January 16, 2018


The real costs of NHS contracting out -

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Sunday, June 18, 2017

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Friday, February 17, 2017

The real costs of NHS contracting out

The NHS is being given away! Normally, ‘privatisation’ means that shares are sold by the state-owned organisation to private companies, financial institutions and individuals. But shares are not being sold in the NHS – it is being privatised by contracting out. It’s being given away, the taxpayer is not receiving one penny, and it’s downright theft.

Not surprisingly, those benefitting from the taxpayers’ enforced largesse claim that this is not privatisation by the back door. The NHS will still exist although the provision of services will be contracted out to ‘any qualified provider’, which is supposed to be more efficient and cheaper. Regrettably, big business, the politicians and the media continually assert the primacy of the private sector, without ever looking at the real costs of contracting out.

The Centre for Health and the Public Interest (CHPI), an independent think tank, states that: ‘Administering, monitoring and enforcing these contracts is costly. We estimate that there are now some 53,000 contracts between the NHS and the private sector, including contracts for primary care services. These contracts, as well as the contracts with NHS providers, are arranged and administered by 25,000 staff working in Clinical Commissioning Groups (CCGs), Commissioning Support Units (CSUs) and NHS England’s local area teams, at an annual cost of £1.5bn’ (1).

As more and more private companies gain contracts, more and more staff are needed and the costs increase. Management costs in the old NHS were between 3% and 5 % whereas they are likely to be nearer 20% in a fully privatised/ contracted out system.

The amount of money spent by the NHS has increased inexorably since its formation in 1948 and will continue to increase as people live longer and new medicines continue to improve lives. The UK now spends 9.3% of GDP on healthcare but it is money well spent and the UK healthcare costs are lower – as a % of GDP – than almost all similar countries.

In addition, the use by private companies of financial incentives can lead to short cuts, risk taking, fraud and corruption. The CHPI report noted the lack of monitoring and enforcement and has recommended that ‘NHS England should commission an independent audit of CCGs capacity to monitor and manage contracts with non-NHS providers before any further major contracts are arranged'(1). This would appear to be a necessary safe guard, but will it happen? Or could the results be embarrassing for the government.

The Government’s good practice advice is that public sector contracts require around 5% of a contract’s value to be spent to ensure effective contract management. Additionally, contractors are reimbursed for their own administration costs by up to 20% of the value of the contract, plus a margin for the contractor’s profit.

If the NHS follows the good practice advice this means that private healthcare providers would have to be unbelievably efficient to be cheaper than a publically owned and managed NHS with management costs of around 5% and no contract management costs.

This is the reality of the government promise to ring-fence NHS expenditure; the cost of administration rises and a lot less money is left to be spent on treating patients.

After the 2nd World War, Britain had the first Labour Government with an outright majority, and it started to create a better and more egalitarian society – and the most crucial part of that was the NHS. Everyone – rich or poor – had access to first-class health care, free at the point of delivery.

Sadly, today’s rabid, hostile, confrontational political atmosphere is not some misguided aberration, but part of a meticulously planned ideological assault on the fabric of British society by neo-liberalism. Is there any hope of a return to the days when people mattered more than profits?

Let’s hope it doesn’t take another war to make us realise what really matters.

Michael Gold,


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