Select Committee on Health Appendices to the Minutes of Evidence


Memorandum by the Democratic Health Network Local Government Information Unit (PS 8)

  The Democratic Health Network (DHN) was set up by the Local Government Information Unit (LGIU) to provide policy advice, information, research and the exchange of good practice on the developing relationship between local government and health. The DHN has over 100 members, the majority being local authorities, but also including health authorities, over 20 primary care groups and trusts and community health councils and trade unions. The LGIU is an independent research and information organisation supported by more than 150 councils and the local government trade unions. The DHN has a particular interest in the role of the private sector in the NHS because:

    —  primary care is an area that has been singled out by the government as a candidate for further involvement of the private sector;

    —  local government and particularly, but by no means exclusively, social services departments are working ever more closely with the NHS and in some cases health and social care are fully integrated; the implications of private sector involvement will therefore apply equally in such cases to local government services;

    —  the government is also expecting greater involvement of the private sector in mainstream local government; there are likely to be lessons from the NHS experience;

    —  there are particular implications of private sector involvement for the workforce; as an organisation with trade union members, we are interested in this aspect of policy;

    —  one of our main objectives is to "support the democratic role of local government" in health; we are therefore interested in how private sector involvement may impact on democracy and accountability.


  The Government has said that there is no ideological objection to involving the private sector in the provision of public services; and the Prime Minister has said that he does not believe that it matters to the public where their services come from, as long as they are of good quality. We do not have any objection, in principle, to the private sector supplying certain goods, such as medical equipment, which are developed for a world market. However, we do question the assumption that the public do not care at all who provides public services, and the assumption that there is no limit, in principle, to the extent of the private sector's role.

  The Prime Minister gives the example of someone being knocked down in the street and asks whether that person would query whether they were being taken to a private or a public accident and emergency department. This is intended to be a rhetorical question to which the answer is so obviously "no" that it need not be given. However we think this depends very much on how the question is put—we believe that a very different answer might emerge if the same person were asked whether they thought it was all right for someone to make a profit from their accident and injury.

  We that know that in local government, it does make a difference to service users whether their services are provided by the local council or by an "outsourced" private provider. One example of this is the 89-year-old resident of a local authority home who made a legal challenge under the Human Rights Act against Birmingham City Council earlier this year, because the council was planning to transfer its homes to the independent sector. According to her solicitor, most of the 900 residents in Birmingham's homes were opposed to the plans to transfer ownership and "would prefer to remain in the public sector". (The Times 14 May 2001).

  We think that residents of such homes and users of other public services are aware that decisions about their services are made by people in whose election they have participated and to whom they have local access. They believe that they have rights of ownership in such services that extend well beyond the kind of consumer rights in a commercial relationship that derive from ability to pay. That is why current trends (such as privatisation, "externalisation" and "outsourcing") in both local government and the health service, that distance service providers from direct accountability to the electorate, are not mere matters of efficiency. There are fundamental issues at stake about the nature of democracy and citizenship. Whatever the Prime Minister may say, these are issues of principle.

  However, there are also practical issues, such as value for money, that should obviously be considered in any decision about involvement of the private sector. We are aware of research that has been done into whether the Private Finance Initiative does, in fact, provide value for money or better services than alternatives based in the public sector; and we are convinced that there are strong reasons to question PFI as the best option. Nonetheless, in some cases it has been the only option available to NHS bodies that have required new capital investment, and this, we believe is not a desirable state of affairs, either in the NHS or elsewhere in the public sector.


  The present government has recognised the "democratic deficit" in the health service and the need for greater openness and transparency in decision/making. The government is encouraging patients and the public to play a greater role and proposes to give powers to Patients' Forums to inspect premises in the private sector that are providing services to the NHS. It has also given the power to scrutinise local health services to local authorities, in the Health and Social Care Act 2001. We warmly welcome these initiatives, but however tight the contracts and however many structures there are to keep privately provided public services under review, we believe that an increased role in scrutinising services is no substitute for the provision of a democratically accountable public service.

  Firstly, the actions of private companies and public private "partnerships" will be much less open to scrutiny than those of the public sector as traditionally understood. Considerations of commercial confidentiality are likely to interfere with the openness and transparency that should characterise decision-making in the public sector. Secondly, private providers of publicly commissioned services are already at arm's lengths from the communities that use services, in the sense that they are neither elected nor appointed to represent the interests of those service users. Rarely do the governing bodies of private sector companies include users of the services provided, while more and more public sector organisations are doing so, with the result of improved quality and user-friendliness of services. Thirdly, the notion of competitiveness that naturally dominates a sector in which capture of market share is an enormous driver, could interfere with the co-operation that ought to underlie transactions within the health service.

  Finally, the obligation to secure profits for their shareholders creates a permanent conflict of interest with the obligations of private providers to act for the common good. As evidence, we cite the Judicial Review[7] of Northumbrian Water's decision not to extend water fluoridation in the North East, in 1998. The Judge, Mr Justice Collins, said that the water company "cannot be said to possess powers solely in order that it may use them for the public good. It has its commercial obligations to its shareholders. It must exercise its powers in accordance with those obligations". He added "with some regret" that the current legal situation makes it "open to the water company to adopt the attitude that it has" and that this was "an inevitable consequence of privatisation".

  We conclude that the "democratic deficit" will be aggravated by greater private provision of health services.


  We have concerns about how a social inclusion agenda can be successfully implemented by the private sector. Providing healthcare to the most vulnerable and to those, such as minority groups, who may require services to be provided in a variety of ways, is more expensive than providing services to those in the mainstream. One of the reasons for having public sector services at all is that they can operate on the basis of different priorities from the private sector and can have clear social policy objectives. It is questionable whether social goals could ever pre-dominate in the private sector, given its requirement to reduce costs and increase profits. These requirements are drivers for greater standardisation in services provision, which we believe acts against the interests of people who are currently socially excluded and discriminated against.

  A small, but telling, example is of the non-core charges that are coming to be associated with a stay in hospital, where non-medical services have been contracted out. These include expensive charges for car parking for both patients and visitors. (It should be noted that the trend for PFI hospitals is for them to be built out of town on sites that are difficult to access by public transport). We are aware of councils' transport and environment departments experiencing problems where patients and visitors are parking outside hospital grounds to avoid having to pay the parking charges.

  We are also concerned about the "Patientline" telephone system provided to hospitals, which is charging both patients and those telephoning them rates far above those for local telephone calls. This is made worse by the fact that patients and their relatives are often unaware of these additional charges until they receive a bill.

  Examples like this are not likely to assist in the government's social inclusion agenda for the least well off. We are concerned that such costs may come to be associated with more and more services closer to the medical core. For example, we would be completely opposed to charging for meals for a hospital stay, which would obviously work to the nutritional disadvantage of the poorest patients and discriminate against those with more expensive specialist requirements (eg Halal food).


  We are very concerned that, in the drive to privatise more and more aspects of health service provision, a "two-tier workforce" is developing. This happens when workers are transferred from the NHS to private sector employers. In theory, their contracts should be protected, at least in the first instance, by the Transfer of Undertakings, Protection of Employment (TUPE) regulations. Even where TUPE regulations are correctly applied, private contractors are engaging new staff on worse terms and conditions than those who were previously employed by the NHS. The NHS is the country's largest employer. We do not believe that the fragmentation and worsening of terms and conditions of employment, given the well-documented evidence relating low income to ill health, is likely to improve the health of NHS employees or improve service quality.

  This issue concerns us particularly in relation to equalities issues. The NHS employs disproportionately many more women and minority ethnic staff than other employees, particularly in the lower and ancillary grades which are most likely to be transferred to private sector employment, when the private sector is involved in provision of services. We are aware that Julie Mellor, the Chair of the Equal Opportunities Commission (EOC), has already warned (at this year's TUC conference) that involvement of the private sector in health service employment contracts is in danger of leading to the kind of gender inequalities which EOC research found that the policy of Compulsory Competitive Tendering in local government had led to at the end of the last century.

  We welcomed the Secretary of State for Health's announcement of pilot projects to try to retain in NHS employment staff who would formerly have been transferred under PFI contracts. We understand that attempts are being made to set up such pilot projects, and that these projects are running into difficulties because the private contractors believe that NHS retention of staff would eat into their profit margins. If this is the case, it is a serious indictment of the way in which private companies plan to make profits from PFI contracts—by reducing staff costs and worsening their conditions. We would not wish to see gender inequalities, race inequalities or greater health inequalities developing out of a drive to involve the private sector more closely in health service employment—this would be a bitterly ironic result for a government which is committed to improving health and reducing health inequalities.


  The government has argued that it makes common sense that, where there is a crisis in the health services and spare capacity in the private sector, the public sector should take advantage of that spare capacity. We believe that this common sense view has not been sufficiently analysed. Use of spare capacity in the private sector may well look like a solution in the short term. Indeed it might be a solution in the long term if there were, for example, a lack of facilities (eg beds) in the public sector combined with a surplus of staff. But this is not the case. One of the reasons for waiting lists and the other factors that cause difficulties in current NHS provision is precisely that it is the same doctors and nurses and social care workers who provide services in and out of the public sector. The more they work in the private sector, the greater the staffing crisis in the public sector is likely to be. So what looks like a short-term solution may well be storing up more difficulty for the future in terms of the supply of qualified staff to the NHS.

  We are also concerned that, if it is believed that the NHS will take up "spare capacity" in the private sector, this will provide a motivation for more capacity to be created in the private sector, to take advantage of NHS contracts. We do not believe that the NHS should be in the business of making markets in the private health sector.


  Aside from the possibility of subverting the public sector ethos, the social inclusion agenda and other social goals discussed above, does involvement of the private sector actually provide better value for money to the NHS? We are convinced by the research of Professor Allyson Pollock and others that PFI schemes currently in operation will not provide value for money in relation to the objectives originally envisaged for them. We are particularly concerned about assumptions of risk transfer and public sector efficiency that are built into the original assumptions that have led to many PFI contracts. We would refer the Committee to the work of Professor Pollock and her colleagues and to the LGIU's summary and analysis of public private partnerships in Sillet, J, Public Private Partnerships, LGIU, 2001.

  We are also concerned that PFI schemes provide perverse incentives to deliver services in a certain way, that may not accord with research into appropriate care and treatment in the future. For example, an enormous amount of capital expenditure and commitment over 30 years is being locked into PFI schemes for large hospital buildings, while at the same time, the government is encouraging health and social services, rightly we believe, to work together to ensure that people spend much less time in hospital and much more time being looked after at home and in the community.


  We are concerned that PFI and certain types of public private partnerships are coming to be seen as the only option for health trusts and local government to modernise their services. This is as much to do with the capital raising and spending regimes that operate in the public sector as with the presumption that "private is good, public is bad" that seems to prevail among some areas of government. We would wish to see a much greater range of options within a financial framework for health bodies and local authorities to finance the kind of services that will be appropriate to their local populations and a level playing field so that a genuine choice can be made between a capital project directly commissioned by the NHS or local government and a PFI deal. We would suggest that the Select Committee should look at Treasury rules for public sector investment in comparison to those that exist in other European countries in this context.


  We believe that, before the government completely changes the nature of the way that public services in this country are delivered, as it looks set to do, there should be a debate around the basic principles that should underlie public service provision. To what criteria should any provider of public services conform, in relation to ability to prioritise the public good over private profit; standards of accountability, openness and democracy in decision making; quality of service and inclusion and access for all; quality and equality in employment? How should such matters be regulated, where public services are delivered by the private sector?

  These are issues that have not fully been talked through in public and they are issues about which the public are likely to have strong views, if questions about them are put in a fair and open way. We are very pleased to see that several other organisations (eg Unison, the Chartered Society of Physiotherapy) have begun to formulate checklists and call for a charter for public services. We would urge the Committee to recommend a full debate leading to the setting up of an official charter for public services backed by government regulation.

7   Regina v Northumbrian Water Ltd, Ex Parte Newcastle & North Tyneside Health Authority, December 1998. Back

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