Is the NHS being privatised?

The NHS has offered care free at the point of use to UK residents since 1948. However, there's increasing concern that the NHS is being privatised by stealth. We look at the details behind the headlines to discover what's changed in the NHS.

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Why do people believe that the NHS is being privatised?

Partnerships between NHS providers and private companies are nothing new. Opticians, dentists and pharmacies have all been run by private providers for many years. In hospitals, some clinical services operate in partnership with the private sector, as do services including car parks, facility management and cleaning. The Labour government that came to power in 1997 used private providers to offer patients more choice and quicker access to treatment.

The Health and Care Act 2012 expanded NHS trusts' ability to award contracts to private providers. Between 2010 and 2015, the number of contracts awarded to private providers increased, but the overall spending remained about the same. However, there have been exceptions. In 2009, Circle Group, a private healthcare provider, franchised Hinchingbrooke Hospital but handed it back to NHS control in 2015 after being put into special measures for a significant drop in care standards.

Campaigners believe that the move towards awarding contracts to private companies represents privatisation and that more private providers are now becoming involved with providing NHS care. Private finance initiatives are also a significant issue.

Is everyone in the UK still entitled to NHS care?

When the NHS was created in 1948, its objectives were clear. It was to be free at the point of use (apart from a few charges for special items) and available to everyone. It didn't matter if you were rich or poor; you could get free healthcare services and only have to pay for them through your taxes.

Those principles have stayed the same, even though there have been alterations in how services operate. We can expect to pay parking charges when we visit the hospital, and prescription charges continue to increase. There are also fewer dentists doing NHS work, meaning that more of us must opt for private treatment.

Whilst long waits for NHS treatment remain headline news, we are all entitled to free NHS care.

What's the problem with private companies providing NHS care?

As mentioned, private providers have been awarded contracts to provide clinical and non-clinical services to the NHS. These include pharmacy contracts, patient transport, out-of-hours GP and mental health services.

The British Medical Association have historically opposed using private companies to support the NHS but acknowledged that the use of private providers had increased to tackle NHS waiting lists, mainly due to the COVID-19 pandemic. Their analysis found that independent sector providers had carried out 5.2% of all NHS elective procedures in 2020-21, compared to 0.02% in 2003-04. In 2021, these procedures included 46% of all NHS-funded cataract operations.

Private sector healthcare providers influencing NHS decision making

Outsourcing sounds like a good idea, particularly if it helps NHS patients get treatment more quickly. However, the BMA are unconvinced. They're concerned that private providers may become too heavily involved in decision-making. NHS managers and clinical commissioning groups make decisions based on patient care needs. Whilst there are not-for-profit companies providing healthcare services, many are profit-making businesses with shareholders. This creates the possibility that providers could make decisions based on profit rather than patient care. There are also questions about how the changes will affect patients with complex needs who need multi-disciplinary care.

Long-term sustainability

Outsourcing care to private providers may not be a long-term solution. Increasing numbers of people self-fund their care to skip waiting lists. As more people decide to go straight to the private sector, the capacity for outsourcing will likely reduce. Private companies typically perform more straightforward operations such as cataract surgery and hip or knee replacements. It needs to be clarified how that will impact NHS funding and sustainability if profitable procedures are outsourced.

Staffing implications

Alternatively, more medical practitioners may choose to take on additional private-sector work. This potentially limits their availability to work within the NHS and could also impact training. While private sector providers typically invest heavily in new technological advances, they are not obligated to provide training in the way that there is in the NHS.

Any future contracts with the private sector may introduce an obligation to provide training to ensure continuity. The Government has announced plans to increase Government spending and address the lack of trained staff in the NHS workforce. It remains to be seen what impact these changes will have. However, on a positive note, it demonstrates a commitment to ensuring the NHS remains viable long-term.

How much does the NHS spend on private sector services?

Private companies have become more heavily involved in providing health services in the UK over recent years. The BMA estimates that new initiatives could result in the NHS spending up to £2.5 billion per year with private health companies, almost double the amount spent in 2018 and 2019.

However, The King's Fund, a charity working to improve health and care in England, found that it's difficult to pinpoint precisely how much the NHS providers spend with private health companies. There's no detailed information on individual contracts, and while the actual figure may have increased, the percentage of overall spending has remained consistent at around 7.2%. Campaigners who view any private sector involvement as a sign of NHS privatisation may think this is too much. However, there is also additional spending with voluntary organisations and not-for-profit companies and primary care services, including GPs, dentists and opticians, which may provide NHS services but are also private businesses and partnerships in their own right.

These factors mean it isn't easy to get a clear picture of how much the NHS spends on private services. However, the fact that the overall spend appears to have remained static in terms of an overall percentage suggests that the figures don't provide significant evidence of NHS privatisation.

How do private finance initiatives work?

Private finance initiatives (PFIs) create partnerships where private companies fund public facilities. For example, if the NHS wants to build a new hospital, the PFI is put out to tender, and a private consortium raises funds to pay for the building. They're typically also responsible for designing and building the new site and then managing it for a specified period. Contracts often include catering and cleaning services and other facilities. The NHS Trust pays a charge for these services and the building itself.

While PFIs have existed since 1992, their popularity increased after 1997 when the Blair Government came to power. They were popular because they allowed the NHS to build new facilities without a substantial initial outlay.

The main disadvantage of PFIs is that they typically cost significantly more than NHS-funded schemes. The contracts usually include high-interest rates, and they're also index-linked. When contracts can last up to 100 years, that can represent a significant increase in cost. For example, it's estimated that the PFI programs in Scotland, valued at £2.7 billion, will ultimately cost £2 billion more than if the Treasury had financed it. A recent report estimates that the NHS will pay approximately £80 billion in return for a £13 billion investment. This means the health service may need to divert funds from patient care to fund these costs.

PFIs are often mentioned in the context of NHS privatisation because they allow investors to make a profit. Estimates of the level of return vary, with some commentators putting these profits as anywhere between 40% and 70% of their original investment, while conservative estimates are between 15% and 25%.

Unfortunately, ending the use of PFI contracts isn't easy. Buying out the contract and taking ownership of the site would involve a significant outlay, which NHS trusts may be unable to afford. They would also need to make provision for services currently provided by the private sector, either by recruiting new staff or reaching a new agreement with a private provider.

Is the NHS being underfunded?

The NHS is under pressure, with long waits for elective treatment and failures to meet A&E waiting time targets. There are several contributing factors, with the BMA blaming both chronic understaffing and a lack of funding. However, recent OECD figures put the UK in the top 3 countries for health expenditure, having been the fifth best-funded healthcare system before the pandemic. Campaigners allege that underfunding is a deliberate strategy to push more patients towards the private sector, enabling increased NHS privatisation because the NHS isn't fit for purpose. However, the figures don't bear this out.

Whilst NHS funding is currently on a par with other developed countries, this wasn't always the case. Historically, healthcare spending has increased at around 3.6% per year on average. However, following the 2008 financial crisis, austerity measures reduced Government spending. Between 2009 and 2019, health spending only increased by 1.5% per year. Planned spending increases since 2019 have also been impacted by inflation, meaning that they're worth less, particularly when they affect wages for staff impacted by a cost of living crisis.

New funding settlements and schemes to improve NHS recruitment suggest that there is the political will to increase NHS funding rather than deliberately underfund it. However, frustrations at a perceived lack of spending on staff wages remain.

Health and social care

The social care system is also an essential part of health services as a whole. Clinical staff describe difficulties discharging patients from the hospital because of a lack of support services when they return home. It's also been suggested that better community services could help to prevent emergency admissions and a need for hospital treatment in the first place.

An NHS Confederation survey found that 73% of respondents reported that urgent admissions due to a lack of proper social care provision directly impacted their ability to reduce waiting times. Patients who need urgent treatment will always take priority, meaning that non-urgent, elective treatment must take a back seat.

Social care is typically managed by local authorities but supported by Government funding. Budgets have increased, but local authorities say this still falls short of the level of funding they need to attract and retain staff and cope with growing demand. While some care services are means-tested, care after coming home from hospital should be free of charge. However, it appears that capacity may be an issue.

While there are no official figures on levels of self-funded private social care in the UK, the ONS estimate that 36.7% of care home residents pay privately to live in a care home. These figures only apply to residential care and don't include people who pay for live-in or visiting carers to enable them to remain at home.

Graphic with NHS logo and the question "Is the NHS being privatised?"

Is the NHS being privatised?

As we've seen, there has been increased private-sector involvement in the NHS in recent years. Private companies will likely continue to provide some services. However, since Hinchingbrooke Hospital was handed back into NHS hands after being managed by a private healthcare company, it appears unlikely that hospitals will be governed entirely by the private sector.

While the Health and Care Act 2012 increased the scope for private providers to tender for NHS services, the 2022 Health and Care Act removed the requirement for NHS commissioners to make decisions based on costs. There is now no compulsory competitive tendering so that clinical commissioning groups can make decisions based on patient needs. If the existing NHS providers offer a good service, they can keep the contract rather than having it put out to tender.

Combined with the fact that the proportion of the NHS budget spent on private services has stayed the same, it appears unlikely that the NHS is being deliberately privatised. However, there are still obvious concerns about the increased waiting times and the number of patients choosing to seek private treatment and fund it themselves.

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Disclaimer: This information is general and what is best for you will depend on your personal circumstances. Please speak with a financial adviser or do your own research before making a decision.

Chris Steele
Founder and Editor

Chris is our resident private health insurance and healthcare expert and has over a decade's experience writing for and about private medical insurance and private treatment. He's a Cert CII qualified member of The Chartered Insurance Institute and his research and work are often cited in the press. Chris is also contributing writer to numerous other financial services publications.

Frequently Asked Questions

Is the NHS being privatised?

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It appears unlikely. While private providers have become increasingly involved in providing services to the NHS, the percentage of Government spending allocated to private sector services has remained stable for many years. Attempts to hand NHS hospitals over to private sector companies have been unsuccessful, and the UK Government have advised it's unlikely that they will attempt this in the future.

What services do private companies provide to the NHS?

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Private sector companies provide both clinical services and support services to the NHS. These can include providing mental health support, scans and x-rays. Non-clinical services include catering, car parking and building maintenance, often due to a private finance initiative. Opticians, dentists and even GP practices are often private partnerships and businesses offering private and NHS treatment.