Health 1: Labour looks to the private sector
Labour has pledged to use private-sector capacity to address waiting lists, but this was tried by the last Labour government and did not make a major contribution
I recently wrote an article for CapX which dealt with one of my bugbears, the simplistic and incorrect accusation that the National Health Service is overrun with highly paid managers whose salaries should be redirected to clinical services. For the “tl;dr” among you, the NHS is if anything under-managed given its enormous size, and always has been. Before that, I’d taken a swing at Labour’s policies and criticised their health plans in particular. They’ve added up to pique my interest and tempt me back into the subject of health in general, a long-standing fascination of mine as my father and stepmother both worked in the NHS, making the journey from clinician to management, and my first job in the House of Commons was on the Health Committee, chaired in those days by Sir Kevin Barron, the former Labour MP for Rother Valley.
It was a different world then, because health policy comes at you quickly. The secretary of state (Blair’s fourth), having taken over from John Reid five months before I arrived, was Patricia Hewitt, a mildly competent if charmless Blairite who lapsed into her native Australian accent when annoyed; running both the Department of Health and NHS England (the only time the posts of permanent secretary and chief executive were combined) was Sir Nigel Crisp, educated at Uppingham and St John’s College, Cambridge, but joining the NHS from a background in community work, who had risen through the ranks of trust management and was rather a grand, weighty figure; and the chief medical officer for England was Professor Sir Liam Donaldson, a brilliant and dedicated public health specialist whom my parents knew from his time as regional director for Northern and Yorkshire, and whose mission at that time was to cut the prevalence of smoking and therefore of smoking-related diseases.
The organisational landscape would be unrecognisable today. The Labour government had misguidedly abolished GP fundholding, and primary and community care services were commissioned by primary care trusts (PCTs), responsible for spending 80 per cent of the NHS budget. Overall priorities and budgets were set by the strategic health authorities (SHAs), of which there were 28, reorganised and reduced to 10 in 2006, and these reported directly to the Department of Health, their chief executives unencumbered by a board or non-executive directors. As well as PCTs, SHAs oversaw hospital trusts, mental health trusts, ambulance trusts and care trusts. A unified pay and grading system which covered all NHS employees except doctors, dentists, apprentices and some senior managers, Agenda for Change, had come into force the previous year, 2004, and is still in operation. A new contract with consultants had been negotiated in 2003, and another with general practitioners, which had included substantial pay increases, had been introduced in April 2004.
I set the scene because I think it’s useful for readers to know my baseline, the context against which I dived more deeply into health policy on becoming a clerk. What I want to address in this essay, however, is an item in the Labour Party’s current policy document, Build an NHS Fit for the Future. This is one of Sir Keir Starmer’s five “Missions for a Better Britain”, a creditable if slightly woolly attempt to organise the party’s priorities if, as the polls currently suggest but I still do not think is certain, it wins next year’s general election.
Let’s look first at the problems facing the NHS. No-one denies there are major challenges. The Covid-19 pandemic put enormous strains on the health service, in addition to which NHS spending fell slightly in 2022/23, from £157.9 billion the previous year to £153 billion. However, in 2023/24 it will grow to £160.4 billion, set against the fact that inflation is currently at around 6.5 per cent.
One overarching problem, exemplified by recent strikes by junior doctors and nurses, is that the NHS lacks a fully funded national workforce strategy. There is a record number of vacancies, at more than 130,000, staff sickness absence has risen, and dissatisfaction and burn-out are increasing. The workload of general practitioners has gone up by 18 per cent since 2019—an extra 120 patients for each full-time equivalent GP—and that is having an effect on GP morale and retention. Last month, the prime minister, Rishi Sunak, announced a 15-year NHS workforce plan which the government hopes will increase staff numbers, add new roles and boost the number of UK national employees, creating long-term stability for the health service.
From these workforce problems stem many of the other difficulties. Waiting lists, one of the perennial weaknesses of the NHS, are at record levels. There are currently 7.4 million people awaiting treatment, though, as the prime minister and health ministers have pointed out, the number of people on waiting lists is a less helpful metric, in terms of the individual patient, than the waiting time. Some progress is being made with those who have been waiting longest, and the government argues strongly that its plans will improve the long-term condition of the NHS, but health minister Maria Caulfield, a former nurse, admitted recently that the total number of patients waiting to be treated could will rise before it begins to come down. There is, of course, a blunt instrument which is almost always effective in reducing waiting lists and times: money. Sir Tony Blair’s government brought both measures down dramatically, but did so only by increasing spending in a similarly major way. The Conservative government of 1979-97 raised NHS spending by 2.1 per cent on average, while the Labour administration of 1997-2010 more than doubled that to 5.7 per cent per annum. However, the current government simply does not have the financial headroom to match that kind of increase.
(This is not to say that all the money spent by the Blair and Brown governments was wisely spent, or that it was a sustainable level of expenditure over the long-term, but those remain the headline figures.)
So how would the Labour Party reduce waiting times if it returned to power in 2024? Their policy document contains some vague, reassuring words that it will focus on “getting the basics right and taking long-term, pragmatic, common sense steps”. But then, what would-be health secretary would promise to ignore fundamental processes and take short-term, impractical steps? What interests me, given when I became engaged in this area, is the declaration that Labour will learn from history.
The last Labour Government reduced waiting times by using the private sector, increasing staff numbers and spreading good practice. We did this before. We will do it again… we will use spare capacity in the independent sector to ensure patients are treated quicker.
This is very familiar territory. In the first half of 2006, the Health Committee undertook an inquiry into the use of what were then called Independent Sector Treatment Centres, taking evidence from March to June and then publishing its report in July. This is exactly what the current Labour Party is talking about when it refers to “using the private sector”. Let me explain.
In 2002, the NHS decided to commission a number of independent sector providers to treat NHS patients requiring relatively simple, high-volume procedures like hip replacements, varicose veins, hernia repairs and cataract removals. The idea was that these procedures, because they were elective and therefore could be scheduled, could be done efficiently and at volume in dedicated facilities. This would in turn free up surgical capacity in the NHS to address more complex procedures and emergency surgery. An additional benefit promoted by the Department of Health at the time was that the use of the private sector would foster innovation and spread best practice throughout the NHS, and some of the most optimistic promoters of the scheme suggested it would also present a ‘friendly challenge’ to the NHS, stimulating reform and driving efficiency.
The bids to operate these ISTC were received in the first months of 2003 and the contracts awarded in September of that year. The Department of Health told the committee at the time that bidders had to “meet the core clinical standards required by the NHS, provide high standards of patient care… and provide good value for money to NHS commissioners”. Phase 1 consisted of 29 ISTCs, of which all but four were either operational or about to open by the time of the inquiry in 2006. This was obviously on a small scale, but there was considerable political opposition to a Labour government so overtly employing private-sector capacity, and some vested interests among clinicians were unenthusiastic about the idea of best practice being developed and promoted from within the independent sector.
It is worth saying that the assessments of how much additional capacity was needed was done at the local level. This was a policy decision by the Department of Health, because it was argued that Whitehall didn’t have the “granularity of data” (how I came to hate the word ‘granularity’) to know where the pressure points were. Inevitably, however, ISTCs were concentrated in areas with a lack of capacity or long waiting lists.
Did it work? No, not really. A report to the secretary of state claimed that 250,000 patients were treated in ISTCs between 2003 and the end of 2005, but in fact only 50,000 of these were actually treated as intended as part of a high-volume elective procedure programme. The others consisted of the private-sector provision of other services to NHS patients, such as MRI scans. To put it in context, the first phase of ISTCs were expected at best to perform 170,000 Finished Consultant Episodes (FCEs) each year, while the NHS as a whole was performing 5.6 million elective FCEs annually. When the committee visited some of the ISTCs, we found a great deal of unused capacity, with the facility in Gillingham, for example, operating at 50 per cent of its potential. Moreover, there was evidence of underused capacity in NHS hospitals in areas which had ISTCs, suggesting that they were not addressing a capacity issue.
To be fair to the NHS leadership of the time, one reason they favoured the ISTC experiment was because they believed it would be better value for money that spot purchasing because it was more systematic. The purchase of services from the private sector for NHS patients on an ad hoc basis was, and is, inevitably expensive because it is unplanned and at short notice. But the Health Committee found little evidence that spot purchasing prices had been reduced either.
Are Starmer and Wes Streeting, his shadow health and social care secretary, simply mistaken, then, to moot using the independent sector to relieve pressure on NHS services and bring down waiting lists? Not entirely. Inevitably, if there is capacity within the independent sector to treat patients who would otherwise be on a waiting list, employing it somehow is an option. But the ISTC programme, after Phase 2 was deployed in 2006, was not taken any further. The committee concluded that the evidence was not sufficiently strong that ISTCs did everything which it was promised they would do, and that it would be more efficient and better value for money to separate elective from emergency care within the NHS, use NHS facilities out of hours to increase through-flow or for the NHS to partner the private sector in joint facilities. There had been a successful example of this partnership at the East Surrey Hospital, where BUPA had worked with the NHS to create a centre for elective diagnostic and surgical treatment, and the committee recommended that as a potential model, but in 2007, to improve its performance, Surrey and Sussex NHS Trust had brought the facility in-house and operated it as an NHS centre.
We will need to wait for more detail from Labour. I say this not witheringly or with a Jean Brodie arched eyebrow: I understand Starmer’s dilemma. With probably a year to run till the general election, he faces the dilemma opposition parties always face. Policy has to be made without access to the data and resources of the government, and therefore is necessarily somewhat broad-brush: to set out too much detail with 12 months or more to go is to give the Conservatives a hostage to fortune, which they can scrutinise and pick apart. Many believe that the extent of the “shadow budget” which John Smith published for Labour before the 1992 election was a factor in the party’s defeat, as it provided too much material for other parties to attack (though David Ward, who was an adviser to Smith at the time, contests this vehemently).
Equally, however, Sir Keir Starmer cannot go to the electorate with a wide smile and a soothing manner to ask for a blank cheque. People want and need to know what Labour would do in office, and, in an age in which some people believe the two major parties have huddled together in the technocratic middle ground, they want to know how things would be different under a Labour government. Therefore Starmer needs to be producing not a full-on manifesto but at least signposts towards the party’s priorities and plans.
Absent that detail, however, I have to be sceptical that the idea of employing the private sector simply to cut waiting lists will be effective if it is also to be affordable. Simply handing over cash for x number of patients will not do; but the ISTC programme of the mid- to late 2000s indicates that even farming out specific kinds of patients will not solve the problem either. The Blair government’s assault on waiting lists and times was achieved primarily by increasing substantially the public money spent on the NHS, and it is by no means certain this is an option Starmer would have or would adopt. What the experiment of ISTCs did show was that there were potential benefits to co-operation between the NHS and the private sector, but that reducing waiting lists was only one of them, perhaps not even the most important, and they were only to be realised by much closer partnership between the two sectors.
My advice, therefore, to Streeting would be that it is good to know your history—he was elbow-deep in student politics at Cambridge when ISTCs were coming into being—but you need to know not just what was done but how well it worked. The detail, or “granularity”, of the use of private-sector capacity is that it was not a significant solution to the problem of waiting lists, a problem which will be much larger in 2024 than it was in 1997. He has been brave in addressing private healthcare, which is anathema to some on the Left in any form, but that bravery might come at a cost which does not justify the sacrifice. As a Conservative, I think the private sector has a useful and important part to play in a mixed economy of healthcare, so I feel I should welcome Streeting and Starmer with firm handshakes, but it may be that they have picked the wrong point from which to start.