The Great Student Loans Swindle. It’s a Swindle. A Swindle.

I’ve had a few people suggest that I should write a blog on the economics of Higher Education, and the impact of University expansion.  I am guessing that this reflects the age of my readership – our children are filling in UCAS forms, and buying IKEA starter sets of crockery in preparation of moving out of the family home.

Each person suggested a different aspect that they wanted to read about.   Impact on the housing market, student poverty, prostitution.

Yes, prostitution.

I’m going to disappoint most people by instead focussing on the weird and wonderful world of student loans accounting, specifically how the Government accounts for student loans in the public finances.

This is without doubt the strangest bit of public finance I have ever encountered.   Something beyond even the Child Support Agency’s ever lasting debt pile, or the plans for Universal Credit.

Before we go any further here are some basic concepts about public finance.  I’ve put them in a special text so if you feel that we have gone over this before you can skip it:

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If you think that the difference between debt and deficit is boring in a few weeks time I will try and explain the difference between the Annually Managed Expenditure spend and the Departmental Expenditure Limit.

I was the first generation of student loans.  We still had maintenance grants, and no tuition fees, so the loan was a small proportion over-all.   The Governments decision to nationalise my over-draft was an unexpected socialist triumph in an otherwise bleakly Thatcherite era.  I drank the lot in the Cambridge pub.

Before the introduction of student loans all of the spending on Higher Education, grants, tuition costs, etc. was funded out the budget agreed by Parliament for the Department for Education (the Departmental Expenditure Limit).   As the Government was running a deficit at the time the cost of my student grant and the costs of teaching me counted towards the deficit, and added to Government debt.

The loan bit was different.   Because it was a loan it was classed as a financial instrument, so it didn’t count as government spending, or count towards the deficit, but it did count towards the pile of Government debt.  The expectation was that this loan would be repaid in full, and the only time at which the loan impacted on Government spending (and the deficit) was if the loan was defaulted on.

Due to these rules, there is no impact on the deficit when student loans are issued. If the Government gave grants to cover this spending it would count towards the deficit, but because they are loans they don’t count.

This might sound weird, and a bit of a scam, but the national accounts of the UK are compiled to international standards. These accounting standards are very clear on the treatment of loans and the Government is accounting for them correctly.

Let’s just go over that one more time to be really clear:

Student loans don’t count against Government spending and therefore don’t count against any deficit the Government is running, but they do count as Government debt.  

Unless they are defaulted on, in which case the default counts towards the deficit.  As they are repaid Government debt falls.

While I was drinking in the Cambridge the Student Loans company  was set up as a Non-Departmental Public Body to oversee the system.  In 1990, the year I got my loan it lent an average of £380 to 180,000 students, a total of £684m.  This was a drop in the ocean of Government spending, but at the time the then Conservative Government was running a deficit, and the shift of £0.6bn off the books helped make the numbers look a little better.

The value of these loans crept up over the 1990s, and when Labour got back into power the annual value was just under £1bn.  The departing Tory Government left behind the Dearing review which recommended changes to HE funding.  

The incoming Labour Government wanted to expand HE, but at the same time wanted to keep a tight grip on Government spending.   The result was the  1998 Teaching and Education Act, which introduced Tuition Fees and replaced maintenance grants with loans for all but the poorest students.  The amount loaned increased to £1.3bn.

The 2004 Act increased tuitions fees to £3000 a year, and by 2005/06 the amount loaned was £2.79bn.

None of this mattered from the debt/deficit perspective, because the Labour Government was running a primary budget surplus.   It mattered a lot to people borrowing the money, but didn’t impact on the deficit, because there was no deficit.

Lets just bask for a moment in those halcyon days of a Government with a primary budget surplus and no deficit. 

Things changed after the credit crunch and Peter Mandelson, restored to Government after more scandals than anyone can remember, commissioned the Browne review into HE spending.

I found this great quote about the Browne review from Wes Streeting, then President of the NUS, and now one of my favourite Labour back bench irritants:

“there is a real danger that this review will pave the way for higher fees and a market in prices that would see poorer students priced out of more prestigious universities and other students and universities consigned to the ‘bargain basement’”

Smart chap Wes.

The 2010 Coalition Government entered power with a big pile of ambition, a smaller pile of talent, and no plans worth speaking about.  After 13 years in the political wilderness you would have expected the Tories to come back into power with a pile of polices all neatly assembled in ring binders, with coloured post-its on the best bits, but all they had was an book David Cameron had bought at an airport about nudge theory, and some stuff Michael Gove had written for The Times about stuff.

When it was clear that the policy cupboard was bare a whole lot of old Labour policies discarded by Gordon Brown as too expensive or too crazy were dragged out from behind the filing cabinet by Senior Civil Servants desperate to feed any policies at all to the random assortment of Ministers and Special Political Advisors who they now had to work with.   

Do you remember John Selwyn Gummer feeding an unhappy child a greasy burger in order to prove that the BSE crisis was some awful rumour whipped up ghastly lefties?  She  ended up as the SPAd who signed off Universal Credits, the Caravan Tax, and the Pasty Tax. 

The Browne review was voted through Parliament in December 2010. People had hoped that Vince Cable, once a liberal hero with a fedora hat, would stop this, but he was too busy with the Christmas edition of Strictly Come Dancing.

There were riots in the streets, and an unsuccessful judicial review, but the deal was done. Tuition fees went up to £9000 a year.  Students who weren’t rich enough to pay these fees were forced to borrow to fund their education.

This meant that the total amount loaned by the SLC took a huge leap upwards.  In their most recent set of accounts the Student Loans Company loaned £18bn.  That is a massive shift.  To give you a comparator the capital budget for the NHS is £6bn this year.   The current UK budget deficit is roughly £40bn.

This means that pretty much the entire UK HE budget is now accounted for as loans rather than Government spending.  It counts towards debt, but not deficits, in an era where the deficit is the most controversial part of public spending.  This is a huge story which no-one really understands.   

There is so much complexity in Government finance that it is hard to get a grip on how much of George Osborn’s deficit reduction was due to the 2010 vote on tuition fees, but my guess is that if we returned to a world of grants and tuition fees the deficit would go up by about 50%.

This is bad.But it’s not the end of it.

Student loans are very different to a normal loan, which is repaid come what may.  Student Loans are conditional – that is they are only repaid under certain circumstances, and as the size of the loan has gone up Parliament has added lots of conditions to the repayment terms.   A number of people I know who have these loans believe that they will never repay them in their working life. 

As we discovered earlier if the loan isn’t repaid in the year in which it is due then this difference is counted towards the deficit.  Because the default rate is getting higher this means that the deficit will be higher decades into the future because of the high default rate on the loans.  The value of the assets as they sit on the Governments books is almost certainly a lot less than currently shown, and the future cash flows expected from them will be lower too.  The deficit will be higher in the future as the rate of repayments falls.

There is, however a way that this future negative impact can be removed.  National Accounts accounting rules stipulate that if student loans are sold off at a loss before they are written off after 30 years, there is no impact on the deficit whatsoever.

“The policy of selling off student loans prior to their write-off allows the Government to spend billions of pounds of public money without any negative impact on its deficit target at all, creating a huge incentive for the Government to finance higher education through loans that can be sold off”. Treasury Select Committee Feb 18 2018

This would have been an academic debate of interest only to dullards like me except that over the last year the Government has been trying to price and sell Student Debt in order to improve public finances. 

The context to this is pretty obvious – George Osborne inflicted lots of pain upon the UK to bring down the deficit, but failed to hit any of his targets by miles, and ended up taking advantage of the accounting rules around student loans to create a notional deficit reduction, even though he was still spending the same amount of money.   

On 6 December 2017 the Government sold part of the student loan “book” for  £3.5 billion, writing off £1.8 billion (51 per cent) of those loans in the process.  The write off of the value of these loads reflects the potential future default on them.  Generally Governments are better able to manage exposure to long term risks than the private sector.  As a result, private sector investors require a large risk margin when taking on student loan assets from Government. As a consequence the debt had to be sold at a large loss to reflect that risk margin. 

This reduced the size of Government debt, but it also reduced the in year deficit by roughly the same amount (because a whole bucket load of cash flowed into the Government’s coffers).  The Government plans to sell off £12 billion of loans over the next five years. If the rate of losses on these sales is maintained, billions of pounds of student loan losses will be crystallised without having any impact on the deficit.  The size of these losses are greater than if they remained on the Government’s books, because of the large risk premium that private sector investors require. 

So despite taking a massive hit on the losses Government debt still falls, as does the deficit as a result of the transaction.

I’m not the only person who thinks there is something weird about this.   Really really weird.

In February this year the Treasury Select Committee admitted that they aren’t really sure how these conditional loans should be accounted for either.  The extent to which these loans will never be repaid clearly affects their value, but there is no accepted International accounting convention that covers this.   The TSC has actually written to other countries with similar contingent student loads to try and come up with an accepted international way to account for loans which will never be repaid.

This may seem like a dry accounting point, but changes to the value of the Student Loan book have a big impact on the size of the national debt. Changes to the accounting treatment of Student debt changes the size of the deficit too

Lets just pause for a moment.  After 8 years of bringing down the deficit we don’t actually know how big the deficit is, and we don’t really know how big the pile of debt is either.  As the Treasury Select Committee remarked this year: 

There is no effective control over the increasing fiscal cost of the student loan regime”    

Ouch. 

The total pile of student debt is now over £100bn, which even in the big numbers of Government spending is a massive amount.   By comparison the Child Support Agency maintenance arrears mountain is £3.7bn.  This however is only the debt on the student side.  Wes Streeting’s vision of a competitive market in students has come to pass.  Liverpool University recently borrowed £250m from capital markets by a rights issue.  Oxford University raised £750m by the same route.   Rumours are that there are unpopular former Polytechnics trading at a loss, with debt they can no longer service due to lower than expected income from students. 

There is a pretty obvious solution to this from an accounting perspective – if the full value of the loan isn’t to be repaid it should be treated as a partially repayable grant, particularly because the write off is a feature of the system, not an accident. Which means that the deficit will go up, but at least we will have a set of accounts which realistically reflect the financial status of the entity that the accounts represent.

But the consequences aren’t so easily dealt with.   Large amounts of individual debt to be serviced will hang over UK graduates for decades to come, changing their economic behaviour.  HE institutions will struggle to service debt they can afford if they can’t attract students.

This is more the weird.   These are clear signs of market failure affecting a key part of our national infrastructure. And rather than deal with that market failure the Government is taking advantage of it to disguise the true extent of it’s borrowing.

This isn’t just weird.   It’s dangerous, and dishonest.

https://www.ifs.org.uk/publications/10531

www.ifs.org.uk/publications/13061

https://publications.parliament.uk/pa/ld201719/ldselect/ldeconaf/139/13902.htm

https://publications.parliament.uk/pa/ld201719/ldselect/ldeconaf/139/13914.htm#_idTextAnchor130

https://www.slc.co.uk/media/10152/2017-18-annual-report.pdf

https://news.liverpool.ac.uk/2015/06/22/the-university-of-liverpool-announces-the-issue-of-250-million-3-375-bonds-due-2055/

North East Nazis and Anti-Fascist doo-wop

A few weeks ago I wrote about the way that the 1930s has become a ubiquitous metaphor for people who want to make a point about modern politics.  Not just any 1930s but the Hitler/Mussolini version.   Simon Sharma, who knows better, referred to Trump as a “Yankee Duce” in this weekends FT.

Tonight we’re going to party like it’s 1939?

I made the off hand remark that Newcastle was a more fertile ground for Fascism in the 30s than Wearside.  I’ll admit that this was based partly on historical fact – the BUF offices were in Newcastle, and lasted a lot longer than they did in Durham.  It’s also based partly on my own recollections of the NF skins who followed Newcastle United in the 1970s.

I decided to test how accurate my views on Newcastle fascists were, and came up with the story of George Johnson Armstrong, a marine engineer from Newcastle, which was too good not to write about.

Armstrong had become radicalised by the BUF in the 1930s, and had strong Nazi sympathies.  He was probably recruited by a German agent Dr Carl Klein some time before the outbreak of war.

Armstrong travelled to the still neutral USA during 1940.  Here he approached the German consul in Boston and offered his services as a spy.   His mission seems to have been to betray shipping movements between the US and the UK to the Germans, and also to try and support US neutrality.

He was arrested by the US Immigration Service and held pending deportation. Apparently British authorities were tipped off by their American counterparts, because Armstrong was arrested on his return to Britain on the 23rd of February 1941.

Armstrong was tried on 8th of May 1941, before Mr. Justice Lewis, at the Old Bailey. The proceedings were held “in camera”.  He was charged with the following offence under the newly enacted Treachery Act 1940:

“On or about 19 November 1940, being a British subject in the U.S.A, with intent to help the enemy, did an act designed or likely to give assistance to the Naval, Military or Air operations of the enemy or to endanger life, to wit did write and endeavour to send a letter to Dr. Herbert Scholz, German Consul at Boston, Massachusetts, U.S.A, offering his services, information and assistance to the said Dr. Herbert Scholz.”

Armstrong was found guilty.

He appealed his conviction  at the Court of Criminal Appeal 23rd of June 1941 and lost.

The story of what happens next is pretty grim, but given that today’s Sunday Express includes a call to bring back the death penalty it seems appropriate to give the details, so we are under no illusions what the death penalty means.

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He was hanged by Thomas Pierrepoint, who kept meticulous records of everyone he executed.  Pierrepoints’ records show that Armstrong weighed 154 lbs and was thus given a drop of 7’ 3”.   British bureaucracy has a form for every eventuality, and form LPC4 was used to authorise and record executions.

Armstrong’s LPC4 records:

“Separation of the medulla from spinal cord. Fracture of hyoid and thyroid. Extensive injury to the medulla and brain stem. Spine dislocated between 5th and 6th vertebrae.”

He was the first traitor to be executed in World War 2.

If this is too bleak and ending for a Sunday morning cheer yourself up with this great bit of Anti-fascist doo-wop.

 

http://discovery.nationalarchives.gov.uk/details/r/C10887416

https://www.ft.com/content/0b189030-ddd1-11e8-9f04-38d397e6661c

Post script:

In the previous blog I made some jokes about daft Hitler documentaries on the History Channel.  This of course, is a real documentary broadcast last week:

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Kids in America

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I love America.

It’s one of my favourite places in the world. I have lost count of the number of times I have visited, and I still love it just as much.

Admittedly I only really go to the East and West Coast, and hardly ever to the bits in the middle, but I am not unusual in that.  Lots of Americans don’t go there either.

This isn’t a universally popular opinion among my middle class leftie friends, some of whom view the US as a wicked global imperialist power hell bent on taking over the world.  I don’t share that view at all.

I did claim rashly that I wouldn’t visit the US while Trump was in office, but my principles weren’t as strong as the allure of driving a Dodge Charger around Illinois.

This Dodge Charger in fact:

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Ladbrokes don’t think much of Trump’s chance in 2020, which means that this might be my only visit to America during Trump’s term in office.

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The big shock is that Trump is much less visible in Chicago than he is in the UK.   He was less talked about and less in the news that he is among my left wing friends in the UK.  Trump’s great talent it seems is to use social media to make himself the centre of attention.  Across Chicago people seemed just disinterested.  It was refreshing not to have to the constant Trump noise buzzing around. 

The only spontaneous conversation about Trump I had in the Chicago was with a cab driver. I asked if the Megan Markle story was still big in the US news:

“Oh yes” he said “Megan – that’s some story. She married a Prince”

He then added

“And Ivanka – that’s some story too. She married a frog. Shee-it that Trump’s ugly”

Apparently if he had caught a cat fish as ugly as Trump he would throw it back.

There wasn’t much sign of Trumps policies having an impact either.  His 2 key commitments  – to repeal Obamacare and build a wall – haven’t happened, and the economy isn’t much different to how it was when Obama left power.

This lack of impact is puzzling because so far he has controlled both Houses, and soon the Supreme Court too.  This lack of impact is either because:

  1. He came to power hopelessly unprepared, and it took him a long time to work out what his agenda was beyond some slogans about walls
  2. Cities like Chicago with Democrat Mayors, and Democrat controlled state legislatures have been successful in resisting his policies – for example Sanctuary cities
  3. Trump’s administration is even more chaotic and ineffectual in real life than we have heard, and they have struggled to progress any of their key policies (build a wall, repeal Obamacare) despite controlling both Houses.

I bought Bob Woodward’s book on the Trump White House while I was over there, which seems to re-inforce the idea of a shambolic mess.

With regard to point 2 there does seem to be a lot of passive resistance quietly behind the scenes often by the old Democrat establishment, with some success.  The problem is that this probably isn’t enough for some of the anti-Trump groups, and this passive resistance hasn’t produced an obvious candidate that the different factions can rally round. There are some talented and interesting politicians emerging from the younger generation of Democrats, but 2020 is probably too soon for them. 

When we got to Detroit the indifference to Trump was just as noticeable.   Detroit has a Democrat Mayor too, but unlike Illinois the state legislature is held by the Republicans,

Things changed markedly the day before we left.   Luke Bryan was playing a gig in town.  Bryan is a big thing in country and western music, which means that no-one in the UK knows who he is.   Bryan’s fanbase were white, and from rural Michigan and surrounding areas.   This was a constituency much more favourable towards Trump.

I saw the only actual incidence of racism that I had seen in a very long time, with white concert goers closing lift doors to avoid sharing with a black woman.   I also saw my first MAGA hat.  It’s hard to tell whether Trump has encouraged these behaviours, or whether Trump has brought attention to behaviours which were always there.

My overall impression is that the vast majority of Americans aren’t interested in the current culture wars, sometimes to the extent of being actively turned off by them.   They are more interested in changes to healthcare provision, and the overall state of the economy.

That’s not to say that all Americans don’t like cultural warfare.  It is still a significant motivator for a noisy group of Republican voters, and also for a smaller (but equally noisy) group of left wing political activists.

Despite the country fans with the MAGA hats I came away reassured about the future of the US from my admittedly brief holiday.

The USA is a lot bigger and tougher than Donald Trump.   And it will take more than some tweeting to change it.

The parting on the left. Is now parting on the right. And the beards have all grown longer overnight

Over the last few years I have had a few arguments with people on social media.  You might have spotted this.  I might even have politely explained to you why I am right, and you are foolish.

Over and over again I have had the same, odd experience.

Someone has angrily told me that they are loads more left wing than I am while simultaneously expressing a very right wing opinion.  At it’s most extreme people who self identify as left wing have shared with me material from the far right, including from US neo-nazis, in the profound belief that this material is left wing.

I’m not a great believer in the horseshoe theory of politics that is sometimes taught in GCSE History and Politics classes.  The left and the right are different philosophies, and the only similarities at the extremes are between the tactics of the authoritarian varieties

But sometimes ideas switch from right to left and vice versa.

Freedom of movement across the EU started out on the far right as a way of using free markets to erode workers rights and deregulate labour markets.   Today the same right wingers denounce the policy they championed only 20 years ago, while the left, who once opposed it, give speeches defending it.  Universal Basic Income made the same shift.   Universal Credits was developed as a Labour policy, and ended up as a millstone round the neck of the Tories.

The rise of left wing antisemitism is the most extreme example.   When I was a teenager the kind of antisemitism that relishes ideas of Jewish conspiracies and believes the mainstream media is in the pay of the Israel lobby were only found among a particular variety of right wing weirdo – the kind with a complete collection of Sven Hassel novels

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I can pretty much guarantee that anyone who owns more than one Sven Hassel book is a massive arsehole and has crazy right wing politics, no matter how ironic they think they are being.

I wrote last week about Durham’s brief flirtation with the far right:

Tonight we’re going to party like it’s 1939?

Antisemitism in Britain didn’t start with Mosley, but the anti-semitic tropes which occur in modern politics do.

This is Mosley’s Stop The War campaign.  As you can see he chose to make his anti-war campaign pledges on the side of a bus, which definitely doesn’t remind me of anyone in modern politics.  Not at all.

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Mosley was a demagogue, not an ideologue, and he relied upon others to do his thinking for him.  I have read “The Coming of the Corporate State” by Alexander Raven Thompson so that you don’t have to.

The BUF platform was:

Anti-capitalist

Anti-Zionist – in particular believing that Zionism is the biggest issue in foreign relations

Corporatist – the state organised by industrial and occupational groups

Pro-Environmentalist – the BUF were the first political party with an environmentalist policy.  In particular they believed that capitalism and environmental protection were incompatible and an environmental crisis was inevitable

Anti-elitist – they claimed that Britain is ruled by a small self serving elite, a 1% who run the country for their own ends.  Mosley argued this noisily despite being a Baronet himself.  Again this in no way reminds me of any contemporary politicians.

Anti-mainstream media, which they believed served the interests of Zionists

Anti-war, particularly linking pacifism and anti-war movements with anti-Zionism

Pro-Monarchy, pro-Empire

Quite a lot of this sounds more like left wing politics than right, particularly if you ignore the Monarchy and Empire stuff.  State corporatism is often mistaken for a programme of nationalisation.   As long as you stuck to the slogans and ignored the details it would be easy to mistake this for a left wing programme, which it very definitely isn’t.

Above all the the BUF fascist ideology is a form of secular gnosticism – the world is an awful place, the truth is known only to a select few, a crisis is coming which will transform the world and this can be seized upon by the gnostics to remake the world in their image.

Mosley always denied that his anti-zionism was really antisemitism, but I don’t believe him.  This is Mosley, after the war, denying he is an antisemite:

“The anti-Semitic view that all Jews are born wicked, or that all Jews should be the sacred objects of the system, seems to me equal nonsense. I am neither an anti-Semite, nor a sycophant of Semites….. I believed that certain great Jewish interests were trying to involve us in war, not in a British, but in a Jewish quarrel: I still believe it”

Mosley also argues that the British Empire was inherently anti-racist because it contained lots of different people who it ruled over equally.  Daftie.

By the time Mosley made these claims he was a disgraced individual, abandoned by even the Daily Mail.  Very few British fascists escaped involvement with him without huge reputational damage.

The only notable exception to this was Jorian Jenks.

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Jenks was one of the founders of the environmental movement in Britain, maybe even the most significant figure in it’s early history.  Jenks was an enthusiastic fascist and most of his early work was published in fascist journals.  He was the soil in blood and soil fascism.  His 1939 book Spring Comes Again combined agriculture, environmentalism, fascism and anti-semitism.

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Jenks was also a protectionist who supported the idea of agricultural autarky – reducing our reliance on foreign imports of food.   The current ideas of self-sufficiency post-Brexit are the direct ancestors of Jenk’s ideas, which linger on among the anti-immigrant right.

Jenks was imprisoned in Walton Jail as a traitor, but was released in 1941.

Post-War Jenks became the President of the Soil Association, Britains oldest environmentalist campaign group.  He edited Mother Earth, the Soil Associations journal, and Rural Economy, alongside other fascists like Rolf Gardiner.   Both of these publications promoted a Mosleyite world view – anti-capitalist, anti-war, pro-environmentalist, antisemitic.  From the 40s to the 50s the Soil Association promoted far right politics as much as mainstream environmentalism, and on occasion included articles written by actual Nazis.

Green politics is so tied up with modern left wing politics that we forget that for most of the C20th environmentalism was a far right pre-occupation.

Jenks died in 1963 only a few months after Silent Spring by Rachel Carson was published.   Silent Spring included many of the ideas that Jenks had campaigned on, in particular around banning pesticides, and it took these ideas to a much wider audience, particularly on the left.

At the time a new faction was emerging in the British left, which made anti-imperialism it’s key virtue.  Inspired by the growing conflicts in South East Asia and Latin America the far left began arguing that the cause of the world’s wars and, in particular, its ethnic conflicts, originated with Western imperialism and the lines drawn on maps by conquering powers.

From the perspective of the late 60s this probably looked like a reasonable proposition, and many middle class British lefties started styling themselves in the manner of Latin American or South East Asian revolutionaries.   Environmentalism and anti-imperialism became key elements of a left wing political world view alongside anti-capitalism and anti-war.  Spring Comes Again sold well, on the back of Silent Spring, and the left absorbed it’s messages.

When I was writing this blog and the previous one I had to track down some pretty odd publications (Alexander Raven Thompson’s book above for example), and visit some rather unpleasant websites, mostly on the right, but also some promoting weird left wing conspiracy theories.   There still exists a small group of Mosleyites on the right who keep his memory.   When I tried to track down Spring Comes Again, and work out how popular it was in the 60s I discovered, disturbingly it is still in print, still popular, and easily available on Amazon:

https://www.amazon.co.uk/Spring-Comes-Again-Jorian-Jenks/dp/1908476850

Into the ferment of 60s revolutionary politics come 2 figures from the very right wing of the Labour Party: Ernest Bevin and Christopher Mayhew.

Today Christopher Mayhew is remembered only for taking LSD on the BBC, an event commemorated in this single by The Shamen:

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https://www.youtube.com/watch?v=3MiFV2ukz-w

In the 1960s he was on the right of the Labour Party and a junior Minister.   

Ernest Bevin was a big gun in the Labour Party, a former Foreign Secretary.  He was also, according to Mayhew, an anti-semite:

There is no doubt, to my mind, that Ernest detests Jews.” 

In 1969 Mayhew established the Labour Middle East Council (LMEC) with Bevin’s help with the express aim of turning the Labour Party from a proudly pro-Zionist party to an anti-Zionist one.

Mayhew and Bevin believed that they would find fertile ground for their ideas on the right of the Labour Party, and weren’t shy of deploying the kind of rhetoric that blurred the lines between anti-Zionism and anti-semitism in a way similar to Jenks.   LMEC is just Jenks repackaged for the left.

They were shocked that the people who rallied to their cause were exclusively on the far left. The newly emerged anti-imperialist left, which had already absorbed elements of Jenksian pro-environmentalism also embraced Mayhew’s anti-zionism and Bevin’s antisemitism.

Not only did LMEC tread the same ground as Jenks, but they added some new unpleasant ideas of their own.  Mayhew was the first person to advance the argument that Israel was an apartheid state, in an article for Venture in 1971, and Mayhew and the LMEC actively promoted the idea that British Jews had divided loyalties.

By 1974 Mayhew left the Labour Party outright in protest at the rise of the far left, and by the 80s would refuse to attend anti-war and anti-Zionist events due to the the presence of communists and trotskyists.

The LMEC spawned a host of pro-Palestinian and anti-Zionist groups throughout the 70s and 80s, which mixed left wing anti-Imperialism and Jenksian anti-semitism.  George Galloway’s Trade Union Friends of Palestine, and Ken Livingstone’s Labour Committee on Palestine, and Labour Friends of Palestine.  These groups competed between themselves to see who could be the most extreme.

Labour Herald edited by Livingstone introduced the Israel = Nazis trope in the early 80s.

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This is probably the point at which I went to my first pro-Palestine meeting, at Fowler’s Yard in Durham

If I recall correctly the meeting took place immediately before a Red London gig, and I admit that I was probably as interested in the music as the politics

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https://www.youtube.com/watch?v=r4qyuChgfoc

The meeting, if I am honest, had no angry racism, and no anti-semitism, but no real facts either.  Me and Phil King were the classic rebels without a clue.

Around the same time I first encountered the anti-imperialist left.  The 1980s weren’t a good time for middle class lefties in the UK and the US.  Thatcher and Reagan were ascendent, and were drawing support from working class voters.   Struggles in Latin America offered hope to the left as well as inspiring a rambling Clash triple album

Looking back Sandinista isn’t as awful as it sounded at the time, but not as good as the Clash clearly thought it was.

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https://www.youtube.com/watch?v=COZY27cBR2I

But it is a good indication about how trendy it was to name check non-European radical movements.  At times this was a bit comical.   By the 80s it was vogueish to name check some obscure anti-imperialist faction in any political debate, just as it was essential to name check a rare dub reggae act or 70s German Avant Garde rock band.

Dr Alimantado. Sendero Luminoso. Cluster.

There was however a huge problem with this world view.   Too many of the anti-imperialist movements we were cheering on weren’t very left wing.   Many of them, particularly in the Arab World, were right wing nationalist movements fighting the West, some of which were homophobic, misogynist and racist.   We rationalised these strange alliances either as enemies of our enemies, or with some wooly ideas that once in power they would somehow stop being reactionaries.

The Sandinista themselves turned out to be right wing socially conservative Catholics and authoritarians, not left wing Clash fans after all.

I gave up on the anti-imperialist far left in the early 90s and rejoined Labour.  I continued to go to pro-Palestine events however for a few years longer.  I eventually lost interest, mainly because it was pretty clear that we weren’t achieving anything.  The same speeches, the same people, nothing changing.

The support that the remaining anti-imperialist factions on the far left, including some of the current labour leadership, gave to Milosevic and other ghastly people ended in the Living Marxism trial.  From that point on the tolerance that the rest of the left had towards them evaporated, and they ended as an angry rump on the margins.  On the few occasions I got back in touch with Palestinian Solidarity they were getting odder and odder.  I think by then most people realised that we were failing, but rather than accept that our tactics (in particular BDS) weren’t working, a lot of people were starting to adopt odd conspiracy theories.   The CIA, Mossad, the mainstream media were all plotting to thwart the plucky efforts of brave middle class Marxists.  I think by this point pro-Palestine groups and the rump of the anti-Imperialist left were pretty much the same thing, the same people going to the same meetings.

I honestly thought at this point that the increasingly odd group of ageing lefties would die out, and their ideas with them, and I wouldn’t miss them.  Their ideas were rarely deeper than slogans, and the slogans were a jumble of ideas from the right and the left, including a strong under-current of antisemitism.

What changed was the Iraq war.

I am more sympathetic than most people towards the decision to go war, mainly because I have seen an Iraqi weapon of mass destruction.  In the 80s the Thatcher Government had conspired illegally to help Saddam Hussain acquire WMDs, one of which – the supergun – had been seized by Customs and Excise and rusted in a yard at Tees Port. When I first worked on Teesside you could see it from the Docks road. I’m also pretty happy that Saddam Hussain has gone.  But there is no doubt that the case for war was not properly made, the consequences of war weren’t properly thought out, and a lot of misery resulted.    Given what has happened in Syria it is not certain that non-intervention would have been a better plan, but that doesn’t make things better for the Iraqis’ who suffered.

The Stop The War coalition brought together the old anti-imperialist left, pro-Palestinian activists, and younger campaigners, some of whom were from a socially conservative Muslim background.  For the first time this gruesome mess of ideas was allowed to present itself as the moral highground, and somehow as a pure tradition of leftism, nobler than the nipping and tucking of the then Labour government.

The way that this group of oddballs came to run the Labour Party is partly a tale of their ability to control a political movement through bureaucratic control of it’s committees, as it is  about the popularity of their ideas.

The current Labour leadership do also have a secular gnostic world view.  The world is an awful place, the truth is known only to a select few, a crisis is coming which will transform the world and this can be seized upon by the gnostics to remake the world in their image.

The current crisis of antisemitism and the Labour Party’s inability to put an end to it is due entirely to the crowd of people that the Labour leadership have surrounded themselves with, and the awful set of ideas that they hold to.

None of this is meant to suggest that Jeremy Corbyn or anyone on the British left is a fascist.  I don’t believe that for a moment.   But I do think that Corbynism (if there is such a thing) is a hopeless jumble – a mess of ideas from the far left and the far right, all filtered through the worldview of a bossy privileged middle class public school boy.

But if we were put together a list of the most offensive views that the modern left hold about Jews or Israel we can trace most of these back through Galloway and Livingstone to Mayhew and Bevan, and all the way back to Jenks and Mosley.

I am sure that my pro-Green Party friends will be appalled that I have foregrounded Jorian Jenks, a figure who most modern Greens would rather forget.  But the story of Jenks reminds us how similar the ideas of Paleo-Conservatives like Prince Charles are to the ideas of newt loving Ken Livingstone and Jeremy Corbyn on his allotment.

They would get on like a house on fire, 3 posh chaps making jam, talking to plants and moaning about the awfulness of capitalism.  George Monbiot in the Guardian alternates between progressive leftism and reactionary conservatism on a weekly basis (increasingly on the reactionary side).

This is from another one of the Clashes less fancied albums “Give ‘Em Enough Dope Rope”

https://www.youtube.com/watch?v=2GxL6OA8Srw

The Clash here explore the same sentiment that Arthur Koestler did in “Darkness at Noon” when he compared left wing fellow travellers to peeping toms, “peering through a hole in the wall at history while not having to experience it themselves”.

I think that nothing really distanced my ideas from the middle class anti-imperialist left than spending time outside of Western Europe, particularly in countries like India.   For all the marches against the evils of globalisation it is clear that living standards aren’t falling around the world, this isn’t the age of inequality.   Life expectancy and living standards across Asia are rising, driven not by the campaigns of the left, but by the kind of economics they like to denounce as neo-liberalism or neo-colonialism.

The US isn’t an Imperial hegemon (although China might be about to become one), Russia isn’t our friend, and Israel isn’t an apartheid state.

I wanted to end with a joke, a funny way of describing my erstwhile middle class anti-imperialists with their endless ill informed solidarity for people in countries they will never visit or ever meet.   People who see their own struggle to find a non-Israeli organic kumquat somehow the same as the struggles of Mandela, or Gandhi or Martin Luther King

But the best I could come up with was Talcum X.

 

https://ia802307.us.archive.org/25/items/pdfy-Xm3KNoxQuBK9mHlX/Thompson%20-%20The%20Coming%20Corporate%20State%20%28British%20Fascism%29%20%281938%29.pdf

https://www.lobster-magazine.co.uk/free/lobster75/lob75-farming-fascism-ecology.pdf

https://www.haaretz.com/opinion/.premium-u-k-labour-partys-zionist-problem-1.5420578

Tonight we’re going to party like it’s 1939?

This blog was inspired by a tweet from Jack Monroe, written in the context of the rise of hate speech on twitter, particularly anti-semitism.

 

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This is really a neat restatement of Marx’s great opening to the 18th Brumaire:

Hegel remarks somewhere that all great world-historic facts and personages appear, so to speak, twice. He forgot to add: the first time as tragedy, the second time as farce. 

Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past. The tradition of all dead generations weighs like a nightmare on the brains of the living. And just as they seem to be occupied with revolutionizing themselves and things, creating something that did not exist before, precisely in such epochs of revolutionary crisis they anxiously conjure up the spirits of the past to their service, borrowing from them names, battle slogans, and costumes in order to present this new scene in world history in time-honored disguise and borrowed language. 

History repeats itself, not because of some magic force, but because we are essentially historical creatures.  In times of change or anxiety we look to the past for analogies to help understand what we should do, and we end up repeating ourselves.   This is no less true of radicals as reactionaries, the far left and the far right.   21st Century US Neo-Conservatives dress themselves up as the Founding Fathers even though they are modern reactionaries not C18th radicals.  UK middle class lefties dress up with antique trades union banners as if their struggles to find non-Israeli kumquats was somehow of a part with the fight for union recognition.

Jack isn’t the first person to use the same era for an analogy:

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Piers really does mug himself badly here.

The idea that we are reliving the 1930s has become prevalent.  The Credit Crunch is the Wall Street Crash, Austerity is the Great Depression, and David Cameron is foolish Calvin Coolidge.    The rise of authoritarian and intolerant politics on the left and the right is comparable to the rise of fascism.    The 10th anniversary of the collapse of Lehman’s has encouraged lots of such introspection

As you have probably spotted I am a bit cynical about this.   We overuse Nazi Germany as a reference point for modern history, partly because that is all that is on the History Channel.  “Nazi Yeast: The Story of Hitler’s Bread” is a particular favourite*.  We are historical creatures, but our historical knowledge is poor, and our range of historical viewpoints is pretty limited, which is why we tend to re-live the crap bits over again.

It is pretty clear that modern day Durham isn’t 1930s Germany, or Russia, or Italy or Japan.  It’s a daft analogy

But, a more interesting question would be – how much is modern Durham like 1930s Durham?

The economic history of Durham in the 1930s is predictably bleak.  The County was dominated by  mining.   There was even a colliery at Aykley Heads where I live, among nearly 300 others

The population of the County was roughly the same as now – 520,000, of which 130,000 were employed in mining.  This was a fall from the peak of 170,000 in 1913.

65fc2a6296eef883ac663c702dae1f79909f3dd4 (1)

Output of coal in the County was in decline.  As it declined so did pay and conditions for miners, despite a large and active Trades Union – the NUM.   With falling pay and conditions there were strikes, national and local, which had a huge impact on output as the graph below shows.

 

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As part of miners pay had an element based on how much they produced the swings in output meant erratic, and falling, wages.

This had a devastating impact on parts of the County where many settlements were built around pits and had no other employment.   Despite the strength of the NUM in the County wages fell, and working conditions got tougher throughout the 1920s and 30s.

The depth of hardship was illustrated by the 1936 Jarrow Crusade led by Labour MP Ellen Wilkinson.   Unemployment nationally was 10%, and families without work endured grinding poverty.   In parts of the North East the unemployment rate was much higher – 0ver 50%

The combination of rising poverty and declining wages led to political radicalism.

There was certainly a far left presence in the County.  Ramsey MacDonald, former Labour PM lost his Seaham seat in the 1935 General Election to Manny Shinwell, a far left candidate.  Shinwell was a big supporter of the International Brigage in Spain, and some from Durham, particulary from areas like Chopwell, fought against the fascists in Spain.

The list of speakers at Durham Miners Gala’s in the 1920s and 30s has some familiar names – Ellen Wilkinson, Jennie Lee, Ramsey McDonald, and his nemesis Manny Shinwell.   Clement Attlee’s first appearance at the Gala names him as Major Attlee.  Saklatvala, the Asian Communist who was the left’s first non-white MP spoke a couple of times.  Sadly it would be another 65 years before the Labour Party proper elected a non-white MP.

There are a few more unexpected names – Oswald Mosley was a popular draw as a Labour MP, and returned to speak, not at the Gala, but at Miners Halls as a fascist in the 30s.

This is Claypath in Durham.   If you could turn around you would see a huge building site creating more student accommodation.  The street used to be one of the best shopping streets in the North East, but fell into disrepair, and ended up all Pizza shops and takeaways.     

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Back in the bad old days of Durham Labour politics there were rumours of land deals, and at one point the Chief Executive of Durham city Council was questioned by the police, but no-one was ever charged.  Jamal’s barbers used to be a cobbler, who chronicled the whole affair with notices in his window

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This is the same shot taken in the 1930s. I think this is 1934.  The same building was the BUF HQ for Durham.

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The passage way to the right in those days led to the Bluecoat School, where my Grandfather was Headmaster after the war.

John Beckett, the Jewish former Labour MP from Gateshead who had enthusiastically embraced the BUF spoke at a number of meetings at Cowen’s monument in Newcastle and then at Gateshead Town Hall in 1934, but on each occasion was met with angry crowds of opponents.  His last visit ended with the BUF North East HQ in the Bigg Market (near the modern day Rupali restaurant) being trashed, the fascists beaten and having to rely on police protection.   This was 2 years before Cable Street.

My Gran claimed that she has seen Mosley speak at a meeting in Hetton in the early 1930s, and recalled that he was a great orator.  The assembled audience of miners, fresh from Sunday morning Chapel listened to him politely, with rapt attention, entranced by his rhetoric.  Then they throw stones at him.

The BUF struggled to attract working class voters, but still had some respectability with more affluent voters.  The most prominent North East fascist was Lord Armstrong, the boss of the Vickers armaments factory on the Tyne.   He was involved in many civic groups such as Round Table and Rotary.

Active fascists were encouraged to greet each other with the familiar stiffed armed salute and the slogan PJ! Which stood for Perish Judah!   Nigel Dodds, who wrote the definitive book about fascism in the North East, claims that some respectable shop keepers and businessmen in Durham followed Lord Armstrong’s lead and greeted each other like that on the streets of Durham.  I struggled to find anyone to corroborate these claims with the County record office, and no-one is going to admit this after so many years.

Ultimately fascism was a lot more popular on Tyneside than anywhere else in the North East.  When MI5 rounded up the BUF at the start of World War 2 a couple of ex-army officers from Newcastle were the only North-Easterners interned.  Violent clashes like the ones on Tyneside and at Cable Street stopped their mobilising, while PG Wodehouse’s mockery undermined their credibility.

I don’t know how long the BUF had their recruiting office on Claypath, but it wasn’t long. The windows were smashed with pick axe handles and the fascists given a pretty rough treatment.  They didn’t come back.

I must confess I take a perverse pleasure in uncovering the forgotten history of Durham’s crap fascists, and their short lived attempts at authoritarian politics.

While we shouldn’t be complacent we aren’t living through the 1930s again.  Durham does have a problem with poverty and has a food bank for residents who are struggling to put food on the table. But this is nothing like the poverty in the pre-welfare state 1930s.

Politically we are in a different place too.  The authoritarian rulers of the 1930s had rigid ideological doctrines which citizens had to follow to the letter or face persecution.   Todays politicians can’t be bothered with anything as difficult as ideology, and change their views according to whatever twitter is in a fuss about.  

The authoritarians of today share with their older equivalents is their preference for scapegoating minorities – Muslims, Jews, and their contempt for a rules based international order which impose responsibilities upon nation states.  And the Daily Mail is as awful now as it was then.  

There is still a feeling of relative decline.    From the distance of Delhi or Tokyo the UK looks like an economy where lots of people with relatively modest qualifications and talents, working in moderately productive industries expect to earn salaries which would put them in the global top 10%.    This hasn’t been sustainable in the UK since the end of the Empire, and we have filled that gap through EU membership and an over developed financial services sector.  In the next few years we will have to find a way to live without these things, and for many people this means that relative decline will become absolute decline.

And as Jack Monroe points out.. an awful lot of hatred.   The current Labour leadership seethes with hatred towards banks, bankers, the mainstream media, Zionists, and anyone on the left who doesn’t share their belief that. September 2015 was the year zero of politics.  The right has it’s won animus against immigrants, single mums, muslims

Once upon a time in order to pursue such a hateful agenda you would need to control a lot of newspapers, or TV stations.  Propaganda was expensive, labour intensive, particularly creating the kind of propaganda where people no longer care about the difference between truth and lies, only what suited

Social media has made propaganda, particularly hate filled propaganda cheaper and more accessible than ever.   It doesn’t matter if it is true or not, because there will be something new to be angry about tomorrow, new conspiracy theory to revel in.  The ability to buy data means that messages can be targeted more accurately even at small groups of people – dog whistle politics is commonplace across the right and the left

At the same time our faith in our democratic institutions has declined. Our Parliamentary democracy was strong enough to see of the challenge of authoritarian politics from the right and the left in the 1930s, while the rest of Europe wasn’t so lucky.  Today our failure to update our institutions has left them less well equipped to meet current and future challenges.

I still believe that the British are unlikely to support an authoritarian take over.  But we might be closer to a Putin style guided democracy than we think.

*OK, this isn’t a real History Channel documentary, but it is only a matter of time

https://www.foreignaffairs.com/articles/2018-09-13/crisis-next-time

http://dmm.org.uk/history/index.htm

http://www.dmm.org.uk/lom/1934_202.htm

https://www.questia.com/newspaper/1G1-382399245/fighting-fascists-on-tyneside-when-the-leader-of

This is the link for Nigel Todd’s book:

https://www.amazon.co.uk/Excited-Times-People-Against-Blackshirts/dp/1898880018/ref=sr_1_1?ie=UTF8&qid=1537693064&sr=8-1&keywords=in+excited+times

 

 

 

Evil Tories are Privatising the NHS and only these plucky Memes can stop them! A History of NHS Privatisation

Firstly – an apology, I had this drafted for the 70th anniversary of the NHS a few weeks back, but didn’t get a chance to finish it.  Part of the delay was because I distracted by things like holidays, but also because it turned out to be a bigger task than I thought.

Much bigger.

There are lots of on line campaigns and memes going around the internet expressing concern about the risk to the NHS of privatisation.  It’s hard to check social media without being asked to like and share some meme about the imminent risk to the NHS posed by Tories/Trump/Privatisation.  The quality of debate in the press isn’t much better

Over the last year these campaigns have reached a fever pitch around the NHS 70th Anniversary.  Increasingly these on-line campaigns don’t just want people to click and share, they want money to fund legal action against the current governments plans

One of the most eye-catching campaigns was the crowd funded legal action backed by Steven Hawking before he died to oppose the creation of Accountable Care Organisations.  The Stephen Hawking group was one of 2 campaigns to try and use Judicial Reviews to stop the ACO programme. 

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Between them the 2 campaigns raised over £350,000 to fund legal challenges to NHS organisational configuration, on the grounds that they represented “privatisation by stealth”, or an extension of privatisation into areas like the commissioning of services which they hadn’t previously been allowed.  The costs to the NHS of defending these actions was very much higher.

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Both campaigns lost their cases on all counts. 

As you might have guessed I was always doubtful of their chances of success.  The NHS has always had a mix of public and private provision since it was established, and each Secretary of State for Health gets to decide what the right mix is.  This isn’t a secret agenda, it is exactly how the NHS operates.

I should probably declare my own position up front on “privatisation”  I don’t really have a problem with private sector organisations working for the NHS where they provide good quality care, at a sensible price using their own resources.  When I was a PCT CEO I sent lots of NHS patients who had been waiting a long time for elective surgery to our local private hospital. I wasn’t embarrassed by this, and the patients who benefited certainly didn’t think that the NHS was being undermined.  

I do however have a massive problem with the huge bureaucracy which exists to support the transfer of work to the private sector, even though I got paid loads for years to be part of this bureaucracy.    I like some aspects of the ACO programme particularly as it allows local health economics to start and dismantle aspects of the NHS internal market.

But above all I believe that the Landsley Act is an expensive mess.  

I thought it would therefore be fun to write a short history of NHS privatisation to try and put the current debate in historical context, and to answer the crucial question – is the NHS privatising more or less than it used to? 

History of Privatisation

I have lost count of the number of memes I have seen shared on social media telling the story of how the plucky Attlee Government took on the Tory Party and the Medical Establishment, both of whom were dead set against the creation of the NHS, armed only with a massive majority in Parliament.

In fact both Labour and Tories supported the creation of some kind of National Health Service.   Arthur “Speak for England, Arthur!” Henderson, a former Labour Leader, and William Beveridge  (a Tory) did the work during WW2 to lay the ground for the creation of the NHS, although it the latter’s name which went on the report.

Despite this consensus there were fierce battles in the house over the 3 readings.  The main points of contention were:

  1. Whether the NHS would be funded out of general taxation or from a separate fund (the Tories wanted a separate fund)
  2. The Status and independence of existing healthcare providers, particularly GPs and healthcare charities.
  3. How much of healthcare provision would be nationalised. 

When you read that wicked Tory MPs voted against the creation of the NHS, one of the most common issues that the Tories fought for in the 3 readings of the NHS Bill was protecting the status of pre-existing healthcare charities and guaranteeing their independence

The final 1947 Act put most of Secondary Care (sometimes called HCHS – Hospital and Community Health Services) in the public sector, and Primary Care (sometimes called FHS – Family Health Services) in the private sector.  I say most because some parts of the healthcare system were allowed to continue as charities independent of the NHS, for example Great Ormond Street, or the Richardson Hospital in Barnard Castle.   The NHS was funded out of central taxation, free at the point of use, and provided by a mix of public and private providers.   

It is worth noting that of the NHS principles Free at the Point of Use was the first to be broken.  The Attlee Government introduced co-payments for prescriptions, and later for glasses and dental work.   It turned out that the British had much worse eyesight and dodgier teeth than anyone had suspected.   Gordon Brown also technically broke one of the principles when he hypothecated the revenues from an increase in tobacco taxation in 2002, although this is such an obscure point that I am only mentioning it as I like the word hypothecated.  

There were however ideological grievances against the 1947 Act in both parties.  The right of the Tory Party have always wanted a larger role for the private sector in delivering secondary care services, and the left of the Labour Party has always been resentful of the independence of GPs (this bitterness got much worse after GPs enthusiastically embraced fundholding in the 1990s).  Each has their own agenda – to carve out opportunities for profit making on the right, and to clip the wings of bossy Doctors on the left.

Both in their own way were unhappy with the 1947 Act. 

From the 1940s through to the late 70s all the main parties followed similar patterns of policy and spending towards the NHS.   

And then came Thatcher.

Maggie Thatcher had an intense ideological obsession with privatising nationalised industries, and progressively sold off or smashed up all but one.  The exception was the NHS which was widely popular and had lots of support inside the Conservative Party. Thatcher promised voters in 1982, the NHS is “safe in our hands.

Thatcher still marked a step change in how the NHS was run.  The 1983 Griffiths report introducing Unit General Managers to run NHS Services which previously has been led by Clinicians.   The 1990 NHS and Community Care Act created an ‘internal market’ whereby Health Authorities ceased to run hospitals but “purchased” care from their own or other authorities’ hospitals. Some GPs became “fund holders” and were able to purchase care for their patients. The “providers” became were re-branded as NHS Trusts, who had notionally more independence.

This all amounted to a massive increase in management costs, and as the Berlin Wall came down large numbers of unwanted Cold Warriors were re-deployed as NHS Senior Managers, which helped turn the split between purchasers and providers into a hostile and adversarial environment.   

All of these changes were designed to make it easier for the private sector to take on more and more NHS work. The purchasers in the internal market weren’t constrained to buy only from the NHS, and particularly the GP fundholders were keen to spread their wings and buy a wider range of services for patients.

The reality however was that the private healthcare sector in the NHS didn’t really exist for them to buy from, which meant that the whole exercise was an expense failure. 

In every year from 1990 to 1997 the cost of running the internal market were higher than the value of the contracts that were let to the private sector.  Where there was innovation it was largely GPs setting up their own services to deal with illnesses which were more expensive to treat in NHS Hospitals. 

Private healthcare providers in the UK are tiny in comparison to the NHS, they only provide a limited range of elective operations, and don’t provide complex stuff like A&E.   The services they do provide they are almost entirely reliant on NHS for staff, plus a small number of ex-NHS people (many of whom left the NHS under a cloud).  This created a conflict of interest for NHS consultants who did private work – keeping NHS waiting lists long helped keep their private sector revenue high.

John Major spent more and more on the vast bureaucracy of fundholding, and invested a bit more in running the NHS.   While the use of private sector providers didn’t increase significantly under Major he did introduce the use of outsourcing for support services like cleaners. 

Despite some more money under Major when Labour returned to power in 1997 the NHS was in a dreadful state.  Huge waiting lists, ageing hospitals, shortages of Doctors and Nurses.   I know of at least one NHS CEO who was sacked when it was discovered they had draws in their office full of referrals hidden so that they didn’t show up on the official waiting lists.

I don’t think that the incoming Labour Government were actually honest with voters about the terrible state of the NHS in those days.  They were worried if they told the truth about how bad things were voters might start to think that it was better to get rid of it and start again with something else.  The concern that the Blair Government had about the pubic losing faith in the NHS was overstated, but was a significant factor in their decisions about the service.

As the Government put more and more money into the NHS they became very impatient for results, particularly after Alan Miburn become Secretary of State.  The Government was scared that middle class voters would balk at paying more money to save an NHS with long waits and start going private in large numbers, undermining support for the service. 

One of the easiest solutions to reducing waiting lists was to start and buy surplus capacity in the private sector.  Most private hospitals didn’t run their operating theatres more than a couple of days a week, and it was easy to start buying additional theatre space off them.

I will admit at this point that I was one of the people responsible for this.  I ran a PCT who had inherited a large waiting list for routine orthopaedic work.  I bought up so much operating theatre capacity at our local BUPA hospital that our Chairmans wife, who still  had private heath insurance, was appalled to discover it was faster to get an operation at her local private hospital by going through her NHS GP.  By the mid-2000s there were more NHS patients in BUPA hospitals than BUPA patients, and they sold all of their hospitals to Spire healthcare.

There is no doubt that this was very popular.  The patients who had been waiting a long time and who suddenly got their treatments in private hospitals were made up about it.  I liked it because it let me take control of the flow of patients into the private sector and allowed me to better manage the conflict of interest with NHS consultants who did private work. 

This piece meal approach to transferring waiting list work to the private sector by managers like me was such a success that DH decided to replicate this at a national level with the Independent Sector Treatment Centre Programme.

The ISTCs were supposed to encourage private healthcare companies, often from abroad, to come to the UK to areas with long waiting lists to provide additional capacity.  This was the first big attempt by the NHS to bring in big healthcare companies from the US and around the world to deliver patient services.

Wave 1 was 25 fixed sites, and 2 mobile units, and wave 2 was another 24.   It was soon apparent that there wasn’t anything like enough interest from the private sector globally to make this work, and the programme was opened up to NHS organisations to run and operate them.  By 2006 nearly all ISTCs were run by the NHS due to lack of private sector interest. 

A similar fate befell the NHS Commuter Centre programme.  Ministers (who by the nature of their jobs work in London) were concerned that people who commuted to work found it hard to access GP services.  6 Centres were commissioned, all from private sector providers.  All were closed due to lack of patients.   

More successfully the NHS opened 230 walk-in centres.  These were designed to improve GP Access.   In the decade from 2000-2010, the NHS opened more than 230 walk-in centres. These have been reduced by 50 since 2010.  The original plan was that these would be provided by private sector providers, and Virgin Health did win some of the contracts.   However the majority of these contracts too went to NHS Trusts or to companies formed by consortia of GPs, based on the old GP Out of Hours Consortia model.  This was based on a different model of providing primary care – APMS rather than standard GMS contracts.

The use of the private sector by the Blair Government is one of the most contentious areas, as it was seen by some as running contrary to the values of some Labour members.  Where the NHS bought up private sector capacity locally to reduce waiting lists it was mostly a success.  Where DH tried to encourage an expansion of private sector capacity nationally it was mostly a failure due to the lack of interest and capacity.  It is worth mentioning that while I was moving patients to BUPA I was also bringing a GP practice and a Dentists Surgery under state control, something Nye Bevan never managed.   

When the Conservatives can back into power in 2010 the NHS, despite over 2 decades of the internal market, still had very little private sector provision of direct patient care services.  The costs of running the internal market were still higher than the value of the private sector contracts that they were facilitating.  

The Landsley Act introduced a new dimension into privatisation – the outsourcing of existing NHS patient care services.  From this point on the NHS would have to offer the private sector the opportunity to take over the running of services, with the staff transferring by TUPE to the new organisation.  

I realise that this is a subtle distinction, but it is crucial – up to 2010 NHS privatisation had focussed on persuading the private sector to offer additional capacity to the NHS to expand patient services.  From 2010 privatisation was about letting the private sector run NHS capacity, with no pretence that they were bringing anything of their own to the deal.

In Community Services, where patient activity is less volatile there has been considerable interest in taking over services, in particular by Virgin Healthcare and Care UK.   I don’t really understand the rationale for this, as the private sector in these circumstances are bringing no additional capacity or expertise. They are just taking over the Unit General Management role at a slightly lower cost. 

I am also concerned about the mix of providers who are winning contracts.  There are actually some really good private healthcare companies out there, including some really good US companies like Humana and United who have a very distinctive approach to managing community services that I like.   Under the Tories these companies have actually left the UK healthcare market as they don’t like the way services are being contracted for.  Instead a relatively small number of private companies are taking over services with no obvious patient benefit.

It’s worth at this point to talk about the experiences of Circle Healthcare.  They were a Venture Capital backed chain of private hospitals, which won a contract to run Hichingbrooke Hospital, a small, struggling, NHS District General Hospital. 

DH had been working for a long time on a way to franchise the management of struggling NHS hospitals to more competent management teams.  As well as high performing NHS teams, DH were keen to give a Private Sector teams an opportunity to take part too.   Under Labour this policy didn’t really take off, and mostly it was used to pressurise good managers to take on badly damaged organisations

Under Landsley the policy was resurrected and Circle got the job of running Hitchingbroke DH.  in 2011. By 2012 Circle needed £4m advance on it’s contract.  By 2015 Circle announced that it would withdraw from the contact, although it will still continue to run the Nottinghamshire ISTC, one of the biggest contracts of it’s kind left in the private sector

The Circle experience illustrates the problems with the private sector running healthcare services.  Investors want predictable returns and reliable profits.  Services like Community Services or routine surgery can offer those returns.  Hospitals with A&E departments don’t do this. In a nutshell that is why private healthcare is so limited in the UK, and so expensive in the US.

Right now Circle, Virgin and Care UK are the main market makers for private healthcare, but even with the active support of policy makers they provide less than 6% of the Acute and Community Services budget.

The NHS Budget

Now we have an outline chronology of privatisation we can break the NHS budget down into some component parts so we can look at it more closely.

The 3 biggest bits of the NHS budget are:

Secondary Care. Sometimes described as Hospital and Community Healthcare Services, includes hospitals, mental health, community services

Primary Care. Sometime described as Family Health Services, including, GPs, pharmacists, opticians etc.  Over the last decade or so DH has tried to encourage new models of delivering GP services in addition to the standard independent contractor General Medical Services contract, through arrangements like PMS Pilots (Primary Medical Services), Alternative PMS, and PCTMS contracts.

Central Budgets. This is an odd mix of the 999 Ambulance Service budget, central management costs, and services which are very high cost and low volumes.  Central budgets, as you might have guessed, are nationalised too.

As a definitional point I am looking at direct service delivery costs, not indirect.  For example, if an NHS hospital is paid to treat a patient I am counting this as non-privatised spend, even if some of the money goes subsequently to a private sector cleaning contractor. 

While the share of NHS spend going into primary care has been falling the share of primary care budgets that the NHS provides itself  has increased.  This is mainly due to the introduction of directly provided primary care services. 

Since the 1940s lots of things have happened that have changed the balance of nationalisation and privatisation:

  1. The share of the Secondary Care/HCHS budget which goes to the private sector has increased as services are outsourced to the private sector, for example services given to Virgin Health after the Lansley Act. When we talk about privatisation this is typically what we talk about
  2. The share of the Primary Care/FHS budget which goes to traditional (privatised) GP practices has shrunk as non-GP providers have taken over a bigger role in providing primary care – for example NHS walk-in centres replacing general practice
  3. The share of the NHS budget which goes to Primary Care/FHS has shrunk, and the share which goes to Secondary Care/HCHS has increased. Central budgets have increased the most. While this kind of financial shift over time is mostly invisible to the public (and journalists) it has a huge impact on the shape of healthcare spending.

Lets start with the HCHS budget which goes to the private sector.   Up to 1990 the numbers for this are pretty small, but not zero.  Some bits of the secondary care sector were never nationalised in 1947, however these were never more than a few percent of NHS spend.   Despite all of the efforts form 1990 to 1997 fundholding never really shifted that number up significantly, mostly small scale opportunistic spend on elective operations.

Putting a figure on private sector spend in the New Labour years is complicated because while money went out of the NHS to non-NHS providers lots of it ended up with Local Authorities – for example I transferred £100,000s from the NHS into my Local Authority to deal with the costs of continuing care.  Charities also became providers of NHS services too.

Over the first few years of New Labour private sector spend fell sharply as fundholding was wound up and the contracts that they had with the private sector were stopped.   The costs of the opportunistic use of private hospitals that I negotiated were very small – I was particularly aggressive in using the private sector, but this never amount to more than 0.5% of our total budget, and only lasted for a few years.

Working out how much Walk in Centres cost in total is difficult. Apparently the last NHS Organisation which actually measured this was Monitor, and when it become NHS Improvement the data vanished off its website.  It may be that NHSI actually knows the answer but finding someone in NHSI who is both knowledgable and helpful is beyond my talents.  

My guess is that at it’s peak the Walk-In Centre cost roughly £300m pa, funded by APMS Primary Care funding, with roughly 1/3 of this spend going back to NHS organisations such as Acute Trusts – in the North East for example the largest provider of walk-in centres is South Tyneside Acute Hospitals Trust.

The costs of ISTCs were rather helpfully looked at by the Commons Select Committee.  The total cost of payments to ISTCs from the programme’s inception up to 31 March 2009 was £1.2 billion (Hansard 2009b). Averaging this out over five years, and taking the total budget for the NHS in England of £98.4 billion in 2009/10 (HM Treasury 2008), this represents less than 0.5 per cent of overall annual expenditure.

All of which adds up to lots of big numbers, but not a lot in terms of total NHS funding.

The amount of privatisation since 2010 has accelerated.  Measuring how much is difficult task because of the poor quality of reporting in the general media.  Journalists often conflate the annual value of a contract with the total value of the contract over several years, which makes the sums involved larger.  

I think that roughly 6% of HCHS budget is now with the private sector, up from under 2% when Labour left power, most of which is outsourcing services, rather than buying additional capacity. 

If that helps us measure how much of the HCHS spend has moved to the private sector, and the relatively small amount of FHS spend which has shifted to the public sector we need to work out whether patterns of investment over time have changed this mix.

Working out these shifts turned out to be a big task, which is one of the reasons why this blog took so long.   I tried Department of Health who put in my touch with Legacy Records, who put me in touch with the Public Records Office who couldn’t help. The Nuffield Trust and the Institute of Fiscal Studies were equally stumped.  Eventually I found a data set from the Office of Health Economics which I could use.

Using the 3 headings above I was able to split out spend over time to create this table:

Screen Shot 2018-08-10 at 16.34.33

I have used public and private pretty crudely to mean the bits of the NHS spent in the public sector and private sector according to the definitions used in the late 1940s.  There has been a huge shift in the way the NHS spends it’s money from an NHS which was 1/3rd Primary Care under Attlee

If we start and quantify this the first thing we can see is that there has been a big switch over time from FHS spending, which goes to the private sector to HCHS and other spending, which stays in the NHS.   This is due to a big increase in the amount of funding that the NHS controls centrally for specialist services and for management costs, but also because of a massive decline in spending on dentistry and opticians.   In fact the shift in funding has been driven by a big fall in spend on opticians and dentists, and a big increase in the amount of money the centre hangs onto for itself.

Screen Shot 2018-08-10 at 16.46.12

The shifts in how the NHS spends it’s money over the last 70 years have had a much bigger impact than decisions about privatising and nationalising services.  There was a general swing towards public spending from Attlee through to Wilson, and a slow drift back to private from Thatcher onwards, but not enough to get anywhere close to the levels of private sector spend under Attlee.

There are 2 huge shifts driving this.  As NHS provider organisations have become more independent the centre has held back more and more funding that it controls centrally.   But there has also been a big shift in Primary Care funding away from Opticians and Dentists.  

Lets look at this on a graph shall we?

Screen Shot 2018-08-10 at 16.53.25

So should we be worried about NHS privatisation?

Yes

We shouldn’t worry about the private sector providing services to the NHS where they do so using their own resources, funded by their own capital investors, and where they own the consequences of their own decisions.  We also shouldn’t worry about loads of foreign, mainly US healthcare companies who are lining up to take over and privatise the NHS. This isn’t going to happen in the near future.

We should worry about the NHS awarding lots of contracts to healthcare providers like Virgin who provide services to the NHS using the NHS’s own staff and resources who are transferred to them for the life time of the contract.  The private sector in this kind of contract are bringing nothing to the NHS, and are picking off the lowest risk bits to make money off leaving the NHS with the highest risk, most difficult to manage services, which in turn increases the financial pressure in the NHS.

It is however worth remembering that there has never been a time when the NHS was entirely nationalised, and that this was the result of a decision by the Attlee Government right at the start.   Nationalisation peaked under Harold Wilson, which is no surprise, but Thatcher spent less in the private sector than Attlee did.

https://www.ohe.org/publications/compendium-health-statistics

https://www.ohe.org/publications/ohe-guide-uk-health-and-health-care-statistics

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/283778/WalkInCentreFinalReportFeb14.pdf

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/283778/WalkInCentreFinalReportFeb14.pdf

https://www.kingsfund.org.uk/sites/default/files/general-practice-in-england-overview-sarah-gregory-kings-fund-september-2009.pdf

https://www.kingsfund.org.uk/sites/default/files/Briefing-Independent-sector-treatment-centres-ISTC-Chris-Naylor-Sarah-Gregory-Kings-Fund-October-2009.pdf

https://www.theguardian.com/society/2017/dec/15/we-support-stephen-hawkings-legal-action-to-save-the-nhs

http://www.pulsetoday.co.uk/news/gp-topics/legal/nhs-england-wins-legal-case-impacting-new-care-model-contracts/20036711.article

https://www.crowdjustice.com/case/jr4nhs-round2/

https://www.crowdjustice.com/case/jr4nhs-round3/

https://www.nuffieldtrust.org.uk/chart/a-history-of-nhs-spending-in-the-uk

https://www.nuffieldtrust.org.uk/chart/spending-on-non-nhs-providers-of-healthcare

https://www.nuffieldtrust.org.uk/news-item/those-worrying-about-the-transatlantic-trade-deal-should-look-closer-to-home

https://www.ft.com/content/0067138c-2689-11e3-9dc0-00144feab7de

https://www.theguardian.com/society/2018/aug/05/how-virgin-became-one-of-the-uks-leading-healthcare-providershttps://www.theguardian.com/society/2018/aug/05/virgin-awarded-almost-2bn-of-nhs-contracts-in-the-past-five-years

Does Technology improve productivity?

No.

Screen Shot 2018-05-09 at 17.40.13

Productivity isn’t everything, but, in the long run, it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.”  Paul Krugman

This is why I think that Paul Krugman is wrong, despite his Nobel prize.  People value human contact and personalisation more than economists do:

Productivity is rubbish. Inefficiency rules. Why Craft Gin is better than United Airlines.