1.  INTRODUCTION

  Birmingham NHS Concern is a non-party political forum set up to defend the founding principles of the NHS. Formed at the end of 2001 by the late Dr Tom Low-Beer of the NHS Consultants Association, its aim is to monitor and publicise changes and developments, including the use of the private sector, that affect the NHS in Birmingham. The University Hospital Birmingham NHS Trust has decided to apply for Foundation Trust status. The submission, below, considers the implications of this for local people and the wider NHS.

2.  SUMMARY

  The government is rushing to establish Foundation Hospital Trusts before previous reforms and new investment have had time to take effect. Constant upheaval is affecting the retention of NHS staff.

  The Fundacion Hospital in Madrid, the model for NHS Foundation Trusts, is publicly owned and privately managed, unlike hospitals in the UK. The idea may not work in NHS hospitals, many of which will soon be replaced by expensive PFI schemes that are privately owned and run.

  The Department of Health provides no evidence for key assumptions. Many health commentators believe that a monopolistic integrated NHS is necessary to safeguard patient care. Local accountability might have been achieved more effectively if governing bodies had been established in health authorities instead of NHS Trusts.

  It is misleading to compare Foundation Hospitals with co-operative societies. It is not clear how Members can "own" the assets of PFI hospitals.

  There will be some accountability to local people but the new structures are too weak to effectively empower local communities. There will be less accountability to the Secretary of State and Parliament, increasing the likelihood of voter apathy. Foundation Trusts herald the end of Patient Forums. There will be no mechanism to involve local people in the monitoring of services.

  The freedoms afforded to Foundation Trusts give then an unfair advantage over neighbouring Trusts. As a result, the latter in some instances could be forced to close. Foundation Trusts do not necessarily perform any better than other NHS hospitals, especially in the area of clinical performance.

  The establishment of independent Foundation Hospitals is in line with the privatisation agenda of the WTO.

3.  GENERAL COMMENTS

  3.1  Before the 1997 election, New Labour promised it would modernise the NHS in an atmosphere of stability, avoiding the structural upheaval of the Tory years. Since then, there has been almost permanent revolution. The establishment of Foundation Trusts is yet another round of reform, imposed before previous initiatives and the benefits of new investment have had time to take effect. NHS Staff are demoralised by constant reorganisations. According to recent research funded by the Department of Health (DoH), a fifth of GPs now want to leave the NHS because of the they are dissatisfied with the government's reforms (Guardian 3 January 2003). In Birmingham, the situation is compounded by the fact that 30% of GPs are due to retire in the next five years.

  3.2  Foundation Trusts are modelled on the Fundacion hospital in Madrid. The latter is owned by the public sector and privately managed for a fee, unlike any hospital in the UK. Although its governance arrangements involve a wide range of local people, its not clear how the idea will apply to hospital trusts in the UK, many of which are due to be replaced by expensive, privately financed schemes. The benefits are also unclear. According to Spanish authorities, the Fundacion Hospital outperforms government controlled hospitals in virtually every respect. However, local Unions say that this is because the most costly and difficult patients are sent to a nearby fully public hospital. Over 90% of nurses are unhappy with the management of the Fundacion Hospital where average working hours are 8% longer than normal (Guardian 6 November 2001).

  3.3  Only hospitals awarded three stars in the Government's rating system can apply for Foundation trust status. Although they are considered to be top performing hospitals, they may only be so in a narrow sense. According to the audit commission, the Government's rating system is based on a limited range of performance indicators that measure quantitative targets such as waiting times and financial performance, not clinical outcomes and quality of care. For example, under the star rating system, the University Hospital Birmingham NHS Trust is one of the best performing acute trusts. It meets eight out of the nine key government targets and is likely to be in the first wave of hospitals to apply. It also has some of the highest readmission rates and the worst record for MRSA infections in the country. Clearly, a three star rating does not necessarily mean top clinical performance.

  3.4  The DoH does not provide any evidence to support other key assumptions. For example, it states that the monolithic centralised structure of the NHS is responsible for the UK's widening health inequalities; new investment on its own will not solve the problem; local ownership of hospitals, not Whitehall control, is needed to tackle local health inequalities (Guidance, December 2002). However, many health commentators believe just the opposite—that a monopolistic integrated health care system is necessary so that patients are not denied care or passed from one service to another in order to cut costs.

  3.5  Local accountability could have been achieved more effectively and with less disruption if the Government had established governing bodies in local or strategic health authorities. Local people would then have had the responsibility for overseeing strategic planning and the wider public health agenda. This would have allowed the NHS to develop as an integrated service, in a co-operative rather than competitive, fragmented way.

4.  GOVERNANCE AND ACCOUNTABILITY

  4.1  The Government states that Foundation Trusts will be established as independent public interest organisations, modelled on co-operative societies. This is a misleading comparison. Co-operative societies are associations that bring members together for retailing and trading purposes and the sharing of profits. By contrast, Foundation hospitals are hugely complex organisations delivering a public service. Their assets and any surpluses cannot be used to provide dividends or bonuses for local members.

  4.2  The idea of local ownership is also misleading. Members of Foundation Trusts only own hospital assets (land, buildings, equipment, cash and other property) in the sense that they will be liable to pay a nominal sum (£1) towards any outstanding liabilities if the Trust became insolvent and had to be wound up (DoH Guidance December 2002). By the end of the decade, over 100 publicly owned NHS hospitals, including Foundation Trusts, will have been replaced by new hospitals that are privately owned and run. The Secretary of State has not explained how Members can `own' the assets of new PFI hospitals.

  4.3  It is true that Foundation Trusts will strengthen the connections between providers of NHS services and local stakeholders. At the moment, NHS Trusts are accountable to the Secretary of State but not to local people. However, the new accountability arrangements are not very strong. Only local people or patients who apply to become Members will be eligible to elect representatives onto the Board of Governors, not the community as a whole. And although the publicly elected governors will be in a majority on the Board, they could lack expertise and simply defer to the minority that represent professional bodies or to the views of hospital managers and doctors. Some hospital managers already believe they can manipulate the Boards into becoming nothing more than talking shops (HSJ 7 November 2002).

  4.4  The governors will have limited duties and responsibilities. They will not be involved in matters of day to day management such as setting budgets, staff pay and other operational matters. They will not be required to meet on a regular basis. As a minimum they will be expected to hold only three meetings a year, including one open meeting to allow all Members to approve the annual report and accounts of the Foundation Trust.

  4.5  The Board of Governors will be under a general duty to inform the Independent Regulator of any action by the Management Board that appears to be inconsistent with the terms of the Trusts licence. However, local people will have not have any power to remove the Independent Regulator if they think he is acting against their interests, as they do with elected politicians. Establishing Foundation Trusts as independent public interest companies will reduce accountability to the Secretary of State, Parliament and local MPs. As such, Foundation Trusts could see a further rise in public apathy at the polls.

  4.6  The Government's aim of extending Foundation Trust status heralds the end of Patient Forums, before they have had a chance to get started. Foundation Trusts are not required to establish their own Patients Forums, despite the weakness of the new accountability arrangements. Instead, performance will be managed and monitored by a whole range of official bodies, such as Primary Care Trusts and the Commission for Healthcare Audit and Inspection. Without Patient Forums, it is unclear how local people will become involved. It is unrealistic to expect busy councillors on a local Overview and Scrutiny Committee to undertake the duties of a large number of Patient Forums, as would be the case in a city such as Birmingham.

5.  IMPACT ON THE WIDER NHS

  5.1  The freedoms given to Foundation Trusts will, in theory, provide them with extra money to attract staff and services from other hospitals. In fact, this appears to be the aim. The DoH states "Financial benefits for an NHS Foundation Trust will be generated not by reducing prices and competing with other NHS Trust but by realising performance and efficiency gains and increases in range and volume of services delivered to NHS patients" (paragraph 5.9 Guidance on Foundation Trusts, December 2000). Given the restrictions on private patient work, a Foundation Trust could only increase the range and volume of services it provides by taking work from neighbouring NHS Trusts. This is unfair competition, despite the official view.

  5.2  The fundamental problems of the NHS—too little capacity, too few staff and low pay levels across the board—mean that many trusts, however good their clinical performance, may struggle to win three stars. They could become second rate institutions under competition from Foundation Hospitals and eventually be forced to close. The threat is real in Birmingham where only one out of four acute hospital trusts is expected to become a Foundation Hospital. The NHS will no longer provide a universal, equitable service to the population as a whole.

6.  THE GLOBAL AGENDA

  6.1  Establishment of Foundation Trusts facilitates the World Trade Organisation's (WTO) privatisation agenda under the GATS treaty. GATS (The General Agreement in Trade in Services) is a system of international law that aims to facilitate the expansion of the private sector into service areas traditionally run by government agencies, such as transport, health care, social services, education, housing etc. Article 19 of GATS requires member states to "enter into successive rounds of negotiations with a view to achieving a progressively higher level of liberalisation".

  6.2  In the current round of negotiations, the UK/EU has received a request to remove a horizontal limitation that protects the rights of EU member states to provide services through public or private monopolies. According to the Government, if the EU's "limitation" were to be removed or watered down, public services would still be fully protected under Article 1.3—a GATS rule that exempts "services supplied in the exercise of governmental authority ," defined as "services supplied neither on a commercial basis nor in competition with one or more service suppliers". However, according to the WTO, public services such as the NHS that are run along commercial lines should be subject to GATS rules. Given the views of the WTO and the uncertainty surrounding Article 1.3, the removal of the EU's limitation would more than likely expose the NHS and other public services to GATS rules.

  6.3  Since 1991, successive UK governments have deliberately introduced new policies to enhance the role of the private sector in the delivery of public services, particularly in health care. As a result, the lines between public and private services have become progressively blurred. For example, in 1991, the UK government introduced capitation funding and commercial practices into the NHS in order to establish an internal market. These and subsequent changes such as the private finance initiative and the private sector concordat allow the private health sector to compete with the NHS for public funds.

  6.4  The establishment of Foundation Trusts continues this trend. When they are established, they will have the power to generate income by providing clinical services to non-NHS bodies, in direct competition with the private sector. Eventually, Foundation Trust status may be awarded to organisations such as private hospitals that are currently outside the NHS. This indicates a willingness on the part of the Government to allocate substantial state subsidies , formally earmarked for NHS hospitals, to `for profit' organisations in the private sector.

  6.5  Under GATS, the Government could be challenged under the Most Favoured Nation Rule(MFN)—which states that all trading partners must be treated equally. The MFN extends across all WTO member countries and applies to any area covered by the GATS. It means that wherever there is a mixture of private and public funding or competitive contracting for services or where there are subsidies for non public capital projects such as privately financed hospitals, the service sector should be opened up to foreign corporations. Creating independent hospitals free from Whitehall control would greatly assist this process.

  6.6  Under the GATS treaty, the Government could be challenged to abandon the principle of Tax -based funding on the grounds that it was trade distortive. The UK's system of tax based funding for health services ensures universal coverage and shared risk for the population as a whole. It also constitutes a subsidy for the NHS and a massive trade barrier for private health care and insurance firms. Under GATS, the UK government could be forced to abandon tax based funding in favour of private health insurance, on the grounds that the latter would achieve the same objective ( provision of health care ) and be less burdensome for trade (Article V1).

  Ominously, at a recent health service conference, a former DoH official, Ken Jarrold, told the audience "The NHS as we know it is over. In 10 years people will be paying for their own health care. It will only be free for those who cannot pay". He added that it was significant that government ministers had begun referring to the NHS as an "insurance system"

5 December 2002