Introduction
The Conservative Party in the UK, which was in power between 2010 and 2024, sought to significantly reduce government spending to address budget deficits generated by the 2008 financial crisis. Reducing funding was intended to compel existing service providers to become more efficient by delivering certain tasks with a smaller budget and by cutting back areas of support with little added value.1 At the same time, health and social care commissioners could seek to maintain service provision while paying providers less. In practice, this meant privatising state-funded services by outsourcing to for-profit providers.2 The supposition was that allowing the private sector to compete with the NHS would improve (or at least maintain) quality while reducing costs to the taxpayer.2–4 To facilitate this, the government expanded the private sectors access to NHS contracts via the 2012 Health and Social Care Act and by limiting growth in NHS funding. In hindsight, it has become clear that the space for efficiency gains seems smaller than the government imagined at the time, and the quality of public services appears to have worsened in the years since.5–7 However, what remains unclear is whether funding cuts did, in fact, accelerate privatisation, and whether commissioners used privatisation as a tool to adapt to austerity.
This puzzle is significant because it potentially helps us understand stagnating life expectancy since 2011. Both austerity and privatisation have been evidenced to correspond with declining quality of care and worsening health outcomes.8–10 If austerity and privatisation are related, the association between privatisation and health could be entirely confounded by levels of funding, and we might conclude that private provision is not itself the cause of worsening care. Alternatively, it could be that privatisation connects the causal pathway between austerity and health outcomes or, finally, that these events happen independently of each other. Unpacking these associations is key to understand whether, and if so, how, austerity impacts health and how privatisation impacts health.
Retrenching the state: the privatisation-austerity nexus of the 2010s
The policy debate surrounding healthcare privatisation is a long-standing and contentious topic in England. Consecutive governments have implemented reforms to, step-by-step, introduce private sector provision into the NHS. Thatcher’s 1990 marketising reforms were part of a concerted long-term privatisation plan that aimed to make the NHS more ‘business-like’ and responsive to ‘customer’ needs.11 The moves in the 1990s towards an increasingly marketised provision of the NHS resulted in a significant academic debate about the impacts of competition on the quality of care, with mixed conclusions.12–14 Then, New Labour’s privatisation—via the agreements with ‘Independent Sector Treatment Centres’ (ISTCs)—were framed in terms of target- and performance-driven policymaking which, for the NHS, often centred on waiting-times: ‘in order to sustain lower waiting times while continuing to treat patients according to clinical need, a permanent structural increase in the volume of healthcare services delivered to patients would be required.’15 The introduction of ISTCs in the 2000s has been evaluated in relation to the impact of private sector competition on health service performance, with some studies finding shortening length of stays or higher treatment volumes in areas that had private sector competition.16 17
The incoming conservative-led coalition government in 2010 leveraged the 2008 financial crisis to justify many of its reforms, blaming a need for reducing public debt despite these being ideologically informed political decisions, including reforms that were designed to outsource NHS services.18 Repeating the previous political rhetoric of making the NHS more responsive to consumers and improving performance, a new argument was introduced for outsourcing services: that this enabled the NHS to adapt to the ‘necessary’ cuts to public funding. For example, in a speech about the NHS, David Cameron stated: ‘we need to make the supply of healthcare more efficient - which is why we are opening up the system to new providers…’.19 The potency of this political paradigm rationale was evident, even in local NHS documents.20
In the 2010s, privatisation and austerity were a political nexus, and the narrative designed in a way that enabled politicians to use both concepts to legitimise and reinforce one another. The prevalent political discourse justified increasing outsourcing through the necessities of austerity. Meanwhile, austerity was enabled by the financialisation, commercialisation and deregulation of certain public services.21 22 Privatisation and austerity were implemented in the 2010s with a shared objective: to retrench the state. The burden of the financial crisis was outsourced, both in terms of shifting the burden to individual families receiving lower social security payments, but also in terms of outsourcing public services to private companies willing to implement budget costs and service reductions that ultimately came at the expense of service quality.
How would austerity increase NHS privatisation locally?
There are two possible reasons why NHS commissioners may respond to government-imposed austerity through privatisation. (1) Areas with worse financial resources are under the most pressure to cut costs by politicians and commissioners. In a push to find ‘efficiencies’ in delivering the same level of healthcare, commissioners have been encouraged to turn to the market.23 24 Through outsourcing processes, competition is supposed to enable them to find providers who will deliver the same services for less cost. (2) Austerity increases the need—but not the support—for healthcare.25 Lower levels of public funding and worsening social determinants of health since 2010 have been strongly linked to worse population health in England.6 8 10 With evidence linking austerity to a range of worsening mortality, health and life expectancy are measured.26–29 And, with devolved governments having their budgets cut by Westminster, the negative impact of austerity on health has been recorded in all nations of the UK.30–32 The cuts to welfare and local authority services may then drive privatisation via increased demand on already constrained NHS services, which, in turn, may force commissioners to supplement existing provision with private services.
Commissioner decision-making around outsourcing is informed by a range of relational, political and informational determinants.24 33 Some commissioners feel they have flexibility in deciding who provides NHS services, while others feel that the legislation constraints their freedom to decide.33 Commissioners certainly mention financial pressures as one of the reasons they might turn to formal procurement processes from the market.23 Similarly important are the availability of effective private provision in their geographic areas, the strategic/political direction of local commissioning leadership, and the need of local populations.24 Financial constraints might not, therefore, be the sole (or even primary) reason for increased outsourcing.
Why would some commissioners feel financial pressure more than others during this period? The NHS allocation was intentionally distributed to equalise health inequalities under New Labour’s time in power, with some evidence of successful results.34 But this tilt towards deprived areas changed in the early 2010s under the conservative-led coalition with new directives towards finding efficiencies, and early evidence suggests a slowing of equality improvements.35 36
Is an association between austerity and privatisation important?
The policy implications of the association (or the absence of one) between austerity and privatisation are significant. Below, we briefly discuss the implications of the existence and absence of this relationship through the three scenarios, which will be explored and tested in this paper. If austerity is associated with higher privatisation, we might be observing the intended implementation of privatisation policies by the conservative government. Outsourcing is used by the commissioners, who are experiencing the most financial pressure. This would help explain why levels of privatisation vary substantially among areas. Unpacking this relationship will enhance our understanding of the impacts of NHS privatisation. Evidence suggests that privatisation corresponds to higher mortality rates in areas with the most for-profit outsourcing.9 37 The conclusion of these studies is that, on average, privatisation is associated with worse quality of care for service users.38 However, the causal pathway through which privatisation impacts quality of care is unclear and contested, especially given the observed null differences in outcomes between public and private hospitals in England. This means that it is an open question whether private provision is of worse quality.39 40 If austerity drives an increase in privatisation, it suggests that the aggregate associations between privatisation and health outcomes are not representative of the impacts of increased for-profit healthcare and that it is in fact driven by austerity cuts. More technically, the conclusion would be that privatisation and its relationship on health are confounded by austerity cuts. In evaluating the promise of pro-market reforms going forward, it is therefore of key importance to evaluate the extent to which outsourcing relates to austerity, and whether the effect of privatisation is independent or explained by shifts in funding.
Figure 1 details the three potential causal pathways, which might be occurring. In scenario 1, austerity causes increased privatisation, and mortality rates are impacted by both privatisation and austerity. In scenario 2, the relationship between privatisation and health outcomes is confounded by the levels of government funding, so that once accounting for austerity, the relationship between privatisation and health would disappear, thus suggesting that privatisation itself is not reducing the quality of care. In scenario 3, austerity and privatisation are not related, and each has their own independent relationships with health outcomes.