Padraig Colman

Rambling ruminations of an Irishman in Sri Lanka

Tag: privatisation

Failing Grayling Part Two

I wrote in a previous article that UK Transport Minister, Christopher Grayling, had granted a contract and £14 million of taxpayers’ money to set up a ferry service from Ramsgate in Kent to Europe. The flaw in the cunning plan was that the company awarded the contract had no boats and had never run a ferry service before. In its pitch for the contract it seemed to have cut and pasted from the website of a pizza delivery firm. The contract has now been cancelled and MPs of all parties are calling for Grayling’s dismissal. Grayling has a long record of foolishness and I promised my readers that I would give them more information.

Grayling was also a disaster when he was Minister for Justice. He served for a mere three years but presided over many ill-judged policies. At least nine major policy reforms were abandoned, either because of widespread outrage or because a court ruled against them.

Legal Aid

In 2013, the Ministry of Justice tried to stop legal aid for prisoners in certain situations. The Court of Appeal said this was “inherently unfair” and argued the Government did not provide enough “alternative support” after general cuts to legal aid. In March 2014, Grayling introduced a legal aid cut of 8.75%, with a second reduction of the same amount planned for July 2015. Grayling’s successor at the Ministry of Justice, Michael Gove, suspended that follow-up cut because the MoJ was facing 99 legal challenges over the process, and a judicial review had “raised additional implementation challenges”. One scheme placing restrictions on legal aid for domestic violence victims unless they met specific MoJ criteria was deemed “invalid” by the Court of Appeal.

Tough on Prisoners

Another bright idea was to apply a ban on books being sent to prisoners as part of a crackdown on “perks and privileges”. This was declared “unlawful” by the High Court. In the same initiative, the Government banned steel-stringed guitars. He rejected efforts to improve condom access behind bars, despite warnings of the public health implications. An offender tracking scheme which would allow prisons to keep tabs on dangerous and repeat offenders costing £23m was ditched after “considerable delays” because it proved “too challenging”.

On Grayling’s watch, the number of prison officers declined by 5,000. This coincided with a rise in deaths of prisoners. The chief inspector of prisons, Nick Harding, accused him of interfering with his critical reports into the prison estate and threatening the independence of his office.

Another Grayling cunning plan was a contract to advise the Saudi prison service on training staff and running the organisation. It drew criticism even from some inside Cabinet, and was ditched by Mr Gove in October 2015 – but not before it cost the Government £1.1m.

Charges

Another spiffing wheeze was to make offenders pay between £150 and £1,200 depending on what court they were in and whether or not they pleaded guilty. This policy was so unpopular that 50 magistrates resigned in protest. Gove scrapped it seven months after it was brought into force.

A similar genius plan bit the dust when Grayling introduced employment tribunal fees of up to £1,200 in 2013 in an attempt to reduce the number of malicious and weak cases. There was, indeed, a 79% reduction in cases in three years. The Supreme Court ruled that the charges were unlawful because they “prevent access to justice” and ordered the Government pay back millions of pounds.

Probation

Grayling’s reform of the probation service must surely be the jewel in the crown of his incompetence. The service was privatised in 2015, despite the fact that no-one wanted it and everyone warned that it would be a disaster. The National Offender Management Service, which oversaw 35 self-governing probation trusts, split into the public National Probation Service and private CRCs. The public National Probation Service is still doing rather well. Dame Glenys Stacey, the chief inspector of probation, has pointed to many flaws with the new system. Meg Hillier, the chairwoman of the parliamentary public-accounts committee, has said there is a danger that the Ministry of Justice has “bitten off more than it can chew”.

Staff on the front line said their bosses became more concerned with meeting targets that have little to do with helping former offenders. The number of cases soared and safety standards deteriorated. Morale plummeted and many staff left the service.

An eight-month inquiry by the Parliamentary Justice Committee concluded that the Transforming Rehabilitation scheme was failing by every measure and was a danger to public safety. Some private Community Rehabilitation Companies (CRCs) were monitoring offenders on the telephone, with overstretched staff handling up to 150 cases each. CRCs are meant to ensure prisoners are freed with accommodation, employment and financial support, the Justice Committee found many were being kicked out of jails homeless and with just £46 to last for several weeks. They may revert to crime in order to survive.

HM Inspectorate of Probation said firms commissioned in a 2014 overhaul of the service are “stretched beyond their capacity”. failures by CRCs allowed people to drop out of contact and disappear, including a homeless heroin addict with a “long history in the criminal justice system” who was later wanted for arrest. Many people on probation are being sent back to overcrowded prisons because the private firms who are supposed to be supervising them cannot cope. In the 2016-17 financial year, almost 30,000 court orders were terminated through failure to comply, further offences being committed or other reasons. Convicts who were released but then recalled to prison for violations made up 6,554 out of 85,513 people imprisoned in England and Wales.

Conclusion

MPs on the Justice Committee hit out at the Ministry of Justice’s “reluctance to challenge over optimistic bids” from firms running CRCs and its closed-door renegotiation of contracts. The government had to pay out more money to failing private companies.

Let me conclude by quoting the political commentator, Ian Dunt: “Grayling is at the top of that system of failure. He is that little bit more intellectually, presentationally and ideologically useless than all the others and therefore deserves special mention. But he is merely the totem of a culture that has singularly failed the country.”

Fighting Them on the Beaches

This article appeared in Ceylon Today on April 5 2018

http://www.ceylontoday.lk/news-search/padraig%20colman/print-more/2103

It is reasonable to argue that, in order to grow and prosper and to be secure, a nation needs to have control over its infrastructure. Who could argue against the view that British railways, roads, water, electricity, telecoms, airports, ports, broadcasting, financial institutions should be British-owned or UK Government owned.

In pursuit of the voodoo economics of privatization the great and the good who steer the good ship Britannica, Labour as well as Conservative, have contrived a situation in which British citizens depend on Russia to heat their homes while that nation’s leader is poisoning people in Salisbury and Russian oligarchs are making it impossible for ordinary Londoners to afford homes.

Energy

Many years after UK State energy market was privatized, much of the industry remains in State ownership. The thing is that it is owned by foreign States not Britain. EDF Energy one of the largest distribution network operators in the UK after taking control of the UK nuclear generator, British Energy. It is owned by the French State. Power is owned by Innogy SE, a subsidiary of the German company RWE. Scottish Power is a subsidiary of Spanish utility company Iberdrola. E.on (formerly Powergen) has its HQ in Dusseldorf.

About 60 per cent of the UK energy supply comes from foreign countries including Russia, Norway, Qatar, Sweden and the Netherlands. Around 60 per cent of the UK’s natural gas imports come from Norway, and 30 per cent of it comes from Qatar. Around half of the UK’s crude oil imports come from Norway, and just over 30 per cent comes from OPEC.

Water

Few other EU States opened their vital services to foreign competition the way Britain did. Most of the water that Britons use to make their tea or flush away their excretions is controlled by foreign companies. After the UK water industry was privatized in 1989, several new companies were formed and many were sold off. There are now 12 water companies, out of the 23 in the UK, which have foreign owners. Thames Water was bought by a consortium which included the Australian investment group Macquarie and a Chinese wealth fund. Yorkshire Water was acquired by a consortium including Citigroup, HSBC, and the Singaporean sovereign wealth fund GIC. Northumbria Water was bought by the Hong Kong-based company Cheung Kong Infrastructure Holdings.

Transport

It would be impossible to take a rail journey anywhere in the UK without putting money into the pockets of foreign shareholders. Chiltern, Cross Country, Wales & Borders, London Overground and Grand Central services are run by Arriva, which is owned by the German company Deutsche Bahn. MTR shares the South West Trains franchise with a British company First Group plc. MTR will also run Crossrail. Hong Kong State owns MTR.Trenitalia, an Italian company, runs Essex Thameside. The French State firm SNCF owns Keolis, which runs numerous franchises in joint ventures. SNCF, as part of Govia, operates Thameslink, Great Northern, Southern, Southeastern and London Midland and with Amey it runs the Docklands Light Railway. Scot Rail and Greater Anglia, and Merseyrail are run by Abellio, which is owned by the Dutch State.

Ports

Transport Minister Chris Grayling visited Felixstowe and proudly boasted of Britain’s history as a “great global trading nation”. An empty boast because, as Private Eye pointed out, Britain’s ports are owned by “a medley of foreign governments, billionaires and tax-avoiding conglomerates”.

Felixstowe is owned and run by a Chinese conglomerate listed on the Hong Kong stock exchange and incorporated in the Cayman Islands. Southampton and London Gateway are run by a UAE Government conglomerate called Dubai World controlled by Dubai’s ruler. In 2013, a Judge ruled that the company had used “an elaborate trick” to avoid paying £14 million in UK income tax.

Liverpool, Glasgow and Great Yarmouth are run by Peel Ports which is jointly owned by Deutsche Bank. In 2013 the Parliamentary Public Accounts Committee accused the company of tax-dodging. Associated British Ports is established in Jersey to avoid taxes and is owned by Singapore’s foreign reserve fund and Kuwait’s sovereign wealth fund.
The rhetoric of many Brexiteers was that the UK had to get out of the EU to restore national pride. A similar mindset persuaded Americans to vote for Trump to make America great again. Unfortunately, this is an untenable viewpoint in a globalized world. It is particularly ludicrous in the UK where the very people who called for the UK to be freed of the shackles of Brussels were selling off the nation’s assets for a mess of pottage – well, a mess of something and an expensive one at that.

Robber Barons: The Public Always Pays

This article appeared in Ceylon Today on March 8 2018

http://www.ceylontoday.lk/news-search/padraig%20colman/print-more/145

 

The Wolverhampton-based firm Carillion was a big player in providing services that had once been provided by the public sector. In 2016, £1.7bn, a third of Carillion’s total revenue, came from public sector contracts. In the health service it was responsible for maintaining buildings, cleaning, providing meals for patients as well as the construction of new hospitals. It maintained 50,000 homes for military personnel and 50 prisons, provided meals for 218 schools, and was in charge of the £400 million Battersea power station development.

Liquidation

Carillion went into compulsory liquidation on 15 January 2018. It had been the second largest construction company in the UK and had 43,000 employees. Temporary CEO, Keith Cochrane made some lame excuses about the company’s collapse and saw Carillion, rather than the taxpayer, as the victim. He said that they had accepted too many projects which had turned out unprofitable and for which the amount paid was insufficient for the cost of work done “we were building a Rolls Royce but only getting paid to build a Mini”. The House of Commons business and work and pensions committees found the Carillion personnel that came before them, evasive and delusional and described Cochrane as having only a ‘vague’ knowledge of finance. In January 2018, The Times commented that the company’s problems had been known for around four years, with too many poorly managed contracts, delays to works, and monies withheld by clients.

Dominos

The liquidation announcement had an immediate impact on 30,000 subcontractors and suppliers, Carillion employees and pensioners, plus shareholders, lenders, joint venture partners and customers in the UK and other countries. Five UK banks incurred heavy losses on loans to Carillion. What Private Eye refers to as the ‘bean counters’ have once again disgraced themselves. Chairman of the House of Commons pensions select committee, Frank Field, described them as “feasting on what was soon to become a carcass” after collecting fees of £72m for Carillion work during the years leading up to its collapse. Carillion’s auditor KPMG will have its role examined by the Financial Reporting Council. Transport Secretary Chris Grayling faced calls to resign, having awarded a major HS2 (high speed project) rail contract to Carillion in July 2017, when many people (Grayling should have been one of them) knew the company was in deep do-do. Their profit warning should have given him a clue. What kind of cretin gives of £1.4 billion to a company days AFTER it has issued a profit warning? Carillion shares slumped by 70% in a month as it was forced into the profit warning following an £845m write-down.

Ponzi Overreach

Cochrane may have had a point but it did not excuse the company. It would have been more accurate to describe Carillion’s modus operandi as a Ponzi scheme. All firms involved in public-private partnerships put in low tenders to get the contract. They are able to work on thin margins because they get big money up front from the state and failure is rewarded by the taxpayer. They begin work on construction without paying sub-contractors for another 120 days. They use the upfront money to pay debts within the business, which means they have to win new contracts just to keep going. Overreaching itself to take on lucrative contracts, Carillion failed to deliver and ran up debts of nearly £1.5bn and a pension fund shortfall of almost £600m.

Conclusion

A National Audit Office (NAO) report into wider PFIs shows that the taxpayer will be handing over £199bn to private firms well into the 2040s.The NAO concluded that that there was little published evidence of the benefits of private finance deals. The NAO found that a group of schools could cost the taxpayer 40% more when funded through PFI rather than government borrowing, with further research suggesting hospitals could cost as much as 70% more.

The PFI deals struck with companies like Carillion mean that private companies whose main obligation is to shareholders actually own the assets which were once public and rent them back to the taxpayer. Carillion’ mismanagement means that huge areas of the public sector are threatened with cuts or complete closure.

How ‘Capita’ Became ‘Crapita’

This article appeared in Ceylon Today on March 15 2018

http://www.ceylontoday.lk/news-search/padraig%20colman/print-more/580

Rod Aldridge, or Sir Rodney Malcolm Aldridge OBE, FRSA, to give him his full title, worked in local government for ten years, employed by the Chartered Institute of Public Finance Accountants. For CIPFA, Aldridge ran a company specialising in helping local councils run their computers.

Aldridge bought the company and called it Capita. Since it was founded, as a two-man consultancy firm in 1984, Capita has grown to become the UK Government’s favoured company for outsourcing of public services. In 1987, it became an independent company with 33 staff and now has 36,000 workers based at more than 300 sites, predominantly in the UK and Ireland, and has also extended its operations to India. If the Sri Lankan Government has any plans to use Capita, read this article carefully and heed Mahinda Rajapaksa’s advice about privatisation and public private finance initiatives.

In March 2006, Aldridge resigned as Executive Chairman following allegations that contracts awarded to Capita were influenced by his loan of £1 million to the Labour Party. Aldridge is now reputedly worth £110m. He was replaced by his long-time associate Paul Pindar, who has complained about being called a ‘fat cat’. Pindar received a paltry £770,000 per annum salary and was reduced driving around in an Aston Martin DB9. The average Capita employee salary at the time was £28,000 per year.

Jack of All Trades

Capita’s influence spread malevolently throughout what used to be the public sector – health, education, prisons, health assessments for benefits, administration of benefit and pension payments. The House of Commons Work and Pensions Select Committee received nearly 4,000 submissions – the most ever by a select committee inquiry – after calling for evidence on the assessments for personal independence payment (PIP) and Employment and Support Allowance (ESA).

People with Down’s syndrome were asked by Capita representatives when they ‘caught’ it. A woman reporting frequent suicidal thoughts was asked why she had not yet killed herself. Relevant information was often omitted from, and fundamental errors included in, the medical assessment reports. One report said the subject was fit enough to walk her dog every day even though she did not have a dog. Civil servants had to be drafted in to help Capita out because waiting times were so long that in some cases people with terminal conditions died before receiving a penny. Atos and Capita were paid over £500m from tax payers’ money for assessing fitness to work but 61 per cent who appealed against failed claims won their appeals.

Insensitivity

Capita has demonstrated similar incompetence and insensitivity in other areas in which it operates. Capita’s education arm sent a truancy notice to a pupil who had died two months before. While administering housing benefit for Lambeth Council, Capita wrote to a man telling him he no longer qualified for benefits because he was dead. Tens of thousands of unprocessed claims left many Lambeth families in danger of eviction.

In August 2016, a survey of General Practitioners found 85 per cent were missing records of recently registered patients, 65 per cent had experienced shortages of clinical supplies or delays in deliveries, and 32 per cent had suffered from missed or delayed payments.

In June 2014, it was reported that at least five of eight Liverpool National Health Service Trusts which had contracted their payroll and recruitment to Capita in 2012 were withdrawing because of concerns about the quality of the service provided.

The Great Training Robbery

Capita was guilty of maladministration in the Government’s £290m flagship training support scheme, the Individual Learning Accounts (ILA) which was implemented in 2000 and abruptly ended in 2001.Computer disks containing account holder names and PINs circulated on the black market. People were still being prosecuted for fraud as late as seven years after the ILA debacle.

On 31 January 2018, Capita announced a profit warning and dividend suspension as net debts were predicted to hit £1.15bn and a pension deficit to  reach £381m. The announcement knocked 47 per cent off Capita’s shares, reducing its market value by over £1.1bn.  In handing public service provision over to the robber barons, the Government sacked hundreds of thousands of civil servants. Brexit will close the door on foreign labour. Who will provide public services in the UK in the future?

 

The Blair Years Part Three

This article appeared in Ceylon Today on Thursday, November 3 2016. The title given was Privatisation’s Disastrous Route.

Colman's Column3

We have seen in previous articles how Blair failed to put in place structures that would make a practical reality out of the grand visions he hoped would be his legacy. New Labour did nothing to reverse the disruption caused by Tory privatisation of public utilities and transport. Blair’s own lack of attention to detail led to failures in the areas of energy policy, transport and agriculture.

team-photo

Transport

The New Labour manifesto for the 1997 election promised “an effective and integrated transport policy at national, regional and local level …” However, According to Cabinet Secretary Andrew Turnbull, “no-one ever really looked after transport. It was a very low priority in the first term.”

John Major is remembered fondly by some, but I will always remember him for doing to the British rail network what he did to Edwina Currie. Conscious of being in the shadow of Thatcher, he wanted his share of the privatisation glory. Rail was the only major area left so Major was determined to privatise it, even though it led to fragmentation, chaos and death. Operations were broken up and sold off, with regulatory functions transferred to the Rail Regulator. Railtrack took over the infrastructure and track maintenance became the responsibility of 13 different companies. Three rolling stock operating companies (ROSCOs) took over passenger trains with the stock being leased out to passenger train operating companies (TOCs) which were awarded contracts through rail franchising.

Nobody wanted rail privatisation except Tory ideologues and those who stood to make a fat profit at the taxpayers’ expense. After a series of rail disasters with many fatalities, there was a growing consensus that maintenance work was not being done properly and splitting of the railways into 25 different companies was a horrendous mistake. After the Paddington rail crash, in October 1999, a Guardian/ICM poll found that 73% of all voters would support re-nationalizing Railtrack. Blair did not accede to the people’s wishes.

Privatisation was meant to bring business savvy into public utilities, but, in reality, it allowed foreign governments and their state-owned operators to make vast profits out of the UK. In one two-year period, Dutch company Abellio took dividends of £20 million from their UK operations; French company Keolis made £37.9 million; German company Arriva made £15 million.

Hatfield, the morning after the train crash. Investigators and Police at the scene of the crash. The remains of the crash. New parts of the track waiting to be put on the tracy which was used by the Kings Cross to Leeds train yesterday which crashed. October 20, 2012. Photo by Andrew Parsons/i-Images.

Hatfield, the morning after the train crash. 

The Hatfield rail crash in 2000 led to severe financial difficulties for Railtrack which was put into a special kind of insolvency by the British High Court. On October 17 2000, four passengers died and dozens were injured because a faulty rail hadn’t been replaced: the rail crumbled under the friction of the 12.10 from King’s Cross to Leeds and threw the train from the tracks. Blair did not take the opportunity to re-nationalise the railways but nevertheless pumped in taxpayers’ money. In 2002 a new organisation, Network Rail, bought Railtrack PLC. Network Rail had no shareholders but was nominally in the private sector but its borrowing was guaranteed by the government. In 2004, Network Rail took back direct control of the maintenance of the track, signalling and overhead lines.

Instead of sorting out the chaos in the national rail network, the Blair government went ahead with plans to mess up the Tube. Although chancellor Gordon Brown was resolutely opposed to any hint of privatisation in the NHS (except in building hospitals) and banned use of the word ‘choice’, he was obsessed with using PFI (Private Finance Initiative) to revitalise the underground network. In practice, PFI is a bad deal for taxpayers and involves a hidden privatisation of public services. The UK Accounting Standards Board called PFI an “an off-balance-sheet fiddle” because the government can move the cost of public works out of the public sector borrowing requirement and by sleight of hand reduce the deficit. PFI can only be implemented through an anti-competitive process which inevitably leads to corruption. The big corporations would not be interested if it were otherwise. For a small investment, companies can be sure of long-term profit guaranteed by the taxpayer.

The government announced in February 2002 that it was going ahead with plans for part-privatisation of the London Underground despite wide-spread opposition. Opponents insisted that the plan was fundamentally flawed on both financial and safety grounds. Brown and Blair left the detail to deputy prime minister John Prescott who soon lost control to a group of businessmen, lawyers and consultants whose fees reached £1 billion. The final bill for the project was about £30 billion. Blair supported his chancellor’s hubristic scheme “as the only way to get massive investment into the ailing network”.

Energy and Fuel

Energy provides another example of Blair’s inability to maintain a consistent position and to trust his ministers to implement a policy. As a means of reducing energy costs and the incidence of fuel poverty, a new programme of grants for cavity wall and loft insulation and for draught proofing was quickly launched, with some 670,000 homes taking up the scheme. This scheme was later abandoned and the number of those suffering from the cold increased. Steep price rises and possible power blackouts, that we are so familiar with in Sri Lanka, were a grim possibility.

Germany was driving the EU to increase the proportion of energy supplied by renewables to 20%. Only 1.6 of Britain’s energy needs was being generated by renewables and Merkel’s policy would cost Britain’s consumers £7.9 billion extra every year and would wreck its energy market. Industry representatives doubted whether the prime minister and his advisers understood either the costs or the complications. When Alistair Darling told Blair that he was mad to agree to Merkel’s plans, Blair said “I got confused”.  In Broken Vows, Tom Bower writes: “As so often, although their conversation lasted only a few seconds, his eyes wandered.”  William Rickett, an energy expert working in the Cabinet Office, commented: “That’s not the sort of behaviour you expect from a prime minister. He’s wasted eighteen months of work and it’s delayed anything happening on the ground while we go back to the drawing board”.

 

Petrol Revolt

gbrown2p

An avoidable crisis brought the UK to the brink of anarchy and almost toppled the government. “The great petrol revolt of 2000” led to hospitals cancelling non-vital surgery and funeral directors warned that they would not be able to bury the dead. It reminded me of James Callaghan’s winter of discontent when I sat in a Manchester cinema with rats running over my feet because the local authority could not collect the garbage. By 2000, fuel prices in the UK had risen from being amongst the cheapest in Europe to being the most expensive. By 2000, tax accounted for 81.5% of the total cost of petrol, up from 72.8% in 1993.  Because of demonstrations against increased fuel tax, a stage was reached where nine out of ten petrol stations had no fuel to sell. There was panic buying and supermarket shelves were empty. One minister warned: “There would be no food. The health service was going to collapse. We were twenty-four hours away from meltdown”.

 

After being initially slow to focus on the problem, Blair went energetically into action, working the phones to influential people in the oil and haulage businesses. He was not successful and shouted “For f***’s sake, they gave me assurances”. One of the oil executives resented Blair’s attitude.  “We are not nationalised industries. We are globalised companies with, on the whole, more influence around the world than the British Government”. Blair said, “I have to show I am leading”. Sending in the army was considered but the generals were reluctant. Polls showed that as many as 94% supported the protesters. As Andrew Rawnsley put it: “The petrol shortages might be a pain, but the people seemed ready to endure them so long as the torture inflicted on the Prime Minister was greater”.

 

Foot in Mouth

burning-cows

The army was called upon to help in another crisis which Blair mishandled – the outbreak of foot and mouth disease in 2001. With up to 93,000 animals per week being slaughtered, Agriculture Ministry officials were assisted by units from the British Army. The bureaucracy failed abysmally, politicians were unfocused, then panicked and scientists and self-interested farmers issued confused predictions. Thousands of farmers faced financial devastation because the Rural Payments Agency had collapsed. The Secretary of State, Margaret Beckett, would be officially criticised for contributing to a blunder that cost over £1 billion in compensation but was rewarded with promotion to the Foreign Office. Blair admitted: “We were mired by scandal and controversy and then I did a reshuffle which was the worst of all worlds”.

 

Next week, Blair goes to war – in Kosovo, Sierra Leone, Afghanistan, Iraq – and with the Treasury.

 

Raw Deal for the Public

This article appeared in the March 2008 edition of Lanka Monthly Digest.

 

 

In November 2001 , I read a  local newspaper columnist arguing  that Sri Lanka should avoid commercial borrowing and embrace Public-Private Partnerships (PPPs) as being a more prudent option. He cited the Private Finance Initiative (PFI) in the UK, which began in 1992 under John Major’s premiership and was continued by New Labour. So, how prudent has British PFI been in practice, and has it enabled the Government to save public funds as well as harness the expertise and entrepreneurship of the private sector?

 

The Adam Smith Institute, a champion of free enterprise, found costs to be higher for PFIs than for traditionally procured projects.

 

This is how the trick works. The company’s initial bid provides only broad outlines, not detailed specifications. The Government accepts a tender; and then, its partner discovers new costs such as inflation of labour and materials. Adjustments are then slipped in to huge spreadsheets and the Government hasn’t a clue as to how it is being short-changed.

 

Renovating a hospital in Coventry should have cost GBP 30 million, but that wouldn’t have delivered sufficient profits to the private sector so, the government spent GBP  311 million on a new hospital with fewer beds than the two hospitals it replaced.

 

The Cumberland Infirmary in Carlisle was the first British hospital built under PFI at a cost of GBP 87 million. Carlisle’s consultants committee pronounced the scheme as being “clinically unworkable”. When the hospital opened, there was a major power outage and one of the back-up generators failed. A transformer caught fire in radiotherapy, and equipment in  theatres and intensive care switched to battery power. The operating theatre was flooded with sewage.

 

Dr Paul Dyson, Chairman of the Cumberland Infirmary’s medical-staff committee, said: “We feel maintenance and construction standards were skimped in the first place and it is all part of PFI’s desperate desire to cut costs and make profits.”

 

A Department of Health study suggests that every GBP 200 million spent on privately financed hospitals will result in the loss of 1,000 doctors and nurses. Professor  Jean Schaoul of Manchester Business School estimates that the rate of return for the companies involved with 12 large PFI hospitals was 58 per cent. This comes out of the hospitals’ budgets, so less is available for health care. Beds are reduced by 30 per cent with the first wave and budgets for clinical staff cut by 25 per cent. Many health trusts are in serious difficulty and some will become insolvent.

 

US examples demonstrate the pernicious influence of commerce on education. Education Alternatives Incorporated (EAI) won a contract to run nine schools in Baltimore for five years. Baltimore terminated the contract because EAI students did worse in reading and the company had made claims for nonexistent students. In Hartford. Connecticut -where EAI contracted to run all 32 schools – the experiment ended when the company sacked 300 teachers to increase its profits.

 

The latest trend in US education is to cut deals with brands such as Coca-Cola or Pepsi- Cola to market their products to children. In 1998, Greenbriar High School in Georgia, in fact, created a curriculum around Coke.

 

Although defenders of the free market hail the risk-taking, adventurous spirit of the private entrepreneur, the private arm of certain PPPs cannily avoids risk. So, it is the Government that carries the burden of risk. Accounting conventions on both sides cover up the real situation. The PFI does not show the costs of buildings, for example, on its balance sheet. Its main asset is the Government’s contractual obligation to pay for the building.

 

The Government, in turn, can hide the fact that it is spending public money on a long-term basis. It can omit the building and long-term obligation to pay for it from the state’s balance sheet by paying a single unitary charge for the building and its maintenance, so that it can be classified as a revenue item. The UK Accounting Standards Board has called PFI an “an off balance sheet fiddle”, because the Government can move the cost of public works out of the public sector’s borrowing requirement.

 

PPP can only be implemented through an anti-competitive process, which leads to corruption. Major corporations wouldn’t be interested if it were otherwise. For little investment, companies can be sure of long-term profits that are, in effect, guaranteed by the taxpayer. If the consortia bidding for a project had to supply a detailed bid for the final contract before they were chosen, rather than merely a broad outline, they would have to spend much more on their tender document. When a consortium negotiates a contract after it’s been won, it can develop its bid at public expense, with no fear of loss. If the process were reformed, PFI would come to an end, major corporations have warned.

 

Sri Lankan proponents of PPP stress the need for transparency, cost-effectiveness and fairness. But is this going to happen in Sri Lanka – especially when it doesn’t happen in other countries? Unfortunately, corruption is inherent in the system and transparency is impossible because of commercial confidentiality.

Elders Part Two

This article appeared in Ceylon Today on Tuesday July 2 2015 under the title ‘Betrayal of the Elderly.

Colman's Column3

 

Professor Indralal De Silva, Senior Professor of Demography, University of Colombo, estimates that 25 percent of the population of Sri Lanka will be over 60 years of age by 2040. He argued that unless our development process is improved and sustained we would have a lower level of income to support this aging population.

Last week, I wrote that the “problem” of increasing numbers of elderly people in the world was seen as an “opportunity” for some entrepreneurs. The danger is that businesses providing care for profit might put profit before care and that abuse might take place undetected.

Abuse in Sri Lanka

I was prompted to look into this subject following a recent trip to Colombo to rescue my wife’s aunt. She had been in a so-called “care” home for three years. It seems that anyone can set up an Elders Care Home without any experience, training, qualifications or aptitude for caring for elderly people. People who seem to detest  senior citizens see that as no bar to “caring” for them. I very much doubt if the home I saw had ever been inspected.

To protect the guilty I will not mention names. The home in which my wife’s aunt was languishing was run by a person I will call “The Matron”. She had no training or expertise in the care of old people. She was a retired teacher who spent a great deal of time in a wheel chair because of arthritis in her knees. She had only one assistant who told us she was not paid a salary- what little money she had was often “borrowed” by the Matron.

We kept in regular telephone contact with the Aunt and visit whenever we can. Recent calls caused concern. Aunt said she wanted her nails cut. When we asked Matron to arrange this, she said she had given Aunt some scissors and she could cut her own nails. At one point Matron said that 80% of what Aunt said was lies and she did not like my wife’s tone.

This seemed an unusual approach to customer service, a strange way to address someone who is providing your only income. The Matron became reluctant to communicate and the Aunt kept repeating in a robotic fashion, as if brainwashed, that she was very happy and that Matron and Assistant were very good to her. We heard from another source that Aunt was crying and saying Assistant was pushing her and digging her nails into her arm.

Hell Hole

We searched around for a better home (we had not chosen Matron’s place ourselves but were paying for it on behalf of, and with contributions from, family members). We found something that seemed suitable but were finding it difficult to get to Colombo to inspect it. Before we could get there, Matron said she was no longer able to care for Aunt and asked us to remove her. Fearing that further abuse might occur in these changed circumstances, we made it to Colombo and collected the Aunt while Matron was out at a temple releasing caged sparrows for merit. Assistant was somewhat discombobulated, but we told her she had no choice but to release Aunt.

For the first time I had the chance to inspect the premises. Aunt was sitting in darkness, enduring the intense heat without a fan. Our driver asked to use the toilet and came back looking as though he was about to vomit. I went to have a look. As someone from a working class British background, I am familiar with the concept of the “outside toilet”. Working class toilets were outside in the sense that they were in the yard, but they did have a roof and a door. This one was completely exposed to the elements. There was no roof or door and dirty old saris formed the walls. There was no lid on the cistern. The whole thing was filthy. Close to the toilet was a gas hob with a shelf of dirty spice jars. It seems that this spot near the open latrine was where meals were prepared.

latrine2

latrine1

 

hob

Mission Accomplished

We placed Aunt in an establishment which provided 24-hour nursing care with a nursing station by her door. She has her own bathroom. She can have a TV in her room but she chose to have a radio. There is a menu which changes every day and which offers different options. Matron had provided only a plain bun for breakfast and bought most meals in from outside. She would not provide milk and sugar with tea. She would not allow her to bathe or use a fan.

royal

We will visit Aunt  as often as we can to ensure good conditions are maintained but so far, she is very happy and means it. We can even talk to her on Skype.

Should Sri Lanka Depend on People like the Matron?

If you search the internet, you will find worse cases of abuse than this. We are all going to get old- some of us sooner than others, as a callow internet troll reminded me. Yes, even you bright young things enjoying the full bloom of youth will be like the Aunt one day. Anicca.  Who is going to care for you? Who is going to care for me?

Changing social modalities means that the traditional way of caring for elderly people within the family unit is no longer possible. My English grandmother lived to be 97 and she would not have dreamed of ending her days in an institutional care home. It might have been good for her to be able to spend her final years in her own home but the burden of caring for her blighted the lives of her two youngest daughters who never married.

Caring for the Elderly

Institutional care homes are essential but who should provide them? The state has a responsibility to protect its elder citizens. More homes are needed but they need to be like the one that is now caring for the Aunt not like the one operated by the Matron. I have often pointed out the downside of privatisation particularly in areas like social services. I read with horror that the UK government is planning to privatise child protection services and give the job to a security firm that made a mess of its remit during the Olympics, has killed a few asylum seekers and makes a handsome profit from running prisons.

However, I would accept that private homes such as the one now accommodating the Aunt have a valuable part to play when the state cannot afford to provide such facilities when it cannot get its fiscal house in order or get its spending priorities right . Only today I read the news that Sri Lanka’s trade deficit widened 15.1 percent to US$ 782.9 million in April from US$ 680.2 million a year earlier. I would not have much confidence that the government could develop new capacities for caring for the elderly or mobilising the human resources necessary. Homes like the one I recently visited do have that capacity and they are ploughing back their profits to develop new ventures such as sheltered accommodation and hotel units.

The government does have a role to play in monitoring the care services provided by the private sector. Viewing the Matron’s establishment  made me wonder whether there is anything in Sri Lanka like the UK Care Quality Commission, whatever its faults. If there is such a body, it is ineffective. Monitoring “services” provided by the likes of the Matron will be difficult because such small establishments will sneak under the radar unless whistleblowers notify the authorities of their shortcomings.

 

 

 

 

Getting Death off our Roads Part 1

This article appeared in Ceylon Today on Friday May 22 2015

 

Colman's Column3

Two Boys

Several years ago, we became integrated into our local community because of tragedy. We were invited to a funeral house and were introduced to many of our fellow villagers and many bhikkhus. The dead young man had just won a place at an Australian university and was looking forward to a successful career in IT. He was to be best man at his friend’s wedding the next day. The two boys had been born on the same day and had been friends all their short lives. Born on the same day and died on the same day. They were on a motor bike going to Passara to do some last minute shopping when they encountered an out-of-control bus. The driver was in a hurry to overtake and the boys were killed instantly. Last minutes of promising lives. The parents were mad with grief. The father suddenly became an old man as all the hope and joy drained out of him.

Rich Countries, Poor Countries

Worldwide, there is a road accident death every 30 seconds and ten people are seriously injured. The WHO (World Health Organisation) expects the number of deaths to reach two million a year by 2030, up from 1.3m now. In poor and middle-income countries road deaths will match HIV/AIDS as a cause of death by 2030. In the very poorest, the WHO expects deaths almost to triple.

The rich countries have cut road deaths through higher vehicle standards and infrastructure investment. Simple and cheap safety measures also helped. Pavements and crossings were provided on roads used by pedestrians. Cyclists and pedestrians were separated from fast traffic. Governments enforced speeding and drunk-driving laws and hammered home the message about seat belts, helmets and mobile phones.

Canvassing for Ideas

On May 5 2015, I published an article in this paper about the carnage on Sri Lankan roads. I was particularly concerned about the reckless behaviour of bus drivers and the reluctance of traffic police to address that behaviour. After publication, I canvassed the opinion of many Sri Lankans at home and abroad.

One commenter told how his neighbour was driving carefully but was killed when a bus coming from behind chose the wrong time to overtake her. He had not seen the lorry coming towards him. When did see the lorry, he quickly cut back into his lane, crushing the lady’s car in the process as she did not have time to take evasive action, stop or slow down.  She died on the spot. Even taking short journeys to do local shopping I witness many similar incidents and always feel lucky to get home alive. The sixteen-hour round trip to Colombo is a nightmare. You are not even safe if you stay indoors at home. On one Colombo trip, we saw a bus on its nose end in someone’s bedroom.

The response to my canvas was extremely impressive. In these follow-up articles, I will try to synthesise the astute comments about the cause of the problem and suggestions for possible practical solutions.

Privatisation

Private bus drivers behave more irresponsibly than drivers of other buses. It was ever thus. Before nationalisation, free market competition for the same routes caused a scramble for passengers, leading to brawls and stabbings.

The Ratnam Survey in 1948, the Sansoni Survey in 1954 and the Jayaratna Perera Survey in 1956 all concluded that nationalisation would bring a better service. Between 1958 and 1978, the Ceylon Transport Board (CTB) was the nationalised enterprise providing all public bus transport in Sri Lanka. It was the largest omnibus company in the world – with about 7,000 buses and over 50,000 employees. The present number of buses in the fleet of the successor body, the SLTB, is only 4,500.

When the Premadasa government introduced privatisation, competition on the same routes returned. Currently, bus crews receive a percentage of profits so there is an incentive to overload and pick up too many passengers and run as many high-speed trips as possible.

Endemic National Character

Some of the people I canvassed cited national characteristics as part of the problem. One of my favourite quotations is from Ralph Waldo Emerson: “All generalisations are dangerous – including this one”. I would be particularly wary of generalising about national character, and loth, as a guest in Sri Lanka, to pass judgement on the “Sri Lankan character”. However, my Sri Lankan friends are not so cautious. If I pointed to the success of Sweden and the Netherlands in drastically reducing road deaths, and suggest we might find some lessons, they would say one could not expect Sri Lankans to have the self-discipline of northern Europeans.

One Sri Lankan wrote: “It appears to be the dominant culture that no one is responsible or accountable for anything.”  Another concurred: “We accept chaos. If you inspect the root cause of a traffic jam in Sri Lanka, you will find that it originates in something trivial, like people lacking courtesy, blocking the whole road. There is no sense of coexistence or co-operation. It is the same in banks and post offices. No queues. Everyone wants to be served first”.

Suspension of normal rules during wartime created a pathology of circumventing sensible codes of behaviour. People see politicians bending the rules and think they can do the same. Politicians and military had special privileges, let us all have them.

Police Corruption

One commenter believed the Sri Lankan police force was corrupt and used torture as a routine procedure from its foundation in the 1860s when the force was an instrument of colonial control. It had been further “corrupted and deformed by thirty years of war”. It is now a security force and is incapable of carrying out normal police duties.

Many private buses are “owned” by police in the sense that a policeman or his relative is a silent partner of the people who operate the buses. It is a sort of protection racket; for a share of the profits, police turn a blind eye to unroadworthy vehicles and dangerous driving

One commenter was pessimistic about changing the culture because corruption ran through society right from the top. Another was more optimistic and chose to believe that not all police are corrupt and a Citizens’ Advocacy group could improve enforcement by targeting some of the more intelligent senior officers.

Impunity of Culprits

One respondent thought there were simple solutions available but the state had to be prepared to stand up to the transgressors. Private buses owners have connections with powerful politicians and their stooges. Police issued a circular that the spot-fine system for private buses would be scrapped and that all offenders would be hauled before the courts. Private Bus Owners Association President Gemunu Wijeratne threatened an island wide strike and the circular was withdrawn.

 

Private Owners Victims?

 

Although many see private bus owners as the villains, they feel like victims. In April 2013, Wijeratne was threatening a strike if private bus owners were not allowed to increase fares. He said that normal private buses were incurring losses every day.

 

In May 2005, Wijeratne blamed the high accident rate on the government’s failure to prevent competing companies from plying the same routes at the same time. “I have proposed to the government and provincial authorities to introduce a regular timetable,”

 

On April 30 2015, Gemunu Wijeratne claimed that owners are required to give a monthly sum of Rs 17 billion to extortionists. He said that even though officials have been informed of this situation, the matter has been ignored. Wijeratne said that his association had also decided to complain to the Commission to Investigate Allegations of Bribery or Corruption of Minister Ratnayaka’s allegedly questionable dealings with some bus owners.

 

Next week – what can be done?

Privatisation

This article appeared in the September 2013 issue of Echelon, a Sri Lankan business magazine.

All systems of government are flawed. But few are as flawed as those controlled by private money. George Monbiot.

Self-Mutilation by the State

I once had to wait nine months to get Sri Lankan government permission to buy with my own money, from a prominent national company, a printer for my own personal use. No-one in the ministry would answer my e-mails, letters or telephone calls. In 1977, JR Jayawardene cried, “Let the robber barons come!” There is no doubt that public services in Sri Lanka are in dire need of an overhaul. Beware of seeing privatisation as a panacea.

George Monbiot has written of the loathing that elected governments express for the concept of government: “Deregulation, privatisation, the shrinking of the scope, scale and spending of the state: these are now seen as the only legitimate policies. The corporations and billionaires to whom governments defer will have it no other way.”

Bretton Woods

The British Empire imposed western institutions and Christianity on the savages. In more recent times, the Bretton Woods institutions have imposed neo-liberalist orthodoxy on the “developing” world, often hindering their real development.

Developing countries were blackmailed into accepting the Washington Consensus – deregulation and “liberalisation” of markets. Health and education were cut and essential utilities like water handed over to foreign entrepreneurs. The people of Cochabamba in Bolivia succeeded, in April 2000, in throwing out the multi-national corporation Bechtel who had made a basic necessity unaffordable. Recently, Portugal was bailed out by the EU and IMF on condition that it privatised water, among other services.

Privatisation

I grew up with nationalised industries in the UK. Both of my parents and myself worked for the state. I tried hard, snoozing over hefty tomes on nationalisation by Ralph Miliband (father of David and Ed), but I did not learn to love British Gas or British Steel.

Employees of public services were often arrogant, rude and incompetent (I exclude my family). After privatisation, UK public utilities saw, initially, a positive customer service ethos briefly replacing surly sloth. Britain did not become a share-owning democracy. The man on the Clapham omnibus bought shares but was encouraged to offload them instantly to make a quick profit. Controlling blocks were acquired by big institutions, often foreign.

For and Against Privatisation

The argument in favour of privatisation is that a private firm’s main aim is profit which encourages efficiency. State-owned enterprises tend to inefficiency because they employ too many workers. The break-up of state-run monopolies should increase competition.

On the other hand, for some services a public monopoly might be more appropriate. Can the air we breathe be privatised and commodified for profit? Tap water has been commodified in the UK and most of the profit goes to foreign corporations who avoid UK tax.

Privatisation in Practice

British Rail seemed to be a privatisation too far, mainly designed for John Major’s ego and for private profit. The rail network was artificially fragmented causing confusion about responsibilities and skimping on safety. People died. Privatisation of rural bus services deprived a quarter of English parishes of public transport and forced an increased use of cars.

In Manchester, the bus company Arriva took over the ambulance service with dire results. Serco took on “out of hours” GP services and took the cheaper option of delivering patients to Accident and Emergency rather than to GP locums. Last year, private provider Harmoni had one advanced nurse practitioner responsible for out of hours GP cover for 250,000 patients.

A health worker complained to The Guardian: “If you privatise the NHS a large part of the budget that comes from our taxes goes to profit and often away to some tax haven, Doesn’t that automatically mean there is less to be spent on actually providing the service?”

Tom Gash, director of research at the IfG, (Institute for Government), a respected think tank, said: “Markets in public services can and do often work, but our research shows that mistakes can have a real impact on people’s lives and value for money. The IfG found mistakes in the setting up and management of outsourcing in areas such as care for older people, schools, probation and employment services.“

The Prison of Privatisation

There are currently 14 private prisons in England and Wales. G4S, Serco and Sodexo Justice Services currently manage them.  The private security firm G4S will lose £70m because of its monumental cock-up during the London Olympics. The Government was forced to bring in the army. An Angolan man died after being restrained by three G4S guards as he was being deported from the UK.  Lincolnshire’s police force now spends the lowest amount per head of population on policing in England and Wales after it handed over the bulk of its back-office functions to G4S.

The Serious Fraud Office has been asked to investigate G4S contracts going back more than ten years. An audit discovered G4S and Serco had overcharged taxpayers by up to £50m, billing them for offenders who were dead, back in custody or out of the country.

Disenchantment

There has been in the UK a relentless drive to sell off public services. Anything, it seems can be hived off – from the Royal Mail (Even Margaret Thatcher said she was “not prepared to have the Queen’s head privatised”) to children’s services, from blood plasma to search and rescue helicopters. In the pipeline is a huge sell-off of the probation service.

Dr Hamish Meldrum told a BMA conference: “End the ludicrous, divisive, expensive experiment of the market in healthcare in England. Never has there been a better time to abandon the wasteful bureaucracy of the market”.

The trade union, Unison, recently urged the government to halt pending privatisation and outsourcing deals to allow for a forensic review. In the UK, an organisation has been established to campaign against privatisation. Cat Hobbs Director of We Own It, said: “Despite what the government might think, people aren’t sold on the idea of privatising and outsourcing public services.” Damian Lyons Lowe, CEO of Survation, said a poll his organisation conducted showed: “A clear majority of the general public, including Conservative voters, reject automatic privatisation of public services; 80% want to see public sector bids for all public service tenders, showing a clear desire not to see services simply privatised by default.“

Across Europe, public ownership is making a comeback. Southwark council recently took its customer call-centre back in-house, terminating a long-running contract with a private company. The in-house service costs £3m less to run each year and will provide a better service. Although private French corporations control the water supply in many countries, the water in Paris itself is now owned and controlled by the city.

No Panacea

Tom Gash: “Unless Whitehall and other agencies improve their skills and techniques for ensuring public service markets work, mistakes will be made and the public may lose confidence in this approach to reform”. The IfG report warns that big outsourcing companies tend to act as monopolies, stifling competition and preventing small companies getting involved.

As Monbiot writes: “If a market is to serve a wider social goal than simply maximising corporate profits, it must operate within a tight regulatory framework. Pricing mechanisms do not magic away the need for regulation: if anything they enhance it. To make them work, politicians still have to confront and overcome powerful interests.”

It surely was not too much regulation or not enough privatisation that caused Europe’s current financial woes.

The Healthcare Business in the UK

I posted a version of this on Open Salon in February 2010. Further “reforms” seem to be stalling.

I have been fortunate in that I have had few encounters with the UK National Health Service (NHS) as a patient. The encounters I did have were all related to head injuries. When I was about four years old I fell down the stairs while attempting to play the ukulele and landed on my head. That was the end of my musical education. The only time I ever scored a try playing Rugby, I contrived to get kicked in the head at the same time and had to be stitched up.  Some years later, while leaving a hostelry (sober, I might add) in Manchester with a group of friends, we were unexpectedly set upon by a gang of ruffians and again I was kicked in the head. One of our company fared worse, suffering a broken jaw.

I know something about the NHS from the inside. After graduating from university, I worked as a hospital porter for six months. I was originally hired because the hospital lifts were being replaced and I had to carry patients to and from the operating theatre. My duties also included assisting at post-mortems and taking corpses on my own to the mortuary in the middle of the night. This was more of an education than university.

That hospital was originally built as a brewery in the 18th century. It was an NHS institution, but private patients were treated in what was called the “new building”. It had been built in the 1930s. When there was a cardiac arrest on the public wards we had to run over to the “new building” and collect the necessary equipment which we then trundled through underground passages to the old building.

Since I worked there, those premises have been closed and the hospital has moved to a state-of-the-art skyscraper. Is this better? More about state-of-the art modern English hospitals later.

I also know something about the NHS on a more scientific basis having done many studies as part of a Department of Health team looking into day-to-day practices and assessing how efficient they were. This was at the time when the Conservative government, through Secretary of State Kenneth Clarke, was introducing NHS “reforms” designed to make the provision of healthcare more “business-like”.

The English love to complain about the NHS and perhaps compare it unfavourably with what they imagine things are like elsewhere. When I was visiting the United States I developed a severe, and possibly serious, eye-condition. I received excellent care and friendly and concerned attention at a clinic in Baker, Louisiana, and the costs were covered by my travel insurance. I needed to continue treatment for six months after my return to London. Greenwich Hospital was drab and unfriendly. Luckily, I kept a diary note of my appointments as the reminder letter I received in the post was virtually blank because the hospital’s printer had run out of ink. The receptionist looked at this and said: “If you could read this there can’t be much wrong with your eyes”. The doctor was rather brusque and gave the impression that he had more important things to do than deal with me. When I pressed the point that the American doctors had told me to mention that I was also suffering back pain and this could have a bearing on the eye-condition, he became quite angry and told me to forget about it.

Although many people complain about similar incidents, there is in the UK also a deep affection for, and pride in, the NHS. Paul Addison wrote in 1985 about people who had grown up with the NHS: “While critical of this or that aspect of the service, they are profoundly glad of its existence and appalled by the prospect of its destruction. But, however genuine, their appreciation is limited in one respect. Much as they value the NHS, they do not remember what the health services were like before it started.”

The historian, Peter Calvocoressi, wrote in 1978: “For its customers it was a godsend, perhaps the most beneficial reform ever enacted in England, given that it relieved so many, not merely of pain, but of the awful plight of having to watch the suffering and death of a spouse or a child for lack of enough money to do anything about it. A country in which such a service exists is utterly different from a country without it.” Professor Rudolph Klein described it as “the only service organised around an ethical imperative”. He also wrote: “At the time of its creation it was a unique example of the collectivist provision of health care in a market society”.

Health Minister, Aneurin Bevan, was an unexpected choice to be the man to establish the NHS in 1948. He was an ex-miner from Tredegar in South Wales, a militant trade unionist who had been a dedicated Marxist. He was an inspiring orator in spite of a stutter. Despite his working class background he acquired sophisticated tastes and wealthy friends. Brendan Bracken called him to his face a “Bollinger Bolshevik, you ritzy Robespierre, you lounge-lizard Lenin”.

The revolutionary thing about the NHS was its universalism and the fact that it was paid for from central funds. It was open free of charge to upper, middle and working classes. In effect, Bevan nationalised the hospitals, which had previously been operating under a hodgepodge of different administrations and funding arrangements. By doing this, Bevan brought hospital consultants into the scheme. Lord Moran, Churchill’s doctor, was very helpful to Bevan in winning them over. As Bevan put it: “I stuffed their mouths with gold”. Under the NHS, the consultants would be paid for providing their services to hospitals and also carry on their private practice, even using NHS beds for their paying patients.

The free market alone would not provide adequate health care. General Practitioners (GPs) had to be persuaded to set up practices in poor areas. As small businessmen they would naturally be more attracted to wealthy areas in which they could make more money. In present-day Detroit most of the conurbation’s poor are excluded from healthcare because GPs have moved to the suburbs where they can earn more. Winning over GPs was more difficult than co-opting hospital consultants because they were anxious about losing their independence and becoming salaried public servants. During my time studying the NHS I found that there was a general opinion among hospital doctors and nurses as well as NHS management and civil servants that GPs were difficult and fractious. They eventually joined the NHS when offered a salary plus a larger amount in “capitation fees”, that is, payments based on the number of patients on their books. In spite of this there has been tendency to put more healthcare work to locally-focused GP surgeries and away from hospitals.

One of the key provisions of Bevan’s Act was Section 21: “It shall be the duty of every local health authority to provide, equip and maintain, to the satisfaction of the Ministry, premises which shall be called ‘Health Centres’.” The socialist vision was that the centres should house GPs, dentist, chemists and also receive visits from hospital consultants. Preventive and curative medicine would be equally important and in time all primary care would be provided within them. It is ironic that Bevan exerted none of his political skill and socialist fire to bring this about, probably because he knew he could not defeat the medical profession’s entrenched opposition, but a conservative government, widely accused of trying to wreck Bevan’s creation, brought local primary care centres into being in the 1990s.

Funding a universal health care system was always going to be difficult. Sir Kenneth Stowe was Permanent Secretary at the time I was at the Department of Health. After his retirement he made a speech in 1989 in which he put some questions that he would have liked to put to Beveridge and Bevan in 1948. “How did you get the costings so wrong? Didn’t anyone listen to the Treasury? Prescription charges had to be applied within three years of the NHS coming into existence. Wouldn’t it have been better to go for viability rather than have everything free when, in fact, nothing is free?”

The service certainly cost more than expected. Four million dental cases a year were projected but the actual figure was eight million. The cost of ophthalmic services was estimated at one million GBP in the first year and the actual cost was 22 million. Bevan said: “I shudder to think of the cascade of medicine which is pouring down British throats at the present time. I wish I could believe that its efficiency was equal to the credulity with which it is being swallowed.” Another stutterer, George VI, could not understand why people should get free teeth paid for by the taxpayer. He pointed to his elegantly shod, in-bred feet and asked why the masses should not get free shoes also. His Majesty seemed unaware of the irony of the fact that his own shoes and everything else he had was paid for by the taxpayer. The taxpayer might echo Faron Young’s immortal words: “I bought the shoes on your feet”. Bevan and Harold Wilson made dramatic resignations from the Labour government on the grounds of principle when Chancellor Hugh Gaitskell introduced charges for teeth and glasses.

Stowe was responsible for the Thatcher government’s white paper Working for Patients, which he said was long overdue in its “willingness to break the monolithic structure and make a start at least on dumping some of the structural garbage”. “Even more important is the acceptance and promotion of diversity in institutions in the shape of Trust-owned and managed hospitals with the freedom to buy and sell services to meet the needs of the communities they serve”.  The Thatcher administration’s aim was to make the NHS more “businesslike”. To this end it drafted in businessmen from the retail trade, from Marks and Spencer and Sainsbury’s. Sir Roy Griffiths, from the latter company, in his report on health service management wrote: “If Florence Nightingale were carrying her lamp through the corridors of the NHS today, she would almost certainly be looking for the people in charge”.

A problem that I saw at first hand from the very early days of Working for Patients was that implementing the reforms entailed recruiting armies of accountants and managers. Vast amounts of money seemed to be spent on that rather than patient care.

The short-hand term for what was proposed in Working for Patients and put into practice by Secretary of State for Health Kenneth Clarke in the 1990s was “the NHS reforms”. The Blair government carried Clarke’s policies even further and Gordon Brown was a firm supporter of public-private financing in all areas of service provision including health care.

The Blair government kicked off in 1997 with a White Paper entitled: The new NHS,
modern, dependable.
Blair said in his foreword: “I know that one of the main reasons people elected a new Government on May 1st was their concern that the NHS was failing them and their families. In my contract with the people of Britain I promised that we would rebuild the NHS. We have already made a start. The Government is putting an extra £1.5 billion into the health service during the course of this year and next. More money is going into improving breast cancer and children’s services. And new hospitals are being built. The NHS will get better every year so that it once again delivers dependable, high quality care – based on need, not ability to pay.”
He claimed that things were going to be different under New Labour. “It replaces the internal market with integrated care. We are saving £1 billion of red tape and putting that money into frontline patient care.” The New Labour mantra was “modernisation” but was this any better than Harold Wilson’s much-derided “white heat of technology” in the early 60s? In the light of what has been reported in the UK press only this week, Blair’s promise of “new technology that links GP surgeries to any specialist centre in the country” elicits a hollow guffaw.

The BMJ (British Medical Journal) called the White Paper a compromise and was not impressed by the claim to be replacing the internal market. “The rhetoric is that the internal market, which supposedly resulted in damaging competition, has been abolished. In reality, competition was weak, the purchaser-provider split will remain, and purchasers will still have some choice between providers.”

The main change promised by the White Paper was related to primary care. The chief responsibility for purchasing health care  moved from the previous 100 health authorities, 3600 fund holders, and 90 total purchasing pilots to 500 primary care groups each covering “natural communities” of roughly 100,000 people. Primary care groups were to consist of groups of general practitioners (around 50) and community nurses which were intended to hold a budget for virtually all hospital and community health services for the area plus the cash-limited part of the general medical services budget—for example, for prescriptions and practice staffing. Health authorities would continue to purchase only selected specialist services, and fund holding was to be scrapped from April 1999. The plan was for primary care groups to develop in four stages over the next five years: at a minimum they could leave all purchasing to the health authority and have an advisory role only; at a maximum they could purchase almost all services and merge with community trusts to form primary care trusts providing all primary and community health care. The overall budget for patient care was to be cash-limited, and the primary care groups would be able to keep any savings made. Management costs of the health authority and fund holders were to be pooled, capped, and shared out between the health authority and primary care groups.
The BMJ saw the main effect of Labour’s policy to be: “softening the harsher edges of the internal market by increasing collaboration and openness; involving all general practitioners in commissioning/purchasing; and strengthening central control over the quality of, and access to, clinical care. They rest on several beliefs, which, as in all policy-making, are the messy product of political values, aspiration, practical judgment, and evidence: that competition in the NHS has generated bureaucracy and inequity; that the most promising way to manage scarce NHS resources is through devolving budgets to clinicians; and that existing systems to monitor the quality of clinical care (Royal Colleges and General Medical Council take note) are poor.”

The BMJ sounded a prescient warning note: “There are also notable omissions. For example, there is nothing new on overall funding of the NHS except that the changes in themselves will save £1bn in bureaucracy over five years—a fiction since developing the primary care groups will need high start-up costs. At best these reforms could give the service a real chance to manage scarcity better—through effective managed care. At worst they could just be the internal market with its motor removed, while perennial problems which undermine support for the NHS— haphazard rationing, financial deficits, the ‘winter crises’, and lengthening waiting times—go unaddressed.”

Whilst the stated purpose of NHS Foundation Trusts was to devolve decision-making from a centralised system to local communities in an effort to be more responsive to their needs and wishes, others saw the change towards semi-independent hospital boards as a move towards privatisation of the health service. Some contended that NHS Trusts went against the spirit of the principles laid out by Bevan. Others said that it would lead to a two-tier system, as in Canada. Although the quality of healthcare in Canada is excellent, the WHO has shown that it has the longest waiting times for any developed country. A further concern was that NHS Trusts would copy the USA (those drafting the reforms were much influenced by American thinkers) in seeing some illnesses as more profitable than others, and concentrate on those at the expense of others.

It was unfortunate for the UK and the NHS in particular that Blair and Brown were fixated on the idea of the Public Private Finance Initiative. If I go into all the details of that, this post will be even more intolerably lengthy. PFI (these days sometimes called PPP) can be summarized as Public Pays Private Profits. The “risk-taking” entrepreneurs of the private sector are on a certain winner. They will not enter into a contract with the government unless all the risks are covered. They put in incomplete tenders underestimating the costs and then the taxpayer makes up the shortfall and the companies rake in the profits.

Let Carlisle NHS Trust Hospital stand as an emblem of PFI in the NHS. Nick Wood, the chief executive of the North Cumbria Acute Hospitals NHS Trust, resigned a few days before a damning report was published by the Commission for Health Improvement (CHI). The CHI report coincided with criticism of the hospital by the public service union Unison, which is opposed to PFI hospitals. It published a dossier of complaints from members, including lack of beds and sewage bubbling out of theatre sinks when nurses were scrubbing up.

Another design flaw was a glass atrium which heated up in summer because there was no air conditioning. Sir Stuart Lipton, head of the government’s Commission for Architecture and the Built Environment, said: “The present round of PFI is effectively sub-contracted obligations. It is not that the buildings are being built inefficiently, but the contractor has got nothing to do with the medical process – they are two separate functions, which effectively should be one”.

David Hinchliffe, chairman of the House of Commons Health Select Committee, was also concerned about the design of PFI hospitals. His committee uncovered a number of problems:

  • confusing layouts
  • corridors being too narrow to be able to turn a hospital trolley round
  • difficulties for nursing staff actually seeing patients because of the layout of the wards

The Health Secretary at the time, Alan Milburn, invited the Prince of Wales to be design champion for the new hospitals. Mr Hinchliffe was not impressed. “I don’t know what experience Prince Charles has of working in hospital kitchens, or taking clinical waste to sluice areas, or removing bodies from hospital wards to mortuaries. If he has got experience in that then I think he would be ideally suited to offer advice to the government.” I should have been offered the job because I have experience of those things as well as being adept at cleaning human bones out of the incinerator.

In December 2006, the Guardian revealed that half-year accounts for NHS hospitals, ambulance services and mental health organisations showed 121 NHS trusts across England overspent by £372.4m in the first half of the financial year. At least a dozen NHS hospital trusts were technically bankrupt, with no chance of meeting a legal obligation to balance their books. Data provided by the Department of Health under the Freedom of Information Act showed 103 hospital trusts across England expected to end the year with accumulated deficits of £1.6bn, caused by overspending since 2001.

The financial rules governing NHS Trusts were described by one NHS finance director as “a nightmare from Alice in Wonderland”. Their financial difficulties became impossible to manage because of a mistake made by the Department of Health and the Treasury in 2001, when they put NHS trusts under a financial regime known as Resource Accounting and Budgeting (RAB). The new system was designed to regulate spending by Whitehall departments, but had a devastating effect when it was applied to overspending hospital trusts. If a trust spent £105m, but had an income of only £100m, it would end the year with a deficit of £5m. The new rules sliced £5m from its income in the following year and obliged it to make a £5m surplus. That required the trust to cut its spending from £105m to £90m. Trusts faced with this triple whammy could not achieve the target without damaging patient care and so their deficits escalated. Many took corrective action, including sacking staff, closing wards and reducing the time patients spend in hospital, but the Guardian identified a group of trusts that had passed the point of no return.

Nigel Edwards, policy director of the NHS Confederation, said “Financial recovery would imply such damage to patients that no sensible person would go for it. They would not compromise the survival of the people they serve.”

One of the reasons for the financial difficulties of the NHS is the incredible amount of money the government has wasted on IT systems rather than patient care and funding for more practical areas of the NHS. Whilst a new IT system may improve some areas it is a luxury that is not anywhere near the priorities of most NHS employees and is also vastly expensive. The other problem with the government’s IT investments is that they have an uncanny ability to make a hames of it. The Independent newspaper reported on January 21 2010 on  the failings of Labour’s most costly programme, the mammoth £12.7bn IT scheme to revolutionize the way the health service worked. But far from heralding a new age of efficiency, the National Programme for IT is now widely perceived as the greatest government IT white elephant ever. As well as the huge costs involved, suppliers have walked away, projects are running years behind schedule, while medical professionals have complained that they were never consulted on what they wanted the new system to achieve. The Independent has learnt that just 160 health organisations out of about 9,000 are using electronic patient records delivered under the scheme. The vast majority of those were GP practices. New figures have also revealed that millions of pounds have been paid out in legal fees. Alan Milburn, the former health secretary, said in 2001 that everyone would have access to their health records online by 2005.

In August 2011, it was announced that the NHS was to abandon the national database of patients’ records, as originally envisaged by the previous Labour government in 2002. The cost of the fiasco was £6.4bn with a further £4.3bn  needed. As the Independent editorialised: “But we must not forget that each botched IT project also represents a private-sector shortcoming. Many firms have promised a great deal but not delivered. The PAC today rightly singles out CSC and BT for criticism for their inability to live up to their contractual commitments over the NHS IT projects. These businesses have been – and continue to be – rewarded for failure.”

The move towards Primary Care Trusts (PCTs) has not been easy. The Health Service Journal reported on 21 January that most PCTs will be unsustainable because just 10 per cent have successfully reduced emergency admissions. The CEO of Peterborough PCT recently resigned because of budget deficits.

The NHS is also likely to suffer because of factors beyond its control. The world financial crisis will have an impact as the government struggles to balance the books. NHS trade union Unison has warned against punishing public services for the excesses of “greedy bankers”, following the government’s Budget statement in 2009. King’s Fund (a healthcare think tank) chief economist John Appleby says it is very hard to see how the NHS can escape a real-terms cut. A real-terms cut would be a major adjustment for the NHS, which received annual real-terms growth of 7.4 per cent from 2002 to 2008. KPMG (financial consultants) head of healthcare Alan Downey says it is likely the cuts would mean the NHS will need to scale back its ambitions. “Noble aims are things which aren’t going to be pursued over the next ten  years. It’s going to be about retrenching back to what are seen as the priorities. The target to reduce health inequalities could be dropped, particularly under a Conservative government with less commitment to equality.”

Recent events seem to confirm that the NHS has never been clearly a national or a local service, and existing trends seem to lead to the worst of all worlds: the disadvantages of central control, and local differentiation without any genuine local autonomy. As the NHS is arguably the most national service in the British welfare state, it is possible that the heyday of the national welfare state may be over.

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