Health and Social Care Bill

Memorandum submitted by George C A Talbot (HS 123)


The NHS is essentially socialist and I challenge Government’s claim it needs capitalist autonomy and competition to increase efficiency to meet rising demand. The PM adds he wants the NHS to be the best in Europe. But the NHS is not demand led and performs above average on most measures despite below average funding. It has suffered from historically low funding and ceaseless ideological reorganisations. Recently these have aped capitalism. Thus payment by results is ill suited to professionals and has increased costs to little benefit. And the purchaser-provider split has added over ten billion pounds per year and not been shown to benefit patient care.

Government faces an economic crisis but my informed opinion is it is wrongly blaming previous Labour governments and idealising Conservative ones and has no credible recovery strategy. I regret being unable to trust it. I fear it seeks to apply the same principles that have manifestly failed business globally to the NHS although they are even less appropriate. I reject these reforms that have appeared almost out of the blue. Free market competition is poorly suited to providing a people with efficient health care.

I worry about recurrent emphasis on the need to achieve internal savings of 4%/year during this Parliament. Any established organisation should seek savings year on year but this large amount could prove counterproductive. It appears an emotional reaction to the huge budget deficits needed to sustain the economy rather than a reasoned response to the state and cost of the NHS. I am sure conventional management with the power to discipline could further improve efficiency and urge Government to reintegrate Foundation Trusts into the NHS to restore a fully cooperative service.

If the Coalition wants to make its mark, it should develop reforms to the economic system to assist people to live in harmony with themselves and the planet.

1. During the 1970s, I studied depth psychology to try to understand the roots of mental illness and myself. Soon I was moved to apply this to children in trouble. In the early 80s, I combined my approach with an earlier interest in macroeconomics to criticise the Thatcher government’s economic policies. I feared they would cause troubles similar to those earlier in the century. Since then I have explored the religious and secular values adopted by society. Below I oppose the Health and Social Care Bill because it would replace the rational and cooperative values that formerly sustained the NHS with the primitive self-interest and competition of capitalism.

2. By nature the NHS is an essentially socialist facility. I regret Government ignores the benefits of direct management respectful of subsidiarity to ensure decisions are made at the lowest practical level and of emulation to ensure less efficient units can learn from more efficient others. NHS responsibilities are not just patient care. They include the well being, training and disciplining of staff, and preserving and enhancing its assets. Numberless hard choice must be made in real time and after deliberation to ensure as good care and treatment as possible are offered to those seeking help in England without prejudicing the present or the future. It is very large, has limited resources and unlimited demand. This and the personalities of those who choose to work in it mean it is not like most capitalist businesses or even those running privatised utilities under a regulator.

3. Great harm has been done to the NHS over the years by politicians claiming it can meet the need for treatment. Need is unlimited and this has never been possible. This claim overworks NHS staff and threatens its assets. And it distracts attention from deciding how the available resources can best be used. As the NHS is funded nationally, it must have a strong decentralised management that can make and enforce crucial decisions from top to bottom. GPs are important but cannot meet patients’ needs simply by commissioning. GP commissioning: insights from medical groups in the United State suggests it is hard to sustain in the US; Nuffield Trust, January 2011.

4. Section 34 • 6 of ref.1 says
An independent NHS Commissioning Board will take over responsibility for running the NHS, in accordance with a mandate set by the Secretary of State. The Board will hold consortia to account for the health outcomes they achieve and for their steward-ship of NHS funds. In addition, it will itself undertake commissioning of primary care services (including GP services) and some specialised services.

5. Monitor is central to Government’s reforms that liken it to Ofcom and Ofgen despite no longer calling it the Independent Regulator of NHS Foundation Trusts. Although charts show data flowing into it as befits its name, section 6.1 of ref.2 says
Clause 52 of the Bill stipulates its principal overarching duty: to exercise its functions so as to protect and promote the interests of people who use health care services, by promoting competition where appropriate and through regulation where necessary. Right!

6. These two quotes reveal Government’s faith in competition between autonomous providers managed by Government appointed commissioners from the centre. This mirrors nominally independent capitalist companies run by directors appointed by shareholders. But they usually have decentralised managements!

7. I find this extraordinary given the dire state of the economies of many advanced nations. Since 1980, I have carefully followed macroeconomic policy and know the Coalition is wrong to blame Brown’s pragmatic policy and to idealise those of Thatcher and Major. And I doubt its claim that eliminating the budget deficit will ensure recovery.

8. I fear Government is in denial about the failure of the deregulated global economic system and is applying the same arrangements to the NHS to strengthen its denial. If so, this would explain why it is immune to the severe criticisms its proposals have received. They have little to do with the NHS and much to do with retaining faith in a long cherished ideal that is in deep trouble.

9. A two page report from the Commonwealth Fund ranks health care for seven nations under twelve headings in 2010 and compares their spending on health from 1980 to 2007. It shows the NHS nearly best despite low funding.

10. The most comprehensive comparison of health care I have found is the OECD’s Health Care at a Glance 2009. Its web pages and PowerPoint slides compare the health care in many nations around the world on dozens of measures. These take time to interpret but confirm the Commonwealth Fund’s conclusion: The NHS performs relatively well.

11. Many agree that the purchaser-provider spilt was introduced to allow competition into the NHS. I add despite its socialist nature. Wendy Savage provided a neat summary of its effects in a letter to the Guardian, 20th January. I quote it in full.

a. Colossal waste in NHS commissioning costs

b. We are glad to see the president of the Royal College of Surgeons speaking out against the cuts that are taking place all over the country ( Report , 17 January). The health select committee said in March 2010: "Whatever the benefits of the purchaser-provider split, it has led to an increase in transaction costs, notably management and administration costs … If reliable figures for the costs of commissioning prove that it is uneconomic and if it does not begin to improve soon, after 20 years of costly failure, the purchaser-provider split may need to be abolished."

c. What is needed is an end to the purchaser-provider split that underlies the market, following the example of Scotland and Wales, where the NHS has not fallen apart. It is ludicrous to stop surgeons from operating because PCTs want to save money. The marginal cost of surgery is minimal; what costs money is running the hospital, heat, light, and staff salaries. And what costs even more money is the tendering, contracting, marketing etc, which does not benefit patients and could be scrapped, while retaining evidence-based treatments that work and help patients.

d. The new health select committee says that "more effective commissioning is key to delivery of efficiency gains" and is critical of the "surprise proposal" to abolish PCTs ( Report , 18 January). However, it does not follow up on the request to examine the cost of commissioning. DoH officials have said this was 14% of the NHS budget, but this was the cost of administration in 2002, and they are not revealing what it is now. What we do know is that administrative costs in the NHS were 5% of the budget before the 1984 Griffiths reorganisation (which brought in managers not administrators), rose to 10% in the early 90s and are probably 18% now. The cost of the market must be at least £10bn, but no one wants to discuss this colossal waste of money that has not been shown to improve patient care.

e. Wendy Savage: Co-chair, Keep our NHS Public

f. Note well the distinction that Savage draws between the marginal cost of an operation and the price (needed to fully fund the facility providing it). None now supposes free markets create optimally efficient economies. See the cautionary note in Annex 1.

12. In ref.2, the Health Select Committee refers 28 times to the Nicholson Challenge; "also expressed as the need to make £15 to 20 billion in efficiency savings", Summary. The Committee is clearly worried that Government’s reforms will fragment the NHS yet it accepts the purchaser-provider spilt. How interesting! Is this another example of the group think an IEO report says prevented the IMF from seeing the Crunch coming?

13. Government quotes statistics showing the NHS unfavourable saying, for example, France has had much lower rates of heart disease. But this is because of how they record deaths and the gap has almost closed: See John Appleby Does poor health justify NHS reform?. He qualifies the cancer figures in his final paragraph.

14. I admit NHS figures for cancer are poor. For expert opinions see S. Michael Crawford, BMJ 341, UK cancer survival statistics reflect clinical realities in the NHS, 11 August, hear More or Less, 21 January from 5:45 or for the full report from 0:44, and watch the 9 min interview of Michel Coleman on EJC News Focus, February 2011. I conclude that the low historic funding has limited NHS spending on consultants and drugs. This does not justify major reforms. Note, although GP gatekeepers reduce unnecessary referrals, they delay diagnosis and worsen outcomes.

15. In conclusion, I urge reflection on public services provided by capitalist companies subject to competition and choice and external regulation with socialist ones where structured, thoughtful management preserves local freedoms with respect for subsidiarity and enhances efficiency with cooperative endeavours and emulation.

16. Capitalism fails when the marginal cost of an extra unit is low and costs of the capital required are high. Power generation and telephones are classic examples where at best, competition is managed illegally to avoid destitution or a monopoly. Why have national monopolies been broken up and forced to compete under regulators? This occurred after governments had deregulated the economic system but its full effects had not been felt. As a student of human nature, I know our base nature seeks freedom when it feels secure. But although many feel better when restraints are dismantled, eventually security is lost. The global economy is now in this stage. I urge Government not to take the NHS further down this road as it is poorly suited to capitalism. Rather, it should try to create a more cooperative economic system that would assist persons and peoples to live in harmony with each other and the planet. Perhaps it could usefully try some of its ideas out on public services!

Reference 1: House of Commons: Health Committee; Commissioning, Third Report of Session 2010–11, Volume I, 13 January 2011

Reference 2: House of Commons Library: Health and Social Care Bill research paper 11-11, 27 January 2011

Annex 1

For the Common Good – Herman E. Daly & John B. Cobb; Beacon Press, Boston, 1994

Chapter 2: Misplaced Concreteness: The Market

From Some Market Grammar: The Equi-Marginal Principle of Maximization, page 49

Economists do not spend all of their time celebrating the virtues of the market. Much effort has gone into specifying both the conditions under which markets work as advertised and the conditions that give rise to "market failure." If we focus on market limitations and failures throughout this book, it is not because we are antimarket. Much to the contrary, we are eager to identify and correct those conditions that lead to market failure as a way of enhancing the market as our basic institution for allocating scarce resources among alternative uses. Three broad categories of problems with the market have been identified by economists:

(1) the tendency for competition to be self-eliminating,

(2) the corrosiveness of self-interest on the moral context of community that is presupposed by the market, and

(3) the existence of public goods and externalities.

Of these types of problems, the first two are cases of the market eroding its own requirements, which we treat in The Market's Tendency to Erode Its Own Requirements. The third is considered under Public Goods and Externalities below.

March 2011