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It’s the Market, Stupid!

Posted by Dr No on 23 September 2011

crash.jpgAttila the Humph attempted to interview Mr Lansley on the Today Programme earlier this week. Attila was in Gatling mode, achieving as usual more noise than hits. Lansley, on the other hand, was operating in lounge lizard mode, and the lizard just kept on talking. He also slithered a lot, but Atilla’s attacks bounced off him like dried peas off a plate glass window. The problem was that Atilla, despite having been tipped the big question by his previous interviewee, the King’s Fund’s John Appleby, was stuck in semi-automatic mode, and stayed stuck, like the proverbial to a blanket, while the lizard sped off, like the proverbial from a shovel.

The news story, such as it was, was that twenty-two NHS trusts were also in poo on account of burdensome private finance initiative (PFI) contracts. Attila accused the lizard of lizarding, and the lizard obliged, blaming the ruinous PFI deals on Labour. It was all a bit of a non-story, all the more so since a Select Committee chairman had only a month ago declared – on Today – that PFI was ‘ripping off taxpayers’ – as if we didn’t know, but then one supposes it does take time for politicians to catch up with the rest of us.

Whether PFI alone was pushing the trusts to the ‘brink of financial collapse’ is of course a moot point – some trusts do fine despite PFI, while others manage to get themselves to the brink without PFI burdens. Furthermore, the extra – marginal – cost of using PFI, compared to traditional funding, is small, of the order of three percent, even if over the course of a twenty-five year contract the sums do add up.

But if, on balance, we stick with Andy Pandy Tyrie, the Select Committee chairman’s – a Tory MP no less – view that PFI is the private sector ‘ripping off’ the tax payer, then the real question is, as Appleby spotted, and Attila missed, not whether PFI is the sole cause of certain trusts being on the brink of collapse, but the far larger question of what on earth are the Tories doing by introducing what amounts to PFI not just into the bricks and mortar side of the NHS, but into the providing of services as well?

So we have this bonkers position: Tory MP (Select Committee chairman) says PFI is a rip off; and the Tory health secretary says PFI is pushing trusts to the brink of financial collapse. So what do they do? Introduce PFI (dressed up as any willing provider/very willing cowboys) in vastly extended form to provide NHS services as well as buildings. And we already know – Southern Cross – how the private sector manages to provide care. Bonkers – or what?


Erm, worrying stuff and governments of whatever hue never seem to learn from past mistakes (even if they weren't theirs!).

Labours little initiative of feeding patients (requiring routine procedures) to specialist clinics in the private sector (Independent Sector Treatment Clinics (ISTCs)), cost the taxpayer dear – an estimated £462+ m in botched contracts.

Private health providers had needless payments written into contracts and the taxpayer paid over £200m paying for operations that were never performed, buying back treatment centres at the end of contracts cost over £186m and compensation paid to companies when planned ISTCs were axed cost almost £60m.

What’s your bet that ‘any willing providers’ in the private sector are rubbing their hands with glee?

Anna :o]

I couldn't agree more that the PFIs and ISTCs had expensive and inflexible contracts. The problem comes from the whole act of commisioning, which differs only a little from a cattle auction, except the lowest bidder wins. This is how privatisation germs a bad reputation. Smaller providers with local roots and reputation are more dynamic and innovative, but squeezed out by the larger providers with their lobbyists. Commissioning acts as a constraint on a free market, the worst of both sectors.

The state wants control via commissioning and deniable responsibility via private provision. This won't happen, The public will blame them when a real scandal happens. They are afraid of a real open Market, not least because it makes the department of Health and all it's tentacles into our lives redundant.

Dr Phil

Anna - the proverbial amoeba is probably better at learning from past mistakes than your average politician.

One does not need a PhD to appreciate that private greed plus poor regulation (in both narrow and broader forms) wrecked the banks. The same goes for PFI and ISTCs, and Southern Cross (and here it is worth noting that the Iranian Hospitalier's Circle group is modelled on the same opco-propco lines). They key feature running like a thread of cyanide through all these setups is unfettered greed (in the shape of effectively unregulated private initiative, and here the private pool includes sharks as well as dolphins). So that is why Dr No says: It's the Market, stupid! - and he just cannot for the life of him see why the Tories are so dim as to want to introduce the same thread or should that be torrent of cyanide into healthcare provision.

Unless it is all about risk management, as in risk dumping. The irony is that if the HSCB becomes law, our low (but efficient) percentage of GDP spend on healthcare will rise, as we become privatised/Americanised, towards American levels...far from saving money, this bill is going to cost money, an awful lot of money.

Dr P - quite agree - commissioning is a dodgy wheeze (and it, as much as private provision, is about deniable responsibility - hence the removal of the SoS's responsibility to provide). Dim GPs like the idea of commissioning because they think it will give them control, but in reality it will be more like the proverbial chalice, and will in time reveal itself as a ticking bomb. The astute if outspoken Dr Clare Gerada is very right to warn her GP colleagues that stormy times lie ahead; and those who ignore or deny her warnings may find they are the first to fry.

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