Socialist Health Association Briefing for Prospective Parliamentary Candidates

September 1991

This briefing selects aspects of the NHS reorganisation which the SHA sees as most damaging to the fundamental principles of the NHS. It aims to fill in the background to the crisis in the NHS and to address matters which affect the public.

The Background

The National Health Service has been reorganised four times by successive Tory governments since 1974. Each reorganisation has demoralised the staff and confused the public. The latest reorganisation, triggered by Thatcher initially to contain costs, is defined by the NHS and Community Care Act 1991, which came into effect in April 1991. However implementation of the Community Care proposals have been deferred to 1993.

The Act sets up a market in health care, which forces hospitals and doctors to compete for patients, removes the last vestige of local accountability, diminishes the rights of users and reduces choice and accessibility.

There undoubtedly is a need to improve patient care and accessibility to services, to deal with lengthy waiting lists, to address public health issues and to bring the NHS under democratic control. None of these needs require the wholesale commercialisation of the NHS.

It is very important that the principles on which the NHS was established are constantly reaffirmed – that it should be funded from taxation and free at the time of need.

It is easy to demonstrate the dangers of the Tory reorganisation but important not to undermine the public confidence in the concept of the NHS. During the passage of the NHS and Community Care Act through parliament in 1990 a Gallup Poll found that 71% of the people polled disapproved of the ‘reforms’ and 75% believed that the NHS was not safe in Tory hands.

Building on that confidence is the most important thing we can do.

1.Is the NHS underfunded?

According to the latest figures available, in 1987 Britain spent £432 per person on health services. West Germany spent £1,060, Sweden spent £1,002, and the US spent £1,252. The Tories claim that the NHS has never had so much money spent on it or employed so many doctors and nurses. This can be refuted on many grounds:

  • advances in medical technology make expensive treatment possible, which people are rightly demanding;
  • NHS inflation   is   higher   than   retail   price inflation as it refers to wages and salaries, new drugs and equipment, rather than goods in shops;
  • a growing proportion of the population who are elderly requires increasing care
  • many doctors, nurses and auxiliary staff work part-time;
  • staff numbers are measured in ‘whole-time equivalents’: reductions in the official working week increased the  figures substantially, without providing any more posts;
  • doctors and nurses now have so many administrative duties that less time is available for patient care;
  • the effect on health of poverty, homelessness and unemployment has been demonstrated, and is an added cost to the NHS;
  • the fabric of the NHS property is crumbling. In 1988 the Public Accounts Committee estimated that £2 billion was needed to maintain and restore existing buildings to an   adequate standard. 75% of our hospitals and other NHS buildings were built before 1918 and only 8% since 1965;
  • the BMA has estimated that the NHS needs an extra £6 billion a year.

2 What is the internal market?

The establishment of the internal market means that health care is bought and sold between District Health Authorities, NHS Trusts, and the private sector. Buying and selling presupposes that treatment is costed and that the buyers will be looking for the best bargain for their patients. In 1991 the BMA estimated that the new administrative posts advertised by the NHS would add some £80 million yearly to the wages bill for 4,000 extra staff to provide financial information. In addition, in 1990-1991 the government spent £306m on implementing the reforms of the NHS, and £50 on tax relief on private medical insurance.

3 GPs and the internal market

Budget holders

Practices with over 9,000 patients are able to opt for their own budgets, so that they can buy services for their patients from NHS directly managed hospitals, Trusts, private hospitals and laboratories. They are funded per capita with some weighting, and are able to negotiate the most advantageous contracts for both in-patient and out­patient services. Some doctors are demanding priority treatment for their own patients from hospitals desperate for contracts (queue-jumping) and some are employing consultants to see their patients in their own surgeries. Budget-holders tend to be in ‘leafy suburbs, with a higher proportion of patients who have some private insurance, so per capita payments will buy more and quicker treatments for the non-insured patients. All this amounts to the two-tier service in action.

Non-budget holders

GPs who have not opted for their own budgets are required/expected to refer their patients to the hospitals where their DHA has negotiated contracts. They lose the right to refer patients where they wish – except with special permission from the DHA, which has a fund for extra-contractual referrals (ECRs). There are reports of ECR funds being exhausted after only five months.

The Royal College of General Practitioners has complained that the internal market “will seriously damage patient care and the doctor-patient relationship”. They mean that patients will not be sure whether decisions are being made for financial reasons or in their own best interests. There is also the danger that practices will be forced into competition which must mean that some will be losers.

4 Hospitals and the Internal Market

District Health Authorities (DHAs)

DHAs are responsible for meeting the health needs of their local population and are expected to assess the needs of their area. They will either provide services for their local populations or purchase them from other health authorities or the private sector (including Trusts). Their senior staff are either managers of the services they provide or purchaser who seek and negotiate contracts for patients of non-budget-holding GPs. DHA meetings appear to be divided into two parts with the members dealing with ‘purchaser’ and ‘provider’ reports separately.

Both purchasers and managers of directly managed units in the DHA are accountable to the District General Manager of each DHA. It is too early to see any clear advantages or disadvantages of this split, apart from the impact of the internal market and the pressure on purchasers to negotiate the cheapest deals and on providers to fill their beds by selling services. It is the internal market which is the real danger to the principles on which the NHS was founded.

What are NHS Trusts?

The NHS and Community Care Act (1990) gives hospitals and other NHS units the opportunity to ‘express an interest’ in opting out of local health authority/board control and out of the planning system. 66 hospitals and other units applied in the first round and ‘consultation’ took place during the summer of 1990. 57 were allowed to ‘opt out’ in April 1991, in spite of advice from accountants Coopers and Lybrand to the DoH that only 12 had financial viability. (This advice cost £500,000.) Some 113 units have applied in the second wave. ‘Consultation’ in general ended on 31 July 1991. Invitations for the third wave are being invited from all remaining hospitals from September 1991.

5 What does ‘opting out’ mean?

  • William Waldegrave, Secretary of State for Health, himself confirmed that Trusts were out of his control when he stated in April 1991: “It is not for governments to tell hospitals how to organise their services and how many staff to “
  • Each Trust is run by a board of ten appointed directors, with some accountability to the NHS Policy Board but none to local people. The chair is appointed by the Secretary of State. Just one meeting a year must be held in public.
  • Self-governing Trusts will be run as a business, selling their services to their local DHA to fund-holding GPs, other health authorities, the private sector, insurance companies.
  • They are free to set their own rates of pay and conditions of employment, as well as numbers, types and grades of staff they employ (except junior doctors). They are not covered by national agreements. They do not necessarily recognise all relevant trade unions.
  • They can borrow capital, within an overall limit (smaller than most anticipated), retain profits, sell land and buildings, and contract out blocks of services.
  • Employees of a health authority or hospital, elected councillors and employees of NHS trade unions are specifically excluded from appointment as directors. This raises questions of civil liberties, and excludes people likely to be in touch with local needs and opinions.

6 Moving into the Market?

Between April 1991 and April 1992 the Department of Health instructed authorities to maintain a ‘steady state’: that is, they were to continue to refer patients where they had previously referred them. There were to be no surprises.

In fact, since April 1991, fearful of losing out, hospitals have begun to market services without accurate costing being available and inadequate accounting systems, resulting in serious over­spending and panic cuts in services to stay within their budgets.

Within six weeks of the official start of the internal market Bradford Hospitals Tryst announced the loss of 300 jobs. The Tory flagship, Guy’s and Lewisham Trust, admitted “an inevitable reduction in direct patient care” in making spending cuts of £6.8m, involving axing 600 jobs.

NUPE has reported that Lincolnshire Ambulance Trust new non-emergency staff have had their pay cut by almost 28% – a cut of £2,400 to £6,200. The Northumbria Ambulance Trust demands that staff work 12 hour shifts, with no overtime and a cut in annual leave.

Trusts are good news for some senior managers. Guy’s and Lewisham Trust pays its chief executive £90,000 plus perks. Royal London Trust is paying its chief executive £70,000.

The NHS trade unions are the best source of information about local situations.

It is significant that one General Manager, commenting on the second wave of applications to ‘opt-out’ from DHAs in the same RHA, states: “Concern generally has been expressed about the timing of second wave Trusts, given the possibility of a change of government by mid-1992 and the knowledge that an in-coming Labour Government, on the basis of statements made in opposition, would overturn any Trusts that had been established. Thus there is scope for considerable turmoil and the waste of much senior management effort.”

The need for ballots

‘Consultation’ has been a sham with local opinion and staff campaigns ignored. The Labour Party has demanded ballots of local people before a hospital or other unit is allowed to become a Trust.

Tory reliance on ballots for schools and local authority housing to opt out does not apply to the NHS. Even the Parliamentary Social Services Committee (Tory-dominated) has stated that opting out should only go ahead if “the local population have indicated through a ballot that they would support the hospital becoming self-governing”.

8  What do the ‘reforms’ mean for ordinary patients?

  • Patients of non-budget-holding GPs may lose out in the waiting list race if budget holding GPs continue to demand priority for their own patients, overtly or privately.
  • Patients will be referred where their GP or DHA has a contract, rather than where they may wish to go. They may have to go to different hospitals or units   for   different Trusts will specialise in the most lucrative specialties.
  • Patients may have to travel for treatment. Exeter orthopaedic patients are offered operations in Westminster Hospital because Riverside Health Authority, with a waiting list of 791 for orthopaedics, has no money for local people – a bizarre and costly result of the
  • NHS funds are being used to up-grade rooms for private patients, with their own catering and hostesses, carpets, telephone and other comforts required by private patients, but too good for NHS patients.
  • Cuts in community services are being made all over the country to help meet the financial pressure on hospitals. People are losing chiropody, family planning clinics, well women clinics and the many domiciliary services on which elderly people rely.
  • With the abolition of free eye examinations, ophthalmic services have virtually been privatised.
  • The new Contracts for GPs and Dentists have increased paperwork with only limited gain in accountability. For example payment to GPs for achieving targets in immunisation have led to loss of service in areas of deprivation, where GPs have no hope of attaining their Dental services for children in deprived areas have deteriorated since the introduction of capitation fees.

A brief summary of the structure of the NHS 1991

NHS Policy Board

Chaired by the Secretary of State. Non-executive members from in and outside the NHS. Responsible for strategy. Sets objectives for and monitors the NHS Management Executive. Determines finance for the NHS, within limits set by the Treasury.

NHS Management Executive

Chaired by the Chief Executive of the NHS. Implements policy. Divided in two with one half specifically responsible for operational matters. Members appointed by the Secretary of State.

Regional Health Authorities (RHAs)

Eleven members including non-executive Chair appointed by the Secretary of State. Five executive members including Regional General Manager and Director of Finance. One non-executive member to be from a university with a medical or dental school. Responsible for monitoring DHAs and ensuring policy is disseminated to them. Also responsible for some regionally organised services, eg blood and ambulance services. Also manage CHC staff and appoint one third of the members.

District Health Authorities (DHAs)

Eleven members including a non-executive Chair appointed by the Secretary of State. Five executive members including the District General manager and the Director of Finance. Responsible for purchasing/commissioning services for the local population based on assessed needs and within the budget allocated. No local authority or trade union input.

Family Health Service Authorities (FHSAs)

Eleven members comprising a non-executive Chair, nine non-executive members, including four professional members and the Chief Executive. Responsible for administering GPs and dentists’ contracts and monitoring their performance. Also provide support to GPs on specialist functions such as health promotion , and computerised screening systems (call and recall). Organise the registration of patients with doctors.

Self-governing Trusts/National Health Service Trusts

Run by a board of directors with a non­executive Chair appointed by the Secretary of State. Members made up of an equal number of executive and non-executive members. At least two of the non-executive members are from the ‘local community’ and are appointed by the RHA. Others appointed by the Secretary of State. The executive members should include key managers. The board is responsible for determining policy, monitoring its execution and maintaining the Trust’s financial viability.

Directly Managed Provider Units

Responsible for operational issues of delivering care and treatment to meet contracts, usually managed by a Chief Executive (General manager). Accountable to the DHA through the District General Manager.

Community Health Councils

Half the members are appointed by relevant local authorities, others elected by voluntary organisations and appointed by the RHA. Established in 1974 to act as ‘patients’ watchdog’ and monitor local services, powers have been diminished over the years, but they are still a source of accurate information.

This initial briefing is intended to help Prospective Parliamentary candidates who may have no previous involvement with the NHS.

The SHA plans future briefings to cover the background to waiting lists, the development of the purchaser/provider split, Labour Party health policy and the debate on democratic control of the NHS.

SHA publications

New series: Towards Equality in Health: Unequal Risks: Accidents & Social Policy

Food for Wealth or Health Equal Shares in Caring Income and Health

and coming soon:

Healthy Change

each at £3.50 (£2.75 for members)

Putting People First – A Socialist Health Service for the 1990s (£3)

Their Hands in our Safe – the theories behind the Tory ‘reforms’ of the NHS (£2)

Socialism and Health – bi-monthly

Published by the Socialist Health Association, 195 Walworth Road, London SE17 1RP (071-703 6838) Printed by RAP, 201 Spotland Road, Rochdale OL12 7AF

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