Too many managers

Before the 2010 election I heard the phrase "too many managers in the NHS" many times. I also heard the "statistic" that in 2009 "the number of managers increased ten times more than the increase in nurses" mentioned often. The right whinge commentators at Conservative Home said that this was because Labour supporters were taking high paid jobs while they still could. Nonsense, of course, but it is a meme that sits in the mind of many Tory supporters. Of course the Tory commentators did not also say that the number of managers went down by -7% in 2006. Nor did they say that the amount of work carried out by the NHS went up by 65% and the total number of employees went up by 35% between 1997 and 2009. (More work, more employees, means more managers are needed.)

Totally out of the blue, the Draft Manifesto of the Conservative manifesto said that administration costs in the NHS had to be cut by 30%. It gave very little idea how this could be done other than waffling about an "information revolution". As a software developer (and trainer, and writer) I am all for yet another "information revolution", but I cannot see how it will cut administration by 30%. The majority of NHS administration is in stuff that cannot be cut by such a large amount: appointments, scheduling diagnostic tests, use of facilities, and supporting the "internal market" where every procedure has to be billed to someone. I am sure that savings can be made, but 30% is just castles in the sky.

Then after the election Lansley had a brainwave. SHAs and PCTs cost £1.85bn a year, if their work is transferred to the private sector at a cut price rate, then the election pledge can be kept. In the NHS white paper Lansley said that there would be a 45% cut in management through the decision to abolish SHAs and PCTs, so that commissioning would cost £1bn. I'll come back to some of the actual costs of this decision in a later blog post.

Recently the phrase "the number of managers in the NHS doubled under Labour" came to my attention, so I thought I would check it out. The first place to look is the NHS Information Centre. However, these figures only go back to 1995 and I wanted to compare the Labour terms with the preceding Tory terms. Another source of information is Hansard. MPs have a habit of asking questions about NHS statistics, sometimes asking the bizarrest format. Anyway I was able to find one question in 1993 asking for the numbers of administrators and managers since 1975, and this gave figures up to 1991. I still had three years to fill in and I was able to get 1992 and 1993 from another Hansard question and the remaining figure (1994) came from a graph in a report by the Kings Fund (Figure 36).

Putting all of this information together I was able to plot a graph of the number of NHS managers since 1985.

What is immediately apparent from this is that the rate of increase in the number of managers actually slowed under Labour. From 1988 to 1994 there was a sharp increase, year-on-year, in the number of managers. There was a drop in 1995 and then a slower increase until 2002 when the rate increased again. The rate of increase between 2007 and 2009 was comparable with the Tory rate between 1988 and 1994.

This graph shows that increasing managers is a Tory phenomenon as much as it is a New Labour one. So the sentiment that "the number of managers in the NHS doubled under Labour" and the implication that a Tory government is needed to get this under control is hypocritical at best.

Lansley says that he wants to cut management by 45% (by about 20, 000). This will take us to the 2000 figure at around 25,000. Is this possible? Few people think that it is. However, I think that it is perfectly possible for one important reason: the graph shows how many NHS managers there will be. Lansley wants to privatise commissioning and this means that manager NHS commissioners (who are classed as "managers") will lose their jobs. The work will move to the private sector where there will be no public figures of how many managers/commissioners will be used. Lansley will get the drop in the graph he wants, but the graph from that point onwards will show a different measurement entirely.

Level Playing Field part 2

In my last blog I pointed out that the Impact Assessment that accompanies the Health and Social Care Bill suggests that the NHS has a 14% "advantage" over the private sector. This is based on a study by KPMG which is not available, but the results quoted in the Impact Assessment indicate that the study does not take into account training. Today Health Service Journal picked up the story and added the following:

Mr Dingwall [partner at Hempsons lawyers] said the most likely scenario would be the creation of a system whereby commissioners paid the same tariff rate to NHS and private providers, but the 14 per cent was subsequently deducted from NHS providers and placed in a central pot to fund their state subsidised benefits.

Earlier Conservative policy papers indicate that Lansley wants private hospitals to pay for training. The NHS Autonomy and Accountability white paper says:

We are also of the view that those who employ health professionals – both NHS and independent sector – should themselves take on responsibility in relation to workforce planning, and accept the risk should they get it wrong. ... All large employers of health professionals will be required to provide training places, or contribute a levy which will train and develop healthcare staff.

This suggests that private hospitals would take a more active role in training or pay a levy. However, this is from Lansley in opposition, in government he does not seem so keen to make private providers pay for training. This is understandable because training is very costly, at the moment it takes up £5bn out of the NHS £105bn budget. There is another issue. Even if private hospitals were to pay a proportion of the £5bn training, that would only be for the current crop of NHS trainees. It would be hard to work out how much the private sector should be charged for their proportion of the training cost of a fully trained employee.

If training is properly taken into account the 14% NHS "advantage" quoted above would easily be wiped out. But let's assume that the government intends to go ahead with this scheme and pay NHS providers the same as providers but take 12% off the tariff paid to the NHS provider for the "services" it gets from the state (if private sector costs ate 114% higher than NHS, that equivalent to the NHS costs being 88% of the private sector costs). A 12% cut in income is huge. NHS hospital trusts get most of their income from payment by results (ie the payment for the treatments it delivers to the NHS). Hospitals can generate private income, but this is usually small (in the region of a few percent of income).

Monitor, the Foundation Trust regulator say in their annual report for 2009/10

The unaudited total operating income of the 129 NHS foundation trusts in 2009-10 was £28.2 billion ... NHS foundation trusts reported an aggregate net surplus (before impairments) of £365 million in 2009-10 ... Impairment costs of £1.1 billion were significantly greater than planned ... an aggregate net deficit (after impairments) of £764 million against a planned surplus of £304 million.

The surplus before impairments was only 1.3% (the impairments were due to adopting International Financial Reporting Standards and taking PFI as assets). Foundation Trusts are supposed to be the cream of hospital trusts and hence chosen because of their financial governance, the remaining non-FT NHS acute trusts should be considered to be less financially viable. If the best NHS hospital trusts can (on average) only generate a surplus of 1.3% (most of which will be from payment by results from the NHS) what will happen to them when they are paid 12% less?

Next year the payment by results tariff will be 1.5% less than the tariff this year, and most hospital trusts will see their activity reduced as GPs refer fewer patients. Fewer patients and a cut in tariff means that trusts income will be cut next year, so it will be interesting to see what effect this will have on the quality of care. The cut in income next year is unlikely to be as large as 12%.

To be frank, a "payment" of 12% of tariff for the state "services" is ludicrous, and the resultant cut in income will mean that even the most financial stable Foundation Trust will go into the red.

Level Playing Field

The problem I have with many broadcast journalists is that they do not listen to what their interviewer is saying and they do not question them carefully on their responses. Instead, it appears that broadcast journalists seem to have a list of questions and when one has been answered they move on to the next one, almost regardless of the answer they are given.

In the last few days I have heard Andrew Lansley questioned several times, and often he is asked about privatisation. He claims that his policy will not privatise services. He is very keen on making this point since an admission of privatisation would create a political furore. Instead, when he has been accused of privatisation he talks about "creating a level playing field".

For example, here is a quote from the transcription of Lansley's press conference on the Health Bill on the Guardian website:

3.00pm: Q: What is the bill doing to encourage private companies to bid for more work?
Lansley says that "strictly speaking" this bill will not make any difference. After the election he implemented an "any willing provider" policy in the NHS. This meant anyone could bid for NHS work. Previously (under Andy Burnham) the NHS was the "preferred provider".

But the bill makes it clear that politicians won't be able to ignore competition rules. It will impose a consistent competition framework. And, for providers, it will mean they have to deal with a regulator who is responsible for creating a level playing field. But it will be a level playing, he says.

What does this mean? The phrase "level playing field" is usually used when one party has an advantage over another and action is taken to remove the advantage. We assume that the two parties involved are NHS providers (ie hospitals) and private providers. Which has the advantage over which?

Interestingly, the LibDem manifesto talked about such level playing fields:

Giving Local Health Boards the freedom to commission services for local people from a range of different types of provider, including for example staff co-operatives, on the basis of a level playing field in any competitive tendering – ending any current bias in favour of private providers.

The implication here is that the LibDems do not like the private providers (particularly, Blair's Independent Sector Treatment Centres, which were given extraordinarily beneficial contracts) and they want the advantageous benefits given to ISTCs removed. This is laudable.

However, I do not think this is what Lansley is talking about. When the Health Bill was published it was accompanied by a document called the Impact Assessments. In this document there is a table (Table B1) called Fair Playing Field Distortions which lists conditions that may give an advantage or disadvantage to the NHS (or private provider) and in some cases a monetary figure is given representing this advantage.

The Health Bill says that private providers should be able to bid for NHS work as long as the cost is at or below the NHS cost (the tariff). However, if the NHS has an advantage that can be quantified then surely the private provider's tender should take this into account? That is, if NHS providers have (say) a 10% advantage then the private provider should be allowed to charge 10% more and this tender will be treated as being the same as the NHS rate. When I looked at the White Paper in July last year I suggested that Lansley will introduce a weighting for private providers so that they can charge extra and "compete" with the NHS providers. This seems to be the purpose of the Fair Playing Field. Here I have listed just the "distortions" that have been quantified:

Distortion	Cost (per £100)
Pensions If the employee and employer contributions payable under the NHS pension were used to buy a pension in the financial markets, the benefits would be significantly less than those offered by the NHS pension – there is effectively government subsidy of NHS pensions.	£7
Cost of Capital a) Public dividend capital rate paid on public investment is much cheaper than private cost of capital, giving NHS providers an advantage over non-NHS providers. b) PFI. NHS providers with PFI schemes are disadvantaged relative to NHS providers who do not have such schemes, due to the higher cost of capital. c) PFI guarantee. State under-writing of PFI schemes means long-term private capital projects are cheaper than on fully commercial terms. d) NHS capital constraints. Although NHS providers have access to capital at interest rates below market rates, they are subject to capital rationing.	a) £4
Corporation Tax Private sector providers and social enterprises are disadvantaged by being subject to corporation tax, reducing their returns. NHS providers and charities are exempt.	£2
VAT Private sector providers benefit from the VAT exemption for healthcare in that they do not have to charge VAT on many of the services they provide. The other side of this is that they consequently cannot recover a significant portion of the VAT costs they incur. Likewise, VCS providers do not have to charge VAT but cannot recover their VAT costs. However they do benefit from certain other reliefs applying to the wider charity sector. NHS providers are advantaged in as much as their overall funding takes account of VAT costs in the same way as any other cost.	£1

A couple of points: first note that it only quantifies the advantage that the NHS has, not the advatnage the private sector has. Funny that. So while there are 103 PFI projects in the NHS and the table says that the NHS pays more for these than they should if they used commercial rates, the table does not quantify this. Instead, it only quantifies the advantage that the NHS has from public sector borrowing. The other point is that this table completely ignores the benefit that the private sector gets from the fact that the NHS trains ALL healthcare staff. This is a huge cost - the recent white paper on NHS training says that £4.8bn out of the £105bn NHS budget is spent on training, the private sector does not pay towards the training of the highly skilled doctors it uses.

The Impact Assessments document concludes (B55):

The majority of the quantifiable distortions work in favour of NHS organisations; tax, capital and pensions distortions result in a private sector acute provider facing costs about £14 higher for every £100 of cost relative to an NHS acute provider.

This is suggesting that the private sector would have to charge 14% more for their tender to be treated as the same as the NHS rate if there was a "level playing field". (Level only when you ignore training.) This is very different to the LibDem manifesto that suggested that private providers were treated better and that they should only be paid the same rate as the NHS providers. Indeed, this document suggests that private providers should be paid more than NHS providers.

For example, NHS providers are paid £741 per eye for cataract surgery. Under a "level playing field" private providers would be allowed to charge £845 and this would be treated as the same as the NHS rate.


If Lansley had been pressed more on this subject when he was interviewed, and he had said that he intends paying private providers 14% more than NHS providers then I think there would have been quite a loud uproar. Sadly, the British Press are more concerned with asking the questions the Department of Health has told them to ask.

UPDATE: Health Service Journal have now picked up this story. They add a new detail:

Mr Dingwall [partner at Hempsons lawyers] said the most likely scenario would be the creation of a system whereby commissioners paid the same tariff rate to NHS and private providers, but the 14 per cent was subsequently deducted from NHS providers and placed in a central pot to fund their state subsidised benefits.

So this will mean that rather than private providers paying more NHS hospitals will have their income cut.Few hospital trusts will be happy with this. A cut as large as 14% is likely to push most of them into bankruptcy since the best Foundation Trusts only generate surpluses in the region of 5% a third of what is needed to handle the 14% cut in income.

Enthusiastic, or Bullied Pathfinders?

In Cameron's speech earlier this week on the "modernisation" of public services (note that he's no longer "liberating" the NHS he's "modernising" it) he said:

And new powers for GPs, who can join together in consortia, take control of NHS budgets and directly commission services for their patients. People said there would be no appetite for this. But let me tell you today the enthusiasm of ... over 140 GP-led consortia [who] have now come forward, covering over half the country.

I talk to GPs and I do not hear of much enthusiasm for Lansley's top-down re-organisation of the NHS. However, I hear a lot of other emotions: apprehension, hostility and resentment. But often I hear about resignation to the inevitable. But the facts are there, aren't there?: in December 52 GP pathfinder consortia were appointed covering a quarter of the population, and on Monday this was extended to 140 consortia, as Cameron mentions, covering half of the population of England. Doesn't that show enthusiasm?

No, the opposite. It shows the result of bullying.

I have blogged before about the fears of GPs, and significantly their fear of inheriting PCT debts. It is clear that some PCTs have debts, and that the Department of Health have blamed GPs in part for these debts. After all, if GPs over-refer patients to secondary care, the costs of these "unnecessary" referrals have to be paid by someone: the PCT. These debts are potentially very large, and although they are apparent on the balance sheets of some PCTs, they are hidden on others through loans by other trusts.

GPs are often regarded as being "small businesses" (which is nonsense, because they have a UK-wide contract with the government, they have state-provided pensions and their training is paid for by the state, what other private businesses have these benefits?) and this means that they have some justification in being concerned about being handed a debt in 2013 that was generated by state organisations (PCTs). This was a sticking point in the acceptance of GP commissioning and so the Department came up with a compromise. This is outlined in the 2011/2012 Operating Framework, the rulebook for the NHS from April this year:

5.10 GP consortia will have their own budgets from 2013/14. They will not be responsible for resolving PCT legacy debt that arose prior to 2011/12. PCTs and clusters must ensure that through planning in 2011/12 and 2012/13, all existing legacy issues are dealt with. During this period we expect developingGP consortia to work closely with PCTs to ensure that financial control and balance is maintained to prevent PCT deficits in those years. This will reduce the risk for GP consortia that they could have responsibility for any post 2010/11 PCT deficit unresolved at the point of PCT abolition.

This says two things:

1. The department will write off any debt PCTs accrued until April this year.
2. Any debt PCTs generate after April this year will be passed onto the GP consortia.

PCTs are staffed by professionals and, contrary to the right-wing rhetoric of some commentators, they are not profligate. However, read #2 again: any debt that PCTs generate from April this year will be passed on to GP consortia.

Do you understand now the "enthusiasm" of GP practices to become "pathfinder" consortia? If a GP practice joins a year later then it may inherit a debt generated by someone else. Why would any business want to inherit a debt that they didn't create? The GPs simply want to have their hand on the tiller to try and ensure that the debt they inherit in 2013 is as small as possible.

So while there are a minority of GPs who are keen on GP commissioning (for example, the National Association of Primary Care - the cheerleaders for the previous Conservative administration's GP fundholding programme) it is clear that the real reason for the 140 pathfinders is blatantly bullying in the Operating Framework over inheriting potentially crippling debts. Cameron, as usual, is misleading the public over the "popularity" of his policies.

Developing the Health Market

There is a lot of talk about privatising the NHS at the moment. Let me calm you all down. The NHS will not be privatised the day after the Health Bill is passed by toady Tory MPs and their lick-spittle Lib Dem chums. But it will happen a year, or maybe five years after. In a decade's time we will look at our local hospitals and reminisce, wistfully "remember when the community owned all the hospitals and there was proper public accountability?"

The problem is that hospitals are a huge investment (the Department of Health reckons that the hospitals in England are worth, in total, £24bn). Few healthcare corporations are able to invest even a fraction of that amount of money, especially since (as we are told incessantly) NHS funds are tight, so there's not much money to pay for treatments and so profit margins will be small.

However, Lansley has bet his reputation on creating a "healthcare market" of alternative providers. If he doesn't deliver this then he will lose all credibility with his right-wing chums. The likelihood is that few companies will want to invest such large amounts of money right now. So what does a government do when it the private sector refuses to invest through lack of cash? It provides our money, free, for the private sector, of course! This is from the Spending Review document from October last year:

1.89 As well as new opportunities and rights, the Government will assist new providers by improving access to the resources they need. The Spending Review announces that:

• the Government will direct around £470 million over the Spending Review period to support capacity building in the voluntary and community sector, including an endowment fund to assist local voluntary and community organisations. As part of this, the Government will provide funds to pilot the National Citizen Service and establish a Transition Fund of £100 million to provide short term support for voluntary sector organisations providing public services. The Big Society Bank will bring in private sector funding in addition to receiving all funding available to England from dormant accounts;

So, when the government is cutting the NHS budget so that some people are being denied treatment; while the government is cutting local authority funding so that social care budgets are being slashed and vulnerable people are not getting the care they need, while all of this is happening because "there's no more money", we learn that there is more money, but it is being used to maintain Lansley's reputation with his right wing chums by creating a market we do not need. Brilliant!

Health Inequalities

Today Cameron said:

"Health inequalities in 21st century Britain are as wide as they were in Victorian times"

(...and then he talked some bollocks about the rich living longer because they can buy healthcare, which is not the driver in making the rich live longer, it is better diets and living conditions.)

This didn't seem right, so I did some searches and I came up with the Marmot report (2009). I guess if I had spent some time reading this I could have gone further, but there are 147 pages and I could not see a graph that proved the point one way or the other. In any case, scanning through it I could not see any data going back to Victorian times. Instead I resorted to twitter, asking my followers if they knew whether it was true or not. One reply (from @border_rebel) suggested that I looked at the Black report. The problem was that this was 30 years out of date (published in 1980) and I could not easily find inequality figures.

Another Twitter follower suggested that I asked Gary Wallace (@geerai) so I did. He said initially that it sounded like Cameron was talking nonsense, but said he would get back to me with some statistics. In the meantime I saw a tweet from FactCheck covering this topic.

The figures that are used are mortality of the various social groups. Cathy Newman points out:

"The only comparable figures we can rely on begin in 1921"

and then she concludes:

"If the Prime Minister had claimed that health inequalities were worse than at any time since the 1920s, he’d have been on firm ground. But he stretched it too far. There’s no water-tight evidence to show that 2011 holds a mirror to Victorian times."

Clearly Cameron was over-egging the pudding by mentioning "Victorian times". Gary tweeted back a bit later with a link to a lecture online on health inequalities by Prof Danny Dorling. This screen shot is taken from that presentation:

The graph shows the change in mortality rates over the period 1921 to 2005. The ten lines are for various social-economic groups where the darker the line is, the poorer the people are. What is interesting about these figures is that initially the poor improve much more than the rich up until the 60s when the rich started to improve more than the poor. However, it is important to point out it is not that the poor are no longer improving - they do - it is that the rich are improving faster.Since the rich are improving faster than the poor the difference - the inequality - gets larger.

I have heard this mentioned before, and heard someone retort sarcastically when Cameron says he wants to reduce the inequality "how? by making the rich live less long?".

The poor are improving (life expectancy getting longer) but not as fast as the rich. Assuming that policy does not stop the poor improving it will mean that at some point in time they will catch up with the rich. They must! There is a limit to the the life expectancy of the rich, and as the rich approach this limit the change will plateaux. At this time the poor will continue to improve and so the inequality will decrease largely without doing anything. (OK Prof Dorling cautions against this approach, saying that government policy must still target decreasing health inequalities.)

But there is an important issue: the poor are more likely to smoke than the rich and the single-most important health decision you can make is to give up smoking. Labour passed the most important legislation to achieve this: the ban on smoking in public places. This has led to large numbers of people giving up smoking, but the effects on mortality will take some years years to work through.

I wonder if Cameron's speech writers are thinking about these bits of information? Perhaps they know that the combination of, at some point in the future, the rich improvement in mortality will be at a lesser rate than the poor, combined with the benefits of the smoking legislation giving an improvement in mortality of the poor, will mean that in a few years time Cameron will be able to point at the health inequality figures and say "I did that!" when really it would have happened anyway.

House of Lords

The Parliament Act 1911 asserted the supremacy of the House of Commons over the House of Lords. Of course, at the time, since half of the population was excluded from voting in elections for the House of Commons, this is not quite the case of democracy winning over the hereditary principle and patronage, but it was almost there. Since then, there has long been a campaign to abolish or further reform the House of Lords, and these are my thoughts on the subject.

As a result of the Parliament Act (and subsequent acts) the primary aim of the Lords is as a revising chamber: the members scrutinise laws and suggest amendments. The Commons usually accepts the Lords amendments, but they don't have to. In addition, the Salisbury Convention is that the Lords should not block government bills that were mentioned in the government's manifesto. This scrutinising of bills is very important and helps to prevent bad laws being made.

Lords reform has a long history, but the main issues that people cite are privilege and patronage. The privilege issue comes from the fact that some of the Lords are hereditary and their membership of the House is based on an accident of birth: they happen to be their father's child. The House of Lords Act 1999 partially fixed this by removing the right of all but 92 hereditary peers. The problem is that there are still 92 people in that chamber who are there because of who their father was, rather than on their own abilities. When one of these Lords dies there is an election between the members of the Lords to determine which hereditary peer will take up the place. This partially breaks the hereditary principle on the membership of the Lords, but it is hardly democracy since the hereditary principle is used to determine the "candidates" for the vacant post.

The patronage issue comes from the fact that the rest of the Lords are appointed life peers. The majority of new peers are recommended by the political parties and these recommendations are vetted by the Independent Appointments Commission. The Commission also recommends non-party political members. The problem is that this system is wide open to political patronage highlighted by the cash-for-peerages scandal where party donations were sought with an offer of a place in the House of Lords. 

The usual argument is that if the House of Lords is wholly elected then these issues of privilege and patronage will disappear. The problem with this approach is that modern politics is all about privilege and patronage. While there are some MPs who have been elected through their own hard work, there are many who were selected as a candidate in a safe seat through patronage. And there are several MPs who are the children, siblings or even spouses of MPs, so one could argue that there is some hereditary principle in the Commons too!

However, my main concern is what we will miss if we make the Lords wholly elected. Many of the life peers are there because of what they have achieved: scientists, musicians, artists, doctors, people who have run charities. It also has Lords who were judges, and there are bishops of the Church of England (and by convention, the Chief Rabbi is a member). There is a wealth of experience and knowledge in this collection of people and the expert nature of the chamber is ideal for an organisation whose main purpose is to scrutinise and amend legislation. If the upper chamber is elected it is unlikely that these people will wish to stand for election, for the simple reason that they are not politicians. The result of elections to the upper chamber is that we will merely get a mirror image of the House of Commons. Some people have suggested that a different election process should be used, and this could even cause the problem of the upper chamber claiming it has more legitimacy than the Commons because of its election process.

So I propose that the House of Lords should remain wholly appointed. You may think that this is against my democratic instincts, but it is not, as I will explain. First, there must be some tidying up. The House of Lords should be revising only and so after reform legislation only originate in the Commons. There should also be rules about how long bills can be delayed (currently it is one year). The new chamber will also have no hereditary Lords (or rather, none there because of their title).

The new House of Lords will be by appointment, but without political patronage. The important point is that the people nominated for appointment to the House of Lords will be elected by membership organisations. The Independent Appointments Commission will determine which membership organisations will provide nominations, and then appoint their nominations to the House. The appointments should be fixed term and require a renewed approval of their membership organisation (I am not in favour of term limits, but open to be persuaded if there are any good reasons). There could also be a right of recall to take into account situations when a Lord has proven to be unsuitable. If the Commons has fixed term parliaments then the Lords appointments should be of a different cycle (so if the Commons is 5 years, the Lords appointments could be for 3 or 7 years). Rather than appointing the House all in one go, and to keep some continuity, the appointments should be staggered (say, a third at a time).

So what sort of membership organisations would nominate peers? I suggest it should be a wide range, but the important point is that there is a membership. This will mean that trades unions, churches, charities and professional organisations can nominate members. So the Royal Colleges of medicine will have a member each, as will the Chartered Institute of Accountants, the Institute of Physics, RSPCA and the National Trust. The Inns of Court and other lawyers organisations will ensure that there are some legal experts in the chamber. Special care would be taken to make sure that most religions have a member. In addition, organisations like the AA and RAC and sports organisations like the Amateur Athletics Association will have members. The whole point is to ensure that as wide a range of experts as possible are in the chamber.

Each organisation must hold a ballot of their members, in effect, they will do this to nominate their most expert member who will provide their knowledge of their area of expertise to make our laws better.

This will make sure that political patronage is removed almost entirely from the process, while maintaining a chamber of experts elected by their peers. If the range of membership organisations who provide nominations is kept as wide as possible, then it means that everyone in the country will have at least one opportunity to vote for a nomination, and this will give some democratic legitimacy to the appointment.

FT Membership

There are 132 Foundation Trusts in England and these provide acute, mental health and community care. An FT is a "public benefit corporation" which is meant to be loosely based on the mutual concept, that is, the service user "owns" the provider. The way it works is that every FT has a membership, which is some combination of patients, carers, staff and the people living in the geographical locality (interestingly, members can be as young as 16, younger than the age of majority).
Pulse have produced a short guide to FTs and this point seemed interesting to me, referring to FT membership:

But according to David Stout, Director of the PCT Network at the NHS Confederation, this could potentially undermine a consortium’s claim to be the representative of patients locally: “Through their governance strategy Foundation Trusts have a system of membership. Patients are members of Foundation Trusts and that gives the trust some legitimacy in how they operate within the health system – they can say they genuinely represent patient views. That’s potentially a challenge to [GP] commissioners who also claim to represent patient interests and patient views. If you as a commissioner want to redesign services in a way that takes care out of the hospital and puts it closer to home in general practice or community services and the hospital is resistant to that change then their well-developed system of patient representatives might be a challenge to your decision making.”

Lansley says that he will not provide instructions about how GP Commissioning Consortia are managed. He will not require patient involvement (indeed,, he does not even require GP involvement in the consortium board).

The NHS white paper partially acknowledges that FT membership could be seen as more legitimate making the FT boards more accountable than GP consortia where it says:

We will consult on future requirements: we envisage that some foundation trusts will be led only by employees; others will have wider memberships. (4.21)

This seemed to indicate a weakening of the membership model. However, Next Steps, the government's response to the white paper consultation, says:

The Government has considered these concerns and concluded that staff-only
membership would not be compatible with the foundation trust model.(6.17)

Which removes the threat of employee-led ownership (management buy outs) but the document does not provide any more detail on the consultation on membership promised in the white paper. Next Steps does say:

The Health and Social Care Bill will make explicit the duty of governors to hold the board of directors to account, through the chair and non-executive directors (whom they have power to appoint and remove); (6.15)

There is no equivalent public accountability of GP consortia. This means, as David Stout points out, FTs will have memberships, consortia will not.

I wonder if, in the future, we will see a clash between FTs and GP consortia, particularly if the consortia demand service changes (which may involve closing part, or all of a hospital) and the FT refuses stating that they have the support of their membership and hence greater public legitimacy and accountability.

The privatisation starts

Pulse reports that

NHS London has awarded a contract to the KPMG Partnership for Commissioning to support the development of pathfinders across the capital. The partnership, claimed to be the first of its kind, sees KPMG teaming up with UnitedHealth UK, the National Association of Primary Care, Healthskills, NHS Primary Care Commissioning and legal firm Morgan Cole. 

NHS London is the strategic health authority (SHA) for London, as the name suggests it provides the strategic policy for the area. NHS London oversees the commissioning performed by eleven primary care trusts (PCTs), these PCTs commission care from GPs, community health services, acute and mental health trust (hospitals). The "pathfinders" are groups of GP practices (consortia) who, under Andrew Lansley's plans, will take over commissioning from PCTs in the next couple of years. The "pathfinder" status is not a pilot or trial because GP commissioning will happen even if the pathfinders fail. The pathfinder programme is just a way for Lansley to implement his policy without Parliamentary approval; undemocratic, sure, but then again, we have a Conservative government without an electoral mandate.

There are several interesting things about this decision. The first is that there will be one, SHA-wide, organisation providing commissioning, whereas under PCTs there were eleven such commissioning organisations. Can someone tell me how this decision will provide the much lauded "localism" that this government strives for? This seems to me to be taking the commissioning decisions away from the local level and into a large, private organisation.

Admittedly, this decision is just for the interim, the pathfinders are not yet statutory organisations and are in "shadow" form so when they have complete control they will be able to buy services from whoever they choose. However, it is likely that a pathfinder consortium which takes on the services of this company would find it expensive to change provider or to provide the services themselves later on, so this this company will be the provider in the future.

Reading through the comments on the Pulse article raises other questions:

• Anonymous - London | 14 Jan 11 I don't wish to be churlish but, under competition law NHS London are obliged to run a open tender for this contract. I have seen no advertised tender, and suspect there was none - which just isn't right. I doubt if anyone will refer the matter to the competition authorities, however...
  

It would be rather embarrassing for a Secretary of State so obsessed with competition if it proves that NHS London were acting in an anti-competitive way.

Another point is that the commissioning (for the interim at least) is being handed over to one private company. We know that PCTs currently employ commissioners and it has been suggested many times that PCT commissioners would transfer to the new consortia. This has not been the case in London. The commissioning has been handed over entirely to a private company. Of course, that company is likely to recruit existing, experienced commissioners, but this is not the situation that was spread in the Press by Conservatives (in an attempt to allay fears of privatisation). This was picked up by one of the comment writers on the Pulse pice:

• Marie-Louise Irvine - London | 14 Jan 11 This is just the beginning. Now they are the ones providing commissioning support for pathfinder consortia - next they will be providing the commissioning support for actual consortia after 2013. For those who think that consortia will be able to employ ex PCT people directly - I have news for you. At an information event about consortia development I attended the other day we were informed that consortia will very likely have to tender for their commissioning support. Ex PCT people will have to form organisations and competitively bid for the contracts. Organizations like KPMG will be light years ahead of them in knowing how to win these contracts. Some GPs have a kind of fantasy consortium idea in their heads, where they will be able to carry on the kind of co-operative and collaborative relationships they value such as with the local hospital, experienced local ex PCT staff, etc, whereas the harsh truth is that they will be so circumscribed by competition law and and outsmarted by clever and powerful private companies, that they will find they can't do many of the things they'd like to. There will be little room for manoeuvre. But as long as the GPs make the cuts and take the flak they will be serving their purpose. I can predict one thing - it won't feel like "empowerment".
  

If this is an indication of what the future holds, it certainly shows that the publicly owned NHS is on its way out.

BBC News

OK so the last post said I was proud of the BBC, this one is not so complimentary.

Last September Mark Thompson, the director-general of the BBC, visited Number 10. This caused a bit of a stir since the BBC were putting together programmes to explain the cuts. The DG claimed that the impartiality of the BBC was not affected, but it seems to me that since then BBC News have softened on the cuts, and are all too keen to tell us how "necessary" the cuts are (when have you ever heard a commentator suggest that perhaps a higher contribution from tax may be a good idea?). And in particular, even though a year ago the public were clearly satisfied with the NHS, the BBC seem so positive about Lansley's policies for the NHS, and do not mention at all that they are unnecessary and costly.

I've noticed BBC News has a tendency to churn out reports about the NHS that, well, seem to be of tabloid "quality". Let's be frank, 24 hour news is demanding. The BBC journalists have to fill pages on the site as well as radio and TV bulletins. If someone is willing to do some of the work for them, it is tempting for them to accept the help. (For a decade I used to write monthly and fortnightly columns for up to four different magazines and the hardest part was to come up with the initial idea. Once I knew what the article would be about it was then only a matter of finding the facts and writing about them. Rarely would I get a suggestion from an editor about an article subject, but when I did I was always grateful.)

The Department of Health has 40 press officers. That is a lot of people when you consider that the NHS has its own information website specifically for information and statistics about the service. This website should be the first stop for any journalist who wants to write about the NHS, so it makes you wonder what the DH Press Officers do all day. Perhaps they are being helpful to BBC News by thinking up stories for them?

Take for example this one. "Lucrative NHS overtime for consultants questioned". The title is certainly sensational, although I guess if it was in a tabloid the title would be something like "Fat Cat Docs Screw The NHS".

On first sight the article says that some hospital consultants have been "playing the system" over waiting list initiative payments (WLIs) and could make £100,000 in overtime payments. The BMA deny the accusation and point out that if there are any large payments it is due to poor management. For added spice, the radio version of the report has an interview with Prof Maynard, a health economist at York University, who rather helpfully drew a comparison with the banking crisis by saying that the WLI payments are same as bankers' bonuses. So to summarise, you get the impression that all NHS consultants were fiddling their timesheets to get up to £100k a year in overtime and this was either due to greedy docs or incompetent managers. The "bankers' bonus" quote from Prof Maynard was a nice extra bit of tabloid demonisation!

So let's look a bit deeper, and look at the facts. The article says

Basic pay for consultants stands at just under £90,000 a year on average.

The Pay in the NHS parliamentary briefing paper says:

The basic consultant pay scale consists of eight pay points, ranging from £74,504 per year to £100,446pa.

These figures are from the NHS Information Centre which gives figures for average basic salaries, as well as average salaries including performance awards and overtime. The parliamentary briefing paper, says that for total pay:

Consultants’ median annual NHS earnings for the period April to June 2010 were £111,700; mean earnings were £120,400

The BBC article says:

Figures seen by the BBC show that, in some cases, consultants are making more than £100,000 a year. 

Nice touch that "figures seen by the BBC", why can't we see them too? Are these "figures" secret? If so, why? The parliamentary briefing paper I linked to above is freely downloadable, so why didn't the BBC link to it? That phrase is typical of lobby correspondents who are passed unattributable information. If this statement is referring to total pay then it is an underestimate since the median pay for NHS consultants is £112k. I suspect this is implying that consultants can earn this amount of money in overtime. Further down in the BBC report it says:

At Coventry and Warwickshire NHS Trust, one ear, nose and throat specialist made more than £105,000 in 2009-2010 in overtime. Another three consultants from other areas made in excess of £80,000.

That's where the "more than £100,000" comes from. But notice that they give just four cases.

According to the NHS Information Centre there are 33,000 consultants (as of Sept 2010). Yet the BBC could only find four cases, and they could not find any aggregated figures (the average payment of overtime for consultants).

The NHS Information Centre says that the average (mean) basic pay salary for a consultant is £90,200. In other words the "average" consultant earns an extra £30,000 in performance awards and over time. Not quite £100k, but still very nice money. However, the performance awards (in effect rewarding skill and excellence because once awarded the consultant is paid the award each subsequent year) vary between £2,957 and £75,796, so it is likely that this is more likely the source of the extra £30k payment above basic salary.

Now here's the odd thing. The BBC article says:

Overtime rates vary, but are often about £600 for four hours

Again, nice money. So how many hours would you have to work to earn an additional £100k? I work it out to be 668 (rounded up to give whole four hour periods). Assuming a 48 week year that means working 14 hours extra a week. Bear in mind that we are talking about NHS consultants who are typically employed on contracts of 4.5 days a week and they are allowed to work the other 2.5 days in the private sector, why would they spend two of those days doing NHS overtime? It doesn't make sense. There may well be one consultant (or even four) in the NHS who is willing to work these hours, but it is hardly likely to be typical.

Updated using information from the comments:

"the salaries quoted for consultants are for a week of 10 sessions of four hours each. Most consultants agree to work between one and four extra sessions at a pro rata rate, of around £200 per 4 hours. There is also a supplement of between 1 to 8% for on call availability at nights and weekends."

So at £200 for 4 hours it would take a lot more overtime to earn the £100k that the BBC quote. However, the supplement is clearly an important source of income. Take an extreme case (extremely unlikely) of the "average" consultant on £90k on call every weekend and every evening. That means earning about £7200 more. Nowhere near £100k.

I think it is acceptable to say that the BBC have written an article on entirely exceptional cases and that a journalist investigating consultant pay from primary sources would not have produced an article highlighting a situation that is so atypical. Even though the "figures" were given such a prominence on BBC radio bulletins and on their website, the story is essentially made up.

There are lots of interesting nuggets of information in the data on the NHS Information Centre website, as well as in the parliamentary briefing paper I linked to above. For example, the following statement comes from the parliamentary briefing paper:

HM Revenue and Customs conduct periodic analyses of the private practice income of consultants by linking tax return data with information from the NHS workforce census. These are used to inform PCT funding allocations. The most recent detailed analysis of consultants’ private income took place in 2003/04. It found that the ratio of average (mean) private income to NHS income was 0.45; that is, on average, consultants supplement their NHS income by an additional 45% through private practice.

This is far more interesting. Almost half of consultants' income comes from private work. That is, the "average" consultant earning £120,400 from the NHS earns an additional £54,000 from private work giving an "average" total income of £174,000. Note that the £54k will come from at maximum 2.5 days work. Few consultants are likely to work 7 days a week, but let's just assume this extreme case. It would mean that they would get 45% of their pay for 36% of the week, and clearly this means that private work is paid at a higher rate than the NHS rate (a rate 45% higher). Of course if the consultant works fewer days a week for the private sector to get the 45% of their income then the private rate will be much higher.

This is not the sort of news that a government whose whole NHS policy is based upon the mantra that involving the private sector will bring down NHS costs would want to make public.

Updated using information from the comments:

Most surgical consultants have to meet malpractice insurance premiums of around £10-15K, room rental, secretarial and office fees, postage etc, not to mention tax out of this average income of £40K.

The important point that the briefing paper omitted is that the 45% is on gross income rather than a more accurate figure which is income after expenses. (Of course, tax will be on income after expenses, so the tax will be on less than £40k.)

However, I still think the investigation of private income of consultants is interesting, since it shines some light on the government's policy which is to expand this area of the health economy. We are told by the government that their policy will just work, and that ultimately it will be cheaper. I want to see the actual figures.


So why is the BBC making so much fuss about dodgy figures about overtime? If the BBC was impartial and wanted to give a clear, complete picture they would mention the private earnings in their article about "lucrative" pay, but they have not. The reason is that the government does not want the public questioning the rates of the private sector. The government wants to have the private sector fully embedded and providing NHS care before the public realises that it costs more than the NHS but, of course, by that time it would be too late to reverse the changes.

The premise behind the article was clearly written by a Department of Health official with the clear agenda to make the public think that the NHS is wasting money and that a "reform" is necessary. The BBC are simply providing Department of Health propaganda.

Proud of the BBC

 

This is what I got for Christmas. You can get one too, from Mitch Benn's website. Oh and while I am at it, watch his POTBBC video.



(The image is from Mitch Benn's site, but I hope that since I have provided so many plugs he won't mind me using it.)

Flu jabs

There is a lot of grumbling about flu jabs. Clearly there has been a cockup because the uptake of flu vaccinations this winter has not been good enough, and now that cases of flu are increasing, and the numbers of people needing intensive care in hospitals are at high levels, people are starting to go to their GPs demanding a flu jab and finding that there are none available. Why? Poor planning. However, the good news is that you can get a flu jab but only if you are willing to pay Boots £12.99 or Asda £8.

But note: you have to pay. And note: if Boots or Asda have the vaccinations then your GP doesn't (but note, Dr Clare Gerada the chair of the RCGP wants restrictions on sales). Last week Newsnight interviewed a GP who complained that it was a waste of his time to be hunting for available stocks of the flu vaccination, as a GP he should have access to the stocks that he needs. He's right, NHS GPs should have access to the vaccinations they need.

There are two explanations for this cockup. The first is that Lansley is just completely incompetent, he has no clue about how to run the NHS. The other explanation is that this is how the new NHS is supposed to work: those who want the flu jab should purchase it from a pharmacy and those who actually need it can only hope that the safety net of the NHS catches them. 

I happen to think that both explanations are true: Lansley does not have the competence, nor the inclination to run the NHS and he is trying as hard as possible to rid himself of this responsibility. It is also an illustration of what the NHS will be like if Lansley's re-organisation goes through.

I am quite familiar with the complaints of the worried well (and also at risk groups) complaining that they cannot get a flu jab from their GP and have to resort to buying it from a private supplier like a pharmacy. I am also familiar with the complaints that GPs cannot get the vaccination for their patients because the pharmacies are buying up all of the stocks. I am familiar with this because I have friends in the US and these were their complaints in the winter of 2009/10. At that time I smugly explained to my American friends that such issues did not happen in the NHS. Well now it does, and the rest of the NHS will soon be like this.

People with tea cosies on their heads

Today there was a piece in the Financial Times about Foundation Trust (FT) governors.

According to the white paper, all hospital trusts have to be FTs by 2014 (although the Department of Health admits that about 20 have no hope of getting their finances in a state to qualify as a FT).

A FT is semi-autonomous organisation. The state still owns the trust (indeed, every year they have to pay the Secretary of State a public dividend), but (nominally at least) the state does not run the trust. FTs are run by a board of directors. The board is made up of executive directors and non-executive directors. The executive directors are the managers who run the trust: the chief executive, the finance director, the medical director, the director of nursing, etc. These are people who know how the hospital works and are expert in its day-to-day running.

The non-executive directors (NEDs) are part time and are appointed from the community. According to the Appointments Commission:

Non-executive directors are responsible for providing independent scruitiny and constructive challenge of their executive colleagues and their organisations.  It is a role which has taken on new importance in today’s economic and political climate.  Budgets are tight and there’s an increased need to account for the proper use of public money while at the same time delivering high-quality.

Consequently, NEDs are specifically chosen for their business acumen. Their skills in business means that they can scrutinise the hospital's finances and the ways that the executives run the hospital. The chair of the trust is a non-executive director and chairs the board meetings.

A Foundation Trust also has governors. When the FT is created it determines how many governors it has, but the majority must be publicly elected by the "trust membership". Trust members are members of the community that use the trust and again, the trust determines the criteria for membership (some have an opt-out scheme, so that all patients are members unless they opt out; most trusts are opt-in where members of the community opt to be a member). The non-publicly-elected governors are "stakeholder" and staff governors. The stakeholder governors represent some other part of the community: local authorities, GPs, voluntary groups, local medical schools, PCTs etc; the staff governors are elected by the trust's staff.

The board of governors appoints the NEDs (including the chair of the trust) and they hold the NEDs (and through these, the board) to account. The board of governors is chaired by the chair of the trust, so this gives a link between the governors and the board.

The main role of the governors is to represent their members (the public membership, the staff membership or the stakeholders they represent) and ensure that their members are properly served by the trust. The governors do not run the trust. They are expected to influence the trust strategy and to highlight when the trust's decisions will affect their members adversely. This means that governors do not have an implicit right to inspect wards, nor rebuke staff. They do not have the responsibility of scrutinising the trust finances or care quality other than on a general sense that if the trust has poor finances and care quality it will adversely affect their members. (On this last point, Mid Staffs FT governors failed, however, I have spoken with a staff governor from this trust and she told me that the trust did not co-operate with the board of governors and consequently the governors did not know the full extent of the situation in the trust.)

In some respects the role of Foundation Trust governor is quite weak: they have no powers other than the ultimate extreme power to dismiss one or all of the NEDs - including the chair of the trust. Note that the most powerful member of the board of directors is the chief executive of the trust, not the chair. However, if the Foundation Trust is properly constituted and the board of directors treats the governors correctly, they can be very useful to the trust as a two-way channel to the community: determining what the community wants and as an advocate for the trust to explain to the community the trust policy.

The main regulating body, Monitor, is more powerful than the Foundation Trust governors, because Monitor can intervene in the running of a trust. For example, if a trust consistently shows poor financial governance Monitor can intervene ranging from taking a closer day-to-day oversight of the trust's finances, to replacing the financial team. In the future Monitor will not have this power since it will act as the regulator of all hospitals providing NHS-funded care (ie including private hospitals over which it has no governance control).

The Financial Times article is a bit thin on new information, it simply explains what the white paper says about governors as modified after the so-called "consultation" on the white paper. The article explains:

Under one of health secretary Andrew Lansley’s more radical changes to the health service, all public hospitals are to be turned into NHS foundation trusts – free-standing operations able to borrow, make surpluses and losses and no longer directly answerable to the Department of Health.

This has been the case since 2004, all FTs have been making surpluses (and hopefully not losses) although their ability to borrow has been restricted. The FT article goes on to explain that Lansley's policy is to put more responsibilities on governors:

locally elected governors, who currently appoint the chairmen and non-executive directors of trusts, will have almost full responsibility for the safe conduct of the business

This is a large change since, as I explain above, the NEDs currently scrutinise the boards decisions and hence the "safe conduct of the business". I wonder what the role of NEDs will be, since it appears to me that much of their responsibility will be handed over to governors. The response to the white paper consultation Legislation Framework and Next Steps section 6.15 says that the new bill will:

• make explicit the duty of governors to hold the board of directors to account, through the chair and non-executive directors (whom they have power to appoint and remove);
• give governors power to require some or all of the trust’s directors to attend a meeting. For transparency, the FT’s annual report would have to list any occasions when this power was used;

This sounds not much different to what governors do already, however, the Next Steps document goes on to say that this:

reflect a significant cultural shift: placing genuine responsibility on FTs themselves rather than on Monitor as FT regulator

In other words, it shifts this responsibility from Monitor to the governors.

Bear in mind what this shift means. Currently the governors represent their members. Their influence on the trust is solely for their members. If the trust wants to change the services it provides, the governors have a responsibility to ensure that the service change will benefit their members. Under the new arrangements the governors will have a responsibility to ensure that the service change will not affect the safe conduct of the business. Can you see the shift? Governors currently put their members first, but in future they will have to put the business of the trust first. Currently governors are community representatives, in future they will have to be business-savvy.

The Financial Times points out that the shift will mean a change in the skills of governors and it quotes David Bennett, the interim chief executive of Monitor:

there is a worry that as a whole they do not look like a group that is yet well equipped to take on this new role

Indeed not. Most elected governors stood for election to represent their community, not to run the trust. The article has a rather insulting quote from a "senior NHS figure":

According to other senior NHS figures, governors vary “from those with extensive business backgrounds to people with tea cosies on their heads”. 

I am an FT governor and I can say that out of the 14 elected governors at our trust just one is a current businessman, and two others have business backgrounds. The remainder have academic or medical backgrounds, or non-NHS related backgrounds; these I suppose are the "tea cosy wearers". (Under this definition, I am a "tea cosy wearer".) The "tea cosy wearers" are the community representatives and are the sort of people Lansley does not want, yet the community is best served by such people. At our FT meetings we do not spend time talking about productivity of the staff, or cost improvement programmes (we are shown the figures), instead we spend our time determining how the trust can provide the best service for the community. In my opinion the "tea cosy wearers" are far more important than the business people. At the last FT meeting, the businessman governor did make a fuss about productivity (unwarranted, the productivity is high at our trust), which drew the response from one of the "tea cosy wearing" governors "this is a hospital with patients, not a business with customers!".

We are constantly bombarded with the Big Society rhetoric from this government that says that people who care about their community should be running public services. We get the impression that Cameron wants "tea cosy wearers" running public services, but Lansley says he wants business people. I suspect he will not get what he wants. FT governors are unpaid and business people are unlikely to devote much time to an enterprise if they are not paid for that time (if they give away their skills so freely they cannot be successful business people).

I had better go shopping tomorrow for some new head wear for our next Foundation Trust governors meeting.

NHS Crises

Nick Bosanquet is the professor of Health Policy at Imperial College. He is also a consultant director of Reform (while it describes itself as a non-party think tank, it is certainly pro-market when it comes to public service reform). I do not accept his pro-market views for NHS reforms but I do respect his knowledge of the NHS and his predictions for the future.

Recently at a seminar for Policy Review TV (the contribution starts at 1:20 but the entire seminar is worth watching) he described what he called "Bosanquet's Halloween Shocker" referring to the imminent financial crisis in the NHS. Prof Bosanquet started by giving some historical background:

There have been four rather similar crises in the NHS. These have followed a pattern. Funding and activity had increased by generous funding by government for a time and at some point that hit a funding constraint.

Sounds familiar? The four other financial crises in the NHS history had been when there had been a period when the NHS was well funded followed by a budget squeeze. Prof Bosanquet continues:

If the NHS was a flexible system that could say we will lower our costs, deliver more services and improve quality even though we have got less funding then that might not be a problem. But the NHS is not a flexible system.

In other words, the NHS is not flexible enough to withstand a sudden drop in funding.  In fact, it is arguable that no large organisation is. Imagine the effect on a large commercial organisation if it finds a sudden drop in income, it is doubtful that such a company would survive, so I do not see why we should expect the NHS to be any different.

Bearing in mind the Spending Review allocation of funds to the NHS, Prof Bosanquet predicts that:

Around November the first 2011 many trusts will find that they've not got the funds for the rest of the year. They will be faced with a very hard choice of insolvency or cutting back services.

Although it is clear that the financial crisis will be caused by the Conservative government inadequately funding the service, Prof Bosanquet gives three reasons why the financial crisis this year will be different to the previous four in the service:

1. Patients are more demanding for higher quality treatment
2. Many hospitals with PFI projects have not yet started paying the full charges.
3. The number of doctors being trained has increased and there will be pressure on trusts to find jobs for these graduates.

Prof Bosanquet says that these factors will make this financial crisis much worse than the previous ones, he says that the NHS will face the "father and mother of a fifth financial crisis".

A financial crisis in the NHS will be disastrous. Other than Prof Bosanquet's prediction of hospital insolvency (and remember that Lansley says that he will not "bail out" a trust that goes into debt, hence the hospital will have to close), there will be service cuts which means rationing of treatment. Both of these will result in public outcries. The outcry will not be from a section of the population that the government is happy to ignore (as was the case with the removal of EMA), it will be from their core vote: middle class and predominately older voters. The government will be seriously unpopular, and a Prime Minister like Cameron, who rules with one eye on his reputation, will be tempted to seek a quick fix. The only solution will be to increase funding.

A recent parliamentary report gives the level of funding for the NHS since it was created.The percentage increases in NHS funding is plotted on the following graph.

The interesting point about this graph is that there are periods when funding is fairly constant, followed by sudden dips (for example the dips at 1961, 1969, 1977 and 1996). The dips are then followed by sudden increases. In 1963 following the 1961 dip, funding has increased by 6.6%; in 1970 the funding increased by 8.5% and 1980 the increase was 9.8%. The point is that a sharp cut in funding cannot be sustained, in fact, the NHS has never sustained more than one years cut in funding, and any cut is followed by a sharp increase in the next and following years.

The Spending Review at best gave the NHS flat funding for the next four years, but other analysis suggests that NHS funding will actually be reduced by a small amount (John Appleby of the Kings Fund says that there will be a real terms decrease of -0.3%) every year until 2015. As you can see from the graph above, the NHS has never sustained a period of flat funding. The closest are 1961, 1969 and 1996 which were all followed by sharp increases in funding the following year.

However, the Spending Review funding is not the whole story. The NHS will have to make £20bn "efficiency savings" by 2015. This is a cut of about 4% year-on-year. The NHS has never suffered a cut that large for so many years. The graph above shows that when there has been a single year of cuts it has to be followed by several years of large increases in funding. These were the financial crises and the subsequent increases were due to the public demanding more funding.

So what will happen if there is no large subsequent increase in funding? One thing is very clear: the government will be extremely unpopular and there will be huge pressures on Lib Dem and Tory MPs to do something about the funding crisis. Cameron will have the dilemma of losing the support of his MPs or to raise funding. My guess is that he will choose the latter and we will see a real increase in funding in 2011/12. The public will also demand more than just extra funding, they will demand the head of the person who caused the funding crisis and that will mean Lansley will be replaced.

Cynic? Me?

Just at the time when Lansley is getting a lot of stick in the Press for his incompetent running of the NHS (the looming financial crisis, and his incompetent handling of flu vaccinations) the Department of Health suddenly comes up with a good news story: new money.

Following a successful efficiency drive, the Department of Health is able to make an extra £162 million available to local health and care services to spend this financial year on front line services, Health Secretary Andrew Lansley announced today.

The extra money will be spent on helping people to leave hospital more quickly, get settled back at home with the support they need, and to prevent unnecessary admissions to hospital.

The funding will bring forward the plans being put in place by health and local authorities to work together using NHS funding to support social care, as announced in the spending review. It will also enable local services to respond to pressures this winter.

This money will be spent on reablement services. That is, it will be used to prop up social services who will suffer huge damaging cuts from Pickles axe. The short term Pickles cuts will result in people spending more time in hospital because they cannot be discharged without the social care in place. Cuts in local authority funding means that social care is being devastated. This £162m is vital to stop the NHS costs rising rapidly.

Where does this money come from? The Press Release says:

The Department has made efficiency savings by applying the controls over central spending on consultancy, IT, administration and advertising common across all of Government.

I keep a close eye on announcements from the department, but this is the first time I have heard of this "efficiency saving" and the Press Release does not say where the money comes from. However, I do notice the phrase "common across all of Government" at the end of that sentence.

Is this a lifeline from Osborne thrown to Lansley? Is the Chancellor trying to help out the beleaguered Health Secretary by giving him a smidgeon more?

The most important issue of 2011

This is my response to Anthony Painter's column on  Labour List today. In my opinion, 2011 will be the year that the NHS collapses and here I want to outline the political effect.

So far Lansley has been rather clever, and rather dim.

Take the "dim" first. The NHS is a very large organisation to run. It is particularly difficult to run when the money is short. Lansley has taken the attitude that he does not want to run it. He's refused to pay any attention to the financial issues in the service. What's worse is that his attitude is that it is nothing whatsoever to do with the government or the Department of Health. He takes the attitude that the financial problems are the problems of PCTs, NHS trusts, Foundation Trusts and GPs: he gives them money and if they generate a deficit that is their problem. (Of course, it is not their problem, it is our (patients') problem, but I don't think Lansley ever thinks about patients.)

The NHS will face a financial crisis later this year. It will be one of the worst crises the service has ever faced because the NHS has never before faced a 4% cut year-on-year while having to re-organise itself. A 4% cut is bad enough, but the re-org is the real problem. You simply cannot increase productivity and efficiency when there is the disruption of a large scale re-organisation. Do one or the other, but not both. Since the financial situation is the most important it is vital to minimise any other disruption. Lansley, however, has to go ahead with the re-organisation because it is his vanity project, he knows that it is the policy that will put his name in the history books.

The historical precedent from its 60 year history shows that in the four other times the NHS had a financial crisis the only way to get the NHS working again was to raise funding. In those four cases the funding raise was between 8% and 12%. [I will give the details in another post.] Can you imagine the effect on Lansley's reputation of pleading with Osborne for another £10bn to save the NHS from collapse?

This incompetence on Lansley's part has not gone unnoticed at No 10. This makes Lansley very vulnerable, and if there is a cabinet re-shuffle after the May elections Lansley will be top of the list. My prediction is that Dorrell will be the next Secretary of State. As the chair of the Health Select Committee he's made satisfying noises about the importance of focussing on the finances rather than Lansley's vanity re-organisation.

Where has Lansley been clever? Well, announcing in July last year that PCTs and SHAs will be abolished, and then telling PCTs that they must prepare immediately for that event. Without any legislation, without Parliamentary approval, Lansley has already implemented GP Commissioning. That's clever. PCTs are in meltdown and it is a one way process: you cannot revive them now. The first 52 GP Consortia pathfinders are already in place and are commissioning for one quarter of the people in England, this will rise to half of England by the summer.

GP Commissioning is here. Lansley's vanity project has been implemented, and it will be extremely disruptive to reverse it (see my comments above - disruption must be avoided). The problem is the cost: it has contributed to, rather than mitigated for the financial crisis later this year.

The NHS financial crisis will be a terrible thing, but it will be an opportunity for Labour. For a start, it will finally convince the public that the Tories can never be trusted with the NHS: never again will a Tory leader be able to tell the British public "the NHS is safe with me". The problem is whether there will be any NHS left for a future Labour government to protect. The other problem is that GP commissioning is here and it cannot be removed and Labour attacking GP commissioning will be a losing battle. I am not saying that Labour should not oppose the plan, just that it should not expend too much energy on it. Instead, Labour should concentrate on Lansley's plans for providers. The plans to take all NHS hospitals out of public ownership; the plans to mandate that a fixed proportion of NHS paid work must be provided by the private sector; the application of competition law; the whole "any willing provider" policy. These are the areas where Labour must attack Lansley. They must attack these policies because they are wrong, and because the majority of the public are against them.

And one final point. Ed Miliband must pledge that Labour believes that hospitals and community health services should be publicly owned. Drop the "mutuals" idea because this is too close to Lansley's "social enterprises" idea. NHS hospitals should be publicly owned, publicly run and publicly accountable. Is that a simple enough message for Ed to understand?

Big Society

We all know that the Big Society is all about cuts and reducing the state, but how does this work? Well here is a simple example that shows how we will be expected to pay for public services from our pockets rather than out of our wage packets.

We are a maritime nation with a long history of sea trade. We are also a nation with some of the most treacherous seas on the globe. In such a situation you would expect that it would be a basic public service to protect the vessels that supply us and are used to export the good we make. Yes, we have the Coastguard. The Maritime and Coastguard Agencyprovide the following service (from their website)

The Maritime and Coastguard Agency implements the government's maritime safety policy in the UK.and works to prevent the loss of life on the coast and at sea. We provide a 24-hour maritime search and rescue service around the UK coast and in the international search and rescue region through HM Coastguard and inspect and survey ships to ensure that they are meeting UK and international safety rules. We also provide certification to seafarers, register vessels and respond to pollution from shipping and offshore installations.

Clearly they are there to make sure that in an emergency ship passengers and sailors will be rescued. They currently have 19 stations around the country. These are paid out of taxation, that is, a little bit of your wage packet goes to pay for the Coastguard whether or not you live near the sea or ever go on it.

Let me now introduce you to the Royal National Lifeboat Institute. This is what their website says that they do:

The RNLI is the charity that saves lives at sea. We provide a 24-hour lifeboat search and rescue service around the coasts of the UK and RoI, as well as a seasonal lifeguard service on many of the busiest beaches in England and Wales.

The RNLI have 235 lifeboat stations and 444 lifeboats. They are funded entirely by public donations. They do not get a penny from the government (British or Irish). The public pays for this service out of their pockets. Some donors may live by the sea, but others don't. The organisation depends on the generosity of ordinary people.

Notice some overlap between what the RNLI does and what the Coastguard does? One is paid by public donation and the other from taxation. One is subject to spending cuts, the other feels it has a moral duty to provide the service.

The Conservative government has decided to cut the number of Coastguard stations from 19 to 8 as part of its spending cuts. The reason why they can do this is that they know that the RNLI will always provide search and rescue, even if the UK government decides that it won't. This is the Big Society.

This is how we will find the Big Society will be used to implement the cuts. The government will cut a service and concerned citizens, or existing charities will feel that in a civilised society someone must provide the service. The government will remove itself from providing public services and so will not have the cost. The ultimate aim is that the government will be able to reduce taxes. The alternative provider, the concerned citizens ("social enterprises") or charities cannot provide the service with no funding. So consequently we will dip into our pockets to support them.

This is the Big Society.