Market testing ends for NHS

5 Oct 00
Health Secretary Alan Milburn ushered Best Value into the NHS last week, abandoning almost two decades of compulsory market testing in support services such as cleaning and catering.

06 October 2000

At the Labour Party conference he said market testing would be replaced by a system that stressed factors such as patient satisfaction and staff consultation, as well as efficiency.

Guidance on the new system, Value for Patients, will be published early next month but it is understood that it will apply initially to all NHS trusts, including primary care trusts.

Although officials are reluctant to use the term Best Value, Milburn's announcement clearly operates on the same principles as the initiative now in place in local government. Hospitals will have to review their support services every five years with the emphasis on increasing quality.

It is understood that the new system will cover all support services, compared with three at present. It will operate alongside a range of clinical indicators and the NHS Controls Assurance project, which aims to improve risk management in areas such as health and safety, to ensure that all trusts' activities are regularly reviewed and quality assured.

The similarities with local government Best Value do not end there. Trusts will assess their own performance but a new external inspection regime, probably led by the Audit Commission, will also be put in place.

Value for Patients is the latest step in the government's modernisation programme, the major theme of the CIPFA Health 2000 conference in London next week. Speakers will include former Observer editor Will Hutton, now chief executive of the Industrial Society, and Andrew Foster, controller of the Audit Commission.

Hilary Daniels, CIPFA health panel chair, said the new system was symptomatic of the challenges facing NHS finance staff. 'These recent developments mean there is a wider role for finance staff in the NHS. They will have to look far wider than their own areas of expertise.'

Public sector union Unison, which has campaigned against market testing since its introduction in 1983, welcomed the abandonment of compulsory tests. 'We are pleased to see the end of compulsory competitive tendering – and the admission that it was a failure and led to the lowering of standards in the NHS. We believe it is best that these services are provided by health service workers employed by the NHS,' a spokesman said.

However, the NHS has not seen the back of market testing. Milburn stressed that trusts will still need to demonstrate value for money. They will be required to measure themselves against the best the NHS can offer – including services operated by the private sector where they are already contracted out – to see whether or not they are meeting value for money and the high standards that are now required. If not, trusts should market test the service, but with a new emphasis on satisfaction and quality as well as cost.

Employees subsequently transferred to private employers would retain their employment rights under the Transfer of Undertakings regulations.

'The new standards we want to see under the NHS Plan – especially in the areas of food and cleanliness – need a more flexible, less dogmatic way of doing things,' the health secretary said.

'For too long, the NHS has had to cut costs in services like catering and cleaning. These may be support services. But that doesn't mean they're not important. In fact they are central to the experience of patients in our hospitals and clinics. Now the NHS will be able to decide for itself how it wants these services to be provided, and the views of staff and patients will be central to the process.'

Compulsory market testing has died a slow death in the health service. Milburn, then health minister, announced a review of the process soon after Labour came to power in 1997. Then, in January last year, the NHS Executive indicated in a letter to Unison, which has been seen by Public Finance, that compulsory tests would definitely come to an end. In the meantime, trusts could gain an exemption from them simply by contacting the NHS Executive.

Ministers also ruled that support services did not have to be contracted out as part of Private Finance Initiative schemes.

Many trusts had been forced into market testing as a way of meeting the annual efficiency gains demanded by government. About 30% of the contracts in the three compulsory areas – cleaning, catering and laundry services – were awarded to commercial operators. However, trusts have tested a further 83 services and awarded half of these by value to the private sector, including security, switchboard operations and portering.

In 1993, the Department of Health estimated market testing had saved £1bn in its first ten years.

CIPFA Health 2000 takes place at the Cumberland Hotel in London on October 10–11


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