Private Island: Why Britian Now Belongs to Someone Else (22 page)

Still, the lights haven't gone out. At least that's what an MP told Dieter Helm a few years ago when he was giving evidence in Parliament. People warned there would be blackouts the previous winter, the MP said, and there weren't. With unusual passion, Helm put him straight. If you define the problem as the lights not going out, he said, you misunderstand everything about the way the new world of electricity markets works. The
ideal situation for private electricity firms is one where there is only just enough electricity to go round; where the lights are always just about to go out, but never quite do. Then they can charge as much as they like, and people will have to pay. ‘People think insecurity of supply means will the lights go off or not – but that is not the issue,' he said. ‘It is what happens just before the lights go off.'

More than twenty years after the great electricity experiment was launched, it can be seen that although it was an act of privatisation – of taxation, principally – it was most significantly an act of alienation, lowering an impenetrable barrier of complexity, commercial secrecy and sheer geographical distance between the controlling interests of electricity companies and the customers they serve. It's easy to switch suppliers. But behind that barrier citizens and small businesses have no way of knowing that they aren't being fleeced as egregiously by the cheapest provider as they are by the most expensive. The consumer-peasants of Britain bring their tithes to the locked gates of the great electrical estates and wonder who lives in the big house now, and whether they are at home, or in one of their other estates around the world. No wonder Denis Cohen, old communist, heir to the Communards and the sans-culottes, hates what the company that pays him is doing abroad. ‘I was very surprised to see the British trades unionists were not very opposed to this,' he said, meaning privatisation and foreign takeover. ‘We, with our culture, would have fought until death to prevent it.'

Wrightington Hospital, in the countryside near Wigan, grew in fits and starts around an eighteenth-century mansion that Lancashire County Council bought in 1920 after the death of its last resident, a spendthrift with a fanatical attachment to blood sports. The hospital promotes itself as ‘a centre of orthopaedic excellence'. National Health Service hospitals have to promote themselves these days. In 2011 it survived a brush with closure. It's neat and scrubbed and slightly worn at the edges, unable to justify to itself that few per cent private firms set aside for corporate sheen, although it does have a museum dedicated to John Charnley, who, almost half a century ago, invented a reliable way to replace human hips with artificial ones, creating a benchmark by which the success and failure of the NHS would always be judged.

They still do hips at Wrightington, and knees, and elbows, and shoulders. They deal with joint problems that are too tricky for general hospitals. There's a sort of blazer and brogues testosterone in the corridors, where the surgeons have a habit of cuffing one another's faces affectionately. At the end of a hallway lined with untidy stacks of case notes in wrinkled cardboard folders Martyn Porter, a senior surgeon and the hospital's clinical chairman, waited in his office to be called to the operating theatre.
He offered me his intense, tired, humorous gaze. ‘The problem with politicians is they can't be honest,' he declared. ‘If they said, “We're going to privatise the NHS,” they'd be kicked out the next day.'

The patient Porter was about to operate on was a sixty-year-old woman from the Wirral with a complex prosthesis in one leg, running from her knee to her hip. She had a fracture and Porter had got a special device made for her at a workshop in another part of the NHS, the Royal National Orthopaedic Hospital at Stanmore in Middlesex. The idea was for the device to slide over the femoral spur of the knee joint, essentially replacing her whole leg down to the ankle. ‘The case we're doing this morning, we're going to make a loss of about £5,000. The private sector wouldn't do it,' he said. ‘How do we deal with that? Some procedures the
ebitda
is about 8 per cent. If you make an
ebitda
of 12 per cent you're making a real profit.' You expect medical jargon from surgeons, but I was surprised to hear the word
ebitda
from Porter. It's an accountancy term meaning ‘earnings before interest, taxation, depreciation and amortisation'.

‘Last year we did about 1,400 hip replacements,' he said. ‘The worrying thing for us is we lost a million pounds doing that. What we worked out is that our length of stay' – the time patients spend in hospital after an operation – ‘was six days. If we can get it down to five days we break even and if it's four, we make a million pound profit.'

I felt I'd somehow jumped forward in time. A year had passed since the 2010 election that brought the Conservative-Liberal Democrat coalition to power. The Coalition's programme promised: ‘We are stopping the top-down reconfigurations of NHS services, imposed from Whitehall.' A few weeks after they gained power, a new health secretary, the Conservative Andrew Lansley, announced his plans for a top-down reconfiguration of England's NHS services, imposed from Whitehall. When I talked to Porter, Lansley had barely been in his job a year, and hadn't yet, supposedly, shaken up the NHS. But here was a
leading surgeon in an NHS hospital, about to perform a challenging operation on an NHS patient, telling me exactly how much money the hospital was going to lose by operating on her, and chatting easily about profit and loss, as if he'd been living in Lansleyworld for years. Had the NHS been privatised one day while I was sleeping?

When the NHS was created in 1948, it had three core principles. It would be universal: everyone would get medical treatment whenever they needed it. It would be comprehensive, covering all forms of healthcare, from dentistry to cancer. And it would be free to use. No matter how much the system cost to run, no matter how much or how little any individual had contributed to those costs, no matter how expensive their treatment or how many times they went to the doctor, they'd never be billed for it. Through dozens of reorganisations since then, these principles have remained, along with another: that it's never a bad time for a fresh reorganisation. Otherwise, much has changed.

The main source of the money that funds the NHS is still, as it was in 1948, general taxation. For the first thirty years of the health service's existence, civil servants in Whitehall and the regions doled out annual budgets to hospitals and GPs according to the populations they served. Money flowed down from the Treasury, but it didn't flow horizontally between the different parts of the NHS. Each element got its overall allowance, paid its staff, obtained its equipment and supplies, and co-operated, sometimes well, sometimes not, with the other elements, according to an overarching plan. The aim was fairness, an even spread of care across the country. In a monopoly healthcare system, competition has no place; on the contrary, it seemed sensible to the planners to avoid duplication of services. It was patriarchal and democratic, innovative and hidebound, cumbersome and cheap. For the majority without private insurance, if you were ill, you knew you'd always be cared for; if you were cared for carelessly, you had nowhere else to go.

Trying to describe in generally comprehensible terms how
money flows through the NHS today would be hard enough without the shifting channels of policy. In England – Scotland, Wales and Northern Ireland have gone along divergent health paths – the various parts of the NHS had already begun altering or abolishing themselves in response to the reorganisation announced in 2010 when the reorganisation itself was reorganised. In 2012, the Coalition responded to the clamour against Lansley's reorganisation by sacking Lansley and keeping the reorganisation. Truly you can't step in the same NHS river twice. The last period of relative stability was just before Lansley came along, when, crudely speaking, the money flowed like this. Every so often – perhaps every year, or every two or three – the Department of Health made its pitch to the Treasury for the amount of money it thought it should get from the overall tax pot, and was then told how much it would actually get. Most of the money came from general taxation – income tax, VAT, corporation tax, duties on booze and tobacco – but a proportion came directly from national insurance, a vitiated form of the link between that levy and the welfare state its architects intended. In the last pre-Lansley allocation, Health got £101.5 billion for the following year, a slight increase. Most of it – £89 billion – was divided up between about 150 local agencies called Primary Care Trusts, or PCTs, spread around the country. PCTs acted as the ‘commissioners' of health services, ordering a community's medical care from hospitals, GPs and mental health professionals and paying them accordingly.

PCTs could use NHS money to commission care from the private sector. They weren't under any obligation to shop locally, either. Under Labour in the 2000s, NHS patients had been given the chance to choose private or far-away hospitals for treatment, which meant the PCTs were obliged to commission from them. Even before Lansley's changes, NHS hospitals like Wrightington had become dependent for their financial viability on the money they made from selling their services to the PCTs. Competition already existed.

The amount of money PCTs got from the government varied. The Department of Health had a panel of civil servants and academics called the Advisory Committee on Resource Allocation (ACRA), which came up with a formula for working out the health needs of each area based on population size and density, the proportion of elderly people, life expectancy and the degree to which their health varied from the mean. In the poorer parts of Merseyside, for instance, where male life expectancy is sixty-seven, men can expect to be incapacitated by disability of some kind by the age of forty-four. The corresponding figures for the richer parts of West London are eighty-nine and seventy-four. The variation in the sums different PCTs got relative to their population was, accordingly, considerable. In 2011 South Gloucestershire received £1,298 per head, Islington in London £2,268.

Primary Care Trusts were set up in 2002; they were abolished only eleven years later. Post-Lansley, money flows through the NHS differently. It still comes from general taxation, but most of the money that used to go to the PCTs is doled out by a new organisation, NHS England, to bodies called Clinical Commissioning Groups, essentially clusters of GP practices. Across England, groups of family doctors have become responsible for handling tens of billions of pounds of public money, using it to commission most of the medical care NHS patients receive, from major surgery to simple diagnostic tests. Lacking expertise of their own, most are paying private contractors to manage these funds for them, or hiring ex-PCT staff to do the same jobs they used to do.

At the same time a series of other changes have made ‘commission' more of a euphemism for ‘buy'. Not everything the PCTs commissioned came with a price tag. But increasingly almost all procedures, even those as seemingly amorphous and complex as caring for the mentally ill, have been coming in quantified, priced units – ‘healthcare resource groups', each with its own code. Any hospital anywhere in England, NHS or private, that carried
out procedure HA11C on an NHS patient in 2010 – treatment of a routine hip fracture – got a base payment of £8,928 from the outfit that commissioned it, and £9,373 if it followed ‘best practice'. A maternity unit clocked £1,324 for a regular birth, NZ01B; putting in an artificial heart, EA43Z, earned £33,531. The sum was adjusted according to a local ‘market forces factor', which took account of the variation in cost of labour and assets between different areas. The codes and prices were worked out, in turn, according to the actions taken and materials used by typical hospitals, with ‘best practice' bonuses – if a hospital gave a stroke patient a prompt brain scan and had an acute stroke unit of a certain standard, for instance, it would get an extra £475 on top of the base payment of £4,095. If the actual cost to the hospital was less – if the hospital managed to send the patient home quicker than usual, for instance – the hospital would keep the difference. The notion of the profitable hospital within the NHS was born.

The new system takes this simulated privatisation, this enactment of commerce, further. State money ‘follows the patient' wherever the patient chooses to take it, even when that is outside the NHS. Patients with chronic conditions like diabetes will not be given treatment, but money to spend on treatment. All NHS hospitals are obliged to become ‘foundation trusts', turning them into semi-commercial operations, able to borrow money, set up joint ventures with private companies, merge with other hospitals – and go broke. The contracts they make with GP groups are legally binding. They now compete not only with other NHS hospitals and private hospitals but potentially with the GP groups themselves, who may set up local clinics to provide diagnostic tests or minor surgery. Alongside the NHS Commissioning Board two other quangos now supervise the new, competitive marketplace: the Care Quality Commission, there to make sure the players in the new marketplace don't harm patients, and Monitor, which, among other duties, will make sure that if a hospital goes bust somebody takes up the slack.

In 2011, it was announced that a billion pounds' worth of NHS services, including wheelchair services for children and ‘talking therapies' for people suffering from mild depression, anxiety or behavioural awkwardnesses like obsessive compulsive disorder, were to be opened up to competitive bids from the private sector. The doctor and
Daily Telegraph
blogger Max Pemberton described it as ‘the day they signed the death warrant for the NHS'. Now the NHS must compete with private outfits for MRI scans in Lincolnshire, glaucoma treatment in Cheshire, continence care in Stoke-on-Trent and psychotherapy in West Kent. Worried about the lack of competition in flexisigmoidoscopy in Bassetlaw? NHS England's website reassures you: it's coming soon.