Sunday, August 10, 2014

Thoughts on the "Privatisation" of the National Health Service

The word "Privatisation" is being used at the moment in respect of the National Health Service - especially in Labour circles. I suspect that this is in nearly all cases an inaccuracy. Privatisation is correctly a descriptor when a publicly owned asset is transferred to private ownership. The most recent example was the Royal Mail. The key word here is "asset". If you look at the Balance Sheet of an enterprise the Assets will be listed as belonging to that entity. If that enterprise is publicly owned and is then "privatised" then the purchaser will acquire the assets. This will rarely be their book value because there will also be intangible assets such as the brand which will increase the value to the purchaser. In essence in privatising something you transfer the assets, tangible and intangible, and you also sell future income streams.

The assets of the NHS are publicly owned and so far as I am aware none of them are being transferred to private ownership. However some of the services that the NHS provides are being "contracted out". Essentially some services which have hitherto been carried out by NHS employees are being put out to tender to the private sector. This is not "privatisation" because no assets are relinquished. True there may be redundancies connected with this sub contracting and many will find this regrettable. But the trend for enterprises of all sorts only to carry out core activities and to seek third parties to carry out the rest is a feature of the modern way of doing things. Competitive tenders, so the logic goes, ensure better value than if a single unchallenged supplier carries out the work.

The key issue is not whether the NHS is being privatised but whether this huge enterprise is giving value. Surely nobody could carp if, say, the operation of the boiler house at a hospital was contracted out to a private operator. Obviously the sub-contractor would have to give value - performance against standards and competitive costs. But if that is guaranteed why would you argue against it? Where you draw the line is the key but, I would argue, this should be non-ideological. If NHS employees are the best people to carry out a service then that's what should happen. If contracting out offers better value over time then contract out. The clash of ideologies between free marketeers who probably would like to privatise the NHS, on the one hand, and those who believe that public ownership requires that there only be public employees on the other is unhelpful. The publicly owned and accountable NHS is operationally a huge public/private partnership - and has been for years. Orwellian cries of "Public good, private bad" (or vice versa) take us nowhere.


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