Revive Labour’s NHS reforms and introduce an opt-out to improve care


Press Release

Our long-term fiscal situation is unsustainable unless significant reform is undertaken

Market reforms are urgently needed to enable the UK's health system to compete on a global level

A revival of Labour’s market-oriented healthcare reforms would dramatically improve NHS care, saving thousands of lives. The Blair government’s adoption of patient choice and a payment system which incentivised competition hugely increased care quality, yet the UK still falls far below its European counterparts in terms of survival rates and efficiency.

In Health Check: The NHS and Market Reforms, Dr Kristian Niemietz outlines a way to revive pro-market reforms, expand provider and commissioner competition, and break the link between geography and care. Crucially, the report calls for an NHS opt-out to lower costs and increase patient freedom. These measures would ensure that patient choice, care and survival rates continue to increase and catch up with the rest of the western world.

Measuring the success of pro-market reforms

•    The improvements of the 2000s are largely a result of the last Labour government’s focus on patient choice and competition between providers. These reforms included a Payment by Results (PbR) system of hospital funding, the creation of self-governing ‘Foundation Trust’ hospitals and new initiatives to increase patient choice.

•    The effect of these reforms is clearly shown by a comparison between the English and Scottish NHS. Scotland, which did not implement the English NHS reforms, spends more on the NHS, more inefficiently, yet records longer waiting times for both in- and out-patient services.

•    Non-government providers account for 9% of hospital care in the UK, compared with almost half in Germany, and 38% in France – both of whom perform significantly better in comparative studies.

Problems with the status quo

•    The UK performs poorly internationally. In terms of cancer survival rates, the UK consistently ranks closer to the post-communist countries of Central and Eastern Europe than to Western counterparts. In terms of efficiency the UK comes 24th out of 30 high and upper/middle-income countries. If the UK managed to reach the efficiency level of the 5th best-performing country – Japan – life expectancy in the UK could be increased by more than two years without any additional spending.

•    Market reforms stalled. The intention of the reforms of the 2000s was that almost all spending on healthcare would be channelled through PbR and that the vast majority of hospitals should be Foundation Trusts. This has not materialised and should be reinvigorated.

•    Politicians have focused on provision but not commission. Allocating patients to hospitals on the basis of geography is backwards, yet patients are allocated to commissioners and GPs precisely on that basis. Policymakers should tackle this imbalance.


•    Complete the stalled reforms of the 2000s. Encouraging more Foundation Hospitals, expanding patient choice, and expanding the PbR scheme, would be a simple way to expand patients’ freedom of choice.

•    Allow hospitals to go bankrupt. Bankruptcies should become a normal occurrence in healthcare. This does not mean organisations should physically close down, but that they would find themselves under new management.

•    Break the link between geography and care. The concept of ‘catchment areas’ should be entirely abolished. Breaking the link between geography and care, in both commissioning and for GPs, would immediately allow for regionalised competition.

•    Introduce a social insurance system. Paying private providers based on the risk profile of their patients would prevent competition affecting the availability or cost of care available to the vulnerable. Healthcare would still be free at the point of use.

•    Allow an NHS ‘opt-out’. Similar to the ‘contracting-out’ option that existed in the UK’s post-war pension system, an opt-out would ensure healthcare funding is best directed to those who lack the ability to pay, so that access to care was still determined by health need, not ability to pay. Those opting out would receive a tax rebate, but this would only be equivalent to what it would otherwise have cost to treat them on the NHS.

Commenting on the paper, Mark Littlewood, Director General of the Institute of Economic Affairs, said: 

“Although the reforms of the last government opened up the UK health service to much needed competition, comparative studies show how much more must be done to catch up with our neighbours.

“Allowing complete freedom of choice and empowering people to choose private commissioners and providers will promote competition across the health sector. This will see hospitals, as well as GP surgeries and commissioning groups, competing to look after the health care of all Britons, as their livelihood will depend on it.”

Sam Collins, Director of the Age Endeavour Fellowship, said:

“The current health system often lets down the most vulnerable, especially pensioners. Reviving and expanding the reforms of the 2000s would make the system more responsive, while ensuring those who cannot afford to pay still receive the treatment they need. Patients should have the power, not politicians in Whitehall.” 

Notes to editors:

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To download the full report, Health Check: The NHS and Market Reforms, by Dr Kristian Niemietz, click here.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

The IEA is a registered educational charity and independent of all political parties.

Since it was formed during the Great Depression, Age Endeavour Fellowship (operating under various titles) has been concerned with the dignity of work and its benefits to physical and mental health and to general welfare and prosperity: latterly it has focused on the older age groups and will continue to do so.