Opinion: What Andy Burnham didn’t tell you about NHS privatisation

nhs sign lrgAndy Burnham’s recent set-piece speech on the NHS, the latest instalment of Labour’s “summer offensive”, opened with a neat bit of scene-setting. By briefly championing a group of Darlington mothers who are presently marching 300 miles in protest at the use of private providers in the NHS, he conjured a mood of protest while subtly co-opting their campaign. Thereafter he sought only to reduce the 2015 general election to a “binary choice” between “a part-privatised, two-tier health market under David Cameron” and “a public, integrated national health and care service under Labour.”

In terms of how he defined that choice, though, Burnham could hardly have done worse than to frame his argument with an example from Cambridgeshire, singling out for particular criticism its attempt to integrate care services for older people. On one level, it is easy to understand why he did so. Cambridgeshire’s clinical commissioning group is one of the biggest in the country, meaning that the contract was able to provide the headline figure, £800m over 5 years, such a speech requires.

Politically expedient though this may have been, it is a serious mistake. As the former Secretary of State for Health, Andy Burnham ought to know that highlighting goings-on in Cambridgeshire would immediately invite comparison with Labour’s own record in the Fens. This can only be unhelpful, because, from 2004-10, Cambridgeshire was in effect a national testing ground for Labour’s experiments to involve the private sector in the NHS.

So, as the mothers of Darlington lace-up their walking boots and embark on their march, retracing the footsteps of the Jarrow Crusade, I humbly invite them to take a minor detour from the marchers’ original route so that I can show them around a county whose health economy, although home to some of the best specialist provision and research in the UK, is among the most financially challenged in the country.

Our first port of call would undoubtedly be Hinchingbrooke, the Huntingdon district hospital that is controversially run as an “operating franchise” by Circle Healthcare. The previous Labour Government initiated this £1bn project, a fact which still has the capacity to generate intense cognitive dissonance, even outright denial, among the party faithful. Thus, LabourList’s “definitive” online spreadsheet cites Hinchingbrooke as the second biggest contract “offered to Private Profiteers on David Cameron’s watch” (and the biggest to have been awarded).

Scratch the surface, though, and it quickly becomes clear that the “offering” took place under the Brown Government in July 2009, when the Treasury and the Department of Health approved the outline business case and procurement plan, which meant that private organisations would be invited to bid to run the hospital. Andy Burnham was Secretary of State for Health at the time.

Labour are formally correct to point out that the procurement did not report until November 2010, when the preferred provider was presented to the new government, but it is silly to suggest that Hinchingbrooke is therefore a Coalition initiative. Even if one overlooks the fact that the procurement took place under the Labour legislation that made such tenders possible, every last public-sector bidder had either been eliminated from the procurement by February 2010 or had dropped out, leading the BBC to conclude at the time that the hospital was “poised to be privately run”.

This puts our man Burnham in rather a contradictory position, calling on Cambridgeshire’s commissioners to stop an £800m procurement because a private provider could potentially win a 5-year contract, “which would tie the hands of the next parliament”, when he, while in office, agreed to an even bigger £1bn tender to franchise the management of an NHS hospital, not for five years but for 10. As outgoing Labour MP Frank Dobson says: “that’s the embarrassment in the chamber: because they shout back ‘You started it.'”

Fascinating though it is, the history of Labour’s franchising of Hinchingbrooke should not detain the marchers for long. Much deeper damage to Cambridgeshire’s health economy was wrought by Private Finance Initiatives, two in particular. A £22 million PFI-funded treatment centre, built at Hinchingbrooke in 2004, was based on numerous miscalculations and subsequently contributed to the hospital racking up a £39m deficit that provided the impetus for the franchise arrangement.

Just down the road from Huntingdon, PFI-funded Peterborough City Hospital has been an even bigger disaster. Whilst the hospital itself is a gleaming edifice, significant over-specification and interest repayments that are up-rated using the Retail Price Index measure of inflation quickly led to it amassing a £45.8 million deficit, making it the most loss-making Trust in the NHS. Monitor, the NHS regulator, had warned both the Treasury and the Department of Health that the Trust might be bankrupted by this loan, but these warnings were not heeded. So it is hardly surprising that local health professionals bridle at Mr Burnham’s hectoring remarks about “financial sustainability”.

Unfortunately, the problem is not merely financial. In addition to the vast sums the NHS now spends servicing these extortionate loans, the projects themselves have ossified Cambridgeshire’s existing overprovision of acute care for the foreseeable future. This makes it even more difficult to shift spending out of hospitals and into the community, where care can be preventative, as the hospitals have 30-year loans to pay off. Timescales like these dwarf those of the Older People’s Programme, and make the shadow Health minister’s objections to a five-year contract look absurd.

In such an environment it makes obvious sense to integrate the range of older people’s services in a single contract, as Cambridgeshire is now doing. Aligning financial incentives with clinical outcomes for the system as a whole will end the perverse contractual incentives that currently pull older people into the most cost-intensive care environments, and address the “ever increasing hospitalisation of older people” Burnham criticises in his speech. In this respect the Older People’s Programme is arguably a good example of the “whole person care” that he advocates, even down to the “single point of contact” in his speech.

I am anything but a cheerleader for the current Government’s health reforms. The new commissioning environment has weaknesses, well-exemplified by Serco’s community services contract in Suffolk. However, I would argue that the greatest threat comes not primarily from private sector organisations like Virgin – rank outsiders when competing with world-class NHS providers like Cambridgeshire’s – but from incompetent commissioners who do not properly test the realism of tenders and simply award contracts to the lowest bidder. This does not make it impossible to commission good services in the new system, however, and to suggest otherwise is to mislead the public.

Moreover, as even The Guardian recently acknowledged, it would be a dereliction of political debate if serious politicians were to pretend that the structural challenges facing the NHS are reducible to the private sector question. The fundamental challenge that we face is how to continue to provide top-quality universal healthcare to an ageing population at a time when we can no longer rely on economic growth, and it is clear that deep integration of services is the only way to do so.

In the event of a Lib-Lab Coalition I hope that both parties will make common cause to achieve this integration. Another top-down internal reorganisation will certainly not achieve it; nor can the necessary changes be centrally micro-managed, given the inherently fragmented model that we inherit, which goes back to Labour’s acceptance of the Tories’ purchaser/provider split, and the rise of foundation trusts. Solutions will have to be engineered at a local level by commissioners and providers.

If Labour propose simply to go back to the previous system – and even this is unclear – they urgently need to explain how they will prevent provider organisations from running rings around commissioners as they did previously. This is why care services for older people in Cambridgeshire are so fragmented, and why other attempts to integrate them have failed miserably: because in the previous system each of the provider trusts was necessarily focused on its own interests and commissioners did not have enough weight to effect integration. None of which makes for a neat stump speech, but it must be addressed before May 2015.

In the meantime, as the Darlington mums march south to the beat of Andy Burnham’s drum, he might be forgiven for hoping, privately, that Virgin actually wins the £800m contract. Otherwise, if the public sector wins it, the candidates fighting for Labour in Cambridgeshire will find themselves campaigning in a county with two disastrous NHS PFI contracts and the first £1bn privately-run NHS hospital in Britain – which would be ideal, were they not all Labour projects.

* Kilian Bourke is a Liberal Democrat councillor on Cambridgeshire County Council and chair of the council's health scrutiny committee.