The wreath of conservatism. Niall Ferguson gives us a lecture. Part Two

Since Plato there has been a thread of fear running through Western political thought. The foreboding that, in putting the poor in the saddle, democracy would lead to a fatal redistribution of wealth. Thatcherism in Britain fed on this sense of apprehension: the feeling that government redistribution from rich to poor had placed handcuffs on business, and the creation of wealth. It is a political dogma that conservatives cannot let go of. UK Chancellor George Osborne’s belief that government spending was “crowding out” private sector investment springs from the same source.

Niall Ferguson’s Reith lecture is founded on this primal fear. But he neglects one small fact. That poor and rich have swapped roles. In recent decades conservatives have become so successful at combating this supposed defect of democracy that now in western states, all boasting universal suffrage, redistribution works in the opposite direction. From poor to rich. Or to be more accurate, from the majority to a rich minority.

The ubiquity of corporate welfare in the UK, as shown in part one, is such that its presence can longer be politely hidden. As an example consider the Bank of England’s "funding for lending" scheme which will offer cut-price loans to banks, in exchange for some of their toxic assets such as credit card debt – “assets” which will be transferred to care of the government, otherwise known as the taxpayer. The scheme is worth £80 billion: just £3 billion less than the £83 billion cuts in public spending which the Conservatives are implementing in order, they say, to eliminate the government’s fiscal deficit. Cuts, equivalent to taking 19% from the budget of every government department, which will have a palpable effect on the welfare of people, as opposed to corporations, in Britain.

In continental Europe, the story is similar, and sometimes even more blatant. Spain ran a budget surplus prior to the economic crisis. Nevertheless the right-wing Spanish government of Mariano Rajoy is forcing through a €65 billion austerity package in order to pay for another  €100 billion bail-out of insolvent banks.

Don’t Call it Democracy

Many people now experience government as a racket, shovelling money with alacrity down the throats of banks and corporations, but denying, with stony-hearted glee, basic support to people when they need it most. In Britain, you can pay national insurance and tax for decades, but if you fall ill you find that the “benefit”, which you have paid for, is time-limited for a year. That is, if you are considered ill enough to qualify for benefit at all.

 The honest conclusion from all this is that we don’t live in democracies. We live in “polyarchies” – countries with universal suffrage and fair elections but where a privileged class ensures that, whoever wins, it benefits from government spending and tax avoidance. Former New York Times foreign correspondent Chris Hedges describes our political domicile as a “corporate state”.

But it’s also true that, in these polyarchies, the people who present themselves as fiscal conservatives aren’t conservative at all.

Top of Niall Ferguson’s list of wasteful US government programmes to be culled, come Medicare and Medicaid. They are ways in which the government pays for the cost of medical treatment for people on low incomes and the retired. And it’s true the costs are rising exorbitantly. But that is because these programmes pay for huge cost of private, as opposed to socialised, medicine. A recent international study illustrated the size of the expense. A routine visit to the doctors, the study found, cost $23 in France compared to $89 in the US. The price of an angiogram – a scan to see whether arteries in your heart are blocked – was $789 in America, compared to $35 in Canada.

So one way to seriously reduce the costs to the taxpayer, a sensible person might conclude, would be to create a public health system, resembling the French system, for instance. The “public option” is supported by 65% of Americans, opinion polls say. But to conservatives like Ferguson, the thought is simply verboten. (Actually what Americans got in the recent health care reform was compulsory registration with private medical insurers, a compromise that ensures costs go on rising and that says a lot about the pointlessness of American liberalism.)

Fiscal Incontinence

The idea of using taxpayers’ money to subsidise the private sector is such an unthought of feature of conservative strategy, that it is almost a reflex, rarely rising to consciousness. The possibility that costs might be reduced to the taxpayer by challenging  private sector structures cannot be contemplated.

 In Britain, the 2012 Health and Social Care Act will compel the National Health Service in England to commission services from the private sector. The cost to the public of this new market has been put at £20 billion a year. According to the authors of The Plot Against the NHS, “Each consortium [now clinical commissioning group] will have to employ a team of commissioners to negotiate contracts, monitor their performance, accountants to pay all the bills, lawyers to vet contracts and conduct court cases over disputes, team to vet drugs prescribed by GPs, and check their referrals to specialists and the treatments proposed by specialists. It will also need an advertising and PR department. Every hospital and chain of clinics will need the same.”

The Act, the largest reorganisation of the NHS in its history, has been introduced by the Conservatives in the face of deep opposition, and whilst they inflict £83 billion spending cuts elsewhere. The symmetry with the interests of corporations, regardless of the financial cost to the public, is unmissable. According to health researcher Alyson Pollock, the private health care industry does not want a purely private market. “Its interests lie,” she says, “in becoming for-profit providers in a basic health care system funded out of taxation.” And, at a time of austerity, they are getting what they want.

The similarity between the fate of the de-nationalised railways in Britain and the awaiting fate of the NHS has been noted. An equally inconvenient truth is that re-nationalisation of the railways has been estimated to save £1.2 billion a year. And yet, despite this policy having overwhelming public support, all the main political parties, Conservative, Liberal Democrat and Labour, each one fervently committed to saving public money, reject re-nationalisation. When it comes to derailing the corporate gravy train, our fiscal conservatives magically transform themselves into fiscal incontinents.

You might draw the conclusion that Leftism is the only option that makes financial sense.

Self-regulation

Niall Ferguson ends his lecture with the now familiar conservative lament that, at root, people caused the economic crisis themselves. “As our economic difficulties have worsened, we voters have struggled to find the appropriate scapegoat,” he tells us. We blame politicians, “but we also like to blame bankers and financial markets, as if their reckless lending was to blame for our reckless borrowing. We bay for tougher regulation, though not of ourselves.”

This is clearly meant to be a rhetorical flourish but there is, actually, a simple way of “regulating ourselves”, a method that has been used, often quite brutally, by conservatives in government for decades. The method is interest rates, the price of lending money. The government, or the central bank, sets the rate, and banks and other financial institutions set their rate at similar levels. Government interest rates, in the US and UK, are at historic lows. At 0.5% in the UK, the interest rate is at the lowest level since the Bank of England was formed in 1694. Savers suffer because the interest they get is lower than inflation, while borrowing and spending are officially encouraged.

As far as the state is concerned, Ferguson believes that "you can't solve a problem of extensive debt with more debt”.

But with the wider economy, apparently you can.

If conservatives, such as Ferguson, had the courage of their professed convictions, they would argue that interest rates should rise, to say 8 or 10%. This would reward and encourage saving and discourage the binge borrowers whose reckless behaviour plunged the economy into such dire straits. But I don’t hear any calls to raise interest rates. In 2011, David Cameron did plan to tell the Conservative Party conference that people should pay off their credit card debt. But when the speech was leaked, it was pointed out that if his advice was followed, consumer spending would drop by a quarter and GDP by 15%. The speech was rewritten.

The only conclusion to draw from this silence is that continued borrowing, by consumers and banks, is saving the economy from completely collapsing. In other words, the response to the bursting of a huge credit bubble is to strain to create another one. I’m not an economic historian but that doesn’t look sustainable to me.

As far as conservative thought is concerned, the light is beginning to get in.

Kill the Bill, volume two

Review of The Plot Against the NHS

By Colin Leys and Stewart Player

A correction. Scotland and Wales don’t “commission” healthcare, contrary to the BBC’s inept description. This is the heart of the difference with England. While England buys health services from private and public “suppliers”, post-devolution Scotland and Wales plan and fund the NHS through health boards.

It might seem a soporific distinction but, in it, lies the choice between preserving a “national health service” and changing into a taxpayer-funded health market.

Leys and Player acknowledge a Scottish and Welsh commitment to social democracy “which politicians of all parties have to respect”. But there is another, more prosaic reason – the financial cost of introducing a market.

“Even before the financial crisis politicians of all parties in Scotland and Wales realised that if they followed the English route, and allowed the costs of operating a market to start soaking up ten per cent or more of the health budget, health services would be liable to deteriorate, with dire political consequences for themselves,” the authors say.

A healthcare market leads to a hike in cost - which will be funded by the weirdly uncomplaining taxpayer -and a growth in bureaucracy.

The authors are specific. “Each consortium [now clinical commissioning group] will have to employ a team of commissioners to negotiate contracts, monitor their performance, accountants to pay all the bills, lawyers to vet contracts and conduct court cases over disputes, team to vet drugs prescribed by GPs, and check their referrals to specialists and the treatments proposed by specialists. It will also need an advertising and PR department. Every hospital and chain of clinics will need the same.”

Public health researcher Allyson Pollock has estimated the cost of maintaining a market is £20 billion a year, which coincidentally, is exactly the amount in cuts the English NHS has to make by 2014.

As Pollock shows in her book NHS plc, the old NHS was so economical to run precisely because it had so radically eliminated market mechanisms. There was no invoicing and payment of bills within the system.

As Pollock has said recently the question is not whether we can afford to have the NHS, but whether we can afford not to have it.

In contrast, in the US market health system, one dollar in every three in absorbed in administration costs. Or to use another word, bureaucracy.

To quote a GP, Julian Tudor Hart, the old NHS was a system “in which wealth was distributed according to need, and nobody knew the cost of anything”.

But that system proves vastly cheaper than a market where the cost of everything has to be measured. Because the act of constantly measuring costs, and demanding payment, eats up money.

The meaning of “nobody knew the cost of anything” is not that costs were not estimated. The old NHS was not a wonderland where nothing cost anything. Not every drug was available. But doctors paid no attention to cost when they treated patients. It was all about medical need.

If you move to a market system that firewall crumbles. If independent businesses in the NHS, such as foundation trusts, have to compete and be financially self-sustaining, it becomes extremely relevant how much a patient will cost. Whether they are old, their treatment is complicated and they will need to spend more time in hospital. Or whether they are young and healthy and their treatment will be swift.

It’s here that the deception of being not for profit and therefore different, should be exposed. The UK government is doing its level best to get public sector workers to form non-profit mutuals and social enterprises. There are no shareholders demanding profit in these enterprises. How could anyone be so petty to object to a mutual or social enterprise?

But the most important factor in determining behaviour is not for profit or not for profit. The most relevant question is whether these enterprises work in a market system or not. Foundation hospitals are constitutionally non-profit but they have to make a surplus and will soon compete for patients with private companies.

As Leys and Player say, if the Health and Social Care Bill becomes law, all NHS hospital trusts, mental health trusts and ambulance trusts will be converted into independent businesses.

“They will be competing in a market, in which the penalty for financial failure will either be closing or being taken over by a private company”

In a market, financial considerations are paramount, even without “rapacious” shareholders. The beauty of the old NHS and the reason why for neoliberals, it has always had a target painted on its back, is that it removed a need everyone has – healthcare - from the market. It wasn’t only non-profit, it was, more importantly, non-market.

Leys and Player give an illustration in their book. They talk about a US Health Maintenance Organisation (HMO) settling “criminal charges for discharging a 63-year old patient and then dumping her on the street in a hospital gown in a run-down area of Los Angeles”.

The HMO in question was Kaiser Permanente, a non-profit organisation.

The absence of shareholders did not, according to the authors, stop this particular organisation avoid taking on high risk, costly patients. It was reported, they say, “cherry-picking whole communities by closing down facilities in areas of high deprivation to avoid the cost of having to provide services to uninsured victims of accidents or gunshots and other emergencies that are more common in deprived areas.”

It’s not as if the UK government is unaware of the results of what it is doing. In 2003, the UK Treasury published a document on why a market in health was not a good idea.

Price signals don’t work, the consumer doesn’t have the necessary knowledge, there is a risk of over-treatment, a potential abuse of monopoly power and it’s hard to let hospitals go bust.

Actually the risk of over-treatment, or over-selling is present in any market. It’s just in health the consumer is in less of a position to argue (‘no I don’t need that craniotomy’).

In markets, especially markets populated by profit-maximising corporations, over-selling is inherent. As the economist Harry Shutt has pointed out, the customer is not always King, but there to buy as much as h/she can be persuaded to buy. It’s why markets are unavoidably anti-ecological. There are inherently unlimited.

But genuine markets are also risky. If you don’t succeed you go under. Leys and Player say that the NHS is being privatised. But it is a specific kind of privatisation. The companies involved don’t covet real risk. What they want – and are getting – is low risk procedures (the difficult things like intensive care are someone else’s problem) coupled with a guaranteed inflow of tax, from the every-suffering, though thus far, compliant, UK taxpayer. The English NHS is, in American parlance, a single payer system.

“The private health industry is not interested in a purely private market,” said Allyson Pollock in NHS plc. “Its interests lie in becoming for-profit providers in a basic health system funded out of taxation, while also providing, for additional fees or co-payments, a much higher quality of service for those who can pay for it.”

The most apt comparison – and the original Health and Social Care Bill makes this explicit – is with the UK railway system. The railways aren’t privatised, they are contracted out by the state to profit-making private companies. The result has been that the service has declined, the price of tickets has shot up and the cost to the taxpayer of funding the system has risen by five times. But the East Coast Mainline is not going to close if passenger numbers drop and if numbers do decline the government will step with a handy top-up from guess who?

Scotland and Wales have shown, Leys and Player would argue, the NHS doesn’t have to turn into a “low risk playground” healthcare corporations. It’s not inevitable and it can be resisted.

But is the only alternative fighting a defensive battle? The corporations in question – mostly American – are only doing what, from their inevitably self-interested perspective, is only possible course of action. Find new sources of revenue. They aren’t going to stop.

Maybe the problem needs to be addressed at its source.

Kill the Bill, volume one

Review of The Plot Against the NHS
By Colin Leys and Stewart Player

“It’s been twenty years in the planning. I think they’ll do it.”

The words are those of Eamonn Butler, director of the free market think tank, The Adam Smith Institute.

The question he was answering was whether, after the UK coalition government’s Health and Social Care Bill, the NHS would become a franchise. Not a public health service anymore, but a badge denoting that competing providers had met minimum care standards.

Butler’s words provide inadvertent confirmation of the authors’ contention of a plot against the NHS. Conservative and Labour governments have through step by step measures brought it closer and closer to privatisation, to a collection of competing, separate businesses.

Now the wrapping has been peeled away.

Privatisation itself is not a plot. What constitutes a plot is the attempt to achieve under the cover of lulling phrases like “modernisation” and “a patient-led NHS”.

“Since 2000, if not earlier, successive governments have been pursuing a policy for the NHS that the electorate hasn’t voted for and doesn’t want,” the authors say.

Here is one of the authors speaking:

Now with the government’s promised changes to their health bill, the Adam Smith Institute doesn’t want it either. It has disowned the changes The government has also been attacked from the Right by the former Labour Health minister, Alan Milburn, who claims their plans mean the largest nationalisation since the NHS was created in 1948 

In such circumstances, it’s advisable to take a step back and look at what is happening in a historical perspective. Here, very roughly, is the story of the last 20 years.

Before 1991 the NHS was funded through block of funding through district health authorities. Hospitals received an annual lump sum on the basis of an assessment of their residents’ health needs. GPs referred patients to the NHS hospitals and consultants they judged medically appropriate.

This, significantly, is the system that, post-devolution, Scotland and Wales have reverted to. They are like ghosts from the past and create an fascinating, real-life controlled experiment. But more on that later.

In 1991, under John Major’s Conservative government, came the internal market. For the first time health care was “bought” by purchasers (health authorities at that time) from suppliers (such as hospitals). Although the private sector wasn’t involved yet, theoretically, contracts could be placed with anybody.

But it wasn’t yet a real market. Contracts were not legally binding and hospitals would not be allowed to go bust. “The needs of patients could still be seen as more important than the bottom line,” Leys and Player say. “This had to change.”

In 1997 Labour was elected. After 2000 there was a huge, one third, increase in NHS funding. There were large salary rises for GPs and consultants. But alongside all that, was a deliberate, concerted effort to get private companies to deliver NHS treatment. Regardless of the results on patients, which were not assessed, or the cost, which was a lot more expensive.

A “Commercial Directorate” was established in the Department of Health, under a Texan businessman, to get private companies to do NHS work. Prices were established for every treatment.

Private surgical centres, called Independent Sector Treatment Centres, were established for low risk operations like cataract surgery. They were paid significantly higher prices than NHS treatment centres received, and paid for the number of treatments contracted for, not whether they were carried out or not.  Conveniently, the Department of Health did not collect data on the result of their operations on NHS patients.

The justification was the private centres provided additional capacity for a stretched NHS. But after a while they were allowed to use NHS staff, which made nonsense of the original reason.

Hospitals had to become Foundation Trusts. This meant they could go bust. Their contracts became legally enforceable. Although non-profit, they resembled private corporations under a chief executive and board. They had to be financially self-sustaining and make a surplus.

Under a new type of contract, corporations employing doctors on a salary took over some GP practices. For example Atlos Origin Healthcare, which is employed by the government to tell the sick they are fit for work, took over a GP practice in East London. Though running it proved too much of a strain.

“Polyclinics”, aimed at bringing together GPs and non-life threatening work from A&E, were created. Of the first 140, one third were run by private companies or joint ventures with private companies.

By 2009 there were 149 private hospitals, ‘treatment centres’ and clinics treating NHS patients and using the NHS logo.

This was the state of play when the Tory/Lib Dem health and social care bill, was published. At that point, the authors say, the plan to privatise the NHS no longer had to be concealed.

The result will be a market for specialist, hospital care, with public-funded foundation trust hospitals competing for patients with private companies.

                      

Commissioners, now clinical commissioning groups, will have to offer patients a choice of providers, and fix a price at a level large enough for companies can make a profit.

Even if price competition is ruled out, hospitals will close because they will be financially undermined by private companies.

Private providers cannot do anything but “cherry pick” the easiest and cheapest to perform services because they don’t have the infrastructure to provide expensive but essential services like A&E.

As the authors show, under the price system introduced by the last government, hospitals cross-subsidise difficult and expensive services, such as intensive care, with the money they make from easier and cheaper procedures.

If private companies take the easier services, like knee replacements, because they are the only procedures they are able to do, public hospitals will be financially crippled as a vital source of income is taken away. But it will be tragic and predictable consequence of the twenty year plan to introduce a market into health care.

English NHS hospitals now – foundation trusts – have to be financially self-sustaining. If they can’t make a surplus, they will have to close. Or be taken over, very possibly by a private company.

The NHS will become a “low-risk playground for healthcare corporations”.

What is almost comically ironic is when the coalition government insists they have no choice but to cut £200 billion from public spending in four years they are pursuing a health policy that will vastly increase costs to the taxpayer.

As the Adam Smith Institute says every pound spent on bureaucracy is a pound less for patient care. But, contrary to propaganda, the private sector is the greatest creator of bureaucracy.

The paradox we will look at in part two, is that the NHS, a system where nobody knew the cost of anything, is far less expensive than a market system where the price of everything is measured.