been formed, consisting of some 150 ‘clinicians and managers from partner organisations’ (i.e. including the private sector) to provide ‘collective leadership for the next phase of transformation, advise ministers on developing policies … and promote shared values and behaviours’. What these values and behaviours are is kept secret. Access to the network’s webpage is restricted to its members, and publications, resources and contacts are all password-protected.

Concealing data

These restrictions are a good example of another key means of limiting political risk – information control. Such control was particularly sensitive in relation to the quality of operations done in the private centres. The first official quality assessment of ISTCs, carried out in October 2005 by the National Centre for Health Outcome Development (NCHOD), found that poor data returns rendered ‘any attempts at commenting on trends and comparison between schemes and with any external benchmark futile’.

The one direct indicator of clinical outcomes at ISTCs had been completely ignored. This did not stop Lord Warner declaring that the NCHOD’s report provided ‘heartening’ evidence of a ‘robust and comprehensive quality assurance and reporting system’. A further study was undertaken by the Healthcare Commission, but in July 2007 it had to report that the necessary information was still lacking. Yet the data concerns NHS patients, whose health and lives are at risk.

Concealment would appear to have been essential, as many first-hand reports by NHS specialists on clinical quality in ISTCs have been highly critical. For example, the professor of orthopaedic surgery at Nottingham University, Angus Wallace, told the Guardian in March 2006 that: ‘We expect failure rates of hip replacements at approximately 1 per cent a year. But we have got some of the ISTCs that are looking at 20 per cent failure rates.’ A study by Dr Gordon Bannister, a leading orthopaedic surgeon in Avon, found that 9 per cent of hip and knee replacements carried out at a nearby ISTC had to be reoperated on, compared with 0.6 per cent in the local NHS hospital – in spite of ISTCs being able to select simpler cases. Notably the surgical repair work fell on the local NHS hospitals.

Such results are hardly surprising. Most of the surgeons originally involved in the first wave of ISTCs were brought in from overseas. They were often unfamiliar with NHS surgical techniques, sometimes had language problems, and were under pressure to achieve high levels of productivity. Release of information about their results therefore had to be kept to a minimum. Once sufficient numbers of NHS consultants have transferred to ISTCs the availability of outcome data will no doubt improve.

All these measures to limit political risk show that ministers and their advisers are acutely aware that the risk is real. The counterpart of this is that if the public clearly understood what is being planned, there is an excellent chance that this path to privatisation would have to be abandoned.

Stewart Player’s and Colin Leys’ new book, Confuse and Conceal: the NHS and Independent Sector Treatment Centres, is published by Merlin Press at £10.99

The media instantly converted this into a story about how the big increases in NHS funding have been largely swallowed up by greedy doctors, nurses, ambulance staff and the rest, so that instead of further improvements, the NHS finds itself mired in a ‘deficits crisis’, requiring drastic cuts.

But what are the facts?

In September 2005, half-way through the government’s five-year programme of planned increases in NHS funding, the NHS Confederation, representing 90 per cent of all NHS organisations, analysed where the money was going. Its main conclusion was that ‘the impact of underinvestment in the NHS during the 1980s and 1990s seems to be much greater than was first anticipated. Much of the “new” money has had to be used to compensate for previous cost-cutting …’

Renovating badly neglected hospital buildings, replacing outdated equipment and meeting rising drug costs had absorbed some 30 per cent of the new spending. Another 30 per cent had had to be spent on improving staff salaries. This, the Confederation pointed out, would save money in the long run. For example, the gap between NHS and agency pay has been draining the NHS of nurses, forcing hospitals to hire them back through agencies at much greater cost.

The low pay of NHS support staff had also become unsustainable. ‘Agenda for Change’, the new NHS employment deal negotiated with Unison, began by raising hourly rates for the lowest-paid workers from £5.16 to just £5.67. With 1.3 million people employed by the NHS, the £2 billion pounds spent on raising their pay and pensions in 2004-05 was by no means lavish. And with better pay, and almost 90,000 additional staff recruited since 1999 (largely thanks to the new funds), the NHS’s performance was actually improving dramatically, the NHS Confederation’s chief executive noted.

The government’s estimates for 2006-07 cited by the King’s Fund really tell the same story. But if the new money hasn’t all gone in excessive pay increases, and if there are still two more years of major funding increases to come, why are there any deficits at all? And at barely one per cent of the total NHS budget, why are they so important as to bring about the closure of NHS services across the country, depriving patients of care and costing the jobs of thousands of NHS workers?

The reality is that the deficits are a creation of the government’s determination to replace the English NHS as an integrated public service with a health care market in which large for-profit corporations compete – on highly privileged terms – for NHS funds.

To see how this is so we need to begin by noting that we don’t hear about a ‘deficits crisis’ in Scotland – where, incidentally, NHS pay increases have been exactly the same as in England. This is not due to the famous thriftiness of the Scots, but to the fact that in Scotland the purchaser-provider split has been abolished and services have been reintegrated. This means that any overspending in one area can be offset by savings in another, and the overspending corrected without a crisis, as it always used to be in England. It is only in England that every hospital trust is now required to carry any overspending on its own books – and told that in the next year it must both eliminate the overspend, and pay back its entire accumulated debt from this year. (Managers refer to these instructions as ‘P45 targets’ – miss them and you’re out.)

The reason is that moving to a health care market in England means that hospital trusts are going to face massive new financial uncertainties and risks. First, ‘payment by results’ (that is, paying hospitals for every individual treatment, after it is completed), coupled with ‘patient choice’, means they can’t know in advance what their income is going to be. Second, a significant part of the current hospitals budget is to be transferred to the primary care budget, much of it destined for for-profit providers. Third, private sector bosses have been told that by 2008 as much as 40 per cent of the work carried out by private hospitals and treatment centres will be paid for out of the NHS hospital budget. Mean-while, all trusts have been told to make 2.5 per cent ‘efficiency’ savings every year …

Many hospital trusts’ difficulties are compounded by the extra costs of the Private Finance Initiative. And underlying the financial difficulties of all of them are the huge – and still growing – ‘transaction’ costs of operating in a market. In the US these account for at least 20 per cent (and in the for-profit sector as much as 50 per cent) of hospital budgets.

In England, as one primary care trust (PCT) manager put it recently, ‘NHS hospitals [now] need an army of data clerks and managers to run payment by results, making sure that every visit to hospital is counted and coded and billed. PCTs also need an army of data clerks and managers to spot the tricks that the other army is using to bump up the price of the visits.’ Not to mention the impending costs of marketing, advertising, management consultants, lawyers, and so on, and so on. In the NHS these extra costs must already total several billion pounds, and are a major underlying cause of the financial stress now being felt throughout the service. The government, however, never refers to these costs, and provides no details of them.

So trusts are being told, in effect, to become ‘lean and mean’ businesses like the private ones they are being made to compete with. Patients’ needs become secondary, however bitterly doctors and nurses object – and however much Patricia Hewitt protests it isn’t so. Across the country hospitals, wards and beds are closing and staff and service cuts are being pushed through, as trusts try to shed whatever is ‘unprofitable’. (Anyone who doubts this should look at the news round-up on the keepournhspublic.com website.)

All sorts of new inequalities are emerging, too, but they are going officially unmonitored and largely unreported. Free care at the point of access is already being eroded as desperate NHS finance directors try to ‘generate’ extra revenue by charging new kinds of ‘top-up’ fees. The government has not stepped in to ban this, and the Social Market Foundation and the far-right think-tank, Reform, are stepping up their calls for patient charges to be imposed across the board.

The truth is that the NHS is being re-designed to fail. It is convenient for the government to represent the ‘deficits’ as showing that the NHS is failing, when they are really a symptom of the costs of marketisation. And attributing them to financial mismanagement or greedy staff is handy too, because it silences some of the very people who can best defend the NHS. It also allows the government to renege on wage settlements, as they have done with the consultants’ contract. Meanwhile, the government is creating further divisions across the NHS by giving hidden subsidies to some areas and services, while others are left to go to the wall. It then points to inequalities to justify channelling money to private corporations in fields or areas it claims the NHS cannot serve.

And the clamour about ‘deficits’ diverts attention from the most astonishing – and shameful – fact of all: the government’s idea that marketising the NHS will improve it is not based on evidence, but on ideology.

All the evidence points the other way. A rational policy would abolish ‘payment by results’ and market bureaucracies, get rid of the real ‘producer interests’ – the interests of the shareholders in companies like Capita, Netcare, UnitedHealth, Dr Fosters, KPMG and hundreds of others that are now working to dismember the NHS – and go back to giving absolute priority to the public interest in an integrated, comprehensive, equal and publicly-provided health service.Where’s the money going?, King’s Fund Briefing by the Fund’s economist, John Appleby, 3 February 2006. Available online at www.kingsfund.org.uk/news/briefings/wheres_the.html

Historic underinvestment in the NHS “grossly underestimated”’, NHS Confederation report, Medical News Today, 30 September 2005.

This unevenness will be offset by new opportunities to buy ‘superior’ or ‘enhanced’ services through ‘co-payments’. Those who can afford it will buy the kind of services that the NHS was created to provide free to everyone, regardless of ability to pay. Everyone else will get a ‘basic’ service, which will decline steadily as the middle class loses interest in it, and good staff flee to better-resourced and less stressful work. If this picture seems far-fetched, it is because government spin and media bias have prevented a clear picture emerging. Most of it has already occurred, or is explicitly planned.

Privatisation so far

NHS premises are increasingly owned and operated by private corporations. In the case of hospitals this is occurring through the private finance initiative (PFI). Of the 100 hospitals promised in the 2000 NHS Plan virtually all will have been procured via the PFI, while local investment finance trust companies are set to own a fast-growing proportion of primary and community care facilities. Non-clinical work – hospital cleaning, laundry, catering and so on – has long been outsourced to private companies, and services such as radiology are also beginning to be privatised. Assurances were always given that direct clinical work with patients would stay public – with hospital doctors salaried, and GPs independently contracted with the NHS. But from 2000 onwards this also changed. Now clinical work is being handed to private companies too.

Of course some clinical work has long been privatised – dentistry, routine eye care, and long term nursing-home care – and is no longer free. But now 15 per cent of all hospital procedures are to be provided by the ‘independent sector’. Privately-owned specialist treatment centres, undertaking routine hip and knee replacements and cataract surgery, have been given special risk-free terms, being paid at rates well above those of NHS hospitals, and with guaranteed revenues for five years. By 2008, when all hospital trusts will have become foundation trusts, 80 per cent of their income will come as ‘payment by results’ – separate payments for every completed ‘episode of care’ – so that for all intents and purposes they will be like private businesses. They will no longer be subject to direction by the health secretary, and will be free to enter into joint ventures with private companies. Indeed next year, for the first time in the history of the NHS, they have been told to make a profit (described as a ‘surplus’).

Privatising primary and community care

There remains the question of primary and community healthcare, provided by 34,000 GPs and some 250,000 community health staff (GP practice and district nurses, health visitors, speech therapists and so on), largely employed directly by the primary care trusts (PCTs). How is the market to be introduced here? Last July, all PCTs, which commission all primary and most secondary healthcare from GPs, community health trusts and hospital trusts, were instructed to stop directly employing primary care or community health staff themselves. This was a step too far. There was an astonished and outraged reaction. Who were all these NHS workers going to work for? Were they going to form businesses themselves (some are now doing so), or would their PCTs ‘enter into discussions’ with some private company, to which they would be compulsorily transferred? The health secretary, Patricia Hewitt, eventually backtracked and apologised.

Meanwhile, however, Thames Valley health authority was being instructed to ‘pilot’ the outsourcing of PCTs’ commissioning role to the European branch of a private American company – United Health Europe, led by Blair’s former health adviser, Simon Stevens (see page 10). This too had to be abandoned in the face of local outrage, backed by intense concern across the country. PCTs had originally been promoted as putting power in the hands of GPs and other community health workers on behalf of their patients. Now that power was to be handed to private corporations? The plan was dropped, or perhaps just deferred, while an alternative route was explored.

This involves bringing in private corporations via ‘practice-based commissioning’, whereby GP practices take over the commissioning function from the local PCT. Practice-based commissioning was first introduced in 2004. It is very like the old ‘GP fundholder’ system, except that GP practices will commission not just hospital care for their patients, but also local community health services. So if a private corporation operates GP practices, it can then commission virtually all other health services for the patients covered. If it decides to commission only private services it will be free to do so. This is the long-run significance of the recent decision of two PCTs to contract with the same United Health Europe to run general practices in Derbyshire.

If that deal goes ahead – and it is subject to a legal challenge, as well as strong local and national opposition – and is widely replicated, the drive towards further privatisation will obviously accelerate. Community health staff will realise that their jobs are at risk if they don’t form or join private companies. Hospitals will intensify their efforts to offer better ‘deals’ to the new corporate commissioners of hospital services. And the new corporate commissioners will start counting the cost of every treatment given to the patients in their care, to see if it can be reduced: money saved on treatment will be money added to their profits, as with US for-profit health maintenance organisations (HMOs).

The government defends its plans by saying – correctly – that it has hugely increased spending, then pointing to the fact that a high proportion of NHS trusts have financial deficits. This is blamed on weak financial management. The trusts with the biggest deficits are ‘named and shamed’ and ‘hit teams’ sent in, in New Labour’s usual fashion. The only way to ensure that NHS bodies spend their revenues efficiently, the government argues, is to make them compete with private providers.

People don’t want a choice of hospitals, any more than they want a choice of fire brigades

The deficits crisis

In fact, the NHS ‘deficits crisis’ is a product of government policy. Part of the reason that trusts have deficits in spite of big increases in spending is that they had huge spending backlogs, due to years of underfunding. Catching up consumes a large part of the new funding before any big improvements can be felt. Part of it is due to long overdue improvements in pay for NHS staff, and to the government’s failure to get its sums right on the new doctors’ contracts. Part of it is due to the PFI, under which the extra cost of using private finance has to be paid for out of hospitals’ current income. To meet this, hospital managers had to cut services. But reduced services mean reduced income. Even the most capable executives and directors of finance find it impossible to close the resulting ‘affordability gap’.

The recent case of the Queen Elizabeth Hospital in Greenwich is a clear example. An accountants’ report for the Audit Commission showed that the trust would have a deficit of almost £20 million in 2005-06, in spite of having achieved an efficiency level above the national average. Half of the deficit was due to the extra cost of the PFI. In the case of the St Bartholomew’s and London trust’s huge new PFI project, the extra annual cost of using the PFI will be over £48 million. A sample of eight other PFI schemes shows that the share of their annual revenue that had to be devoted to servicing capital costs rose from an average of 4.5 per cent to 16 per cent after the completion of their PFI projects. (See Mark Hellowell, What problems does PFI present for Barts and the London NHS Trust?, Centre for International Public Health Policy, University of Edinburgh, 2006.)

Another reason for the deficits is the introduction of ‘payment by results’ – since last April, for elective surgery, and by 2008, for most hospital treatments. Instead of having secure revenue for blocks of work commissioned in advance, hospitals will be paid in arrears for the work they do on every individual patient; and with patient choice, to be fully introduced by 2008, some of this work will fluctuate unpredictably. The requirement on PCTs to place 15 per cent of elective surgery with private providers, adds to the problem, while Patricia Hewitt’s latest white paper makes it even more intractable by proposing to transfer £4 billion from the hospital sector – about 10 per cent of hospital revenues – to primary care. In other words, NHS hospital finances have been critically destabilised.

In the original NHS, shifts in revenues could be handled relatively easily, since a loss in one sector was compensated by a gain in another. Now that all hospital trusts have to be self-financing, fluctuations hit them individually and imply cuts in services if their deficits become too large. Patricia Hewitt is not interested in this. Her aim lies elsewhere, in forcing the NHS and the public to accept further privatisation, all in the name of the supposed greater efficiency of the private sector. If anything, though, the evidence points the other way: the fact that the private sector could only be induced to provide the easiest, low-risk kinds of surgery for NHS patients in the new specialist treatment centres by being offered more money than NHS hospitals for the same work suggests that even in narrow business terms the NHS is substantially more efficient.

‘Choice’

Instead, Hewitt invokes the deficits as a reason for pressing ahead with more privatisation, talking of having written the NHS a very large cheque but not a blank one, and heavily stressing the idea of offering more ‘choice’. Research by the government’s own Consumer Council has shown very clearly that people don’t want a choice of hospitals, any more than they want a choice of fire brigades. What they want is a hospital near them that is as good as any other in the country. The real reason for the focus on choice – apart from denying it to the Tories – is that you can’t have a market without choice-making consumers. The truth is the opposite of what Hewitt asserts: we are not being given a market in healthcare to satisfy our wish to choose between hospitals, we are being induced to choose between hospitals in order to make them compete with each other, instead of cooperating as they did in the past.

The cost of privatisation

The most general and obvious result of privatisation is to push up costs. First, costs must now cover the payment of dividends to shareholders. The effects on PFI hospitals are all too clear: to pay the PFI consortiums, which borrow privately and have their own shareholders, hospitals have had to cut beds by an average of 25 per cent, and staff by 15 per cent. Second, the loss of integration – making every organisation cover all its costs, instead of costs in one area leading to savings in another (such as more money spent on prevention leading to less spent on treatment) – involves further costs. Third, the whole operation of a market has enormous transaction costs – paying for the marketing, invoicing, accounting, auditing, contracting, lawsuits and so on – not to mention losses from fraud, which in the US market system are enormous.

In the mid-1970s, Charles Webster, the official historian of the NHS, estimated its administrative costs at 5-6 per cent of its total spending. Today they are probably approaching 20 per cent (which is the norm in the least wasteful sector of the US healthcare market). The difference means that something like £10 billion is being consumed annually by administration, due mainly to the replacement of the NHS by a market. You don’t have to be a health economist to realise that the supposed superior efficiency of a market couldn’t possibly offset that.

The hospitals’ government-induced financial crisis is already producing a result that has been obvious for some time: the end of free services. This is coming in the shape of fees for so-called ‘superior’ or ‘enhanced’ services. As services are cut to save money, and patients’ health ‘needs’ are redefined (for example, you can no longer get a knee replacement in Suffolk if you are seriously overweight), people have a new incentive to ‘go private’.

In the new market-oriented NHS, hospital managers see in this a chance to raise revenues by offering something semi-private themselves. Thus Queen Charlotte’s and Chelsea NHS hospital in London is offering expectant mothers ‘one to one’ services of a midwife for £4,000, and Harrogate and district NHS foundation trust is opening a new fee-paying skin clinic to deal with minor skin conditions – described as a ‘half-way house’ between state and private care. The implication is clear: routine skin care will no longer be offered free, and a one-to-one midwife, which is the recommended standard for childbirth, and reduces the need for medical interventions, will cease to be the NHS standard. The fact that the government has not immediately banned these developments is highly significant. It is evidently ready to see a growing distinction between ‘basic’ and increasingly inferior services, which will remain free, and ‘superior’ ones, which must be paid for.

By 2008, if no real resistance is aroused, New Labour will have done what Thatcher couldn’t, and replaced the integrated, economical and egalitarian health service created by Nye Bevan with a fragmented, expensive service, based on ability to pay.