Foundation Hospitals & The Health Service Reforms:

Imaginative Idea or Disaster in the Making?

Labour Reform Group, Socialist Health Association & ATTAC London

One day conference at the London School of Economics 13th September 2003

Aims: To further informed debate on this important issue and bring together political campaigners and health service professionals


11am Registration

11.30 Opening Plenary: Setting the context

  • Sarah Burns (New Economics Foundation)
  • Phil Green (Unison)
  • Roger Seifert (Keele University)
  • Rosamund Stock (London School of Economics)

1pm Lunch (provided)

2pm Workshops

  • Mutuals in the health service
  • Market style reforms and GATS
  • Distributive justice in health
  • Public health and primary care

3.15 Tea

3.30 Plenary: Moderated debate.

  • Martin Rathfelder (Socialist Health Association)
  • Labour Reform
  • NHS Consultants Association (tbc)
  • Steve Iliffe (International Association for Health Policy in Europe and practising GP)

5 pm Close

Sponsored by Health Matters

Report of proceedings:

The role of competition

Phil Green from Unison, Rosamund Stock (LSE), Roger Seifert (Keele) all emphasized that the crucial reform is the introduction of competition within the NHS. It will change the relationships between different elements of the health service and between the service and its patients, and even between patients themselves who will be set in conscious competition with each other for the “best” services.

The deregulation of assets

A central pillar of this is the freeing up for the market of public assets which will be independently controlled by trust executives. And yes, if they undertake risky investments hospitals can go bust. What belongs to us can be disposed of privately.

The consumer model

And the other side of the competitive coin is a consumerist model of patients, and of people within society. Sarah Burns from the New Economics Foundation criticised this model of society. It reduces people in their complexity to passive choosers just when research is showing that active involvement in health care actually improves outcomes – especially for vulnerable groups. Such a voice is also a key component of fairness. When people are treated fairly they will accept negative outcomes such as waiting for treatment while those in greater need are seen.

NEF’s original idea of mutuals in the public sector sees the involvement of staff and patients in a “co-production” model which aims to share risk and build social solidarity.

And public involvement is already available: Community Health Councils were actually successful – and some think that is why they are being abolished! What is needed is more democracy in the NHS.

The ideological framework

But Roger Seifert pointed out that both competition and consumerism need to be understood as part of an overal framework. This is all part of the neo-liberal ideas which dominate the WTO, the US, the World Bank and, unfortunately, our government. They have bought the arguments about markets, efficiency, competition and choice. The government may talk in terms of choice and regulated markets, but the mantra of efficiency, rewards for success, consumer sovereignty has become an unquestioned wisdom.

As soon as we look at it, the hollowness becomes obvious. Some hospitals are supposed to be inefficient – but included in this calculation is an “imaginary rent” for their site/ buildings that no hospital actually pays. But the inflated price of land in, say, London skews the accounting in favour of some hospitals and not others.

It is also accompanied by a control/target setting mentality, particular toward staff. They cannot be trusted in this view and must be minutely managed, thus wasting one the NHS’s greatest assets.

The Health Service as a National System

But perhaps the most corroding effects of the changes will be seen at the national scale: competition will set up some dangerous feedback loops that will cause widening inequalities and change attitudes for good. The first is the way that successful hospitals will get preferential treatment so that they get better still.

The second is that pitting hospital against hospital for patients and money will create a competitive mindset. That will make the unequal outcomes more acceptable. And the inequality itself will lead to more competition.

The resulting fragmentation and competitive attitudes will make sharing risk and cross subsidy far more difficult. We will lose an integrated system which is envied by the rest of the world. A unified system is far better for dealing with standards in medecine, addressing mistakes and coordinating different services.


Both Roger Seifert and Steve Iliffe (International Association for Health Policy in Europe) brought out the conclusion that these reforms are part of a serious shift from a universal service, free at the point of use, to one where many providers compete in a market. A social insurance based system, paid for by the state is likely to be the half way house. The long term aim is for us to belong to “Health Maintenance Organisations”on the model of those found in the US – a country where half the population has either no or inadequate health protection!


Roger Seifert’s notes:


  • The neoliberal Washington consensus: ‘liberalize trade and finance, let markets set price (get prices right), end inflation (macroeconomic stability), privatize. The government should get out of the way — hence the population too, insofar as the government is democratic’ (Chomsky 1999).
  • Market competition
  • profit seeking and maximizing
  • no waste through efficiency
  • replace producer domination with customer sovereignty
  • privatize — cct; pfi; lea management; student fees etc
  • marketize — NHS trusts; FE colleges; LMS; best value etc
  • performance measures — indicators; league tables; inspections; regulations; name and shame etc


Critical analysis of public sector provision based on waste – the misallocation of resources, because o Politicians cannot be trusted to select the best pattern of provision because of their short-term electoral interests; and Bureaucrats may ignore politicians and act inefficiently anyway; therefore Public goods/services and publicly provided private goods/services should be provided by the private sector since managers will make rational decisions based on market need and not waste resources


  • Job regulation – control and order
  • Taylorisation and scientific management
  • The Three Es – economy, efficiency and effectiveness
  • Public choice theory – political short-termism and bureaucratic waste
  • Deregulation and privatisation


  • In Local Government: “the drive to modernisation and improvement sponsored by central government demands higher performance … this requires considerable organisational change, including the introduction of a high performance working culture … a key aspect of high performance working is financial reward” (Pay Advisory Bulletin No.3 for Employers’ Organisation, October 2002, p2)
  • In the Fire Service: “modernisation is long overdue” (; “there is a strong case for a radical overhaul of the whole pay system” (p74); and “the existing scheme is part of a structure that discourages modernisation and reform” (Bain report, December 2002, p.91)
  • In Central Government: “as part of its comprehensive plan for modernisation, the government has recruited a team of top private sector managers to the PSPP – with a remit to advise on improving efficiency and productivity” (Foreword by Andrew Smith, to ‘Incentives for Change’, Treasury, January 2000).


  • The HR Policy Development Division has three main activities, “modernising pay and contracts for employed staff … modernising the GP contract … modernising professional regulation”
  • The introduction of Foundation Hospitals
  • The use of performance indicators and targets
  • The setting up of NICE and now a new Regulator on service provision
  • Changes in the Commissioning process
  • Increased use of PFI
  • Increased use of private provision both health and management


  • The agreement creates three pay groups: those covered by the DDRB; those covered by the PRB for nurses etc; and those others called employed staff. Senior managers are outside the scheme
  • For employed staff (not doctors etc) Basic Pay will be determined through NHS specific Job Evaluation. Jobs will be placed on one of eight pay bands within two separate pay spines.
  • All staff will receive development checks through the Knowledge and Skills Framework
  • There will be some common terms of service: hours, holidays etc
  • Some variation based on overtime, area allowances, and recruitment and retention premia.


  • Senior decision-makers wish, one way or another, to deliver and more efficient and effective health care system
  • This is to be done mainly through control of the supply of health treatment
  • The costs are met from central government funds
  • But in a labour intensive service, locally delivered on a personal basis changes in service delivery must be met by changes in the management of labour
  • This means changes in pay and performance – ceding more control over both to site managers