This issue was also carried on page 4 on the Financial Times on Friday which may have been based on the Treasury sources that Michael White mentions in his Guardian article below.
It is an interesting conflict about the mechanics of market socialism. The government has just published performance tables for the success of hundreds of National Health Trusts, with an implication that this will affect their entitlement to further state funding. But the crunch issue below is whether these Trusts can have access to capital markets. While they may still not be allowed to make profit themselves, they would have to on behalf of the capitalists from whom they are borrowing. But Gordon Brown's worry is that it would strip him of his ability to massage the state sector debt to keep it down and to appear ultra prudent in front of the financial markets. Any supporters of market socialism might usefully consider this as an exam question thrown up by practice to explain how the state could allow local initiative in meeting economic goals in the delivery of services, while distributing access to development capital in such a way as not to cause inflation. And how to stop a process of uneven development whereby the more successful trusts would grow in economic power and be able to take over less successful trusts in order to use finance more efficiently. Chris Burford London Ministers at odds over funding of hospitals As Milburn meets foreign surgeons here to operate on hundreds of patients, the Treasury insists on maintaining control of health spending Michael White, political editor Wednesday July 31, 2002 The Guardian Gordon Brown and Alan Milburn are deadlocked over the financial status of the NHS's new foundation hospitals as the chancellor resists the health secretary's plans to allow them to raise funds on the open markets. Mr Milburn believes the £40bn NHS plan to raise health care standards to European levels can only work if huge sums of new investment are matched by Whitehall's willingness to loosen its grip on decision making and let hospital trusts run themselves. But the chancellor's traditional role as guardian of the national chequebook - coupled with his personal obsession with detailed performance in the public sector - has made him reluctant to give even the NHS's best hospitals such a fundamental freedom. Behind the Treasury's concern lies the fear that over-ambitious hospitals could get into financial trouble, leaving the government to bail them out. Such unplanned additions to the public sector borrowing requirement would undermine Mr Brown's vaunted commitment to fiscal discipline. The Milburn camp fears that Tony Blair's commitment to deliver public sector reform cannot work without real authority being devolved to line managers and the wider community - to set their own priorities and find their own solutions. "There is an important difference of view," health officials confirmed yesterday. "There are huge implications in the foundation hospitals being freed from the secretary of state's powers of direction." Mr Brown and Mr Milburn worked closely on the Wanless report which confirmed the case for funding health care from general taxation as being both fair and efficient. Agreed on retaining the financial near-monopoly of NHS funds, they disagree about about how far to go to break up the monopoly of health care provision, allowing private hospitals and even foreign medical teams to do key jobs - free to the patient. NHS unions share Mr Brown's fears of creeping privatisation. But Mr Blair and his No 10 policymakers side with Mr Milburn. Though leaks on the row have appeared - apparently Treasury inspired - the Treasury yesterday declined to comment. The dispute now extends to Treasury concerns about the possibility that foundation hospitals will succumb to the temptation to raise extra funds by treating more and more foreign and private patients. The Health Department calls such suggestions "drivel" since all NHS hospitals have always had the right to treat private patients. "The idea that they are going to be quasi-private hospitals is ridiculous," said a health source who complained that the Treasury view reflected "the wider fallacy that the choice has to be between mainstream public or private organisations". Mr Milburn is already tightening the the rules by telling hospitals to devote more of their pay beds for ordinary patients as he battles to cut waiting lists. To reduce his exposure to borrowing Mr Brown is happy to see the private sector take over the risks of building hospitals and schools, even though critics say he would have to pick up the bill if things went wrong.
