As the FT notes this morning:
The British government could save at least £20bn a year by modernising IT systems, tackling fraud and getting a grip on failing mega-projects such as the HS2 rail line, according to the head of the UK government's independent spending watchdog.
To be candid, I really do not doubt it.
But imagine how much more it could save if it stopped pretending that so much of the public sector was made up of independent organisations competing with each other rather than cooperating to provide integrated services.
Take this on the NHS. There are:
- 42 integrated care boards, which each have an integrated care partnerships
- 229 total number of trusts, including 154 foundation trusts
- 50 mental health trusts
- 10 ambulance trusts
- 124 acute trusts
Each of these will spend its life:
- Creating duplicated policy
- Accounting furiously to each other, billing like crazy and employing an army of accountants to reconcile the results
- Have its own PR and comms teams
- Spend a fortune on websites, glossy annual reports and more
- Duplicate management structures
And all for no gain and a lot of cost. Regional strategic health authorities could solve that.
And then there is education, where in 2022 (I struggled to find more up-to-date information quickly), there were 2,539 multi-academy trusts operating in England, made up of nearly 10,000 schools. That still left 17,500 outside trusts, rather surprisingly, but all these trusts suffer all the problems noted above, and destroy the chance of integrated education provision in any area, which should be the goal.
What if we got rid of all this nonsense? What would that save?
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All of these systems have been put in place by politicians on the assumption that people are stupid, only “in it for themselves” and will always skive off at the first available opportunity.
Well, I guess it takes one to know one!
Whilst public servants are only human, most approach their work to serve…. we just need to set the environment for them to do that.
I agree, but principled public servants arise from a culture of mutual respect and responsibility – some are born, but probably the majority are made. A society of rapaciously greedy sovereign individuals (who deny there is no such thing as society) can never create such a culture.
Another cost category that could be reduced is the eye watering level of legal costs. Many outsourcing awards are routinely contested. In some cases Trusts compete against each other and seek legal recourse when contracts are lost.
Some clever person once said:
Competition is the law of the jungle.
Cooperation is the law of civilisation.
I believe this sage was the Russian geographer and scientist Pyotr Kropotkin, whose extended debate against the Social Darwinism of his time, with all the pseudo-science, including Lamarckism and Malthusian dogma, that involved, is not well enough known.
Social Darwinism still strongly underpins conservatism, even neo-liberalism.
The wealthy are superior and their status is achieved on merit.
If wealth flows to their cadre it is deserved.
The poor are underserving because they are inferior.
This the same thinking that drives the absolute conviction that competition ALWAYS achieves more efficient and effective outcomes in resource allocation.
Adam Smith too, has been hijacked in the reinforcement of this myth.
It excuses the malign allocation of social resources under contemporary Toryism.
Of course Kropotkin was also a leading anarchist thinker. We tend to ignore the writings of his generation these days, especially now we’re all regressing to 21st century neo-serf status, but any serious student of politics ought to be familiar with ‘ Mutual Aid’. Even the arch evolutionist gatekeeper Stephen Jay Gould eventually wrote a sympathetic review of his thinking on co-operation vs competition.
How we currently structure public organisations and institutions is very much linked to this century old debate.
https://www.marxists.org/subject/science/essays/kropotkin.htm
It’s the profound stupidity of applying neoliberal ideology to everything, the NHS should not be run as a series of internal markets, who is it competing against?
The NHS should be run as a centrally planned operation. Neoliberals would argue that sort of scale of operation would be inefficient, but if you want an example of a privately run organisation that is centrally planned you can just say ‘Amazon.’
In the case of the NHS – I agree – it is a complex system – that is far better run on an integrated basis.
HS2 is “sort of” a different case – big infra that could have/should have been handled in a much batter fashion – perhaps by not attempting it in the 1st place.
However, I digress. Some projects are very very successful – on-time and on-budget. For example BritNed – 1GW HVDC interconector -Uk – NL. Client was National Grid, supplier – Siemens. Very successful – & with no add-on (function creep) or extras (how the main contractor makes money). IT projects? function creep kills them every time. None of this is “hard” it is all well understood – & yet & yet.
Precisely…
The contracts for building HS2 were “design and build” and paid using “cost plus”. This means the contractors can skimp on materials and standards and be paid what they want. Note that the build time was doubled and as a rule of thumb this will double the cost.
The flaw there is that the NHS is not Amazon – or Tesco or any other organisation that delivers a totally uniform service to a homogeneous group of ‘customers’.
The totally centralised model (Westminster…?) ends up being remote from the the different problems that face different areas. We ought to have learnt that by now. And the answer is certainly not setting multiple organisations up to compete with each other, neoliberal style. There is a logic to clustering the many services that contribute to health in any given area. That needs to be combined with an approach that is continually looking for ‘best practice’ or ‘what works’ and spreading it across the different areas. It does happen – see Roy Lilley’s blog – but it takes a shift in mindset and the space and time to change. Consultants are notoriously resistant and territorial.
That also means, as said elsewhere, collaboration rather than competition.
Agreed
And collaboration in many ways – genuoinely with patients, for example
That also requires government to be hinest abiut the real threats – like big sugar
Richard,
Completely off topic
A favour since I suspect you have an interest in Doctors’ pensions.
Does what I have written make sense?
(Possible answers: “too busy”. “total nonsense”)
The NHS Pension Scheme Rip-off
My daughter-in-law is a GP and sent me a tweet by @DrSteveTaylor on the surplus in the NHS Pension Scheme. (https://twitter.com/DrSteveTaylor/status/1745838489751462152)
The TLDR version
1) Pension contributions are supposed to be tax-free, but NHS staff pay the equivalent of 20% income tax on their pension contributions.
2) Since pension contributions are based on the member’s whole salary, this hidden tax is paid on the member’s whole salary, unlike income tax, which is paid on the amount above a threshold.
3) Because of this hidden tax, the cost to the Government of the NHS wage bill is 6% lower than stated. (All percentages approximate)
4) The name of the hidden tax is “Transfer to the Consolidated Fund”.
I am not a pension professional, though I was a trustee of the Medical Research Council pension scheme for 16 years. As far as I can see, the NHS Scheme Report contains a lot of words and a lot of fantasy, concealing a significant injustice.
The story.
Because the Government acts as guarantor, the NHS scheme is pay-as-you-go. In a mature pay-as-you-go scheme, such as the NHS, the amount paid out in pensions each year is covered by the amount received in new contributions.
This may not always work. For instance, if more and more services are contracted out and fewer NHS staff employed, new contributions will be lower. Similarly, new contributions will be lower if NHS staff continue to receive below-inflation pay increases. Despite both of these happening now, a hidden tax is still being collected.
Of course, if more NHS staff were employed in order to meet demand, and wages were increased at least in line with inflation, new contributions should more than cover pensions.
Most other pension schemes, including the Medical Research Council and University Superannuation schemes, are “funded”. They are expected to hold enough assets to pay all existing pension liabilities, even if contributions stopped overnight. (This provides a lovely cash cow for the Financial Services industry. Vast sums of money to play with while taking their fees, with inexperienced trustees too ready to defer to “experts”.)
As far as I can see, the NHS Pension Scheme Report (https://www.nhsbsa.nhs.uk/sites/default/files/2023-09/NHS%20Pensions%20Annual%20Report%20and%20Accounts%202022-2023.pdf) treats it as if it were a funded scheme, except its assets and liabilities are hypothetical sums pulled out of thin air by its actuaries.
Some figures from the 2023 NHS Pension Scheme Report and Accounts
2022-2023
Pension contributions (p67)
Employers £12,585 million
Employees £6,094 million
Transfers in etc. £213 Million
Total £18,893 million
Pensions paid (p75)
Pensions £11,162 million
Lump sums etc. £2,967 million
Deaths, Transfers etc. £237 million
Total £14,367 million
Contributions minus Pensions paid £4,616 million.
Transfer to Consolidated Fund £4,325 million (p50)
“Consolidated Fund” = Government’s bank account. *
Equivalent to a tax rate on contributions of 22.9%
In 2021-2022 the figures were (p67)
Pension contributions
Employers £11,703 million
Employees £5,650 million
Transfers etc. £276 Million
Total £17,438 million
Pensions paid (p75)
Pensions £10,413 million
Lump sums etc. £2,,644 million
Deaths, Transfers etc. £197 million
Total £13,254 million
Contributions minus Pensions paid £4,184 million.
Transfer to “Consolidated Fund” £4,350 million (p50)
Equivalent to a tax rate on contributions of 24.9%
Earlier years
(assets.publishing.service.gov.uk/media/63527c9ae90e07767e42e999/E02760432_NHS_Pension_Scheme_ARA_21-22_WEB.pdf p52 p57 p64).
2020-2021
Pension contributions £17,469 million
Pensions etc. paid £13,057 million
Transfer to Consolidated Fund £3,642 million
Equivalent to a tax rate on contributions of 20.5%
2019-2020
Pension contributions £16,420 million
Pensions etc. paid £12,444 million
Transfer to Consolidated Fund £3,035 million
Equivalent to a tax rate on contributions of 18.5%
Since pension contributions make up about 30% of the NHS wage bill, the transfer is equivalent to an invisible claw-back of about 6%.
Staff members innocently make their “tax-free” contributions to the NHS Pension Scheme. But for every £1 contribution, the Scheme uses 80p to pay pensions and hands 20p of their contribution to the Government. A tax in all but name.
* Note: The Consolidated Fund is the Government’s own bank account (wikipedia.org/wiki/Consolidated_Fund). Income tax is paid into the Consolidated Fund. National Insurance contributions are paid into a separate account, but in practice there is no real separation between the National Insurance account and the Consolidated Fund (fullfact.org/economy/money-national-insurance-contributions)
I lost you – in disagreement – when you claim tax is paid in pension contributions
It is not
Thereafter I gave up
Richard, Thanks,
I think when you pay income tax, you make a payment into the Consolidated Fund.
If you make a contribution to the NHS Pension Scheme it is “tax-free”.
But the NHS pension scheme takes your contribution plus the employer’s contribution and pays 20% of it into the Consolidated Fund
Same effect as income tax but with smoke and mirrors
Sorry – but you’re playing games
The Consolidated Fund is the government’s combined bank account
This wholly misses the point
Hi Richard,
I think what he is saying is the Employers and Employees are currently paying around 20% too much in their annual pension contributions to the NHS Scheme because there is a consistent (last 5 years at any rate) annual surplus of around 20% of revenues that is being transferred to the Consolidated Fund. The State is, of course, taking the risk that there might be a shortfall in future and a reversal in the flow so that the Consolidated Fund was paying out a shortfall. If an actuarial report showed there was likely to be a consistent surplus into the future, then there would be a case for e.g. cutting the employer contribution and recycling that into general NHS funds.
It is not correct to describe a pension scheme surplus as a tax on the employees. The pension is part of the wages provided by the employer so it is the employer that has to ensure the contractual obligations are met, but they are not obliged to exceed them.
Given that the payment is guaranteed I am not sure what the fuss is…
You could add to your list of negative effects of these pseudo businesses and pseudo markets the impact they have on well qualified young people considering a career in education.
They can either go into teaching with the promise of an ever increasing workload, falling rates of pay and worsening conditions, truculent pupils and the knowledge that Government sees them as the enemy.
Or they can become an educational bureaucrat with a 9-5 job, interchangeable career opportunities across the whole spectrum of education and be largely free from the opprobrium regularly heaped upon the teaching profession.
Ten years agoI had a client in counselling, referred by his local authority ALMO employer. It soon became obvious the difficulty was in the organisation, not the individual. They explained the situation and the unfair requirements placed on this person. I remarked ‘that’s sounds like style over substance.’
The reply was ‘Oh, he -the boss-makes no bones about it. He says he would for style over substance any day.’
I was somewhat surprised even though I had endured a decade of ‘reforms’ to education-albeit pre-Gove.
Naively I asked why. The answer was that the organisation would be judged by what was on the website. Basically what boxes had been ticked- efficiency savings, paperless office, hot-desking ( so they could move to a smaller and cheaper location it seemed ) Investor in people award (ironic really). I came across similar in clients from the private sector too. Same sort of ‘management speak.’
I also saw some folk who had been in the old Housing Dept. When it became an arms-length organisation, new directors appeared who said the existing people didn’t know about the ‘real world’ and within a few years most of the previous staff had left. Yet the survivors were often asked for advice and ‘what did you used to do?’ Experience IS valuable.
I heard all the reasons you give above. One day I hope they will tell them much of it is BS and expose the nakedness of the Emperor.
Thanks
‘Bullshit jobs’ comes to mind….
You are right, but at the same time the NHS is too big to be micro-managed from the centre. One way or another staff need to feel they are working in a unit where the managers understand, and have the power and resources to respond to, the needs on the ground, which means being organised fairly locally.
What worries me is that while there is a case for this criticism, because there is at the same time criticism from the likes of the Daily Mail of the NHS’s supposed “inefficiency” the approach of any incoming government will be to set about yet another reorganisation rather than concentrate on getting the existing system working. I think the size of the NHS means there isn’t a perfect organisational structure and the need is to identify what can be made to work. (Having said that, like you I think the absence of an organisational level corresponding to the previous Strategic Health Authorities is a weakness).
I have first-hand experience of the effect of these Tory ‘improvements’, in the education sector. In 1988, under The Education Reform Act, individual schools were given control of their own budgets (previously, state school funding was controlled centrally by Local Authorities). As a supplier of IT equipment, overnight we went from selling to around a hundred Local Education Authorities, all of which employed skilled expert advisors with the time and knowledge to engage deeply with us, to selling to twenty-seven thousand individual schools, most of which had harassed teachers completely out of their depth and with little time to research buying decisions. Both schools and their suppliers had to add massively to the admin of the supply chain, and all the expertise of the LEA Support Centres was lost. Pure vandalism, driven only by dogma.
I remember it will
I was a governor back then
For a while with someone called Sadiq Khan….
All I see is a set of shadow organisations that can be conveniently packaged up and privatised by being sold into the private sector when the axe falls on state provision.
Going back to my view about poor design and management of services being done deliberately – it would also not surprise me if that the way the departments are ‘fluffed out’ is also done on purpose ready to be culled and offered as evidence of the efficiency savings at the time of privatisation either. I mean, by that time, they would have done their job, slowing things down and absorbing cost.
Couldn’t agree more Richard.
Since the 1970’s politicans seem to have used the NHS as an irresistable target for their fantasies – and have imposed reorganisations often aided and abetted by McKinsey et. al.
https://www.cambridge.org/core/journals/medical-history/article/mckinsey-and-the-tripartite-monster-the-role-of-management-consultants-in-the-1974-nhs-reorganisation/EC86FE3C375D1F7139CE555A71DF4342
https://commonslibrary.parliament.uk/research-briefings/cbp-7206/
Merging or demerging of NHS Regional, Area, District, Local etc etc – partnerships, trusts etc has been characteristic. Making them ‘compete’ one minute and ‘collaborate’ the next.
I have tried to explore how to build a public service from the user upwards – bringing into existence when required, networked service providers with the profile of expertese and treatment needed by that particular user .
All the reorganisations, as you say Richard seem to be variations on ‘top-down’ plus ‘market forces’ – ideology plus theory- which doesn’t provide a mechanism for delivering a service tailored to the unique needs of each service user .
Thanks
Today, Business and Trade Select Committee interrogation of the CEO of the PO, and a Director of Fujitsu. This is a ‘car crash’; they know nothing, see nothing, hear nothing and know nothing of the past. This is a revelation. The PO CEO since 2019 does not even know when the PO Board was first told about the flaws in Horizon; even now. The PO CEO is trying to palm the responsibility to find out what happened is for the Enquiry. The avoidance of responsibility.
Forget the PO scandal this tells you all you need to know about Corporate Britain today and the overpaid executives it employs.
What the MPs are not asking, in spite of suddenly tough questioning of (frankly) rag dolls hanging by a string; is also crucial. The MPs are quick to emphasise the PO was routinely keen to recover assets, rather than prioritise pursuit of what happened. What they are not asking of the PO is the conversations between Government and PO over whether the Government wanted the PO to recover assets, rather than prioritise pursuit of what happened, and accept the fair financial consequences. What sort of people rise to the top of large corporate and other institutions is a question I keep asking; and few wish to address, especially those in power, handing out the jobs, and the patronage.
Now if we had Politicians who prioritised running a competent administration……
Surely though Management Structures should be driven by what you are attempting to achieve and at the moment it looks like the aim is chaos
Kevin Hollinrake MP, Post Office minister, who is doing his best, but floundering. The crunch comes almost from the first question from the Business and Trade Select Committee? It borrows a remark from Mr Bates, that the Post Office proceeded on their approach because they had “the ear of politicians”. Hollinrake replied, “you will have to ask the politicians”. That is the kind of limp excuse I expect from the Post Office, or Fujitsu; ‘don’t ask me, what do i know?’. Think again.
Hollinrake confessed the politicians had not been challenging enough. There is an understatement. This goes to the heart of the matter. It is simply not good enough. What on earth do politicians think their first task in life is, if it is not to proptect the freedom and abuse of the people they represent? Their duty is to their constituents first, not Party or government. When the government and Parliament and government are done blaming the Post Office; then it is overdue – that Government, politicians, the Law, and Parliament itself must be brought to account. nothing less will do.
BBC Radio Scotland News, from 1pm, interviews an FT journalist about the Post Office Scandal Select Committee events today; no close, aggressive interrogation of any politicians; so, we may conclude the BBC News desk simply couldn’t find a good line of attack to accuse the Scottish Government or Holyrood of the direct blame. All their News resources must be in Edinburgh for the UK Covid enquiry, sharpening their knives there.
For healthcare, that’s the way we do it in Sweden. Regional Health care
There are still huge problems with the numbers of administrators swelling, as well as agency staff. Doctors I talk to say it is because of New Public Management, a management form that should be thrown out
One good thing we have is the largest doctor and dentist company in the world, I believe, Praktikertjänst.
Doctors have their own private practice in effect, but they own shares in Praktikertjänst and are employed by it too.
The company takes care of everything, from getting nurses, doing all admin, fixing premises so that doctors can concentrate on…. doctoring…. they even have central purchasing to keep prices down.
Richard. Your points regarding the NHS refer I think to NHS England.
NHS Scotland is quite differently organised.
Public education too is differently organised in Scotland.
My impression is that in Scotland there is significantly less privatisation of both.
Would a comparison of the two countries be useful in this context I wonder.
It may be, of course, that the overwhelming problem in both countries is chronic underfunding.
But perhaps, despite the difficulty of establishing a level enough playing field for comparison purposes, if might be possible to show which country’s approach is working better in practice.
You are quite right
I should always make the point
See also Canal & River Trust set up to take over from British Waterways but now suffering from lack of funds.
That was predicted from the outset
For once this is a subject I can comment on from experience, before I retired two years ago I was a full time trades union officer for an education union and observed the fragmentation of the education service.
The creation of Academies was a clear attempt to break to power of collective bargaining, by creating thousands of separate negotiations with individual schools making it more difficult for unions to organise.
It was also driven by a simple dogma that the private sector was always better and cheaper than the state.
My experience, anecdotal as it is, is that the costs on MATs are higher than the Local Authority. A CEO of a 20 school trust earns more than the Director of Education covering up to 300 schools.
I observed contracts being given to friends, fraud and significant bullying of senior leaders, which would never have happened in LA schools.
There is a whole books worth of stories from just one MAT, where after collective action the whole of the Trust board and senior management has to be removed.
We must return public services to the public and have public accountability.
I worked for a large corporation early 2000s my job was to help clear up the mess from the earlier restructuring of the company from one Ltd to many Limiteds. ABB had done this earlier with some success. For us it was a total failure, and one of the reasons the group ended up selling a large part of it operations.
I was responsible for creating one it system out of hundreds.
When we finally got the system in place we realised that we had a legacy: it was impossible to tell if the company as a whole was making or losing money. We could have solved if we moved fast enough but me and the company ended up parting.
It’s just not a good way for most operations to be organised. Obviously why Tory influence makes it that way, failure opens up to privatisation. I’d call it willful sabotage rather than ignorance.
I found that in a company I got involved with in the 80s
It seemed like there was a good business, but the legacy was so bad the only thing to do was start with a new corporate entity and abandon the old one, with a guarantee that the liabilities of the old one would be paid
That way new management could make the new company work whilst accounatnts sorted out the mess of the old