The NHS’s internal market is an expensive catastrophe

The unintended consequence has been spiralling costs

By Dr Max Pemberton - The Spectator 24th February 2018

 

The NHS is in dire straits. I never thought I’d say this but as a doctor, and having seen the extent of the current crisis, I’d be scared if a family member had to go into hospital. Despite the best efforts of staff, the pressures are such that it’s all too easy for mistakes to be made. Doctors and nurses are going to work fearful of the situation they will find. They know how unsafe it is, and yet they are utterly powerless to do anything about it.

The predictable response is to call for more money to be hurled at the NHS. It’s all because of cuts, they say. Yet a report last year from the National Institute of Economic and Social Research found that health spending is at its highest level in history, and that Jeremy Corbyn’s accusations that the Tories have presided over ‘deep cuts’ to the NHS budget are simply wrong. The annual spend on the NHS has now reached £2,160 per person and the figure has continued to rise steadily in terms of a fraction of Britain’s total income, increasing from 4.7 per cent in 1997 to 7.4 per cent last year.

What’s really happening is that demand is outstripping supply: the increase in money hasn’t been sufficient to cover the increasing pressures of an ageing population, higher expectations and advances in medicine. There’s no doubt that when compared with other EU countries, we are not spending similar levels as a proportion of GDP. While we spend about 8 per cent of GDP on health, countries such as France and Germany spend nearly 12 per cent. We have fewer beds, fewer nurses and fewer doctors per patient than the rest of Europe.

But rather than throwing more money at the NHS, it makes better sense to ensure the money is being spent wisely. The NHS needs to ensure it is as lean and efficient as possible. Surveys have found that people are wary of yet more money being handed out. While the majority of the public rank healthcare as the top priority for government spending, only about a third are willing to pay more in taxes. If more money is going to be given to the NHS, it first needs to demonstrate that it’s making the most of the money it is getting already.

And here’s the rub. There is crippling, shameful waste in the NHS. The kind we hear about are things like missed appointments or doctors prescribing remedies that could be bought over the counter. Equipment such as walking frames that can’t be returned. Or health tourism or failure to recoup the cost of treating overseas nationals. Of course, all of these are important. But there is a source of inefficiency that eclipses all this, wasting billions every year. It is the internal market.

This was first introduced into the NHS in 1990, when the National Health Service and Community Care Act put health authorities in charge of their own budgets. But the NHS really started to embrace market principles with Gordon Brown’s ‘mixed economy of care’, which saw the health service open up to competition to provide services, creating a ‘purchaser-provider split’. The unintended consequence has been bureaucracy on a gargantuan scale. And the spiralling cost has no discernible benefit to patients. A recent study from the Organisation For Economic Co-operation and Development (OECD) suggests that about one fifth of spending on health makes no or minimal contribution to improved health outcomes.

Even last June’s Conservative manifesto acknowledged this, admitting that the NHS internal market can fail ‘to act in the interests of patients and creates costly bureaucracy’. This demonstrates that many within the party have become disillusioned with the free-marketers. And disillusioned they should be. The introduction of the free market to healthcare was based on ideology and has shown itself to be costly, inefficient and a woefully inadequate system.

We know from other countries, such as the US and Germany, that introducing the market into healthcare results in higher costs. Putting an exact cost on the internal market is tricky, but the Centre for Health and the Public Interest gives a conservative estimate of £4.5 billion. Others have suggested about £10 billion is diverted away from front line services to administer the complex negotiations and contract monitoring that the market system requires.

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Overview of the "Save Our Hospitals" campaign in February 2018

NHS senior managers and the medical director and clinical staff at Imperial College Healthcare NHS Trust assured the public in November 2017 that Charing Cross Hospital will not be downgraded or closed before 2021 nor "for the foreseeable future" due to the large and rising demand by patients with acute illnesses. But there has been no official retraction of the plans in "Shaping a Healthier Future" (2012) and the "Sustainability and Transformation Plan for NW London" (the "STP" - Oct 2016) to do just that at some time in the future. The NHS has lost over 50% of its beds over the last 30 years and the current national crisis is very largely due to an insufficient supply of hospital beds to meet acute demand from a growing and more elderly population.

The assurances from both NHS senior management (Accountable Officer Clare Parker and NHSI's query about SOC1) and the clinical management at Imperial Trust are as extensive and as solid as it is possible to give about Charing Cross Hospital "for the foreseeable future". They cannot guarantee Charing Cross Hospital beyond a period in which many scientific changes are going on around them. The clinicians are scientists and must evaluate these changes. But that doesn't let them off the hook for their acquiescence to the adverse effects of Accountable Care Organisations. 

There are huge changes going on in the NHS which the Government and the NHS have totally failed to explain to the public: improvements in medical science and in IT, many of which are positive, and changes in funding arrangements, especially the introduction of ACOs. ACOs will usher in regionalisation and privatisation as they implement "new care models" (ways of treating) in the STPs. STPs contain "local" statistics inserted in a Dept of Health national template and the private sector is specifically "encouraged" to bid for contracts for 200,000 patients for 10-15 years for £10Bns. The changes are huge, far greater than any previous NHS reorganisation although they are a further step in the same direction of travel. And they are irreversible because in English law private contract law takes precedence over public law. ACOs are a form of regional (STP "footprint") outsourcing - privatisation - and a step in the financialisation of health services which has already happened in other public services.  At national level the NHS concepts of "risk stratification" and demographic "packages of care" are borrowed from the insurance and finance industries. Medical, IT and funding changes are, of course, interacting.

Medical science and IT - population medicine:

The scientific changes depend on information technology and science applied at population level. The NHS takes a paternalistic approach and thinks that the public mostly distrusts information technology unless it is an "app", and certainly does not understand statistics. These changes are only just becoming visible in health care practice world-wide after years of development in the US. They are only described in specialised journals or, in outline form, in NHS management briefings. For example:

Software is being rolled out to GP surgeries to instigate and maintain "watching briefs" on populations of patients with long-term conditions. Right now the national WSIC "Care Professionals Dashboard" carries the NW London Collaboration of CCGs logo - User Guide v5 - and it contains costed and non-costed versions. In addition there are more specialised Dashboard "Radars", for example the "Diabetes Radar" and "Asthma Radar". This supersedes existing software in a GP surgery.  Eventually all chronic conditions will be managed by such "dashboards", by a federation of all GPs in one STP "footprint" to a single population of about 200,000 patients. This means the dissolution of GP patients lists. It will be "pro-active" medicine for the entire population for the first time ever in history. We can quibble about the standard of that supervision. It will probably not be what the Queen has for her OAP check-ups. And we can worry about the confidentiality of medical records - experience to date shows that if the exchange of data is kept to regional level the dangers of unauthorised disclosure and use, theft and re-assembly of "pseudononymised" data are much lower. GPs themselves are unsure about what their role will be in this new primary care landscape, especially as they will will loose their own lists, their financial independence and they will become employees of a subsidiary company of an ACO - see below.

We are beginning to see on-line "consultations" with GPs or, indeed, with a lengthening list of other specialists like Assistant Physicians, pharmacists, more highly qualified nurses, "life coaches", etc... in a local GP surgery (soon to become a branch of a "new care model hub"). It is hoped that they can deal with specialised requests of a non-urgent nature. The NHS will need to explain to the public the precise nature of each profession's specialisation - and the public will decide whether they trust them in practice.

As the costs of test kits, hardware and software come down patients or their carers will be told to conduct their own monitoring of chronic conditions at home with much, much cheaper diagnostic tests e.g. the bowel cancer screening programme - testing every 4 years; home cholesterol tests, etc... You can buy your own blood-pressure measure for £30 - £130 if you need one! But can patients really understand that they are being given total responsibility for their own long term condition? Do they have the skills of a doctor or nurse?

The NHS assumes that patients will search for websites: NHS and non-NHS patient reference fora. Many are extremely helpful and supportive, and offer avenues for discussion for informed patients, which sometimes interface with research and researchers.

The information is getting out there... but the public has little experience of assessing a scientific problem, taking scientific decisions, taking responsibility for those decisions. And a sizeable proportion doesn't take a responsible attitude to maintaining their own health. Obesity is a recent population-wide condition which only occurs in rich countries.

All these new types of care are only for already identified, non-urgent and/or chronic conditions, what the NHS calls "Long Term Conditions".  Patients and carers will need to learn about the range of their own symptoms and the usual pattern of their LTC in depth in order to identify themselves exceptions requiring a re-evaluation by specialists. But, if used widely and properly, it should be possible, for example, to keep blood sugars of diabetic patients in better balance and avoid most crises and thus hospital admissions. Can this approach be applied to other chronic conditions? Each one differs. Software developers and clinicians want to do so. The modelling gets really complicated when two or more LTCs interact.

And it is mentally depressing to be given this much knowledge as a patient or carer.... Do you want a computer readout to tell you bad news or a real doctor or nurse?? And a lot of patients may well distrust their own readings.

Most of the bodies watching the NHS are adopting a wait-and-see approach to the new science and IT.

 

Accountable Care Organisations - regionalization, privatization and capping of funding:

A long-term regional contract from the Government for an ACO presupposes a fixed budget to provide the services: this is capping. Capping health service provision has not worked in the US and it won't work here. In the past NHS funding has waxed and waned according to political decisions and the UK economy. The conversion of the NHS into a collection of ACOs will be a final and irreversible change with capping for the duration of each contract. It remains to be seen whether the private sector will renege on its promises when predictions fail to materialise and costs exceed expectations, as happened for example on the East Coast mainline railway recently.

Campaigners and many NHS professionals believe that the responsibility for deciding (1) the standards of care and (2) the allocation of funding between different parts of the primary/acute/chronic/social care services should stay with a mostly publicly provided, 100% publicly funded, 100% publicly managed and 100% publicly accountable NHS ("true" NHS), and not be delegated to private outsourcing insurers/providers on huge and long contracts to decide according to their and their shareholders' profit requirements. Fraud is set to become a big new headache - in the US the Dept of Health is suing UnitedHealth for $1bn for overstated claims for Medicare - https://www.nytimes.com/2017/05/19/business/dealbook/unitedhealth-sued-medicare-overbilling.html.

The dangers of ACOs cannot be overstated and we think that campaigners should be concentrating on telling the public about these dangers. All the good developments above could be undone by entrusting health management to private companies and losing public oversight, transparency and accountability. That is why we think that the Labour party should grasp the nettle about keeping the NHS truly public and they should back the NHS Reinstatement Bill at every level (national, regional and local). This is already Labour Party policy - composite motion 8 at the October 2017 party conference.

Public accountability and control of funding are why the two actions for Judicial Review of ACOs are so important. He who controls the purse strings and how the purse strings are pulled wields ultimate power. ACOs will hand enormous power to largely unaccountable private companies.

 

A maths problem to solve: 44 x ACO does not = 1 x NHS

 

http://publicmatters.org.uk/2018/01/13/a-maths-problem-to-solve-44-x-aco-does-not-1-x-nhs/    Last updated on January 15th, 2018 at 10:20 pm

 

What’s all the fuss about STPs and the ACOs that are being introduced? Isn’t this just another one of the NHS’ endless re-dis-organisations? Is it important how the NHS is run if it’s still there for us ‘free at the point of need’?

In this blog we examine what has happened to the NHS since 2012 and why ACOs and ACSs threaten the integrity of the NHS.

Prior to the Health & Social Care Act (2012) the NHS was a national service with national standards. It was owned and provided by the government mostly through the Department of Health (DoH) but with some responsibilities delegated to local authorities.  Although some services were outsourced to the private sector long before 2012, the private sector could never describe its services as ‘the NHS’.

This is what most people think the NHS still is, barring a few organisational name changes and more privatisation. This is partly because the ‘delivery system’, though tattered round the edges, still looks roughly the same as it always has done.

The Blairitisation of Public Services – privatisation New Labour-style

During the Blair years there was a revolution in what it means for a service to be publicly provided and owned. He saw the NHS as old fashioned and inefficient – despite the fact that it has always been a world leader in clinical research and development. It was also consistently one of the cheapest universal health service in international comparisons by spending per person and as a percentage of GDP.

Blair’s aim was for the NHS to be ‘a kite mark and a funding stream’. His health team set about putting changes in place with the backing of the Treasury who raised the funding to unprecedented levels. They encouraged private sector contracts for clinical service. His Health Secretary Alan Milburn’s team went over to the States to talk with Kaiser Permanente who operated Health Maintenance Organisations (HMOs) which deliver Medicare.

The Health and Social Care Act 2012

In 2010 the Coalition’s Health Secretary, Andrew Lansley, was contacted by McKinsey & Co who had been talking to some of their major global clients about strategy for the NHS. When the extent of McKinsey’s involvement was leaked to the Mail on Sunday they ran a story ‘The firm that hijacked the NHS’.  It was the birth of the Health & Social Care Act (2012).

The Act removed the responsibility for providing the NHS from the government and created Blair’s ‘kite mark and funding stream’. Commissioning of services was handed over from the DoH to a new body separate from government, NHS England (NHSE). This is now the Commissioner in Chief alongside 200+ smaller commissioning groups (CCGS) across the country. CCGs buy in services from Any Qualified Provider who are badged as NHS by NHS Identity, the trademarking division of the NHS.

As the CCGs are not capable of running large, complex tendering exercises, Commissioning Support Units (CSUs), pre-approved by NHSE, are used to manage commissioning for a variety of other services. Notably amongst the top companies approved by NHSE is Optum, the UK subsidiary of UnitedHealth of America.

Crucially, the Act also quietly enabled the DoH to transfer ownership of all NHS land, estates and assets, previously under the control of the Strategic Health Authorities and Primary Care Trusts, to a (DoH-owned) private company, NHS Property Services Ltd, aka ‘The PropCo’. It has since created commercial leases for its properties and has started to charge commercial rents.

Breaking up the NHS

The ‘NHS’, no longer a public body, is now a series of separate entities working under the logo. Effectively all services work in a contractual relationship to NHSE in the way that GPs used to work for the Department of Health. But these services are not under the same restrictions regarding private services they can offer alongside ‘NHS services’ that the public service was.

Shrinking the NHS

In contrast to New Labour’s high funding levels, the Coalition and the Conservative governments put the squeeze on the NHS, increasing funding at less than the rate it needs – despite the huge demands being put on the system by these seismic administrative changes.

Inevitably this has a direct impact on service provision. CCGs have already started to exercise their legal powers to deny services, bringing in ‘lifestyle’ conditionality to a patient’s entitlement to treatment (obesity, smoking, foreigners…). Meanwhile, the new commercial rent has to be paid to Propco, and premises kept up to scratch, either because it is a condition of a PFI contract or because Hospitals and GP surgeries can fail a Care Quality Commission inspection and be closed down. Prior to the 2012 Act, buildings would have been allowed to get a bit scruffy and queues to lengthen rather than actual treatments being denied.

CCGs are structured as insurance groups. Their job is not only to put services out to competitive tender in order to get the best price from Any Qualified Provider, but to ensure that any referrals made via their members (all GPs have to be a member of a CCG) adhere to their individual rules. CCGs are not obliged to provide comprehensive services other than a core obligation for emergency, maternity and ambulance services; the rest is up to them.

The discrepancy between what CCGs provide gives rise to situations where private clinics situated within NHS hospitals can ask NHS patients to check with their funding body (CCG) whether the treatment they need is covered by them, as their service covers several different CCG referral areas. Otherwise self-pay and insurance payment is available. Bedford 3 Counties Laser Clinic explicitly states this on the home page of their website.

This isn’t a matter of cuts, this is a question of the integrity of the NHS as a public service.

ACOs – An American Import with a 5 Year Plan

In 2014, NHS England CEO, Simon Stevens, produced a 5 Year Plan, The Five Year Forward View. In it he talks about a growing and ageing population, whose care needs aren’t being properly catered for. He argues that the NHS must be reshaped to meet this ‘challenge’ with a ‘joined-up strategy’ to integrate health and social care.

The 5 Year Plan promotes a voucher system and ‘choice’. Maternity vouchers are being trialled across the country allowing women to decide where they want to spend their ‘NHS’ money – in the public or private sector. Midwives have been encouraged to create midwife-led maternity businesses outside the NHS.

Stevens also says that A&E is expensive and overused. He has revived Professor Sir Bruce Keogh’s plan to reduce them in England, replacing them with a significantly smaller number of huge centralised Major Trauma Hospitals. District Generals will become Multi Speciality Community Providers providing urgent care only, sending patients for consultant-led, high-dependency care to centralised Major Trauma Hospitals if necessary.

To speed up the implementation of the 5 Year Plan, Stevens announced the Sustainability and Transformation Plans (STPs) and their 44 footprints to run combined health and social care in which a variety of organisations including Foundation Trusts, Local Authorities and private sector providers will participate. Some have championed the Plans claiming that they will end competition and restore the Strategic or Regional Health model with the added bonus of integrating health and social care.

In reality this is the end of nearly 70 years of the NHS.

The STPs take the N out of the NHS. The 44 footprints represent 44 Local ‘Health economies’ – soon to include ACOs – each with different configurations and services.

What are Accountable Care Organisations? Where do they come from?

To answer this question let’s take a trip to America and consider the Health Maintenance Organisation (HMO).

There is much speculation at the moment as to whether President Trump will stay in post or be impeached or removed. In the 1970s another president, President Richard Nixon, was impeached and left office. His advisor, John Erlichmann, also served a prison term as a consequence. The scandal was focused on the Watergate Tapes – an event so significant that the word ‘gate’ is now tagged onto other scandals. In the Watergate tapes, at the centre of the scandal, there was a conversation between Nixon and Erlichmann, both friends of Edgar Kaiser. Kaiser had made a proposal to extend Medicare through his company’s system of HMOs.

Nixon didn’t like the proposal because he questioned where the profit was and was reluctant for the state to pay for the roll out of HMOs to provide healthcare for the poor. It was explained to him: “All the incentives are toward less medical care, because the less care they give them, the more money they make.” Nixon made a speech shortly after in which he said how proud he was that the US was finally going to offer essential healthcare to all its citizens.

However, HMOs suffered increasingly bad press with allegations of fraud and denial of care to those enrolled on its lists. HMOs were superseded by Accountable Care Organisations as part of Obama’s Affordable Care Act, relaunched and rebranded to remove the bad smell they had developed. And for good reason, because at least three of the leading eight insurance companies have had 18 month-bans from the US government at times for refusing to allow expensive patients to register. UnitedHealth is currently being investigated for fraud associated with Medicare. They are investigating cases in which the global corporation charged the government for care that never happened.

ACOs – who benefits?

ACOs, like their predecessors the HMO, work on the basis of a population in a defined geographical area registering for care to be provided by them. People eligible for Medicare can sign up to a healthcare insurance plan provided by an insurer like Edgar Kaiser’s company, Kaiser Permanente, but paid or part-paid (depending on benefit eligibility) by the government. The US government pays for about 52% of all the healthcare costs in the US either via Medicare and Medicaid or through tax relief on company employee health plans. That means government funding goes directly or indirectly into insurance groups’ pockets. And eligible services through Medicare and Medicaid are ‘free at the point of delivery’.

But this is not a universal, comprehensive or accessible service.

By receiving the money and controlling where, how and on what conditions the money is spent the insurance industry organises its care delivery to ensure as little is spent as possible on patients. Health insurance bosses are some of the highest paid people in the US and the businesses are extremely profitable (despite Kaiser Permanente, like Eton College School, having ‘not-for-profit’ status). The people who cost the most in healthcare are the elderly and the very young which has always been the case. These are the costs – births, maternity care, mental health, long-term care or the elderly and disabled, along with Acute and Emergency services – which tend to be covered by ACOs.

In England’s NHS eight ACOs are expected to be in place by April 2018 with others to follow. The government will pay the ACO to look after its registered members through its own providers. Greater Manchester has already put out a contract for ‘expressions of interest’ worth £6,000,000,000 over ten years. And in Dudley a contract worth £5,000,000,000 over 15 years.

So….

  • The local GP family practice is seen as unsuited to modern demands. They are being replaced by multi-speciality clinics staffed by nurses, Physician Associates and prescribing pharmacists run by GP management or super-clinics.
  • GP/patient relationships are seen as out-of-date. Instead an electronic shared record is preferred. There have already been security issues arising from the privatisation and sharing of records.
  • No more district general hospitals designed for easy access to A&E or community hospitals with in-patient beds offering real local care. Instead there will be ‘Urgent Care’, promoted as being just a different kind of A&E, but in reality a transfer station with few or no major consultant-led services in the hospital to back it up.
  • Specialist care and A&E will be centralised in rich metropolitan areas where additional private services will find a market while there will be a reduction of services in rural and poor areas.

 

How is it being put in place?

  • Foundation Trusts and GPs alike are being ‘incentivised’ by being given extra funding if they comply with the changes and denied it or threatened with closure if they don’t. The Naylor Report describes one method of achieving this.
  • Kaiser Permanente is ‘buddied’ with NHS Foundation Trusts to teach them how to run their systems.
  • US computer systems for clinical records, based on commercial invoicing, are already in use in many NHS hospitals.
  • The CCGs already provide an insurance style set-up, with limited core responsibilities and choice over what else is offered. In Lincolnshire three CCGs are run by Optum, the UK subsidiary of UnitedHealth of America. Optum are also vetting GP referrals in West London.
  • New grades of clinical staff are already being recruited from the States or trained-up here to run the new models of care.
  • NHS hospitals are already able to earn up to 49% of their income from private patients and are already offering not just ‘fast track’ but additional services no longer available on the NHS for those who can self-fund or have insurance.

It’s not much of a step a couple of years down the line to find that NHS is synonymous with Medicare/Medicaid – still state funded, still ‘free at the point of need’ but alongside a much larger private sector with private insurance plans available through the ACO.

Just like Kaiser Permanente and all the other health insurance companies.

This isn’t simply another reorganisation of the NHS. This is the murder of the NHS dressed up to look like suicide.

 

Carillion: A story of Britain's fake markets

By Chaminda Jayanetti;  Published in Politics.co.uk on 17th January 2018

They can't say they weren't warned.

From the earliest days of the private finance initiative (PFI), journalists and trade unions warned of the timebombs that were being laid beneath the public sector. Stories of failure and waste have been legion for two decades. The issue finally blew up when austerity squeezed hospital finances under the coalition.

But even then the show went on, this time rebranded as 'PF2'. Same firms, more deals. Infamously, Carillion issued a profit warning last year, with severe questions even then over its prospects for survival. Still the contracts rolled in.

The political, social and financial contagion of Carillion's collapse will unfold for some time, but it has already dealt a hammer blow to the marketisation mania that has dominated public service delivery for the last 30 years.

Carillion doesn't tell us why it failed. It is just one example of how.

There was a time when state ownership extended into what we would now consider the private sphere – airlines, cars, steel. It was never the radical dream of state control of the 'commanding heights' of the economy, but nevertheless the extent of it is unimaginable in Britain today.

By 1990 this had all changed. Thatcher's privatisations are most keenly remembered for the utilities that were sold off – water, electricity, gas – largely because they later proved unpopular. There is no public demand for the return into state ownership of British Airways.

But British Airways exists in a genuine marketplace. It is not what most people would consider a 'public service', nor an everyday 'utility'. There are multiple airlines, offering different fares and destinations. People spend their own money on them from their disposable income, generally as a matter of choice. From that money springs profit. We don't think of it as 'marketised' or 'privatised' – it's just a private market. It looks like one because it is.

The continuation of the privatisation agenda under subsequent governments brought it right to the heart of the 'social state' of safety nets and public services: the NHS 'internal market', benefits administration, PFI, prisons, probation services, adult care provision, pupil referral units…

The list of marketised or privatised public services becomes exhaustingly long before it becomes exhaustive. There is barely an area of social provision that has been left untouched by the ideological frenzy of the last three decades.

But here's the thing – we have marketised services without creating markets. Most of the privatised utilities have descended into regional monopolies or oligopolies, but outside of that, the 'market' for provision of public services is not a genuine market at all.

A genuine market has customers – individuals or corporates – spending their own money from a choice of providers. I choose a supermarket, and choose items within it. A company chooses a supplier of goods. Money is paid, profit is made. Marxists aside, this is not controversial.

What happens in our marketised public services is different. The government requires a service. A charity or company – often selected from a limited sphere of options – provides it. Taxpayers' money is handed over. Many of these providers are heavily dependent on this source of funding. The private sector providers make a profit from it. But throughout, the taxpayer is on the hook – if something goes wrong, the taxpayer pays.

These are fake markets, and they proliferate in Britain's social state. There is no natural, genuine market mechanism. Market sectors spring up purely to suck at the government teat. Providers demand assurances that a lengthy 'pipeline' of government-funded projects will be offered to them to make it worth their while to even bother offering the services that until then the government had provided itself.

PFI is a perfect example of this. It uses a form of funding called 'project finance'. This is a system where projects are financed through loans which are then repaid from the profits the projects make. So, a company borrows money for a coal mine – the profits from selling the coal will repay the loan while making a profit on top. It all makes perfect sense.

PFI is different – it takes project finance and applies it to public projects. But where is the profit? Hospitals do not make a profit. Nor do schools. Nor do roads, unless they are tolled. Instead the 'profit' comes from the government – the public sector pays out. One of the arguments for involving the private sector is that it 'shares' the risk of failure – but as Carillion shows, in reality it doesn't. When times were good, the money went to Carillion. When the government stopped paying enough, the service must still be delivered and the taxpayer is left holding the baby.

The core idea behind this process is that the private sector is more efficient than the public sector. But this assumption – born of pure ideology – has a huge logical flaw. Pre-PFI, the government would borrow cheaply to pay a private contractor to build its project. Subsequent operations and maintenance would be provided by the public sector. The only profit margin was that of the construction firm.

Under PFI, the private sector shareholders take a cut. The construction firm takes a cut. The banks take a cut. The outsourced operations and maintenance firms take a cut. At every stage, over the course of decades, someone or other is taking a cut – and that cut always comes from the taxpayer.

Competition can lead to greater efficiency – and to greater corner-cutting – and yes, the public sector can be, and has been, inefficient. But the idea that private firms are so much more efficient than the government that this efficiency can outweigh the multitude of profit margins the taxpayer must cover is a logical fallacy. It doesn't work in theory and, as we can see, it doesn't work in practice. When, as with Carillion, the government started demanding major efficiencies, the whole edifice came crashing to the ground.

PFI is a specific form of marketisation. There are many others, and, as ever, the markets are fake. They are fake because they are entirely dependent on the taxpayer.

Take adult social care. The last decade has seen councils shut down their own care homes and replace them with publicly subsidised services, provided by charities, 'social enterprises', and private companies. For a while the going was good – so good, in fact, that private equity cowboys rode in, confident of making a killing off the taxpayer.

Then came austerity. Swingeing cuts to local government funding were passed onto care services, and therefore care providers. One particularly badly run provider, Southern Cross, went bust. Four Seasons, which took over many of Southern Cross' care homes, is now itself in trouble. Charities are against the wall. Without government money, the 'market' disappears in a puff of smoke. You'll find a more bona fide market at your local jumble sale.

Underpinning all this is a basic fact that governments of all colours have tried to wish out of existence: Things cost money. Neoliberal dogma holds that the public sector is inefficient, that markets know best, that necessity is the mother of invention, that 'choice' is everything and that the expertise of public sector workers should be discounted against the whims of corporate directors.

It is nonsense. Those 'markets' weren't markets. That 'choice' was fishing from a puddle. Those costs weren't inefficiencies, but the real costs of delivering real services. Public sector workers, who had delivered services for decades, knew about public services. 

Reality does not bend. Public services are not profitable. They are forms of redistribution, not wealth creation, providing life's necessities to people who could not afford it themselves. Because of this, they can never be run as competitive consumer markets. 

Is this a watershed moment? It could be. Or maybe the Adam Smith brigade will succeed in arguing this is 'one bad apple', that the contracts were the problem, and that the civil service is to blame. In which case, we'll be back here in a few years' time. That would be tragic, because while the markets are fake, the pain is not.

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