As ‘Investors eye opportunities in Labour pledge to boost private health sector’ has Labour in Scotland now shifted its stance on NHS use of private healthcare?

By stewartb

We know that a key plank in the Labour Party’s plans for the NHS in England should it win the upcoming General Election is to increase the use of supposed spare capacity in the private healthcare sector as the solution to stubbornly long waiting lists for hospital treatment. It seems, at least from the tone of BBC and mainstream media reporting, that the ‘Overton Window’ – the window of discourse that frames the range of policies politically acceptable to the mainstream population – has shifted. And some are excited!

To illustrate, on 20 February 2024 the Financial Times had this headline: ‘Investors eye opportunities in Labour pledge to boost private health sector’. It reports – set in the context of ‘Labour pledging tight fiscal discipline’ – a growing anticipation among ‘private capital providers’ of the commercial opportunities which will arise from Labour’s proposed NHS ‘reforms’. As an example, we learn: ’Henry Elphick, deputy chair of the European Healthcare Investor Association, an umbrella organisation for private capital providers investing in healthcare, said a Labour government was widely expected to drive forward private sector investment in healthcare.’ (See https://www.ft.com/content/80056593-1949-4732-828a-9e68835bf69a)

The FT article also has this: ‘David Rowland, chief executive of the Centre for Health and the Public Interest, a think-tank, said Labour’s plans were based on a “series of misunderstandings about the role the private sector currently plays in the NHS”. “Labour’s plans will cost the taxpayer a lot more as very large profits are being made from NHS care by private companies,” he said. “Spending large sums on private providers also diverts income away from NHS hospitals, leaving them with less money and staff to do the complex work that the private sector won’t do,” he added.’

There are further insights into NHS outsourcing to the private sector to be found in a recent report by the Nuffield Trust (16 May 2024) ‘How has the role of the private sector changed in UK health care?’ (https://www.nuffieldtrust.org.uk/news-item/how-has-the-role-of-the-private-sector-changed-in-uk-health-care) 

Reflecting on the present nature of state funding and state provision of healthcare across the UK, the report notes: ‘…. with serious problems with access to care, workforce relations and financial stability in the state-run health services, many have perceived, feared or argued for a greater role for the private sector.’ The report considers three distinct financing aspects of private healthcare: (i) NHS purchasing of services from private providers; (ii) private healthcare services purchased by individuals through a health insurance policy; and (iii) private healthcare services purchased by individuals directly (‘self-pay’). Below the focus is on the first aspect only.

Use of private healthcare providers by the NHS

What we learn from the Nuffield Trust seems highly relevant to an appraisal of Labour’s proposals: ’In England, the amount of the NHS budget spent on hospitals, outpatients and mental health care in the private sector was first disaggregated from council and charity spending in 2013/14. Over the next two years to 2015/16, it rose significantly.’ (my emphasis)

It goes on: ’Until recently, private spending (in England) then remained largely consistent as a proportion of the total health budget. It is important to note, though, that the absolute amount has grown consistently. Keeping up with the slowly rising health budget means billions more are spent on private providers.’

And more recently: ‘Since the pandemic, there has been a substantial growth in the amount spent by English NHS trusts purchasing private care. This will usually be to meet their obligations to provide planned care for patients referred to them, from diagnostics through to surgery. Urgent care remains almost entirely in the public sector.’

So one of Labour’s ‘big ideas’ for the election – to increase the use of private providers in order to reduce waiting lists – is not so different after all. The Tories have already been responsible for ‘billions more’ being spent by NHS England with private healthcare providers yet this has not solved long NHS waiting lists. So let’s spend billions more or entice in private capital with promises of attractive returns on investment?

The Nuffield Trust provides an insight into the scale of NHS trusts’ spend with the private sector, with the figures expressed in real terms:

• trusts spent £1.66 billion on care contracted out in 2019/20, the year mostly before the pandemic 
• this rose to £3.12 billion by 2022/23 – ‘This likely reflects ….above all the strong pressure to address hospital waiting lists as NHS trusts struggled to provide as much care as they managed before the pandemic.’

We also learn: ‘Quarterly NHS England figures, analysed and published by the Independent Healthcare Providers Network (IHPN), suggest a further marked expansion in private care paid for by the NHS, showing that the volume of privately provided care on the NHS hit new highs of more than 100,000 a week several times since last summer. The IHPN say that this is “an increase of, on average, more than 30,000 patients per week since the dataset began publication in 2021”.

The report raises another issue relevant to the appraisal of Labour’s plan for the NHS: ‘The rapid increases seen in the latest quarterly figures also raise the question of whether there is actually much more treatment to be unlocked simply by increasing willingness to use the private sector, as the opposition Labour party have raised.’ 

Regarding current levels of NHS England’s expenditure on outsourcing: ‘The data seem consistent with the NHS pulling this lever very hard already, showing willingness to expand the private sector to a large proportion of all care in some specialties.’ And it notes: ’Given that NHS England’s budget is stretched to the absolute limit, it is probable that the key constraint is not having any more money to spend on the private sector, rather than an ideological unwillingness to do so.’ So in effect if Labour in government won’t increase spend because of its fiscal rules then increased capacity – new capacity – must come from private capital providers instead – who will of course expect to extract an ‘appropriate’ return on their investments. Of course such private sector funding will be invisible to Barnet Formula calculations.

The Nuffield Trust also makes the important point: ‘More private spending means more competition for the time of consultant doctors – most private doctors split their time with the NHS – and outsourced services like imaging, potentially making it harder to expand care paid for by the health service.’

End note

Given Labour’s insistence that it will adopt the same fiscal constraints as the present Tory government, how will Labour’s plans for NHS England be realised? The Nuffield Trust is pointing up four inter-related, relevant issues: (i) NHS spend on outsourcing to the private sector is already at a high level – the NHS has pulled this ‘lever very hard already’; (ii) it questions how much spare capacity remains in the private sector; and (iii) it notes that more private spending leads to more competition between the NHS and private providers for resources, including for access to consultant-level staff.

Is this then a reasonable interpretation of what the FT and the Nuffield Trust are telling us and of the likely implications for Scotland? 

1. the NHS does indeed require substantial additional capacity and funding; 
2. self-imposed ‘fiscal discipline’ will mean this requirement will not be met by increased public spending by a Labour government;  
3. instead, the requirement for additional capacity and funds will need to be met by private investors – indeed providers of private capital are eagerly looking forward to the prospect of the financial returns that Labour-generated opportunities for investment will bring;
4. private investment to provide the necessary boost to England’s national health service will bring financial returns to investors;
5. such reliance on private investment to boost England’s national health service will bring no financial benefit to the Scottish Government’s budget – being invisible to Barnet Formula calculations;
6.  so to boost Scotland’s national health service where in future can a Scottish Government turn whilst we remain in this Union? With the levers for economic growth largely held in Westminster, what agency remains in Holyrood other than an electorally toxic recourse to increasing personal taxes? Check mate for Unionism! 

Or to follow Labour’s plan and open up Scotland’s national health service to much increased private investment? 

Given all of the above, it’s worthwhile revisiting this from 2021. ‘Scottish Labour health spokeswoman Jackie Baillie said: “It’s clear the SNP’s promise to keep private healthcare out of the NHS was not worth the paper it was written on”.’