Moral panics and conspiracy theories around NHS “privatisation” (Part 2)

The Institute of Economic Affairs and the Adam Smith Institute are currently running their annual Freedom Week conference at Cambridge University. On Tuesday, the IEA’s Kristian Niemietz gave a talk entitled “Moral Panics and Conspiracy Theories Around NHS “Privatisation””. The article below is a condensed version of his talk.


…continued from part 1


2002 – 2008: Foundation Trusts and patient choice

The Blair years were a busy period in terms of health reforms. Several Blair-era reforms triggered their own major or minor moral panics, so one could describe this period as a series of overlapping moral panics.

One of the Blair reforms was the gradual conversion of hospitals into “Foundation Trusts”. A Foundation Trust is essentially an NHS hospital which has a bit more autonomy over its budget, its hiring and purchasing decisions. They have long become the norm: most NHS hospitals are Foundation Trusts now.

What does this have to do with privatisation? Nothing, obviously. It was about the sort of question that any organisation above a certain size – public or private – has to deal with: to what extent should the organisation be run from the centre, and to what extent should it delegate decisionmaking powers to its constituent parts? There’s always a trade-off here. Take a pub chain like Wetherspoons. It wouldn’t be practical if the staff at the S. Fowler & Co pub in Ryde, Isle of Wight, had to phone Tim Martin and ask him for permission every time they wanted to change a barrel of beer. But you also want every Wetherspoons to be recognisably a Wetherspoons. So they have to strike a balance somewhere, and so does the NHS. For better or worse, the creation of Foundation Trusts was one way of doing that.

But of course, like everything, it was widely decried as a Trojan Horse for “privatisation”. The Guardian published an article entitled “Foundation [Trust] hospitals will kill the NHS – Don’t be fooled by the rhetoric, this is about privatisation”, which claimed:

“Today MPs will vote on a bill which, if passed, will effectively privatise NHS hospitals.”

The Trade Unions Congress said it was “paving the way for wholesale privatisation of the NHS.”

Around the same time, Labour also gave patients greater choice over where they want to be treated. Pre-Blair, you had to go to the hospital your GP referred you to. The Labour government then gave people a choice between five different providers at the point of referral, which was later expanded further.

What does this have to do with privatisation? Again – nothing. State provision and individual choice do not naturally go together, but you can integrate an element of the latter into the former. For example, you can choose between different state schools within a catchment area – but that does not mean that they somehow become private schools.

And yet, in the mid-2000s, activist doctors accused the government of “using the concept of patient choice as a smokescreen to disguise its intentions to privatise the NHS.” This was not limited to a bunch of cranks: these claims became motions at BMA conferences, and those motions were officially adopted.


1996 – ?: The Private Finance Initiative

Most moral panics around the NHS are intense, but short-lived. For a few years, everyone freaks out about them, and then, they just disappear without a trace. One exception to this is the Private Finance Initiative (PFI). It no longer has anything like the prominence that it had in the later 1990s and early 2000s, but privatisation paranoiacs will still occasionally bring it up.

PFI is an arrangement under which a private company builds a hospital wing, and then leases it to the NHS.

I’m not generally in favour of PFI. These arrangements can be poor value for money. But it has, again, nothing to do with privatisation. A PFI company does not provide healthcare. It just provides property development and maintenance services. It owns the hospital wing, yes – but that is “the hospital wing” as in “the physical building”, not “the institution”.

That distinction is not hard to understand. Take this conference. Freedom Week takes places at Sidney Sussex College. But we would not say that Sidney Sussex College “runs” Freedom Week, or that Freedom Week is somehow “their” conference. No – they just provide the physical infrastructure: the room, the beamer, the chairs, the coffee, etc. But they have no influence over the content. It would be the same conference if it took place somewhere else, whereas a conference by the Cambridge Marxist Society held in this room would be a very different kind of conference.

In the same way, a PFI hospital is still 100% an NHS hospital.

But at the heyday of the PFI panic, large parts of the media did not understand, or did not want to understand that distinction, claiming that “[p]rivate companies are poised to take over the running of NHS trusts”, that hospitals were being “privatised through the backdoor”, that this was the “de facto privatisation of the NHS”, and so forth.

What these episode shows is that moral panics around the NHS are by no means limited to Tory or Tory-led governments: it was exactly the same under Labour.


1989 – 1997: the internal market

But the PFI panic was not the first moral panic of its kind either. Let’s go back in time a bit further.

During John Major’s time in office, there was a huge moral panic around the so-called internal market. This was a series of reforms which introduced contractual relationships between the different parts of the NHS, so that they could buy and sell services from/to each other. You can see why this triggered a panic: after all, the internal market had the dreaded word “market” in it! However, one should not take that word entirely at face value. In any large organisation, public or private, you will have different departments doing different things, and the relationships between these departments need to be coordinated somehow. This can happen through central direction; it can be done via informal agreements – or it can be done via quasi-contracts, simulating market-like relations.

The latter is not always and everywhere a good idea. It can introduce transaction costs, it can provide the wrong incentives, and it can crowd out other arrangements. However, it has nothing to do with “breaking up” or “privatising” an organisation. If one division of the Home Office provides a service for a different division of the Home Office, and if money is transferred between the two divisions, this does not mean that the Home Office has been “broken up”, let alone that it has now somehow become a private company.

So, again, this reform was clearly not about privatisation. But it was still widely decried as “a prelude to its wholesale privatisation”, “the death of our health service”, “an uncontrolled monster”, and so on. According to one Gallop poll from 1989, when the internal market reform had not even been fully worked out yet, 73% of the public already believed that it was “the first stage in NHS privatisation”.

But the story of moral panics around NHS privatisation did not begin in 1989 either.

Let’s move back a bit further in time.


Continue to part 3

Head of Political Economy

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

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