Thursday, 17 October 2013

Question : how can private corporations be more efficient? Is there any evidence?

At the CCG meeting last Tuesday we were asked to submit a question in writing regarding the financial consequences of private corporations running NHS services, so that the CCG could forward it to the Trust Development Authority.

The question is – how can it be more efficient in cash terms for a private contractor to provide a product for the NHS, given the following circumstances:
·      The administrative work associated with granting the franchise?
·      The fact that a private corporation’s primary responsibility is to make sure that their shareholders get a bigger dividend each year?
·      The fact that generous salaries and bonuses must be paid to the directors of the private company?
·      The fact that the company is very likely to pay large fees to tax accountants in order to minimize the amount of tax that they will pay in the UK?

The flow of money in the classical NHS model is simple. Money goes from taxpayer to the Treasury to NHS patient services.

The flow of money in the case of a franchise to a private health corporation is from Taxpayer to Treasury to CCG to private corporation, some of which goes to patient services, and some to the corporation's shareholders as dividends and to bonuses, some of which will flow onwards to tax accountants and tax havens.

There is therefore a net outflow of money in the case of private corporations which does not exist in the NHS model.

As a supplementary question, is there any objective evidence that franchising is more efficient than the public service model. For instance in rail services franchising is there any evidence of increased efficiency?

The question has been put. We await a response.

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