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The Financialisation of Health in England and Wales; Lessons from the Water Sector


  • Kate Bayliss

    (School of Oriental and African Studies)


This is a Foresight paper prepared for the EU-funded research project, Financialisation, Economy, Society and Sustainable Development, FESSUD. Drawing on lessons from the provision of water in England, the paper anticipates future developments in the provision of health, exploring the increasing role of finance and financial cultures. This is captured in the term “financialisation” which has recently emerged in academic literature to account for the rapid expansion of financial assets and financial activity in the economy, and the expanding reach of the financial sector into traditionally non-financial areas of economic and social life. The paper starts with an overview of the context in which financialisation has evolved within, and impacted upon, the National Health Service (NHS). Two contextual elements stand out. First, since the 1980s, the NHS has been subject to incremental reforms to introduce market-mimetic structures. These reforms accelerated with the introduction of the 2012 Health and Social Care Act (HSCA). This legislation has only just begun to have an impact at the time of writing (December 2015), but the extent of private sector involvement in health provision is likely to increase rapidly as a result of the Act. The second significant aspect of the context for financialisation is the growing financial deficit in the NHS which creates an important backdrop to the HSCA reforms. Irrespective of the proximate as well as the deeper reasons for this, it provides for a narrative of “unaffordability” and “inefficiency”, itself taken as a rationale both for greater private sector intervention and as justification for NHS trusts to increase revenue from private sources. However, the paper shows that this narrative thread does not fit with global data which indicate that the NHS is broadly in line with OECD averages for spending on GDP, and health outcomes. The paper considers four mechanisms by which financialisation is affecting the health service in England. First, financing in the sector is allocated on the basis of internal “markets” which mimic financialised structures (regardless of ownership or provision). An institutional division between the “purchaser” and “provider” of health services within the NHS has been refined over the years since it was first introduced in the early 1990s. Health providers are remunerated via a complex “pricing” system known as Payment by Results (PBR) so that transactions between state agencies are delineated in financial terms. Second, financial processes have become embedded in the sector via the process of tendering to both NHS and private service providers. A growing proportion of services has been contracted to private companies, particularly in the wake of the 2012 HSCA. Aside from creeping privatization, this process brings financial practices into the provision of health services, with, for example, health commissioners required to observe competition law even where contracts are awarded to state organisations. Third, under the 2012 HSCA, the cap on the proportion of income that NHS providers can raise from private patients has increased from 2% to 49%, leading to an increase in private patient income within some NHS hospitals. Global finance is becoming more closely integrated with health provision as a result with new partnerships developing between NHS providers and private investors. Finally, since the early 1990s most new capital investment in the NHS has been undertaken through the Private Finance Initiative (PFI) where the private sector finances the design, build and operation of hospitals and these are then leased back to the NHS Trust over a period of decades. These contracts have proven to be costly for NHS hospitals but highly lucrative for (often institutional financial sector) investors in PFI contracts. The paper then considers the nature of the private companies that are involved in healthcare. Health providers are often owned by larger conglomerates for which health is one of many assets in a diverse investment portfolio. The paper compares the changes taking place in health with developments in the water sector in England which has been privatized since 1989 and where financial structures, processes motives and investors have long been established. In both sectors, processes associated with financialisation mean that services are increasingly distanced from the materiality of provision and instead are interpreted in terms of the revenue stream that they can provide to investors. Innovative financial practices have been adopted to boost shareholder returns. In terms of Foresight, health provision is in the process of a fundamental transition from a public service to a financial asset, as has happened in the provision of water in England. The result is expected to be a considerable deepening in the cultures of individualisation and commodification of the health system. This is likely to be associated with a fragmented service and greater inequality in a number of respects: government spending on health will be transferred ultimately to global private finance, boosting the earnings of financial investors; the state will be left with the most difficult (and expensive) to treat as these are of least interest to the private sector; a two-tier system will emerge, with the poorest left with a severely weakened second-rate health system; labour rights are expected to be weakened as employment structures become fragmented across different health providers. Such developments threaten to undermine the core principles on which the NHS was founded. Furthermore, these changes will be difficult to reverse as the ability of the public sector to pose an effective alternative to private and financialised provision of health will be considerably debilitated.

Suggested Citation

  • Kate Bayliss, 2016. "The Financialisation of Health in England and Wales; Lessons from the Water Sector," Working papers wpaper131, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
  • Handle: RePEc:fes:wpaper:wpaper131

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    References listed on IDEAS

    1. Kate Bayliss, 2014. "The Financialization of Water," Review of Radical Political Economics, Union for Radical Political Economics, vol. 46(3), pages 292-307, September.
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      More about this item


      Health privatisation; NHS; financialisation;
      All these keywords.

      JEL classification:

      • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
      • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
      • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
      • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
      • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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