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NHS

The Labour Party have proposed to cap the profit margin that private firms can obtain from working for the NHS at five per cent. There is some briefing that it would be fudged if for some particular contracts it would put off too many firms bidding.  This still leaves The Guardian (of all people) to fret that changing the rules would mean yet more disruptive meddling from Whitehall – These top-down reorganisations can just creep up”.

Let us suppose that the change would actually mean something – that it is not merely a gimmick. What difference might it make in practice? The Times this morning reported(£) concerns that:

“Rigorous application of the cap would affect an increasingly popular model in which companies are given responsibility for co-ordinating care for older people. They are promised a profit if they improve care and keep people out of hospital, while facing losses if they fail.

“Margins on such contracts are likely to exceed 5 per cent if they are successful, but their track record is mixed. Virgin Care was this week handed a £280 million seven-year contract for people with long-term conditions in Staffordshire, but last year Serco said that it was pulling out of clinical contracts because it was losing money. Margins on routine work such as tests and scans are likely to be under 5 per cent.”

This is unremarkable. If there is no risk then a five per cent return is fine. Something rather more innovative, with a greater risk to the shareholder, but potential great benefits to patient? Then Labour would quash the opportunity by refusing to reward the risk.

Lord Warner, the former Labour Health Minister says of his Party’s new policy:

“It runs the risk of being one of these pre-election promises which doesn’t stand up when confronted with the reality of government.

It’s far from clear how you would actually implement it. A lot of the private sector is currently providing services to the NHS at standards NHS tariffs. Is that a profit?

“If you want to scare people, you can scare people. But all the work that was done in the Blair government on choice and competition showed that people didn’t have concerns on whether work was done by the private or public sector.

“What they were concerned with was whether they would have to pay and was their care safe.

“The point is what’s the best quality of care we can provide for patients at a reasonable price.”

That is hardly a ringing endorsement.

Adam Memon of the Centre for Policy Studies says that if the private sector can deliver better outcomes for NHS patients – without NHS patients being charged – then it is “blinkered” to disrupt the process. He adds:

“The cap on profits that he is proposing is also arbitrary. Why exactly does a profit margin of 4.9% represent good value for the taxpayer but not 5.1%? What compelling reason is there for contracts of a value of £500,001 to be subject to the cap but not contracts worth £499,999? What difference would it make if non-medical services such as cleaning or catering earned 5.1% profit margins? Good value for money cannot be judged solely according to a pre-determined profit margin. Moreover, why on earth shouldn’t firms which have invested and delivered quality services be rewarded with profits?”

This is where it all starts to unravel. It is why Ed Miliband and Andy Burnham still disappoint many on the Left. Mr Miliband says profit is “draining money away” from the NHS. So why allow any profit? Mr Burnham says the “market should be removed” from the NHS – so why allow the market to remain, for the safe tendering where a five per cent profit margin is attractive?

If we accept the “people not profits” rhetoric then why not prohibit profit altogether? If funding profit is simply an extra cost imposed on us then why not prohibit profit altogether from any firm supplying any product to the NHS? Why not, for that matter, abolish profit everywhere else? That is the logical conclusion of Labour’s class war language which is so anti business and contemptuous of wealth creation.

There are a worrying number of people who do talk as if the amount of wealth is fixed. If they are right that would mean that reducing profits for companies means lower prices. Or that taxing the rich means more money for the rest of us.  It is a comforting thought. The notion that behaviour would change and that there would be less wealth to share around is less comforting and thus a thought many wish to ignore.

Or even if the deleterous impact is conceded then it could be that the objection to profits is moral rather than practical. Perhaps it could be that allowing a firm to operate making a profit might result in better value for the consumer. That still leaves the arguments that profits should still be banished as a matter of principle.

The difficulty for Labour comes when they endorse this message in their rhetoric but then offer policies which are rather more half hearted. So the logic is that if you really believe the Labour rhetoric then vote for the Green Party, or Plaid, or the SNP or Respect or the National Health Action Party.

41 comments for: Labour’s proposed profits cap on firms working for the NHS will satisfy no one

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