2018 09 – ‘New Labour’ Plot Against the NHS (1)

The ‘New Labour’ Plot Against the NHS   Part One

by Peter Brooke

Julian Tudor Hart and the ‘Inverse Care Law’

2018 – the year which saw the 70th anniversary of the National Health Service – also saw the death, aged 92, of Dr Julian Tudor Hart. Hart was from 1961 to 1987 a General Practitioner working in Glyncorrwg, an isolated coal mining community in the Afan Valley, above Port Talbot in South Wales. He pioneered an approach to medicine which laid great emphasis on the community as a whole and on the needs of those who did not present themselves to the doctor as well as of those who did. To quote his obituary in the British Medical Journal: “He became the first GP in the UK to routinely measure blood pressure. He measured it in everyone in Glyncorrwg down to the last inhabitant—who turned out to have the highest reading—and he wrote it up in what would be the last single authored paper on blood pressure for the Lancet in 1970.

Local cooperation was essential, and working in partnership with patients was a guiding principle for Tudor Hart. He formed a health committee in Glyncorrwg in 1975, which met monthly and discussed public health issues such as smoking. “The preventive health strategy paid off. In 1991 The BMJ published a study that found death rates in Glyncorrwg to be 30% lower than in the neighbouring village, Blaengwynfi.”

In February 1971 he published an article in The Lancet under the title ‘The Inverse Care Law’: “The availability of good medical care tends to vary inversely with the need for it in the population served. This inverse care law operates more completely where medical care is most exposed to market forces, and less so where such exposure is reduced. The market distribution of medical care is a primitive and historically outdated social form, and any return to it would further exaggerate the maldistribution of medical resources.”

It seems that even then there were siren voices calling for a return to a market-based system, or at least a system in which basic services would be provided free, but the ‘frills’ (‘time, convenience, freedom of choice, privacy’) would be paid for. Hart quotes one of the advocates of marketisation (J. S. Seale, writing in The Lancet) saying “it is precisely these facets of medical care – the “middle class” standards – which become more important to individuals as they become more prosperous.” Hart replies that “not only the patient – all patients – value these things; to practise medicine without them makes a doctor despise his trade and his patients.”

Hart recognises of course that the NHS had greatly improved working-class access to health care, but he points out that there were still great inequalities and that these were likely to increase. This was partly because the middle and richer classes still had a better idea of what they wanted and how to get it; but it was also because GPs preferred working in comfortable surroundings with smaller patient lists, and they were encouraged in this preference by the career structure:

“Of 169 new general practitioners who entered practice in under-doctored areas between October, 1968, and October, 1969, 164 came from abroad … If doctors in industrial areas are to reach take-off speed in reorganising their work and giving it more clinical content, they must be free enough from pressure of work to stand back and look at it critically. With expanding lists this will be for the most part impossible; there is a limit to what can be expected of doctors in these circumstances, and the alcoholism that is an evident if unrecorded occupational hazard among those doctors who have spent their professional lives in industrial practice is one result of exceeding that limit. Yet list sizes are going up, and will probably do so most where a reduction is most urgent … The career structure and traditions of our medical schools make it clear that time spent at the periphery in the hospital service, or at the bottom of the heap in industrial general practice, is almost certain disqualification for any further advancement.”


That was in 1972.  In 2012, by now in his 80s, Hart gave a presentation to the ‘Bevan Commission’ set up by the Welsh Government which was, to some extent at least, holding out against the ‘reforms’ introduced in the NHS in England by New Labour. He pointed to four ‘major concessions’ Bevan had made when the NHS was established:

“1.  A right of consultant specialists to conduct private practice within NHS hospitals, as well as to continue trading outside them, if they chose to work part-time rather than full-time for the NHS.

“2.  A right of general practitioners (GPs) to operate as independent contractors to the NHS – private operators of public service.

“3.  As a concession to a large majority in his own Party, he left Public Health functions with Local Government. This separated preventive from treatment services, which progress in medical science had been bringing together..

“4.  A tacit right of both medical professionals and NHS administrators to operate as judges of their own conduct within extremely broad limits, with little control from any elected body, local or national.”

“Bevan”, he says, “believed his four compromises could be rectified later, when progressive forces were stronger. They never were. Even by 1948, the tide of anger expressed by Labour’s landslide victory in 1945 was receding. The socialising function of the NHS survived, but his four compromises remained. They eventually provided entry points for so-called ‘reforms’ of the NHS, back to the marketplace …

“Since control of the NHS was devolved to Wales, Scotland, and Northern Ireland in 1999, their administrations have committed to elimination of the purchaser-provider split. This was the legal and economic foundation for NHS ‘reform’ from public service to a state-subsidised business, initiated by Margaret Thatcher in 1983.

“Her project was reinforced by New Labour governments after Blair’s first year in office, despite an explicit promise in its 1997 manifesto to ‘restore the NHS as a public service working cooperatively for patients not a commercial business driven by competition.’ The present coalition government’s Health and Social Care Bill [associated with the name of Andrew Lansley – PB] has taken New Labour ‘reforms’ to their logical conclusion by ending central government responsibility for providing care, nominally handing power to GPs (98% of whom say they don’t want it), in fact offering it to ‘any willing provider’ – in practice, to corporate healthcare business. Labour’s shadow minister Andy Burnham has done his best to oppose the Lansley Bill within the constraints of shadow cabinet policy, but he evades any explicit commitment to its eventual repeal, or to renunciation of New Labour’s commercialising policies when it was in power.” Julian Tudor Hart, MB, BChir(Camb), honDSc (Glasg), DCH (Lond), FRCGP, FRCP (Lond), honFFPH, honDSc (St.Geo.Lond): A New path entirely – How NHS Wales could lead the world, based on a paper presented to a Bevan Commission seminar, Cardiff, January 19, 2012. Published by the Bevan Foundation, Cardiff (2012). Accessible at https://www.bevanfoundation.org/publications/a-new-path-entirely/


The process of ‘marketisation’ is described in a book by Colin Leys and Stewart Player: The Plot against the NHS, Merlin Books, published in 2011, contemporary with the Andrew Lansley reforms. But for Leys and Player the main thrust occurred under New Labour, in particular under Alan Milburn and John Reid, not under the Conservatives. They outline the immediate problems faced by ‘the chief marketisers in the government, especially Tony Blair and his senior health adviser, Simon Stevens [currently head of the NHS – PB]; Alan Milburn and his main adviser, Paul Corrigan; and Dr Penny Dash, Head of Strategy and Planning in the Department of Health’ in their ambition to open the NHS to private providers on a significant scale: “First, openings had to be created for private companies to provide health care – clinical treatments – for NHS patients … “Second, NHS organisations had to be reorganised into competitive businesses.

In the 1990s under John Major most NHS bodies had been made into trusts, run by boards of governors and chief executives, which ‘sold’ their services to ‘purchasers’ in a different part of the NHS. But this so-called internal market was not a real market. The contracts made between NHS hospital trusts and local Primary Care Trusts (the so-called purchasers, or commissioners) were not legally binding. There were no major penalties for hospital trusts that failed to deliver all the treatments they had contracted to provide, or underestimated what it would cost to deliver them. If they ran into debt the management would be criticised, or might even be replaced, but money would be found to keep the trust going.

“So the financial discipline that comes with the fear of going bust was missing: the needs of patients could still be seen as more important than the bottom line. If NHS hospitals and other NHS organisations, from mental health trusts to ambulance services, were to be ready to compete in a real market (and if private health companies were to be willing to compete with them ), this had to change.

“Third, a growing percentage of the NHS workforce had to be made ready to transfer – voluntarily or otherwise – to private sector employment. All three steps were implicit in the NHS Plan. All of them were put in hand by Alan Milburn, who … presided over the Plan’s drafting.” (all the extracts I’m giving in this article come from Chapters two and three)

A foot in the door for private providers

Part of the problem was that the existing private hospitals were not commercially viable: “none of them could compete with NHS hospitals at NHS prices …They depended wholly on the part-time work of NHS consultants, who demanded extremely high fees, and their clientele of privately insured patients was limited, so there were few economies of scale.”

The solution was “to ‘unbundle’ some of the most potentially lucrative, standardised, high volume and low risk treatments provided in NHS hospitals, and offer private companies extremely favourable terms to provide them. Cataract surgery and hip and knee replacements were the obvious treatments to start with.”

To achieve this a new ‘Commercial Directorate’ was established within the Department of Health “with the brief of ‘introducing independent sector providers to the NHS’ … By mid-2009 the Independent Sector Treatment Centre (ISTC) programme had got some 30 privately owned surgical centres up and running throughout England. The Department of Health’s formula was that they were part of ‘the NHS family’. They were allowed to use the NHS logo, so most patients were (and still are) not aware that they are private companies.”

There was some resistance to this process from local Primary Care Trusts: ‘The board of South-West Oxfordshire PCT, which had refused to sign a contract for cataract removals that seemed bound to lead to the closure of a highly regarded local NHS eye unit, was told that ‘John Reid wanted a reversal of the decision on his desk by 12 o’clock on the Monday.’ A survey of over a hundred NHS chief executives found that this was not an isolated case: the ISTC programme was forced through by bullying …

“By August 2007 ISTCs were free to use NHS staff in most clinical specialities, and were doing so. The programme’s dependence on NHS staff made it clear that privatisation on a larger scale would mean transfer of NHS staff to private employers.

“The ISTC programme also took funding away from the NHS. In order to make it attractive to the private sector, the companies concerned were paid for the number of treatments contracted for, whether or not they were actually carried out, and at a significantly higher price than NHS providers received. In effect it was financially risk free. Clinical risk – the risk of law-suits for medical malpractice if things went wrong – was also covered by the NHS. The money involved – £5.6 billion over five years – involved a significant subtraction from the NHS’s resources. Its main contribution was to fatten the balance sheets of Netcare, Capio, Clinicenta and the other new private providers, feather-bedding their initial entry into the NHS-funded healthcare market.”

The policy was justified by a need to reduce waiting lists – which could have been just as easily secured by passing the money spent on ISTCs to local NHS providers – but “a second objective was to offer patients ‘choice’, and to use competition to ‘drive up standards’ in the NHS. Most patients don’t want a choice of providers if that means for-profit providers. But you can’t have a market without people choosing between different suppliers, so patients had to be induced to choose, and GPs had to be induced to refer patients to private providers. Some GPs were even paid a bonus for every patient they referred to the local ISTC rather than the local NHS hospital.”

A business model for hospitals

So much for introducing private providers into the system. The second objective was to turn NHS hospitals into businesses. The proposal was to establish a category of ‘Foundation Trust Hospitals’ which “would no longer be supervised by the Department of Health, but by a new independent regulator called Monitor. Monitor would license them to provide a specified number of services each year and would have powers to ensure that they did so, while the Healthcare Commission would check their care quality standards. Otherwise they would be free to provide services as they saw fit. They would be free to borrow on the private financial market, enter into joint ventures with private companies and set their own terms of service for staff. Foundation trusts would thus resemble private companies in all but a few aspects. They could only sell assets with the permission of the Secretary of State, and would not make profits for shareholders (although Monitor would require them to make a ‘prudent’ surplus); also, to ensure that they remained focused on treating NHS patients, money earned from treating private patients could not exceed its existing proportion of a foundation trust’s total income (the ‘private patient income cap’).

“But the counterpart to their private sector-like freedom was that a foundation trust could go bust. Its contracts would be enforceable in the courts and it would not be able to turn to the department of Health for help if it ran up unsustainable debts. In that event, Monitor could step in and remove the management and invite another foundation trust to take over. Or it could let the foundation trust hospital close, simply ensuring that other providers were available to fill the gap in services. In terms of incentives, this was all important: the bottom line became the overriding measure of success.”

Alan Milburn told the House of Commons that “in no way” could the bill “be reasonably described as privatisation or a step in that direction.’ Foundation Trusts, according to the Department of Health, “‘have been created to devolve decision making from central government control to local organisations and communities, so they are more responsive to the needs and wishes of local people.'” But “the reality was that foundation trust directors had to have the same freedom as private company directors. Being financially independent meant that every policy decision must be judged first and foremost on its impact on financial viability, rather than on whether, for example, it would meet the needs of this or that category of patient.”

The basis of funding for hospitals was changed: “Starting in 2004 with ‘elective’ procedures (such as knee replacements) and for foundation trust hospitals only, hospitals would be paid per completed treatment, and not with a lump sum for a given total of cases. This was misnamed ‘payment by results’ – it should have been ‘payment by throughput’, since whether the treatments are successful or not forms no part of the formula. It was also short of being a full market system in that price competition was ruled out. All payments were based on a national ‘tariff’ of fixed prices, adjusted for the seriousness of each category of case … The idea was that hospitals should compete for patients on the basis of the quality of care, not price.

“By the end of 2010 about 60 percent of all NHS hospital care was being paid for on this basis … It already meant that hospitals were more interested in some kinds of patients than others, because they were more profitable, and that the success of one hospital in attracting patients could mean destabilising the finances of another, with knock-on effects on its ability to keep staff and provide other services.

“But the full significance of ‘payment by results’ only became fully apparent in December 2010 when the Coalition government let it be known that in future providers could be allowed to offer prices below the national tariff – in effect forcing others to compete on price. The beginnings of a full healthcare market were thus coming into view.

“And so were some of its effects. In July 2010 the government had also announced the scrapping of the private patient income ‘cap’. From now on foundation trusts that are well placed to attract private patients … will be free to step up their private patient intake as much as they wish if this will bring in more money than treating NHS patients …”

In the middle of the process, in June 2003, Milburn “left the government, citing family reasons. He then became a paid adviser to a clutch of private companies interested in cashing in on the marketisation of the NHS: Bridgepoint Capital, a venture capital company involved in financing Alliance Medical and other firms seeking NHS business; Lloyds Pharmacy; Covidien, an American manufacturer of orthotics [material such as ‘insoles, braces, splints, callipers, footwear, spinal jackets and helmets which help people recover from or avoid injury, or live with lifelong conditions’ – PB, from the NHS England website]; and last but not least, PepsiCo …” The relevance of PepsiCo may be a little obscure but in 2010 they were invited by Andrew Lansley “to join a ‘network’ of businesses to help write government policy on obesity and diet-related diseases.”


“the NHS Plan called for new contracts for consultants and GPs. It didn’t call for new contracts for the rest of the NHS’s staff, thousands of whom had already experienced being transferred to private employers during the 1980s when Thatcher made the NHS outsource cleaning, catering, laundry and other services. Over the years 1981 to 1994 non-clinical employment in the NHS had fallen from 260,000 to 120,000, and during that time those affected got scant protection for their wages and benefits. The cost reductions achieved by outsourcing, and the profits made by the outsourcing companies, were made largely by paying workers less.”

Here a big role was played by Dr Penny Dash, Head of Strategy and Planning in the Department of Health. Before being appointed to this role in 2000, “Dr Dash had studied business administration in the US and worked briefly for Kaiser Permanente, the largest US HMO [Health Maintenance Organisation. In the US, a medical insurance group that provides health services for a fixed annual fee – PB]; from 1994 until 2000 she had worked in the London office of Boston Consulting, a leading US health consultancy.”

The strategy with regard to consultants is not easy to follow because at first sight it seemed to be moving in the opposite to the desired direction. “The NHS Plan said that more of them would get the discretionary payments (usually known as ‘merit awards’) that substantially increase the salaries of most senior NHS consultants, but that in future such payments would depend on their demonstrating increased ‘productivity’ with ‘proper job plans  setting out their key objectives, tasks and responsibilities and when they are expected to carry out these duties’, and with ‘regular reviews’ of their performance. In addition, newly qualified consultants would not be able to do private work for ‘perhaps seven years.'”

The proposal was accepted by consultants in Scotland and Wales but overwhelmingly rejected by consultants in England. Soon after this rejection, Dash, who had left the Department of Health to become an “‘independent adviser’ to the NHS and other healthcare organisations” published an article in The Guardian in which “she now declared that the English consultants rejection of the contract could ‘have positive and far reaching implications for the way NHS care is delivered – not least because it may open the door to more private sector provision of healthcare.’

“She went on to spell out various ways in which consultants might escape control by NHS managers – the very control that the NHS Plan had said was needed. Now she suggested that in reality ministers might ‘want to encourage surgeons and indeed other groups of doctors to form their own companies (or join existing private health providers) to sell their services back into the NHS’.” In this way they could be  ‘freed from the stifling grip of the NHS…’ She suggested that this may have been what ‘Messrs Blair and Milburn’ (her bosses while she was working for the Department of Health) really wanted.

The implication is that burdensome conditions had been imposed and now a means of escape was being offered. But if that was the case, the strategy doesn’t seem to have worked. The immediate upshot of the new contract was that after Milburn had threatened to impose it on consultants against their wishes, his successor John Reid apparently caved in to them, allowing the increase in pay but removing most of the conditions, including the ban on newly qualified consultants engaging in private practise – effectively a continuation of the status quo.

With regard to GPs a new contract was introduced which entailed “a bumper increase in payments to GP practices, linked largely to demonstrating performance against a set of specific standards, the so-called Quality Outcomes Framework (QOF)’ At the same time ‘out of hours’ cover became optional, with only a modest loss of income for those who opted out. This provided ‘a useful entry-point into primary care for private companies, as well as a stick to beat GPs with (allowing them to be pictured as work-shy and overpaid). Companies such as Serco and Take Care Now were quick to seize the chance.”

At the same time, the government proposed a “new kind of primary care contract – the ‘Alternative Provider Medical Services’ or APMS contract” which “replaced the traditional contract with an individual GP or a group of GP partners by one with a company employing GPs on salary, and offered a more significant opening for the private sector. It allowed Primary Care Trusts to commission primary care services from large private companies such as UnitedHealth and Atos Origin (both of which were controversially awarded practices in central London), as well as from ‘entrepreneurial’ GP consortia and social enterprises … The great majority of APMS contracts highlighted the fact that they would provide services 7 days a week and from 8am to 8 pm. [I’m wondering if that should read 8pm to 8 am, i.e. the out of hours service not being provided by the GPs – PB] …

‘By July 2010, 227 GP surgeries and health centres in England were being run by private companies, with nine firms, including Care UK and Assura Medical (now Virgin Assura) each holding 10 or more contracts. These are not all small beer. Virgin Assura now claims to have 30 partnerships with over 1500 GPs catering for over 3 million patients, while as the market expands various new outfits such as Intrahealth, The Practice Plc, and Malling Health, are joining the ranks of corporate providers of primary care alongside multinationals such as UnitedHealth and Atos Origin.

Leys and Player outline a third plot, to outsource community health staff – “health visitors, district and community nurses, physiotherapists, speech therapists, occupational therapists, podiatrists and others …” but when this was proposed by Patricia Hewitt as Secretary of State in 2005, there was an uproar and the plans had to be cancelled. This, however, did not adversely affect Ms Hewitt’s career:

“As for Hewitt, whose attitude and policies had antagonised half the staff of the Department and almost all sections of the NHS workforce, she left the cabinet in 2007 and became an adviser to the private equity company Ciniven (which had recently bought BUPA’s chain of 25 private hospitals) at a salary of £60,000 for 18 days’ work a year. She also became a ‘special consultant’ to Alliance Boots, at an annual salary of some £40,000, and a non-executive director of BT, at a salary of £60,000 (for which she would be expected  to attend nine BT board meetings and possibly sit on committees covering remuneration and corporate and social responsibility) …”

To be continued