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A ‘paradox of regulation’ in the NHS has opened the neoliberal floodgates

Red tape









At 493 pages, the ‘Health and Social Care Act’ is a massive piece of legislation. Writing a blogpost on it would be like trying to summarise the contents of ‘War and Peace’ in a single tweet. From that perspective, it might seem as if the NHS is over-regulated, and certainly the number of guidelines and policies relating to the NHS has exploded. The Act has no provisions on patient safety, apart from the abolition of the “National Patient Safety Agency”, and yet Monitor is expected to publish a huge armoury of regulation of ‘competitive activity’ in the market. The full-frontal marketisation, together with outsourcing and privatisation of the NHS, is considered totally unacceptable to many reasonable onlookers, especially socialists. Market failure is a very important concept in economics, on the other hand. Market failure is a concept within economic theory describing when the allocation of goods and services by a free market is not efficient. That is, there exists another conceivable outcome where a market participant may be made better-off without making someone else worse-off. Market failures can be viewed as scenarios where individuals’ pursuit of pure self-interest leads to results that are not efficient – that can be improved upon from the societal point-of-view. The first known use of the term by economists was in 1958, but the concept has been traced back to the Victorian philosopher Henry Sidgwick. The general consensus, now, is not that there is a desperate drive for yet ‘more regulation’ at any cost, but there is a need for a higher standard of effective regulation in the NHS, to which not only top CEOs in NHS management can have full access. This is particularly poignant since the volume of budgeted NHS litigation claims has in fact exploded in recent years.

There is an ideological divide between those on the left-wing and those on the right-wing. The Conservatives promoted themselves on ‘light touch regulation’ at roughly the same time as the Financial Services and Markets Bill was going through parliament. There are two crucial issues now for the adequate regulation of the NHS. Firstly, all parties have a concern in patient safety. The previous failures of the Health Service Ombudsman’s office and that of CQC could be, and even now possibly, be pinned down directly on a lack of sufficient resources needed for them to fulfil their functions, and existing staff there would prefer not to amplify any suggestion that they are failing patients. Neoliberals also have an interest in patient safety, as failures in patient safety threaten competitive advantage, ultimately the profitability of private healthcare companies. Secondly, the failure of adequate market regulation in the water industry (and indeed the privatised utilities) still remains powerfully sobering for any ‘users’ of the National Health Service, a group within the general public formerly known as ‘patients’.

Employment is the first clear example of the ‘law in action’ in the NHS. The NHS, by its own admission, has decided to use compromise and confidentiality agreements in settlement with outgoing employees to prevent them pursuing unfair dismissal claims as is their statutory right. When it comes to a minimum staffing level, the usual riposte from the Right is that the complete answer involves ‘the staffing mix’. However, this is disingeniously to divert from the issue that there is an unsafe staffing level. Despite the fierce debates about the use and statistical reliably of hospital standardised mortality ratios (HMSRs), the clear evidence is that unsafe doctors:bed ratios can shove up the HSMR for weekends both in this jurisdiction and abroad (Dr Foster report 2010-2011, Prof Brian Jarman (personal communication by twitter.)) While the Left (and the Unions particularly) see the minimum staffing levels of nurses as ensuring a safe minimum standard for hospital safety, the Right (and neoliberals) invariably see the safe minimum staffing level as part of ‘the race to the bottom’ to maximise shareholder profitability. Staffing remains the number one issue where more effective regulation in the NHS could make a massive impact on patient safety, and indeed it is likely that this will be addressed as well as the legal duty of candour for hospitals, in Don Berwick’s wideranging report due out tomorrow.

The turbo-charged implementation of the economic market, rejected by true socialists, presents formidable problems for the regulation of the NHS. Traumatic lessons from other sectors, especially the privatised utilities, are particularly helpful here. There are currently twenty one private water companies operating in England, answerable to their shareholders. They are overseen by economic regulator OFWAT. Before 1989, water supply in England and Wales had been in the hands of 10 public regional water authorities, which were then sold off. They are private companies, many are owned by banks, private equity firms or foreign investment funds, like the main supermarkets.Thames Water, for instance, has been owned by Kemble Water Holdings – an investment consortium led by Australian banking and finance group Macquarie, with recent shareholdings taken by the Abu Dhabi Investment Authority and the China Investment Corporation. This democratic deficit of course makes many people angry, whereas the Unions have been the target of malicious smears from virtually all sectors of the media. Similarly, when Cheung Kong Infrastructure was buying Northumbria Water at the end of 2011, it sold Cambridge Water to South Staffordshire Water. South Staffordshire is wholly owned by the US based Alinda Infrastructure Fund.

OFWAT calculates the average water and sewerage bill in England and Wales at £340 for 2011-12, compared to £236 when water was privatised in 1989-90. The Health and Social Care Act and the regulations for implementing it change the nature of the NHS to allocate NHS resources into the private sector, to maximise profitability for shareholders. Private competitive tendering as the default option has seen major contracts being awarded to private sector corporates. The tragedy of this is that some private providers have an atrocious performance record in outsourcing, but because they are able to make slick bids appear to be implementing a ‘winning formula‘ in rent seeking behaviour from the current neoliberal Coalition. Priorities change from patient care to ensuring corporate rights, from spending directly on health care to investor dividends. The UK NHS becomes much more like the corporate-benefit US health care system which has very high spending while many people have no health care.

Any Qualified Provider is a procurement model that CCGs can use to develop a register of providers accredited to deliver a range of specified services within a community setting. The model aims to reduce bureaucracy and barriers to entry for potential providers. The US/EU free trade agreement has been launched, formally called the Transatlantic Trade and Investment Partnership (TTIP). When TTIP negotiations are completed, unless the neoliberal Coalition manage to negotiate successfully an exemption for the NHS, corporations will have the right to sue the UK government for any attempts at ‘reversals’ that limit future corporate profits. In terms of “ownership”, most of our power generating companies, our airports and ports, our water companies, many of our rail franchises and our chemical, engineering and electronic companies, our merchant banks, an iconic chocolate company – Cadbury, our heavily subsidised wind farms, a vast amount of expensive housing and many, many other assets, all disappeared into foreign ownership. No mainstream party appears to be making any progress in this. Debbie Abrahams, Labour MP for Oldham East and Saddleworth, as a lone voice almost, has lodged a question from David Cameron regarding what exemption (if any) has been negotiated (recorded in Hansard here), and it turns out that Debbie Abrahams has now received a rather unclear reply.

In the EU, there are concerns that liberalising public procurement markets, combined with measures to protect foreign investors from government action, could constrain the power of national governments to decide how public services are provided. Concerns about the status and future of the NHS have been raised in the UK by people from many quarters other than in the Socialist Health Association. In particular, some commentators have claimed that measures to open up the NHS to competition would be made irreversible under the TTIP if its investor protection regime required US companies to be compensated in the event of a change of policy. This is of course a very dangerous situation. The liberalisation of the NHS market through the US-EU would be accelerated through a US-EU Free Trade Agreement. This is something which some corporates have been working very hard on ‘behind the scenes’. To dismiss this issue as scaremongering by the Socialist Health Association, which is supposed to uphold socialist principles and oppose further marketisation and privatisation, would be to turn a blind eye to all the legal evidence and judgments.

The legal arguments against further privatisation of the NHS are overwhelmingly strong, and there is a distinct lack of effective regulation of the NHS currently. Such poor regulation, whilst a boon for profiting private health providers, offends what is actually in the ‘best interests’ of patients.

This should massively concern socialists.

We can’t go on like this.

  • rotzeichen

    The whole debate surrounding modern economics and the privatisation of the NHS is based on Neo-Liberal principles, this has brought the world let alone the NHS to it’s knees.

    The truth is that people believe politicians who talk of the deficit as though it were fact instead of total fabrication.

    The past forty years has seen the promotion of neo-liberal economics even down to Gordon Brown boasting the achievements of the Banks prior to the crash, and promising Ed Balls would lead the campaign in Europe to convince the Europeans of the need to liberalise their financial markets.

    Wealth and power has been transferred away from ordinary people upwards to favour the few and all politicians over the last forty years have been instrumental in that, it’s time people woke up and realised that this crisis has been created for the enrichment of the few not the many and has to be reversed.


    This academic spells out precisely what is happening and why.

  • Shibley

    Thanks as ever

  • Richard Bourne

    Just for clarity the SHA shares concerns about marketisation and privatisation and supports clarity over how the TTIP might affect policy options around healthcare for a future Labour Government.
    But we have not accepted that measures to open up the NHS to market competition introduced already by this government would be made irreversible under the TTIP – there are many who are clear this would not be the case; however we would not suggest anyone who raises the issue is “scaremongering” – the issue is certainly important.
    One factor is that it is unlikely that politicians in other EU countries with strong public sectors will simply allow any agreement which requires wholesale enforced privatisation.

  • Linda Kaucher

    That the SHA ‘shares concerns about marketisation and privatisation’ seems very weak as we lose the NHS to private profit.

    ‘Clarity about the effects of the NHS on policy options for a ‘future Labour government raises 2 main issues.
    1) Where is the Opposition activity to achieve clarity?
    2) If the TTIP cuts out any possibility of reversals of the consequences of the Health and Social Care Act then it’s what the official Opposition does NOW that counts, not ‘policy options’ for a future government.

    And who is claiming that reversals are possible once the TTIP is signed? Names please.

    Informed public opinion is the key factor in affecting the progress of the trade deal and its effects on health.The most important action that the Labour Opposition can take is to inform the public about the TTIP now. The Opposition owes this to the public. It’s its job. But it is currently maintaining the silence as much as the Coalition.

    Trade agreements are intended to be irreversible to provide the ‘investor protection’ that transnational corporations pursue via the trade agenda. Therefore the onus is on you and ‘the many who are clear this would not be the case’ to show why and how this is not the case – but there is no such explanation.

    The strongest push for this trade deal and for neoliberal EU policies comes from the UK. Successive UK governments have been more than willing to go in that direction, above and beyond EU directives, as in the UK Health and Social Care Act. It hardly seems appropriate for anyone in the UK to look to other member states to resist requirements of a trade deal that the UK has jumped the gun in implementing, and is pressuring others to accept.

    We need action on the TTIP from the Labour Party Opposition of the type I have indicated, now – no hiding behind ‘the future’ for the purpose of election promises. These will fall flat anyway, because their inadequacy and indeed trickery will out.

    After its last performance in government, the Labour Party needs to do this to start to regain any credibility with the UK public, or else there may not be any ‘future Labour government’. It’s that pivotal.

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