Every once in a while I have to look up the expensive word for monopoly purchaser, as distinct from a provider of goods or services that has established a lucrative grip on a market.
The word is “monopsony” and Britain’s NHS is virtually one, as are defence ministries everywhere. No one else buys jet fighters or aircraft carriers.
The row over pay arrangements for senior staff at the Department of Health – in which some 25 full time employees in legal and IT departments or human resources have had their pay channelled through private companies for “tax efficient” purposes – illustrates just what odd creatures monopsonies are.
The Treasury is now investigating up to 4,000 cases across Whitehall – the Ministry of Defence is one of those in the frame – and in contractual arrangements for quangos and arm’s length bodies, including NHS trusts and (let’s not forget) the BBC.
This strikes me as a pretty shocking admission by the state that depends on taxes and their honest application for most of its functions. Greece’s lack of tax credibility is a major feature of the eurozone crisis. Now we find that officials running UK plc have so little confidence in their own capacities they outsource core functions to the private sector – and, it seems, taxes as well.
Long ago I concluded that public and private sectors can always learn from each other and that in the case of a monopsony like the NHS – the UK private health sector is a modest 7 per cent – what’s needed is more private sector skills. Labour and coalition ministers, as well as top DH officials, seem inclined to agree. Litigation insurance, Circle’s takeover at Hinchingbroke Hospital (it claims to have found a £10m funding hole), McKinsey’s overpriced advice on primary care reform… we see evidence of it every week in HSJ and the newspapers.
I assume there will be failures, even fraud, as well as successes, but (fingers crossed) the NHS and its patients will gain overall. At the risk of sounding naive, that assumption rests on proper regulation and on trust that officials in charge – ministers too, of course – are playing straight with voters and taxpayers. That means not taking £6,000 freebies from McKinsey or designing multimillion pound contracts for which they will later help bid (this is a notorious problem in defence procurement) as private contractors.
Health secretary Andrew Lansley, everyone’s favourite whipping boy, is being blamed, although it is really a personnel issue – one for the “permanent government”, that is officials who do the specialist hiring – rather than a policy or politics one. Ministers rarely get involved in pay packages. In any case, it seems to predate the 2010 coalition. So I contacted eight past health secretaries at the weekend, six Labour, two Tory, to find out what they knew of this sort of arrangement.
I got six replies, all Labour as it happens although we should probably not read too much into that detail. None had been aware of any such arrangements. I got a series of “nope” and “news to me” answers. One former special adviser vaguely recalled some “unusual deals in the national programme for IT” and being told it is “how the IT business works”.
Well, perhaps it does. We all know more than we did about private sector rackets and the ludicrous bonus culture that still pays bankers for failure. But it’s not how Whitehall is supposed to work. It has embraced the dodgy bonus culture, yet IT in the NHS is barely a triumph.
Pay outside experts top money if you must, but they should earn it and pay their taxes.