NHS patients and taxpayers will benefit from TTIP
26 November 2014
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Tax and Fiscal Policy
Monetary Policy
27 November 2014
Economic Theory
11 November 2024
As negotiations for the Transatlantic Trade and Investment Partnership (TTIP) between the United States and the European Union progress, UK critics of this landmark trade deal have made a number of claims against it. Arguably the most prominent is that it would jeopardise the National Health Service (NHS) as it currently exists. Indeed, Clive Efford MP’s NHS bill, which was passed by Parliament on Friday, called among other things to exempt the NHS from ‘any legally enforceable procurement or competition obligations’ under TTIP. (It is worth noting that, as a private member’s bill, it is unlikely to become law.)
This claim by TTIP opponents revolves around a clause known as ISDS (investor-state dispute settlement) which is commonly found in investment and trade deals such as NAFTA and the just-signed Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU. ISDS allows foreign investors in a country to bring a case against the host government before independent arbitration, when that government is judged to have breached the conditions set forth in the agreement. (More about ISDS here.) The arbiters, recognised by both sides, can then determine whether any such breach has occurred and what compensation, if any, is required.
In the particular case of the NHS in TTIP, ISDS would give US companies who had won a contract to provide patient services the ability to sue the UK government for compensation if the latter decided to unilaterally cancel the contract and bring those services back into public provision. An independent arbitration tribunal would then adjudicate the matter and rule in favour either of the UK government or of the investor – that is, in the event that the parties did not settle in advance. (Of all ISDS cases concluded as of 2013, 43 per cent of rulings were in favour of the state, with 31 per cent in favour of the investor and the remaining 26 per cent settled.)
So, what are the implications for the NHS and its ability to remain the way it is today? Contrary to what TTIP critics imply, ISDS would in no way impair the NHS’s continuity under full public financing and free-at-the-point-of-use provision. Indeed, ISDS places absolutely no limits on parliamentary sovereignty, as Parliament would retain its prerogative to regulate, expropriate or ban any industry or sector as per UK law. ISDS is strictly about compensation: ensuring that foreign investors can seek and obtain adequate redress for unforeseen government policy that undermines their long-term investment and business plans. In short, rather than undermining democracy, ISDS is really just about extending the rule of law.
Specifically, what would a future government have to do if it wanted to end private provision of NHS services (a highly undesirable goal, in my mind)? First of all, it would have to repeal the 2012 Health and Social Care (HSC) Act, which mandates competitive tendering (including to private companies and charities) by Clinical Commissioning Groups (CCGs). If it wanted to bring back monopoly provision immediately, it could cancel all existing contracts, compensating providers for the lost revenue. Alternatively, it could wait until contracts expired and re-start public provision then, thereby saving the Treasury the compensation amounts.
All of this would be the same with or without ISDS, except that with ISDS, foreign investors would be able to seek compensation before an independent arbiter in the event of contract cancellation. Knowing in advance that this possibility existed, foreign providers would be able to offer more competitive prices and better-quality services to CCGs, reflecting the reduced risk (and cost) of arbitrary government action without due compensation.
And that is why it is crucial to have ISDS in TTIP and to include the NHS in the agreement. Any service seeks to make the most out of scarce resources, that is, to provide the highest level of quality at the lowest possible cost. ISDS would help the NHS achieve this goal by lowering providers’ expected costs, thus enabling them to direct resources to serve patients and taxpayers rather than to insure themselves against the arbitrary whim of politicians. Meanwhile, Parliament would retain its ability to renationalise healthcare provision, but it would have to take account of the costs imposed on providers, patients (in the form of poorer services) and taxpayers (in the form of a more expensive NHS).
It is natural to disagree on the reforms that would improve patient services and deliver value-for-money to taxpayers – I happen to agree with my colleague Kristian Niemietz, who argues in a recent paper that reviving and expanding the market reforms of the Blair government holds the key to significant improvements in health outcomes and patient choice. But even supporters of a centralised, state-driven NHS should refrain from fear-mongering and misleading statements about TTIP, especially when the stakes are so high, with the European Commission projecting an additional £431 per year for the average family of four if the deal is passed. Patients, taxpayers and consumers more generally should welcome as wide-ranging an agreement as possible, including the NHS.
This claim by TTIP opponents revolves around a clause known as ISDS (investor-state dispute settlement) which is commonly found in investment and trade deals such as NAFTA and the just-signed Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU. ISDS allows foreign investors in a country to bring a case against the host government before independent arbitration, when that government is judged to have breached the conditions set forth in the agreement. (More about ISDS here.) The arbiters, recognised by both sides, can then determine whether any such breach has occurred and what compensation, if any, is required.
In the particular case of the NHS in TTIP, ISDS would give US companies who had won a contract to provide patient services the ability to sue the UK government for compensation if the latter decided to unilaterally cancel the contract and bring those services back into public provision. An independent arbitration tribunal would then adjudicate the matter and rule in favour either of the UK government or of the investor – that is, in the event that the parties did not settle in advance. (Of all ISDS cases concluded as of 2013, 43 per cent of rulings were in favour of the state, with 31 per cent in favour of the investor and the remaining 26 per cent settled.)
So, what are the implications for the NHS and its ability to remain the way it is today? Contrary to what TTIP critics imply, ISDS would in no way impair the NHS’s continuity under full public financing and free-at-the-point-of-use provision. Indeed, ISDS places absolutely no limits on parliamentary sovereignty, as Parliament would retain its prerogative to regulate, expropriate or ban any industry or sector as per UK law. ISDS is strictly about compensation: ensuring that foreign investors can seek and obtain adequate redress for unforeseen government policy that undermines their long-term investment and business plans. In short, rather than undermining democracy, ISDS is really just about extending the rule of law.
Specifically, what would a future government have to do if it wanted to end private provision of NHS services (a highly undesirable goal, in my mind)? First of all, it would have to repeal the 2012 Health and Social Care (HSC) Act, which mandates competitive tendering (including to private companies and charities) by Clinical Commissioning Groups (CCGs). If it wanted to bring back monopoly provision immediately, it could cancel all existing contracts, compensating providers for the lost revenue. Alternatively, it could wait until contracts expired and re-start public provision then, thereby saving the Treasury the compensation amounts.
All of this would be the same with or without ISDS, except that with ISDS, foreign investors would be able to seek compensation before an independent arbiter in the event of contract cancellation. Knowing in advance that this possibility existed, foreign providers would be able to offer more competitive prices and better-quality services to CCGs, reflecting the reduced risk (and cost) of arbitrary government action without due compensation.
And that is why it is crucial to have ISDS in TTIP and to include the NHS in the agreement. Any service seeks to make the most out of scarce resources, that is, to provide the highest level of quality at the lowest possible cost. ISDS would help the NHS achieve this goal by lowering providers’ expected costs, thus enabling them to direct resources to serve patients and taxpayers rather than to insure themselves against the arbitrary whim of politicians. Meanwhile, Parliament would retain its ability to renationalise healthcare provision, but it would have to take account of the costs imposed on providers, patients (in the form of poorer services) and taxpayers (in the form of a more expensive NHS).
It is natural to disagree on the reforms that would improve patient services and deliver value-for-money to taxpayers – I happen to agree with my colleague Kristian Niemietz, who argues in a recent paper that reviving and expanding the market reforms of the Blair government holds the key to significant improvements in health outcomes and patient choice. But even supporters of a centralised, state-driven NHS should refrain from fear-mongering and misleading statements about TTIP, especially when the stakes are so high, with the European Commission projecting an additional £431 per year for the average family of four if the deal is passed. Patients, taxpayers and consumers more generally should welcome as wide-ranging an agreement as possible, including the NHS.
19 thoughts on “NHS patients and taxpayers will benefit from TTIP”
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So you think it a good idea for the UK to have the same dreadful health ‘provisions’ as the USA?
Talk about propaganda, this article is shameful.
@anonymous – I am baffled by your comment. The article is not about health provisions in the US but whether foreign companies should be compensated for breach of contract by the home country government. The whole point of the article is that TTIP is not about how healthcare is provided but about whether the normal provisions of the rule of law apply should the government renege on a contract. And it is certainly not propaganda. In what sense is it propoganda?
The UK doesn’t need TTIP.
Your position is to defend TTIP, you make several unsubstantiated claims, but the fact is that if TTIP comes in we will see a race to the bottom on several fronts, homogenization will ensure it.
People come before profit, TTIP will put that the wrong way around, profit/contracts before people, which is why the NHS will suffer even more than it is now.
No further point in discussing anything with you, you are obviously a corporate believer.
I agree with Philip and in any case on just about every measure, medical provision in the USA is superior to that in the UK. It is true that it is also much more expensive but that is due to a number of factors (the power of the AMA, the weird way in which the tax rules on medical premiums operate, the fact that medical care here is rationed by the NHS, etc.)
I have both immediate and more general reactions to Diego Zuluaga’s article supporting TTIP.
3 immediate points are as follows:
1. Mr Zuluaga states in the 4th paragraph “…ISDS places absolutely no limits on Parliamentary Sovereignty..” then in the very next sentence contradicts himself by stating “ISDS is strictly about compensation…”. To allow a situation where decisions by National Government can have serious financial
implications for the Government (ie the taxpayer) is a severe limitation of the concept of sovereignty.
2. The article mentions the “reduced risk (and cost) of arbitrary government actions” which TTIP would allegedly bring about. The actions of a properly accountable democratic government should be far from arbitrary. On the other hand the existence of and threat from large corporations could inhibit governments from carrying out actions which most people would regard as favourable for the population.
3. At the end of the article Mr Zuluaga mentions an estimated saving of £431 per family of four if the deal [exempting the NHS from TTIP] is not passed. Could we have a reference to the EU paper purporting to show this and a brief summary of the assumptions on which this conclusion is based.
In more general terms an objection to TTIP is the same as the objection to both the EU and NAFTA. i.e. the justified fear that TTIP will be used by the large corporations to extend their own power and prevent smaller companies from competing with them in the open market. We have already seen this tendency in the attempt by the large pharmaceutical companies to place restrictions on the use of natural and herbal remedies.
This was purportedly done to protect the consumer when in reality it was to put highly onerous restrictions on high dosage vitamin supplements (amongst other things).
Taking Governments to court under this sort of legislation would, because of the high cost of legislation, be possible only for large corporations with multi-million pound legal budgets. It will be beyond the scope of smaller or even medium size companies. It will be yet another piece of legislation which will enhance the powers of large corporations and make it difficult for smaller companies to compete.
@HJ
Health provision and delivery is well below UK standards, your assertion is utter nonsense.
@Anonymous – It is very hard to have a rational discussion with you because you just denounce, without any supporting argument or evidence, anything and anyone that isn’t in accord with your view of the world.
Your failing have already been pointed out to you by William.
There is no debate, look at what happened to Australia and plain packaging for cigarettes [Philipe Morris] or Egypt when the country attempted to raise it’s minimum wage.
I will stop the notifications now, no point discussing anything with a pro-corporate lacky.
Well over a million people have signed a petition to put an end to TTIP. Perhaps they are all ignorant.
TTIP is not a good thing for citizens which is why were trying to have our voice heard.
Unfortunately the world is run by big business now, so it’s a giver that it will go ahead.
Democracy is truly dead.
@Anonymous – what does the fact that well over a million people have signed a petition against something prove? And what has that to do with democracy? In case you hadn’t noticed, a million people is a relatively small minority in the UK. What is more, those trying to get people to sign a petition tend to present only their point of view to those they want to sign – they do not present the counter argument (which the people signing may not have heard). Now perhaps you can explain why you think that governments shouldn’t have to compensate for breach of contract just as anyone else would have to. Or do you believe that government power should override the rights of others?
@HJ
“what does the fact that well over a million people have signed a petition against something prove? ”
To you?
Nothing it would seem.
@HJ
“Now perhaps you can explain why you think that governments shouldn’t have to compensate for breach of contract just as anyone else would have to. ”
Because they will pay the compensation with my (taxpayer) money, and not their own.
My guess is the owner of this blog is being paid to spout this garbage.
Notifications off, this crap doesn’t even deserve a reply.
Goodbye.
@anonymous – So what you’re saying is that government should not be obliged to obey the law in the same way as anyone else. So, for example, they could wrongfully imprison you if they like, torture you even, and you should have no right to sue for compensation because any compensation would have to be paid with your (taxpayers) money.
@Anonymous. Last I knew, one million people represents a small minority of the population. Why should a small minority have the right for their interests to be put above those of everyone else?
@Anonymous – If you have demonstrated one thing it is that you are unable to present a coherent argument but do like to throw abuse at those who can.
It is very hard to have a rational discussion with you because you just denounce, without any supporting argument or evidence, anything and anyone that isn’t in accord with your view of the world.
If were going to say things like “small minority”, be careful; the percentage of people that voted Conservative last time could be described as such. Not very representative. “So what you’re saying is that government should not be obliged to obey the law in the same way as anyone else.” No not really. I think that nobody should be above the law, thing is though, down here on planet earth, governments make laws but seldom follow them. TTIP is an example of one they probably will follow… to screw the taxpayer again.
The concern about the NHS is about the difficulty of reinstating an integrated service and eliminating costly market mechanisms should the evidence for this course of action be accepted by a future government. There is already plenty to go on. The UK health service came top again in the international comparison of health services by the Commonwealth Fund which looks at equality of access and comprehensiveness of coverage as well as cost effectiveness. Despite improved funding by the last government which enabled significant catch up on things like waiting times, the UK spends well under the average for developed countries. World wide, ageing and technological developments are causing enormous pressures on all health services.
Over the last 4 years, there has also been a big increase in the bureaucracy and running costs of the NHS because of marketisation – competitive tendering, complicated procurement processes to try to avoid being bamboozled by providers who stick to the letter not the intent of a contract to provide services etc. It all takes money away from where it is needed. But now that private companies are in so many places throughout the NHS with long contracts and not always providing a good service, returning to an integrated NHS will at best be very costly and at worst may lead to a health multinational taking a case to the arbitration court, should ISDS be included in TTIP. This is because our present government is blurring the distinction between state and private provision. Section 75 of the 2012 Health and Social Care Act is the way in for private companies to make their case for very large sums in compensation for loss of future earnings beyond their rights under contract law. The Arbitration Courts are not open to scrutiny and there are many problems with conflicts of interest for the arbitrators. Appeal rights are limited. Whatever the outcome, countries taken to these courts face huge legal costs.
I have no faith in the reassurances that the NHS and other public services will not be affected by TTIP. Similar assurances were given through the passage of the HSCA in 2012. Words ca n be used that sound fine but the final legal version can have quite different consequences. Given the huge amount of evidence that the plan to privatise the NHS has been decades in the making, it is clear that the HSCA and TTIP are both important components of this plan. The end result will be the US model of health care, bottom of 20 in the Commonwealth Fund study.