A shocking mess or a jolt back to life?

It was July 2010 when Health Secretary Andrew Lansley first announced plans to reform the National Health Service (NHS) in order to ‘create the largest and most vibrant social enterprise sector’ in the world. 

Over 18 months on from the publication of the initial white paper Equity & Excellence: Liberating the NHS, what became the Health and Social Care Act 2010-2012 finally completed its passage through parliament. What started out as a relatively clear, if not very well presented, plan to increase the power of market forces has ended up as an unholy mess devoid of any unified purpose at all.

The NHS is definitely still large – it had a budget of £106bn for 2011/12 and employs over 1.4 million people in England – but for social enterprises, and social entrepreneurs hoping to ‘spin out’ of the NHS, the picture is far more complicated.

In many local areas, the ‘most vibrant social enterprise sector’ may now be more difficult than ever to break into. 

A very short history of the internal market

The new Health and Social Care Act is the explosion of a long-running debate over how the NHS is run. In the 1980s and 1990s, the Conservative governments of Margaret Thatcher and John Major began to move away from a system where, broadly speaking, NHS funds were allocated to local agencies and spent on delivering services in that area.

With the intention of making the NHS more efficient (saving money), they began to introduce an ‘internal market’ where different hospitals and other providers of NHS services would compete with each other for NHS business. One aspect of this was GP Fundholding, a policy under which GPs could apply to receive funding to commission services from hospitals and other providers.

When New Labour came to power in 1997, they pledged to abolish the internal market and to return to a system where money was allocated on the basis of local need. Rather than driving up performance by getting NHS providers to compete against each other for business, they introduced national targets – including cutting the time patients spent waiting for treatment – which local NHS agencies had to meet.

Following the 2001 election, New Labour changed their mind and decided that the NHS did need to have an internal market after all (although they also kept the national targets). Primary Care Trusts (PCTs) were introduced to commission (buy) local services (and also provide some of them). New structures called Foundation Trusts were created and enabled to operate like independent businesses within the NHS.

During this period, PCTs were encouraged to outsource some service provision to non-NHS providers including private companies and social enterprises. Currently around 5% of NHS spending goes to non-NHS providers.

No money, big problem

Andrew Lansley’s starting point as Conservative Health Secretary was that the NHS budget is not sustainable. Current government policy is that spending on the NHS will increase by 0.1% per year in real terms until 2014.

Unfortunately, due to factors including the rising costs of drugs and increased demand caused by our ageing populations, it’s estimated that spending needs to rise by at least 3% per year for service provision to be maintained at current levels. 

Within the heated debates between politicians, professionals and other stakeholders since the Bill was launched there is – at least in public – clear agreement on three points:

• NHS care should be funded through taxation
• NHS care – aside from existing exceptions – should be free at the point of delivery
• The NHS needs to save lots of cash through greater efficiency in order to meet growing need with shrinking resources

There is also broad agreement amongst politicians – if not necessarily from NHS staff or patients themselves – that patients need to be given more choice about the healthcare they receive. The idea being that increased choice will both enable people with differing needs to get the care they want and – in the process – save money.

What was Andrew Lansley trying to do? 

The key practical elements of the original Health and Social Care Bill, in terms of the NHS, were to change the arrangements for buying, providing and monitoring services.

Since 2002, buying most local NHS services has been the responsibility of Primary Care Trusts (PCTs). Lansley planned to abolish PCTs and give the power for buying local services to groups of GPs – GP Commission Groups – on the basis that they have a direct, ongoing relationship with their patients and therefore would be best placed to buy the services that their patients need.

Although there is an internal market in NHS (see above), most NHS services are currently provided by staff employed directly by NHS Trusts. Under the original draft of the Bill, Lansley wanted to create a more open market.

GP Commissioners were to be given the opportunity to buy services from Any Qualified Provider – so any organisation, NHS Trusts, charity, social enterprise or private company that received accreditation and could provide a service at an agreed price would be able to offer that service.

In theory, this would give patients the opportunity to choose the service they wanted from a range of different providers – although this depends on there being several providers being able to offer the service at the agreed price, in the local area.

Lansley also planned to give Monitor, the NHS organisation responsible for regulating Foundation Trusts, new powers to set the prices for NHS services and (controversially) to promote greater competition.

The underlying theory was that GPs – who, unlike PCT commissioners, deal directly with patients – were the professionals best place understand local needs, and that greater competition would ultimately increase quality and reduce costs.

Why did politicians and NHS professionals object to the Bill?

The objections to the Bill fitted broadly into to two categories:

1. Reorganising the NHS in this way is a waste of time, energy and money. This is the view of many NHS professionals and many politicians including members of both parties in the governing Coalition. While many critics agree that it’s a good idea for GPs and other clinical staff to have a bigger role in deciding which services are bought and provided, they believed that this could have been done by giving these people a bigger role in running PCTs, rather than creating new structures.
2. Creating an open market in the delivery of NHS services will lead to privatisation of the NHS. Many critics of the Bill, once again including NHS professionals but also Liberal Democrats and opposition MPs, believe that allowing GP Commissioning Groups to buy services from any provider would lead to a significant increase in services being provided by for-profit private companies, who would take the most lucrative business, leaving NHS providers to offer the more complicated, expensive-to-deliver care. Some opponents object to this in principle – they believe it is wrong to profit from people being ill - others believe that it is an inefficient way to deliver healthcare.

What would this mean for social enterprise? 

Although the social enterprise movement generally supports greater competition in the delivery of public services, the original Bill – possibly unintentionally – seemed likely to create markets heavily tilted against social enterprises.

The key problem was that the Bill prevented GP Commissioners from favouring one type of provider over another – leaving social enterprises, including newly-created spin outs, to compete directly with large NHS providers and private companies.

As Ceri Jones, Head of Policy at Social Enterprise UK, explains: ‘The unintended consequence of this would be to prevent clever commissioning where the NHS supports the development of small local organisations and user-led groups.’

So, while under the Right to Request scheme, specialist social enterprises such as Living Well CIC – a social enterprise providing innovative services focusing on HIV services, youth and community support – were able to spin out of the NHS and receive a three-year contract from their PCT, under the new bill specialist social enterprises would immediately have to bid against other providers for their first contract.

At the other end of the size spectrum for social enterprise, Right to Request also supported NHS staff to spin out large blocks of local services previously provided by PCTs into social enterprises – successful examples include Central Surrey Health.

Last year, Central Surrey Health controversially lost out in a bid to take on more services in South West and North West Surrey when the contract went to Assura Healthcare, a private company backed by Virgin. It was suggested at the time that Assura won the contract partly because they were able to put up a £10m capital bond as surety whereas Central Surrey Health, despite being large by social enterprise standards, was not in a position to do so.

It is likely that in its original form the Bill would’ve forced commissioners to replicate that approach. As Ceri Jones explains: ‘Opening up markets in this way creates massive barriers to entry with high capital costs which can only be found by large players.’

A pause, followed by a mauling

The Health and Social Care Bill was initially supported by both parties in the governing Coalition but during the early months of 2011, as Liberal Democrat MPs in particular began to understand its implications and – partly under pressure from party activists – several MPs became less keen on it.

The result was a ‘pause’, announced in April 2011, which included the NHS Future Forum – a listening exercise where professionals and members of the public had the opportunity to have their say on the Bill – which published its recommendations in June 2011.

Since then, a significant number of amendments have been made to the Bill. Some of the biggest ones include:

• Monitor – the organisation that was going to be responsible for promoting competition in the NHS – will now be tasked with promoting ‘the interests of patients’ and ensure competition is based on quality rather than price
• and GP Commissioning Groups have been expanded to include hospital doctors and nurses and will now be known as Clinical Commissioning Groups.

Most significantly, though, the need for the government to accept checks and balances to prevent the new structures leading to ‘privatisation’ has led to a commissioning system that is, at best, confusing.

Any Qualified Provider, the system that was meant to enable patients to choose some services based on an ‘open market’ of providers, is just about still part of the Bill.

Its new status is outlined in a document published by the Liberal Democrats to explain the changes made to the Bill at their request: ‘We will continue to extend patients’ choice of “Any Qualified Provider”, but we will do this in a much more phased way and will delay starting until April 2012. Choice of Any Qualified Provider will be limited to services covered by national or local tariff pricing, to ensure competition is based on quality. We will focus on the services where patients say they want more choice, such as services for back pain, child wheelchair services and local adult hearing services.’

As leading health blogger Paul Corrigan explains in a recent post: ‘Whatever else the Bill achieves – no one can see this as simplified.’

So, what happens now?

Now that the Bill has finally made it through parliament most of the structural changes to the NHS will be in place by the end of March 2013.

Unfortunately (or not, depending on your point-of-view), there is no longer any clarity about what the government wants to happen as a result of the changes.

From a social enterprise point of view, we have moved from an overly bureaucratic system where social enterprises could break into the internal market based on a combination of central government support and imaginative local commissioning, to a fiendishly complicated system where more or less anything could happen.

Existing social enterprises – including those who have spun-out of the NHS under Right-to Request or are doing so under its successor, Right to Provide – will now be operating in a system where contracts currently delivered by the NHS may be less likely to be opened up to competition as the NHS hunkers down to face down ‘privatisation’.

On top of the that, when their existing contracts come up for renewal, they will be in competition with NHS Trusts and private providers, and they will have the handicap of being a relatively small organisation (there is more risk of not delivering the contract due to running out of money) but will not be able to receive preferential treatment for being social enterprises.

None of this means that new and existing social enterprises won’t succeed in delivering more NHS services in the future but there is a clear need for the government to make sure that they are not inhibited by factors unrelated to their ability to deliver high quality, innovative services for patients.

On the plus side, the recent passing of Chris White MP’s Public Services (Social Value) ACT 2012 in February means that Clinical Commissioning Groups will have to consider additional social value when commissioning services. 

Speaking during one of the final debates on the legislation in the House of Lords, Health Minister Earl Howe said: ‘The Government agree that a wide-angle lens on the extended social, economic and environmental benefits when conducting procurement exercises can only be helpful. Today I am going further and put on the public record that the Secretary of State for Health is committing that the requirements in the public services Bill will be fully applied in relation to commissioning of NHS services through the procurement guidance that the board will produce on this.’

That should be good news but, as with the Act as a whole, it’s too soon to say what it will mean in practice.

David Floyd writes the social enterprise blog, Beanbagsandbullsh!t.com. He was co-author of the think piece Better Mental Health in a Bigger Society, published by Mental Health Providers Forum in December 2011.