Peter Fisher, NHS Consultants Association


The NHS from Thatcher to Blair


addressed to the 12th IAHP and XIV FADSP Conference, Palma de MAllorca 23 May 2002


In looking at how the NHS has changed over this period it is possible to see a pattern.
Sometimes quickly, sometimes more slowly and with occasional steps in the opposite direction, we have been moving away from the concept of a publicly owned, publicly accountable service.

No two countries have identical health care systems and the terminology, not to mention language difficulties, can make comparisons difficult but it appears to us that many other countries are facing similar problems and having the same sort of debates about how to tackle them.
Our experience in the UK may therefore have some useful lessons and warnings for others as well as indicating ways in which we can work together to promote the things we believe in.

Gradually, after its formation in 1948, the NHS ran into difficulties as the funding did not keep pace with the rising costs and public expectations. The proportion of our GDP spent on health fell below that of other developed countries. In the past 25 years successive governments, instead of tackling the basic problem, have tried to solve it by increasingly frequent organisational change.
In the pre-Thatcher era these changes, although disruptive, mainly involved alterations in the levels of management and in the style of decision making.
The basic structure was maintained. In brief, most elements were the responsibility of Health Authorities, whose job it to provide services.

· The main functional unit was the District, covering up to 500.000 people, with at least one large general hospital.
· District Health Authorities provided hospitals and other services, employed their staff and most of those working in the community apart from doctors.
· The medical part of Primary Care was separate, general medical practitioners (GPs) were independent contractors rather than employees. They contracted their services to a separate Authority and employed their own staff.
· The Health Authorities although not directly elected had staff representatives and locally elected councillors so there was some limited degree of democracy.

Margaret Thatcher became Prime Minister in 1979.
One of the first acts of her government was to agree with the BMA a change in the contracts for consultants allowing all to do some private practice. Before this, consultants had the right to choose a contract to work only for the NHS. About 50% did this and so had no interest in the private sector. The others were paid about 18% less but could do private work, with no real limit. Although this change in 1980 caused little interest outside the profession, it had a profound effect in encouraging the development of the private sector and ensuring that it mattered to most consultants, whereas previously to half of them it was irrelevant.

Her government showed recurrent interest in health insurance but this was played down for electoral reasons. Tax concessions for private insurance were introduced, there were frequent rises in prescription charge and the contracting out of support services to the private sector was enforced.
The major change didn�t come until after her 3rd election victory in 1987, possibly because she was heavily involved in other activities like the Falklands War and anti Trades Union legislation

In 1988 there was a serious problem of capacity in the hospital service, involving a lack of paediatric intensive care beds. This was politically embarrassing. The government response was to appoint a small group of people, without consulting the health professions (or anybody else) to produce a radical solution. The result � in early 1989 - was a report entitled �Working for Patients� which proposed what became known as the Internal Market.

Its big idea was the creation of a market within the NHS so that some parts of the organisation would become providers selling their services to the others, the purchasers.
This separation of purchaser from provider - the Purchaser Provider split - was the key feature
· Providers were to be the hospitals, who were encouraged to become independent Trusts.
· Purchasers were to be the Health Authorities but also increasingly those general practitioners who wished could become fundholders and have their own budgets for purchasing from the hospitals, for non emergency care.

Despite widespread opposition from the other political parties, professional associations, trade unions and the general public,
it was pushed through Parliament in 1990 by the large Conservative majority and became law.
Hospitals becoming Trusts or GPs taking up fundholding were meant to be entirely voluntary decisions but particularly in relation to the hospitals the system for making the decision was very undemocratic � no official ballots of staff or of the public were allowed and the many unofficial ones were ignored. Public money was made available to campaign for trust status, those wishing to campaign against had to find funds from their own pockets.
Opposition continued both nationally against the whole concept and locally against the local hospital becoming a Trust.

Some GPs were enthusiastic about fundholding �as independent contractors they were more used to seeing their work as a business. Government plans also relied upon the perception, not without justification. that the hospital sector and those working in it were too powerful and that fundholding gave the opportunity to redress the balance.
This unfortunately did little to encourage a feeling of working together.

· The whole NHS became fragmented, with each hospital in competition with the others.
· Primary and Secondary Care were put in an adversarial position.
· The ambulance services were no longer provided by the health authorities and each became a separate Trust
· Like all systems which employ market forces in health care it proved, because of its complexity, to be very expensive, doubling the administrative costs from the traditionally low level of 6% to 12%.
· The modest element of democracy in the Health Authorities was removed by taking away members representing staff and local councils and replacing them with government appointees, mainly with a business background
· Each Trust had its own Board of Directors, not elected by or accountable to its local population and so resembled a private sector company.

Those who continued to campaign against the market system were optimistic that the Conservatives would be defeated in the General Election of 1992 and had some success in delaying decisions on Trust status until after then, the Labour Party having pledged to abolish the market.

However, although Mrs Thatcher herself had been forced out of office by her colleagues, the Conservatives held on and were elected for another 5 years.
This was a devastating blow and meant that the market would inevitably develop further.
By the time of the next election in 1997 almost all hospitals had become Trusts and about 50% of GPs were fundholders.
But neither health service workers nor the general public had accepted the market system and its unpopularity played a significant part in the final defeat of the Conservatives.

In 1997 a Labour government elected with Tony Blair as Prime Minister
There was great relief at this result with the expectation that the market system would be abolished as soon as possible but it did not turn out quite like that.
Towards the end of 1997 the government published �The New NHS� setting out its plans.

• Although it was claimed that the market was being abolished the key element � the purchaser/provider split - was retained.
• The hospital Trusts were allowed to continue.
• The more aggressively commercial language was changed so that purchasing became commissioning. Contracts became service agreements and were for longer periods so that there was greater stability
• No further applications for GP fundholding were accepted. Fundholding itself was then abolished ending the distinction between two groups of GPs but in its place all were to be formed into Primary Care Groups � around 50 GPs in each. These would move, at whatever pace they wished, through 4 stages of increasing independence and financial powers until in the 4th stage they became fully independent Primary Care Trusts with Boards of Directors like the hospital Trusts.
• Health Authorities were to lose much of their role and be reduced in number.
• There were some good things, including a commission to monitor standards of care and another to assess the cost effectiveness of new drugs and procedures before they were authorised for general use.

Why was so much of the market allowed to continue?

Possible reasons

• By 1997 it had become too entrenched.
• To avoid another major upheaval - staff had made it clear that they were fed up with administrative changes.
• To avoid trouble from fundholders
• A genuine belief in commercial methods by �New Labour�, particularly Tony Blair. This has become more apparent since then.

There were nevertheless high expectations from public and staff that things were going to get better quickly, which was gradually replaced by disappointment, anger and finally despair when they didn�t.

This was to a large extent due to the government being bound by its pre-election pledge to stick with the Conservative spending plans and not raise income tax levels.

Things started to improve in 2000 with the publication of the NHS Plan

Large increases in spending were promised for the next 4 years but the money was conditional on health service staff accepting �change�, not at that stage defined but usually referred to as �modernisation�. This is a clever word because it allows any one who raises doubts about any aspect to be dismissed as a dinosaur.

Together with the extra money, significant increases in hospital and primary care staff were promised, although it is generally agreed that the figure for primary care was inadequate.

Just before the 2001 election Tony Blair went further and announced an intention to increase health spending until it reached the European average but still fenced himself in by making the pledge not to raise basic or higher rate income tax.

Where are we now?
I have omitted many things. There has been a plethora of new initiatives, many overtaken by the next one. One of the problems of this government is its hyperactivity and inability to allow one new scheme to settle down and produce some results before the next, sometimes contradictory, one is introduced.

But we have at last

• recognition of the degree of underfunding
• recognition - only since April last year - of under capacity
• recognition of understaffing ( doctors /1000population UK 1.6 EU average 3.1 )

It was a big political mistake not to have acknowledged these deficits when first elected in 1997, because denying them until recently has led to a severe fall in morale and difficulty in the recruitment and retention of staff, even when there is money to pay them.

It is obvious that with the length of time to train additional staff there will be a gap of several years before we can expect to see the full benefits of proper funding

Our great problem now is how to bridge the gap
As you will have seen we are trying to import trained staff, nurses, doctors etc from anywhere we can get them and exporting patients not only to Europe but to as far away as South Africa. Thus we are globalising our health care.

The importance of bridging this gap for the next few years is being used as a justification for the privatisation agenda,

Accusations of privatisation are common in the politics of health and there is much argument about its precise definition. In rejecting such accusations, politicians and others are sometimes able to argue on a technicality that any particular move does not fulfil the definition because, for instance, the service is still free at the point of use.

It is perhaps more useful therefore to ask whether any particular change, either by design or by accident, makes eventual undoubted privatisation nearer, easier or more likely.

The answer then would usually have to be YES

There are 3 main components of the privatisation agenda

1. The Concordat - an agreement signed between the Secretary of State for Health and the private health sector to promote joint working and in particular the use of spare private capacity for the treatment of NHS patients. At present, this is largely for elective surgery.
It is not a system of which we in NHSCA approve, as it uses public money to boost the private sector but there are also practical objections and questions which need to be asked.

• If NHS staff are doing the work on what basis will they be paid?
• Who does the after care as there are no junior doctors in the private sector?
• If we transfer more elective work to the private sector, leaving the more difficult emergency work to the NHS, how will we stop nursing and other staff from transferring?
• Will the private sector increase in size, providing an excuse for not increasing the capacity of the NHS?

None of these points has been satisfactorily answered.
Nevertheless, we in NHSCA acknowledge that something has to be done about the long waiting times for today�s patients and are prepared to accept the Concordat in the short term providing it is properly supervised and that it is only a temporary measure until the NHS has been built up and adequately staffed.
However although it was introduced as a means of filling the gap it is now clear that the government intends it to be permanent.

2. Private Management - Private management (or even ownership ) is being proposed for new elective surgery units and also for some existing NHS hospitals which are judged to be failing.

3. The Private Finance Initiative (PFI) The government is persisting with this method of financing building in the NHS and other public services despite repeated demonstrations of its costliness and other disadvantages in the long term.

Our concern is shared by many others, including the health unions and members of parliament. An all party parliamentary committee has just finished a detailed investigation of the role of the private sector in the NHS and published its report last week.
It takes the view, as we do, that we should concentrate on building up the NHS rather than relying long term on the private sector.

It takes a fairly neutral position on PFI but states that there is too little accurate information to judge whether it is cost effective or not.

The situation is further complicated by major changes taking place in Primary Care

When fundholding was replaced by the much larger Primary Care Groups it was stated that they could evolve into Trusts but at their own pace and by their own decisions. This has now been speeded up, so that on 1st April this year all became independent Trusts similar to those in the hospital service. They will have much more financial power than the former fundholders, being responsible for spending 50% of the health budget, rising later to 75%, by commissioning services from hospitals and elsewhere, either in the NHS or private sector.
Many in Primary Care feel that they are not ready for, or equipped for, this additional responsibility and quite a lot don't want it anyway.

As an organisation of mainly hospital and public health doctors we need to tread carefully when discussing Primary Care. We are in favour of a more influential role for Primary Care but would prefer that it was through joint planning and negotiation rather than through this potentially expensive remnant of the market system.

Our strategy as an organisation now is

• To maintain public confidence in our system until it has clearly improved.
• To argue for more democratic control and accountability
• To persuade the politicians to reduce the constant flow of government targets and initiatives. which are counterproductive.
• To make the case for cost effective long term measures rather than expensive �quick fixes� aimed at producing results for the next election.

There are some positive signs

Following devolution to Scotland and Wales those countries have started to take more progressive decisions in some areas than has England. For example, Scotland has decided on more generous treatment for people needing long term care.
This puts pressure on the Westminster parliament to do the same

Chancellor Gordon Brown has firmly rejected alternatives to tax based funding for the NHS.
He had earlier commissioned an investigation by Derek Wanless, a banker, into the long term resource requirements of the NHS. A report has been produced stating that after examining various other options it was concluded that a tax based system remains the fairest and most efficient way of financing health care. This has infuriated the Conservatives.

They are now openly stating that they believe the NHS is finished. This is positive because it signals the re emergence of a clear Left Right divide in health policy which supporters of the public sector can rally round and an argument which we can win.

I wrote this last month anticipating I might need to update it.

A lot has happened, including two very significant events.

First the good news
The Budget was presented to Parliament on 17th April and was even more generous to the NHS than had been expected amounting to an annual rise of 7.4% above the rate of inflation for the next 5 years.
This would take us to 9.4% of GDP spent on health ie around EU average

This was a tremendous encouragement for all who support the NHS, its staff and the government�s own MPs who at last have something looking like socialism to cheer about.

But after the euphoria of budget day, some worries are emerging.

Firstly, the time factor is important � even if all goes according to plan it will be 2008 before we reach the EU average so we must resist any attempts to make premature judgements on success or failure. That does not fit easily with the political cycle which will necessitate a General Election no later than 2006, probably 2005.

Obviously it will all depend on Britain maintaining a successful economy but -
If these spendings levels are achieved, critics of tax based funding will no longer be able to argue as they do now that it is a system which will always be underfunded

On the other hand, if they are reached but have not produced results in terms of waiting times and other outcomes which are comparable with other European countries, it will be difficult to resist arguments that it is the system itself which is at fault.
We have hitherto been able to claim that it is unscientific to compare our outcomes because of the underfunding.

It is essential therefore that money is used effectively and not wasted in short term schemes to meet political deadlines.

Now the very much less good (or frankly bad) news.
The day after the budget Alan Milburn, Secretary of State for Health presented in Parliament his plans for using the extra resources called �Delivering the NHS Plan�

This starts off quite well with the setting up of an independent audit of the use of the money and this new body will take over the role of other organisations which is good because we tend to have a confusing number. But the fact that one which is to be taken over has only been in existence for a month does not promote confidence that we are seeing a well thought out plan.

After that it goes rapidly down downhill, making clear that there is to be much more use of PFI, and more reliance on the private sector

Patients will be given information on waiting times etc so that they can choose, instead of their local hospital another NHS hospital, one in the private sector or even one overseas � at public expense.
Although this may be of benefit to some individuals it damages the valuable concept of a hospital serving a defined community and being part of it.

Hospitals will be paid by case rather than through block contracts, favouring volume over quality
Additional payments for elective surgery will risk concentrating attention on elective and episodic care, making same mistake as the market.

On downloading this document my first thought was that it was so close to the Thatcher market as to be indistinguishable. In one aspect it goes even further than Mrs T in inviting overseas for profit health care companies to establish themselves in UK �because our private sector is too small�

The more I consider all this the more concerned I get
This is not just my paranoia.

I was delighted to see that Charles Webster, official historian of the NHS, has just produced a second edition of his book �The National Health Service - a Political History� in which he states that Tony Blair�s engagement with the private sector has far exceeded that of the Thatcher administration

Other independent commentators are also concerned that PFI and other privatisation measures risk using up much of the additional money.

Whereas the NHS survived the failure of Mrs Thatcher�s market, for the reasons stated earlier, if it is not adjudged a success in a few years time it could be finished.

That then is our dilemma, it has to succeed this time, but if it does so using the current policies it will be in a form unrecognisable to its founders.
We have to support the additional funding ( which is already being criticised by leaders of industry) whilst persuading the government that it risks not succeeding unless it changes its privatisation policies. It will require very careful planning.

We are holding a strategy meeting next month to start to address this.- it will not be easy.


It is a strange paradox that at a time when we are promised resources greater than ever before the future of the NHS is probably at greatest risk.