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  • 30 years ago - the first moves to marketise the NHS

    Monday 5th February 2018

    As Tories, LibDems and some misguided academics back away from calls for proper funding of the NHS through general taxation and once more regurgitate the tired old call for a "hypothecated tax" to pay for the NHS - "perhaps replacing National Insurance" - it's time to remember some of the crazy formulae dreamt up by Backwoods Tory MPs back in 1988 as Margaret Thatcher commenced her "review" of the NHS.

    It was 30 years ago: but the right wing has neither learned anything or forgotten anything from those days of cash crisis, falling share of GDP on health, and searching for ways of maximising private profit from what till then had been a largely publicly provided and funded NHS.

    This is an extract from Chapter 4 of The NHS after 60; for Patients or Profits? - a 300 page book by John Lister (2008), Libri Press (pages 75-79)

    Chapter 4: The first steps into the marketplace

    "When the internal market begins to work and signals that there are winners and losers, it's going to be essential that we don't give in to lobbying and bale out the losers."

    (William Waldegrave, Health Secretary, Health Service Journal, April 1991.)

    "It seems to be part of the government's strategy not to provide all the cash needed for fees [for residential and nursing home care]. Ministers are implying that relatives are part of the income support package. It is a monstrous way of going on."

    (Lady Wagner, speaking to 1991 conference of British Association of Social Work)

    1988, the fortieth anniversary year of the NHS opened with a crisis and a strike - by Manchester nurses followed by a continuing rumble of industrial action (including strikes and "work to contract" action) by nurses furious at the arbitrary way their new grading structure was being implemented.

    There was also widespread anger among health workers and the wider public at moves to scrap free eye tests and dental check-ups (to save an estimated 170m), and to lift restrictions on NHS hospitals making profits from private patients and "income generation" schemes - which ministers claimed could net the NHS up to 70m a year within three years. A new "income generation unit" was set up in February, encouraging hospitals to seek cash from such varied activities as imposing car park charges, running jumble sales and raffles and franchising out space for new shopping malls (Mohan 1995:182-3).

    But events took shape in the shadow of the government's impending review, which had been announced in what appeared to be impromptu fashion by Margaret Thatcher in a January television interview, and which then proceeded behind firmly locked doors amid anxious speculation as to its outcome.

    The formal membership of the review team was the Prime Minister plus just four of her ministers - John Moore, returning from his spell of private treatment for pneumonia in the 195-a-night Parkside Hospital in Wimbledon; health minister Tony Newton, Treasury Secretary John Major and Chancellor Nigel Lawson. It took no formal evidence, invited no participation from the BMA or other professional bodies, ignored the health unions and the representatives of patients, and left MPs as ignorant of its debates as the wider public (Timmins 1995: 456).

    Behind the scenes a furtive cabal of advisors included Roy Griffiths, who was still waiting, impatiently, for the government's response to his report on community care, and a group of hand-picked individuals chosen by David Willetts, then employed at the Downing Street policy unit. One of these, Dr Clive Froggatt, was subsequently disgraced after admitting the use of and sale of heroin (Wise 1996).

    By February it was already becoming clear that the Thatcher review of the NHS was likely to include the introduction of a form of "internal market". But there was no shortage of outlandish ideas on offer from the backwoods fringes of the Tory Party. Leon Brittan, for example, a former trade and industry secretary, home secretary and chief secretary to the Treasury, let rip in February with a booklet advocating a "National Health Insurance Scheme", transparently designed to promote the growth of the private medical industry (Brittan 1988). The establishment of a separate "health stamp" might seem like a pointless organisational change, producing no extra cash for the NHS: but its effect would have been to reduce income tax contributions - especially for those who might feel rich enough to "opt out" of the state scheme and take out their own private policies - and to increase National Insurance contributions by over 9 billion. Critics pointed out that the impact of this would be felt by low-paid workers, who barely pay any income tax, but do pay National Insurance, while those at the top of the salary scale could pocket the difference, and the insurance companies would almost inevitably retain the right pick and choose those it would take on, leaving the NHS with the bill for the chronic sick, emergency services and mental health.

    David Willetts, who played a key orchestrating role in the secretive review proceedings, was also quick off the mark in publishing his views on the way the NHS should be reformed. He praised the model of the American "health maintenance organisations" which manage health care on behalf of their private subscribers. In a booklet for the Centre for Policy Studies in February 1988, Willetts and co-author Dr Michael Goldsmith of the Conservative Medical Society stress that "it is not possible simply to adopt an American model". What they advocated was the separation of the purchasing authority from the providers of health care - with hospitals being detached from health authority control (Willetts and Goldsmith 1988).

    Outside the ranks of Tory crackpots, the King's Fund, sometimes described as an independent think tank, published a collection of essays with a preface from chief executive Robert Maxwell suggesting that it might be necessary to recognise that the promise of comprehensive health care was "one on which we simply cannot deliver".

    "Some things are going to have to be excluded from the NHS, so that it can do well what it takes on, and so that the public and its staff can have confidence in it."

    Among the services to be dropped should be anything the private sector - possibly with elements of public funding - could do as well as the NHS. However Maxwell pulled short of advocating a fully market-led approach, warning of "real limitations of the market as an effective and equitable way of providing health care" (Maxwell 1988).

    No such reservations were expressed by a broadside in May from the Thatcherite Institute of Economic Affairs, which advocated a voucher system to ensure that "everyone, rich or poor, could become a private patient". The Institute's director Dr David Green proposed a complex procedure in which people could opt out of the health service - renouncing any claim to free services or NHS care even in emergencies - and use their voucher to buy private insurance. But they would not exchange the voucher directly with the private health insurer - instead a "health purchase union" would negotiate on their behalf to find a competitive deal with insurance firms. Health care for the poor would remain a government responsibility (Green 1988).

    John Redwood, later more prominent, began to fire off his arsenal of radical right wing ideas in various directions. In a May pamphlet for the Centre for Policy Studies, written with another rising star in the Conservative Party, Oliver Letwin, he advocated earmarking 50% of income tax as a "national health tax", and allowing individuals and companies rebates if they opted to "contract out" al or part of their risks to a private insurance scheme (Redwood and Letwin 1988). Redwood predicted that such a scheme could lead to 20 million people contracting out, leading to a quadrupling of the share of GDP flowing to private health care - from 0.6% to 2.5%. While this would clearly lighten the load on the Exchequer, it would still leave 30 million people, including the poorest, the oldest and the youngest - the most expensive in health terms - dependent upon the NHS. Nor did Redwood explain how, unless individuals paid more into the system through private insurance, the net result would be an increase in health care provision. In a separate line of argument, Redwood urged the government to combat the rising influence and militancy of the health unions COHSE and NUPE by building up the Royal College of Nursing.

    Two months later, Redwood was at it again, this time in a pamphlet jointly produced by the "No Turning Back" group of Conservative MPs, including such luminaries as Neil Hamilton, Edward Leigh, David Heathcoat-Amory, Eric Forth and Michael Fallon. It proposed steps to create competition within the NHS, allowing hospitals to compete against each other, alongside a substantial expansion of the private sector, fuelled by tax relief on private medical insurance. The proposals - which would of course have diverted money from the Exchequer and the NHS into the pockets of well-to-do individuals and private medical corporations - rested on the unsupported assumption that the private sector would be ready and willing to offer a full range of services, and would in this way "siphon at least some of the excess demand away from the NHS." The pamphlet also suggested the establishment of a "Patients Charter" setting out the rights of health consumers (No Turning Back Group, 1988).

    Cash pressures

    Meanwhile vocal lobby groups outside the Conservative right were demanding a very different way forward. As the NHS ground its way through one winter crisis, there were already fears for the one to come. NHS spending had been squeezed down as a share of GDP from 5.5% in 1981/82 - to just 5.1% in the four years1986-1990 (Rivett 1998: 485). Figures grudgingly released in February 1988 by Health Minister Tony Newton revealed that real terms spending on Hospital and Community Health service revenue had increased by just 66m since 1982, whereas ministers had previously admitted that spending needed to rise by 2% per year in real terms in order to keep pace with demographic pressures, new technology and the costs of community care programmes (Radical Statistics Health Group 1987: 46).

    Government capital allocations for NHS development, too, had actually reduced year by year, from 859m in 1984 to 812m in 1986-7: the apparent increase in capital was entirely due to cash receipts from asset-stripping sale of "surplus" NHS land - a source of cash which began to dry up with the collapse of property prices in the late 1980s. The dire shortage of capital for new projects, maintenance and refurbishment came at a time when, according to Health Minister Edwina Currie, 81% of hospitals were built before 1918, 5% before 1939 and only 8% had been built since 1964 (Currie 1988).

    With spending on primary care services still exempt from cash limits, and growing in real terms year by year, the sharpest problems were being felt in the revenue squeeze on hospitals and community services. Figures published by the Commons social services committee showed the rapid increases in productivity that were being forced onto hospital staff: numbers of inpatient cases per bed had risen by 40% between 1978 and 1986; in-patient and day case numbers were up by almost 26%, and the average length of stay was being steadily reduced (HSJ January 26 1988).

    The BMA in February 1988, warning of a new round of cash problems in the coming financial year, called for a 1.5 billion cash injection into the NHS - the equivalent of 1p on income tax- and for it to remain essentially tax-funded (Independent February 2 1988). The Labour Party mounted a campaign involving shadow chancellor John Smith and social services spokesman Robin Cook calling for an extra 2 billion (HSJ February 25 1988). This effort was reinforced by a Gallup poll in the Daily Telegraph is which over two thirds of those asked said they would be prepared to pay at least an extra 1 per week in taxes for the NHS. At local level, too, doctors and others were campaigning. In Redbridge, NE London, 140 GPs and 30 hospital consultants placed newspaper adverts warning that they were no longer able to treat patients to the best of their ability or within a reasonable time. One GP said:

    "Forty percent of our surgical beds are closed, half the operating theatres are closed, and even if we could recruit nurses we could not afford to pay them. My advice is that people should not come and live in this district." (HSJ February 25 1988)

    In Birmingham a pressure group of 150 consultants "for the rescue of the NHS" was formed after 250 doctors signed a protest letter to West Midlands regional health authority. The consultants called for an extra 13m to halt rising waiting lists in England's second city, and complained that only one of the four new operating theatres had opened at Sutton Coldfield's Good Hope Hospital. Their stand inspired the formation of a similar organisation in Manchester (Independent April 22, HSJ February 18).

    The anxiety over funding grew as the year went on. In August the National Association of Health Authorities warned that many HAs were heading towards a fresh winter crisis with many beds still closed from 1987, and a new projected overspend totalling over 500 million. More bed closures were also being triggered by growing shortages of nursing staff. The squeeze on beds and services was having a predictable impact on waiting lists, which rose throughout 1988. By early 1989 the combined total for in-patients and day cases was rising by 6,000 a month, and had reached the dizzy heights of 928,000, with growing numbers waiting over a year for treatment (Health Emergency 23 1989).

    In early July 1988 the massive Department of Health and Social Security was split into two separate departments, with Kenneth Clarke taking over as Health Secretary. Within weeks even more alarming figures were to be revealed, as an internal memo was leaked, showing that the government was not fully funding the apparently generous 15.3% pay award to nurses, linked to the introduction of the new clinical grading structure. Ministers were forced to agree to pay the full 803m cost of this, but refused to underwrite the cost of pay awards to other staff including admin and clerical, ancillaries and laboratory technicians, none of whom had settled for less than 5.5%: the government had only allocated an extra 4.5% to cover NHS inflation (Independent April 22 1988). To make matters worse, NHS managers dragged their feet in implementing the regrading exercise, while others attempted to cut costs by allocating nursing staff to lower grades. It became increasingly obvious that Kenneth Clarke's pledge to have the money in nurses' pay packets by Christmas was a hollow one. Frustrated at this new setback, nursing staff at the Maudsley psychiatric hospital walked out in September on a 12-day strike (Health Emergency 20 1988).

    Militancy was again growing into a "hot autumn" across the country, as angry down-graded nursing staff protested by the effective tactic of "working-to-contract", exposing the holes in the management case. All 19 health districts in the North West were affected: in Burnley health chiefs agreed to reconsider 800 gradings after the health authority meeting was besieged by 1,000 angry nurses. In Yorkshire there was action in Leeds, Bradford, Hull and Rotherham, while Wakefield saw a 95% vote for work to grade action by COHSE members. 50 hospitals in the West Midlands were affected by the industrial action, including Walsall, where 300 out of 340 nurses lodged appeals against their grading. In London, NUPE nurses at St George's hospital staged a 3-day strike, and both NUPE and COHSE found strong support for days of action (Health Emergency 21 1988).

    [] (the chapter goes on to discuss the White Paper, "Working for Patients" and the resultant "internal market" up to 1997).

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