Click to listen highlighted text! Powered By GSpeech

Home » Law » Was "The Health of Nations" by Dr Madsen Pirie and Dr Eamonn Butler a blueprint for NHS privatisation?

Was "The Health of Nations" by Dr Madsen Pirie and Dr Eamonn Butler a blueprint for NHS privatisation?

For a clear description of what privatisation is, and how the NHS came to go down a process of privatisation, I strongly recommend the article “Opening the oyster: the NHS reforms in England” by Dr Lucy Reynolds and Prof Martin McKee (Clinical Medicine, Journal of the Royal College of Physicians) April 2012.

“”GPs will have to aggregate purchasing power and there will be a big opportunity for those companies that can facilitate this process … In future, the NHS will be a state insurance provider, not a state deliverer.” He added: “The NHS will be shown no mercy and the best time to take advantage of this will be in the next couple of years.””

(David Cameron’s adviser says health reform is a chance to make big profits, 14 May 2011, Guardian)



A document, “The Health of Nations: Solutions to the problem of finance in the health care sector” by Dr Madsen Pirie and Dr Eamonn Butler, published in 1988 by the Adam Smith Institute, may have had a more profound impact on the privatisation of the NHS than previously thought.

Duncan Madsen Pirie, PhD (born 24 August 1940) is a British researcher, author, and educator (biography here). He is the founder and current President of the Adam Smith Institute (“ASI”), a UK thinktank which has been in operation since 1978. Dr Eamonn Butler has even discussed “evolution not revolution” on the publication of the Health and Social Care Bill on the BBC Radio 4 “Today” programme. The course of this evolution could indeed be described as evolution, but the architects of it have never been clear.

The description of the ASI is given as follows:

“The Adam Smith Institute is one of the world’s leading think tanks. Independent, non-profit, and non-partisan, it works to promote libertarian and free market ideas through research, publishing, media commentary, and educational programmes. Famous for its trail-blazing work on tax, privatization, and public service reform, the Institute is today at the forefront of making the case for free markets and a free society in the United Kingdom.” (accessed 16:56, 2/1/12)

The reforms have been progressive and there seems to be no-end to them. David Cameron himself slammed “top-down” reorganisations.


The changes seem to fragment the system and introduce a number of new elements, such as the purchaser-provider split, Foundation Hospitals, Clinical Commissioning Groups (CCGs) and Personal Health Budgets (PHBs) but for many the changes do not cohere into a rearranged system whose functioning they can easily grasp. The current Health and Social Act (2012) is a complex piece of legislation, and estimates about the cost of the re-organisation have been reported as being around the £3bn mark.

It has been mooted that Sections 4-6 of the Adam Smith Institute’s 1988 report “The Health of Nations” contain a clear description of what was to become the privatisation of the NHS: these embrace various elements of the New Labour and Coalition reforms to the NHS, in which they relate these as components of a different health financing system, one based on a reorganisation to an insurance-based healthcare system which is a hybrid of the current mainly privatised US system and the partially privatised German system.

The blueprint, if executed properly, sees the conversion of the current system to full ‘integration’ with a private insurance healthcare system. The privatisation of the NHS can be achieved in five steps, and unknowingly, from the perspective of the general public, we have reached phase IV already.


The grid below [in "Results"] contains a contextual analysis of this document. The recommendations have been copied from the relevant three chapters this report, the marketing content removed, and the quotes and topics collated in a logical order. The extracted recommendations have been tabulated with notes on their later implementation where the policy recommendations can be traced to implementation efforts. The analysis is arranged chronologically by implementation element.


Please refer to the grid shown in this attachment for a full breakdown of how the privatisation steps appear to match up to the Pirie and Butler document.

Phase I  1988 – 1997  Thatcher/Major

Abolition of District Health Authorities  

The NHS internal market, and purchaser-provider split 

Phase II – Blair and Brown (1997-2010)

Payment by resultsFoundation Trust hospitals and HRG diagnosis-related groups systems

Use of private sector hospitals to clear NHS waiting lists for elective surgeries


It is of course remarkable that in an article called “Private equity pioneer”, the impact of Michael Queen is laid bare. The timing of this is particularly noteworthy, predating the Blair government commencing 1997.

Andrew Sparrow outlined a relevant argument in an article last year in the Guardian,

The Health of Nations had provided

Phase III – Cameron/Clegg (2010 – present day)

Formation of the NHS National Commissioning Board

Monitor and the licensing of CCGs (or “HMUs”)

2012 Outsourcing of Hinchingbrooke Hospital to be run by a consortium of investors headed by a former banker

2012-2013 Outsourcing of South-East London & Northwest  Healthcare Trust 

Choose and Book (“AQP”) with CCGs funded by PHBs (“vouchers”)

Introduction to CCGs (Clinical Commissioning Groups) funded by PHBs

Abroad, in the Netherlands, “unintended consequences” of PHBs have now been described.  The “Health of Nations “provides:

The CCGs use the PHBs to  contract with GPs of CCG member practices & purchase hospital and other secondary care through competitive tendering or through Choose and Book (“AQP”)

The insurance risks for CCGs are highlighted

Patient choice will not extend to consultation over exchanging universal tax-funded NHS coverage for an insurance-based healthcare

Phase IV Cameron/Clegg (2012-5)

Abolition of SHA & PCT management superstructure

CCGs as statutory health insurance?

The idea of CCGs as “insurance schemes” has been previously mooted. The ‘pooling of risk’ is explicitly referred to in the Department of Health’s Health and Social Care Bill (2011) impact assessment thus:

  PHBs as the basis of calculation of the funding allocated to CCGs

Performance management of GPs and hospitals by CCGsAbolition of GPs’ Minimum Practice Income Guarantee announced October 2012

“The proportion of remuneration which derives simply from having patients on their books will disappear, leaving payment only by results.” 

Patients and their GPs will have the choice to move to an HMU whose services are more attractive, and will take with them the state’s allocation per patient. 

CCGs as a vehicle for increasing uptake of private sector hospital care and other commercial services

GP incentive scheme?

CCG funding

PHBs calculated with demographic weighting

Personal health budget (partial roll-out now commencing) as allocations calculated for individuals which the individuals can transfer from public to private sector providers (from CCGs to insurance companies selling NHS top-up insurance)

CCGs as transitional structures leading to unification of the NHS with the private healthcare industry

CCGs as insurance mechanisms

Phase V



Many think-tanks submit proposals all-the-time, and it can hardly be claimed that one plan executed substantially over a period of 25 years is a great hit-rate. However, it is impressive that so many aspects of this plan to convert the NHS into an integrated private insurance system have been implemented, certainly fulfilling the aspiration of greater private provision in the NHS. While many journalists have tended to focus on McKinsey’sDeloitte and KPMG in their profitable work in doing this change management, it is striking how little the Medical Royal Collegesthe RCN, and the BMA have been involved in this latter tranche of privatisation, leading to the enactment of the Health and Social Care Act last year. In fact they have opposed it; while it is easy for the right to dismiss this as the behaviour of “ideologues”, and criticise members of this democratic organisation as acting in “guerilla warfare”, contemporaneous management models do predict a spectacular failure for this complex strategic change. A starting point for understanding this are two seminal articles both published in the Harvard Business Review: “Leading Change: Why transformation efforts fail” by John P. Kotter (January 2007), and “The Hard Side of Change Management” by Harold L Sirkin, Perry Keenan and Alan Jackson (October 2005) [and the 'DICE' model].

In my opinion, to improve the service, the opinions of hard-working doctors and nurses should have been aggressively canvassed, as well as the views of right-wing think tanks and corporate management consultants, arguably with their own vested interests, and it is both a tragedy and folly that they could not have utilised the expertise of the NHS’ own Helen Bevan, from the NHS unit on innovation and change, to implement necessary changes for the NHS, without embarking in an uncritical way on the narrative above which has little evidence-base (no references are provided in the original Pirie and Butler thesis.) One of Helen Bevan’s many writings is here. This is a very complex area, and needs specialists who are ‘up-to-the-job’ for the sake of the millions of NHS patients who rely on the service. We have seen a plethora of news articles recently undermining the reputation of, trust in and confidence in the staff and activities of the NHS, which have been very demoralising for employees of the NHS. It also clearly has been politically managed without a clear discourse with the electorate, undermining the psychosocial contract between the State and its NHS staff.


[I am grateful for the unnamed sources for having conducted this impressive piece of research, and for having shared with me in confidence.]

  • A A A
  • Click to listen highlighted text! Powered By GSpeech