[A-List] UK corporate state: unhealthy accumulation

["Michael Keaney" <michael.keaney@xxxxxx>]

Go-ahead for new-style hospitals

Blair brokers Whitehall deal on trusts borrowing private cash

Patrick Wintour and John Carvel
Thursday October 10, 2002
The Guardian

Tony Blair yesterday brokered a ground-breaking compromise between the
chancellor, Gordon Brown, and the health secretary, Alan Milburn, on the
introduction of NHS foundation hospitals, to create a model of
semi-autonomous provision across the public sector.

The hospitals have been given freedom to borrow from the private sector,
subject to monitoring by an independent regulator to ensure they act
prudently. Their schemes will not be limited by money, but if they borrow
more than expected the excess may be shaved from overall Department of
Health spending levels.

The dispute between Mr Milburn and Mr Brown turned on whether the hospitals
should be free to borrow off the government balance sheet. Mr Brown appears
to have won the battle by ensuring that the borrowing is included.

Any borrowing will appear on the balance sheet and be part of the three year
spending levels negotiated in the spending reviews. It will be included in
the annual managed expenditure and will count against the department's
agreed borrowing limits.

But Mr Milburn's office expressed pleasure that a new form of public sector
organisation, largely independent of Whitehall, was being forged at the
heart of the public sector and would now form a model for mainstream public
services.

His concept of how foundation hospitals should be run has survived unamended
in spite of protests from the unions and Labour backbenchers that it could
lead to a two-tier NHS.

Mr Blair in his conference speech last week called for an end to a
one-size-fits-all monolithic public sector.

Political pressure to act had been increased by calls for radical
decentralisation of public services advocated by Conservatives and Liberal
Democrats at their conferences.

Senior hospital managers said the freedom to borrow was an essential
incentive for hospitals to seek foundation status. But the NHS
Confederation, representing health service managers and trusts, doubted that
the government would find the dozen hospitals that ministers want in the
first wave in April 2004.

Nigel Edwards, its policy director, said: "It will not be a long queue. I
have not heard a lot of hospitals that are desperately interested in this."

But Ed Mayo, director of the New Economics Foundation that advised ministers
on the scheme, predicted that 40% of hospitals would take foundation status
within five years, ushering in a style of social enterprise that would
spread through schools and local government.

Although this will be a new way of running public services in Britain, the
government said similar bodies ran 40% of hospitals in Germany, 60% in
Belgium and 80% in the Netherlands.

In a statement yesterday, the prime minister said the Queen's Speech would
include primary legislation to establish NHS foundation hospitals as "public
interest companies". They will be not for profit companies, fully
independent and limited by guarantee.

As envisaged, they will be governed by a supervisory board of
representatives of local communities and NHS staff, rather than be
accountable to the Department of Health.

The hospitals will own and manage their assets, retain all surpluses, and
decide their own wages policy. To alleviate concern that they will seek to
generate surpluses by taking on more private patients, the hospitals'
operating licence will state that their primary purpose is serving NHS
patients.

A lock will also be placed on the use of their assets. An independent
regulator will ensure they comply with this licence. The regulator will also
clear the hospitals' borrowing so long as it remains within the prudential
limit assessed by the regulator.

Any borrowing undertaken by the hospitals will require the Department of
Health to transfer to its annual managed expenditure from its departmental
expenditure limit an amount equal to the projected foundation hospital
borrowing during the remaining part of the spending review period.

Subject to legislation, the first foundation hospitals will come into being
in April 2004. Applicants will be drawn from hospitals awarded three stars
for competence.

The borrowing restrictions will make it harder, but not impossible, for Mr
Milburn to persuade such hospitals to come forward and apply for foundation
status.

The Liberal Democrat Treasury spokesman, Matthew Taylor, said: "Milburn is
claiming a draw but it is clear that Brown has won this bout. This cobbled
together deal still leaves local hospitals subject to Treasury rules and
targets."