The outgoing deputy chairman of Monitor today suggested the NHS still did not have an effective failure regime and called on politicians to relinquish ultimate control over what happened to financially failed trusts.

Stephen Thornton’s comments come just months after Monitor took on powers to place foundation trusts in “special administration”, and at a time when administrator’s proposals for Mid Staffordshire – the first FT subjected to the regime – are still the subject of public consultation.

Speaking at a King’s Fund seminar on NHS competition, Mr Thornton said the health service was headed for a financial “disaster” caused by failure of the old “politically dominated” NHS system to secure necessary service changes.

“We are heading for disaster,” he said. “That’s quite clear. Every month that Monitor looks at the performance of FTs it is quite clear that there’s a cohort of small to medium sized [district general hospitals] whose future is really, really debatable and [which] are really going to struggle. And when next year’s efficiency target comes out it will be even more difficult for them to reach.

“So what’s causing that?… It’s a result of decades of failure of the old rationally planned system of working out how best to run hospital services, that has been politically dominated so [that] the kind of change and reconfiguration that we all know is needed has not taken place, in most places.”

He added: “And if you’ve got a market that doesn’t have an effective failure regime, as the new one doesn’t have any better [a] failure regime than the old one, I mean we still haven’t solved the problem of what to do with Mid Staffs… I think there’s a more fundamental question here about the nature of the political engagement in all of this.”

Under the new failure regime, Monitor has the power to send trust special administrators into a financially failed FT. These administrators are then able to make reconfiguration proposals aimed at making the trust’s services financially sustainable. However, final decision on what action is to be taken rests with the health secretary.

Mid Staffordshire recently saw an estimated 50,000 people marching in opposition to any downgrading of the trust’s services.

Speaking to HSJ, Mr Thornton confirmed his concern about the new failure regime was that it left too much control with politicians.

“Politicians have to bite the bullet and make this a truly and genuinely independent decision,” he said. “[It should be] subject to judicial review and public consultation, of course, but at the end of the day the ultimate final decision has to be taken out of politicians’ hands if we are to avoid [a] train crash.”

He also told the King’s Fund seminar that he thought the “unintended consequence” of a new competition and merger controls regime brought in under the government’s reforms had been “an absolute bonanza for lawyers and for consultants”.

He continued: “I wince at the millions of pounds that should be being spent on patient care [that is] going out. The service sector is leading Britain’s economic recovery – well, you can see why, can’t you? This is a serious issue that we’ve got to address, because I think we’re heading for some scandals here if we’re not careful. And of course once that happens it’s going to muddy the water when in fact I believe that the direction of travel – in having a properly open and transparent set of competition rules – is the right way forward.”

Asked if he would have preferred to stick with the old system, under which competition and merger issues were dealt with by the NHS Cooperation and Competition Panel, without recourse to the Office of Fair Trading or the Competition Commission, he replied: “I would have.”

Pointing to the list of mergers that had been reviewed and cleared by the panel, which is now a part of Monitor, he said: “I think most people would look at that and go, do you know, nine times out of 10 the decision they came to was the right and sensible one. Did it cost those organisations shed loads of money? No it didn’t…

“I think this late night deal that might have been done somewhere in the House of Lords, when the bill was going through parliament, to involve the OFT and the Competition Commission – it’s the unintended consequence of that that we’ve ended up with.”