Socialist Worker

The shaky foundations of NHS plan

A £4 million shortfall announced by a Bradford hospital raises big questions about the government’s health service plans, says leading campaigner John Lister

Issue No. 1925

THE real face of New Labour’s “modernisation” of the NHS was revealed last week as a firm of hard-nosed New York based business troubleshooters was brought in to sort out the growing financial crisis at the first failing foundation trust.

Bradford Teaching Hospitals NHS Foundation Trust had already run up a growing cash shortfall. It was predicting a £4 million deficit after just six months as one of the first foundation trusts to get the go-ahead from the independent regulator, known as Monitor.

City whizz-kids Alvarez & Marsal (A&M) were called in by Monitor—but the costs of flying in a team of “turnaround management consultants” will have to be met by the Bradford trust.

Monitor claimed there were advantages in bringing in advice from outside the NHS—but staff in the Bradford trust are likely to see it differently. A&M are well outside the NHS.

Their website says their approach centres on helping to “stabilise financial and operational performance by developing and implementing comprehensive profitability and working capital.

“A&M’s involvement reassures creditors that the company is taking important steps to address its problems and maximise its value.”

Insofar as this jargon makes any sense, it underlines the concerns of campaigners who fought to stop the government ramming through the establishment of foundation trusts.

The policy scraped through with a wafer-thin majority in the Commons last year, with 62 Labour MPs voting against.

Among the arguments raised against foundation trusts was that not only would they gain additional “freedoms” denied to other trusts—creating a two-tier NHS—but they would be encouraged to act like normal businesses.

In particular they would be free to pick and choose which services to provide and which to withdraw, and free to embark on asset-stripping.

And, if it all went horribly wrong, there was a real chance that some could go bust. Bradford bosses will be encouraged to learn that A&M will help out with “pre-bankruptcy planning”.

While the regulator has seen fit to intervene so publicly and dramatically at this early stage in the trust’s financial crisis (many trusts across the country face deficits of £10 million or more), ministers are washing their hands of the whole business.

The Department of Health told the BBC it was all a matter for Monitor, while in the House of Commons health secretary John Reid has issued a statement refusing to answer parliamentary questions on any foundation trusts.

“Ministers are no longer in a position to comment on, or provide information about, the detail of operational management within such trusts,” he declared.

“Any such questions will be referred to the relevant trust chairman.”

Hospitals facing crisis across Britain

THE PROBLEMS that have tripped up the Bradford foundation trust are set to trigger a wave of cash crises from next April.

Foundation trusts were the first to test out the controversial new “payment by results” system. Under this system each hospital will be paid a fixed amount for each operation and treatment they carry out, in place of the current system of block contracts.

This policy, effectively rebuilding the controversial “internal market” system ushered in by Margaret Thatcher’s “reforms” in the early 1990s, is intended to bring back competition between trusts and to ensure that, in Thatcher’s famous phrase, “the money follows the patient”.

Some foundation trusts with below average running costs had been eager to begin this system early, since it would funnel increased cash into their budgets. Peterborough hospitals, for example, claimed that they stood to gain £2 million this way in the first year alone.

But other trusts, especially specialist hospitals with higher than average costs, face years of heavy-handed cost-cutting if they are not to be pushed deep into cash crisis.

The system is more complex than the old one to administer and carries disadvantages, especially where trusts such as Bradford find that they have treated more patients than their local primary care trusts, which decide local NHS spending, had commissioned.

The Bradford trust’s latest annual plan (July 2004) warns that it faces its most challenging year ever, with significant cost pressures coupled with last year’s failure to meet £1 million worth of cost reduction targets.

It is still owed money from primary care trusts for work carried out in the last financial year.

Although it had hoped to pocket a surplus from payment by results, the trust now warns that this could bring a £400,000 shortfall in income. In total the plan notes a £3 million gap between income and expenditure.

If Blair wins a third term in office he is committed to pressing all trusts to become foundations. New Labour’s reconstruction of the “internal market” goes further than even Thatcher ever dreamed.

Primary care trusts will be obliged to offer patients a “choice” of providers—including private hospitals—a return of GP fundholding under the guise of “practice-based commissioning”, and the wholesale purchase of NHS waiting list operations by private treatment centres.

And ironically the payment by results system seems set to have its most serious consequences for new hospitals funded under the Private Finance Initiative—which are saddled with high, fixed overhead costs while lacking spare beds and capacity to take on additional patients.

In the 1997 election campaign Blair warned we had just “ten days to save the NHS”.

But who will protect this most popular public service from a further round of privatisation and wasteful market-style reforms?

John Lister is a director of London Health Emergency. For more go to

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Sat 30 Oct 2004, 00:00 BST
Issue No. 1925
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