Despite growth in 2024, living standards fell. Inequality, weak public investment and government cuts threaten prosperity. Labour must offer voters something different.
The picture painted by official data for the UK economy in 2024 reveals a country broken by 14 years of Conservative party rule. True, the economy grew – somewhat unexpectedly – but GDP per head fell, showing prosperity didn’t reach most people. There are a few reasons for this decline but none suggests a healthy society. One is runaway wealth inequality, with gains hoarded at the top. Another is stark regional disparities, with some areas falling further behind despite national GDP rising. A third is rising immigration without enough job creation – more workers, but not enough well-paying positions.
A growing economy means little if it doesn’t improve living standards. In 2024, it didn’t. This political reality has shaped recent years, and not in a good way. It’s worth recalling a Newcastle woman’s tart response to the political scientist Anand Menon in 2016 when he warned that Brexit would hit GDP: “That’s your bloody GDP, not ours.” That continuing frustration explains the current backlash against mainstream politicians. No wonder Sir Keir Starmer wants his party to be one of disruption.
Thursday’s growth figures offer the prime minister a chance to break the mould of British politics. Unfortunately, he seems reluctant to act. What’s clear from the statistics is that, in 2024, government spending drove growth – boosted by rising wages, especially in the public sector – rather than business investment or net trade. Labour could challenge the status quo with a new economic vision centred on the state. Instead, unfortunately, the government promotes the idea that growth depends on government inaction in the face of unfettered capitalism.
Statistics often disguise the state’s role, framing public services as just another economic input rather than the engine of demand they are. This distortion makes the economy look more market-driven than reality, reinforcing neoliberal myths. The chancellor, Rachel Reeves, unfortunately, seems more eager to conform to these narratives than challenge them. She plans to cut public sector net borrowing from March 2025 to meet fiscal rules – austerity by another name. The last time this happened, post-2010, it led to a decade of weak growth and stagnant wages. The justice secretary, Shabana Mahmood, gets it. This week, she called out austerity’s role in wrecking probation services. If she was trying to change the chancellor’s mind, she deserves thanks. Britain can’t afford years of cuts.
One of John Maynard Keynes’ sharpest insights was what’s good for society isn’t always good for profits. That’s why the Green Alliance, a thinktank, is right – injecting £3bn into discounting rail fares to boost passenger miles by 22% is smart economics. It’s a win for regional growth, for the climate and for cleaner air. The state has the power to make capitalism work for the public – if it chooses to use it. But Labour’s delay on releasing its industrial strategy is a worrying sign.
The UK must move away from a debt-driven, low-wage, financialised economic model. Public investment in infrastructure – especially in underserved regions – and in skills and industry is needed to stimulate demand and create high-quality jobs. Raising wages and reducing inequality will ensure broad-based prosperity, not just asset bubbles. The belief that “markets know best” has prevented bold action on Britain’s yawning economic divides and the climate emergency. After 40 years of weakening the state and rewarding rentier capitalism, reform is urgent. Labour must build a system that delivers it.
Recent healthcare reforms in England, combined with financial austerity, have accelerated both the corporatization and commercialization of the NHS. This combination has encouraged greater public sector entrepreneurialism, argue Damian E. Hodgson, Simon Bailey, Mark Exworthy, Mike Bresnen, John Hassard, and Paula Hyde. They examine the meaning and experience of corporatization in the sector, illustrating their argument with qualitative data from a specialist hospital.
The passage of the Health and Care Bill through Parliament has revived debates about privatisation and the NHS. However, much less attention has been devoted to the closely related process of commercialism in the NHS, as an illustration of entrepreneurialism across public services more generally. Here, we trace the origins of the growing commercialism in the NHS in England and draw attention to some of the hidden costs of entrepreneurialism in the public sector.
Commercialism in the English NHS, although encouraged implicitly since the formation of Foundation Trusts in the early 2000s, was promoted by the Health and Social Care Act of 2012. The Act not only enshrined competitive and commercial behaviour in law, but it also abolished caps on commercial income of NHS Foundation Trusts, so that trusts could in principle generate up to 49% of their income from commercial sources. This of course has coincided with a decade of austerity, with rising activity in hospitals not matched by reimbursement from the public purse. This financial pressure has served as a sharp incentive to trusts to seek out new opportunities to maximise both ‘core’ and ‘non-core’ income. By 2016, non-core income accounted for 9.1% of Trusts’ income, varying between 1.6% for ambulance trusts to 21.4% for community health trusts.
In practice, income generation has taken many forms. In the English NHS, such ‘non-core’ activity ranges from maximizing revenue from ancillary services such as laundry or car-parking, which generated around £290m in England in 2019-20, through to commercial land sales. What might be considered ‘core’ activity ranges from generating revenue by hosting both commercial and non-commercial research, maximising income from private and fee-paying patients, and public-private joint venture activity, such as University Hospitals Birmingham building a £65m hospital in a joint venture with the private HCS Healthcare UK, or the Royal Marsden hospital opening a cancer treatment centre near Harley Street to directly compete with the private sector.
The effects of some of these initiatives has not gone unnoticed, with rising public irritation at the escalating cost of hospital car parking, for example, and the occasional public furore when an over-ambitious private venture by a hospital, such as a music festival, goes wrong. The financial pressures driving this activity are sometimes visible, with revelations that half of the income generated through one-off commercial land sales went to fill holes in day-to-day budgets of NHS trusts.
These commercial initiatives in the NHS, of course, depend on new behaviours among staff; to be alert to market opportunities, and to be willing and able to take financial risks in order to effectively exploit new sources of income – which has been described as a kind of public sector entrepreneurialism. How far this can or should be reconciled with traditional public sector values and ethos is a key question; does this imply an erosion of public sector values, or a modernisation and reinvention of public service built around innovation and enterprise?
To find out what this increased public sector entrepreneurialism means for the people who work in the NHS, we looked at experiences in one English specialist hospital in the vanguard of commercialisation through the last decade. This hospital was distinctive in that it had a recognisable and prestigious ‘brand’ and a strong reputation for quality of care, nurtured by a large communications department. It was also relatively insulated from the effects of austerity through the 2010s, being much more financially stable than many other NHS trusts with a substantial charity arm. It was also more engaged with entrepreneurial activities, such as joint ventures with private companies, than most NHS hospitals.
We spoke to doctors, nurses, and managers across the hospital about their experiences in the Trust and found that most were very aware of the distinctive mindset at the Trust, which they described as ‘progressive’, ‘business-focused’, and entrepreneurial. While some spoke positively of this, all recognised the distinction between this way of working and the traditional NHS way, and the challenges this posed to many staff. A key challenge related to the blurred lines between ‘commercial’ and ‘non-commercial’ activity, or between the public and private sector activities which take place on the hospital site.
One way in which this boundary is managed by many is by compartmentalisation, with some revenue-generating units seeing themselves as a ‘private enterprise within an NHS organisation’, and thus needing to operate in a different way. Similarly, the strategic and professional way in which the charity and marketing departments worked, to build and maintain a strong brand reputation, were seen as reflecting a different kind of ‘drive’ to the rest of the Trust. Nonetheless, to some degree the charity played a key role in legitimising the principle of commercial engagement and a kind of innovative entrepreneurialism; if the charity could generate valuable revenue, why not other ventures building on the brand identity built up by the Trust? In this way marketing and branding supported other kinds of income generation activities by the hospital including outreach and joint venture activity.
For many, this commercial activity raised ethical concerns which could not be assuaged by compartmentalising this activity. For some, the justification was that commercial success could be used to cross-subsidise core activities, although the degree of public benefit was viewed sceptically by some. Others, committed to the principle of ‘providing care free at the point of delivery’, found any payment for treatment unethical. On a personal level, some staff described their own discomfort with pressures to generate income. However, even staff with objections in principle felt that they needed to engage with the private sector ventures to protect their future career, having seen the direction of travel across the sector.
So to what degree could we see evidence of the kind of mission drift and goal displacement associated with commercialisation in other public sectors? In one sense, this was minimised by work to decouple and compartmentalise commercial and entrepreneurial activities, focusing their activities in certain units such as research, joint ventures, and the charity. However, they similarly served to justify the principle of revenue generation. Arguments that this indirectly benefitted and supported the core mission meant that ethical dilemmas were more widely experienced across the trust. Normalisation also meant that many felt unable to separate themselves from this activity, as who knew when their future employment might depend on their exposure and comfort with commercial work?
Our research does not suggest that public sector entrepreneurialism is normal or indeed widespread in the English NHS. However, there are ongoing pressures to exploit ‘increased opportunities for income generation from the commercialization of certain “noncore” NHS functions’, in the words of NHS Improvement in 2018 – and little prospect of the kind of funding settlement that would release pressure to seek alternative forms of income. In addition to fiscal questions of risk/reward, and ethical questions over certain forms of revenue generation, we seek to draw attention to the more insidious implications of the normalisation of commercialism and public sector entrepreneurialism in the NHS. As the conduct of staff shifts incrementally towards different ways of thinking and practising then there is a distinct risk that mission drift, goal displacement, and more acute ethical dilemmas will become more likely.____________________
About the Authors Damian E. Hodgson is Professor of Organisation Studies in the Management School at the University of Sheffield. Simon Bailey is Researcher at the Centre for Health Services Studies at the University of Kent. Mark Exworthy is Professor of Health Policy and Management in the Health Services Management Centre at the University of Birmingham. Mike Bresnen is Professor of Organisation Studies and Head of Department of People and Performance at Manchester Metropolitan University Business School. John Hassard is Professor of Organisational Analysis at the University of Manchester. Paula Hyde is Professor of Organisation Studies at the University of Birmingham.
The days of the big state are back. Plans announced by Rishi Sunak last week mean public spending as a share of the economy is on course to reach levels not seen since the Thatcherite revolution was about to begin in the late 1970s. The Iron Lady’s disciples are having kittens at the prospect.
It’s worth saying that the economy has changed substantially over the past four decades, with manufacturing accounting for a much smaller share of national output and the service sector growing in importance. Since the 1980s, the UK has run a large and persistent trade deficit in goods, only partly offset by a surplus in services.
Manufacturing’s relative decline has meant the economy has produced fewer greenhouse gases but this doesn’t give the whole picture, because Britain has outsourced its carbon emissions to other parts of the world. Factories and coalmines have closed in the UK but have opened in China.Advertisement
The bigger British cities have been able to reinvent themselves as centres for the retail, leisure and hospitality sectors, but towns on the edges of conurbations have not been so fortunate. There has been a shift in the nation’s economic geography that has allowed some places to prosper while leaving others a long way behind.
The notion of levelling up is not new. Governments have been aware of regional imbalances for decades and have tried a variety of methods to regenerate communities where the staple industry – be it coal, shipbuilding, cotton or steel – has been in decline. In the first decade of the 21st century, Labour governments recycled tax revenues from a booming City into regional aid, but when the financial crash arrived the money taps were turned off by David Cameron and George Osborne.
That has left the current generation of Conservatives with a problem. Deep unhappiness in parts of Britain that felt forgotten contributed to the vote for Brexit and to the loss of Labour’s “red wall”, but now those who backed Boris Johnson – first in the 2016 referendum and again in the 2019 general election – expect the government to deliver.
Doing so requires Johnson and his ministers to repudiate much of what happened in the 2010s. Last week’s budget, which announced real-terms increases in funding for every Whitehall department, was an example of that.
Sunak said extra money for education would allow per pupil spending to return to 2010 levels by 2024, coming close to saying Osborne’s cuts were not a great idea. Likewise, the spending on early years provision tacitly admitted that getting rid of Labour’s Sure Start programme was a mistake.
But as Paul Johnson, the director of the Institute for Fiscal Studies, pointed out, the increase in education spending between now and 2024 will be 2% a year on average, against 4% a year for health. Over the 15 years from 2010 to 2024 the comparison is even more stark: education spending up by 3% when adjusted for inflation, and health spending up by more than 40%.Advertisement
“For the chancellor to have felt it appropriate to draw attention to the fact that per pupil spending in schools will have returned to 2010 levels by 2024 is perhaps a statement of a remarkable lack of priority afforded to the education system since 2010,” Johnson said. “A decade and a half with no growth in spending despite, albeit insipid, economic growth is unprecedented. Spending per student in further education and sixth-form colleges will remain well below 2010 levels. This is not a set of priorities which looks consistent with a long-term growth strategy. Or indeed levelling up.”
In truth, the Conservatives under Boris Johnson have become something of a hybrid: a big-state party in favour of active industrial strategy with a low-tax, market-driven party tacked on. It is a messy compromise, and one that makes life a lot easier for those less conflicted about their support for a more interventionist economic approach.
A pamphlet due to be published this week by the campaign group Rebuild Britain, calling for measures to build up the manufacturing sector, illustrates the point. Unsurprisingly for a body that emerged from the Trade Unionists Against the EU group, it sees Brexit as an opportunity rather than a threat, but its argument that a more successful economy requires a stronger industrial base would be supported not just by leavers but many remainers as well.
Policy recommendations include a more competitive pound, a buy-British procurement strategy, higher investment in skills and technical training, an increase in state aid with a strong regional bias, and an expansion of public ownership starting with steel.
It would be easier for ministers to dismiss all this as a return to the “bad old days of the 70s” if much of the Rebuild Britain agenda were not already part of the current policy mix. The fall in the value of sterling since 2016 has made UK exports cheaper; the chancellor has admitted the UK lags behind other countries when it comes to skills; the prime minister announced in the summer new state-aid laws to replace EU rules on taxpayer-funded bailouts and business support; and the railways are back under state control.
Sunak is clearly uneasy with all this and wants a different direction of travel. But the tax cuts in the budget were modest in comparison to the spending increases and the tax rises announced earlier this year. The impact of the chancellor’s pet project – freeports – will be minuscule in comparison to an enhanced role for the state prompted by demography, climate change, the pandemic and past policy failures.Advertisement
Rebuild Britain is not the first pressure group to sense the way the wind is blowing. It is unlikely to be the last
Bob Hudson writes that, on the face of it, the new NHS white paper’s recoiling from the primacy of competition and markets warrants a warm welcome. Yet reactions have been underwhelming because there is remarkably little detail on how this ambitious mission is going to work.
It would be harsh to fault it on ambition and good intentions, certainly few people will be unfavourably disposed towards innovation and integration. The market system is to be dismantled and collaboration is to take precedence over competition, though there is no proposal to make the NHS the preferred provider of NHS services. In its place there will be new NHS ‘provider collaboratives’ operating at scale and overseen by strategic commissioning groups that will replace the current multitude of local clinical commissioning groups.
These new ‘Integrated Care Systems’ (ICS) will aim to join up the NHS, primary care, local government and the voluntary sector in order to promote system-working at ‘place’ level, probably a local government footprint. Moreover, there will be a ‘duty to collaborate’ placed upon these local partners. New legislation will establish ICSs as statutory bodies and although a consultation on legislative options only closed in January, the die is cast. Several parts of England already have non-statutory ICSs in situ and the intention is that all of England will be covered by the new arrangements.
On the face of it, this recoiling from the primacy of competition and markets along with a rehabilitation of the role of the state might seem to warrant a warm welcome. Yet reactions have been underwhelming. The explanation for this lies in the detail, or lack of it, on how this ambitious mission is going to work. Four particular problems are evident.
Rewriting national-local balance
The 2010 White Paper, in its pursuit of ‘liberation’, provided a degree of independence to NHS Foundation Trusts, and established NHS England as an independent body. Now, these powers (and more) are reverting to the Secretary of State for Health who will also be in charge of every ICS, as well as acquiring new powers to take over public health functions from local government and transfer functions to and from specified arms-length bodies. Quite how the balance is to be struck between allowing local partners to act flexibly ‘in place’ and this arrogation of control to the centre is unclear and unsettling.
Failing to learn from experience
The White Paper takes a traditional view within central government that organisational restructuring can solve problems. This flies in the face of evidence that past attempts to do so have underestimated the associated costs and disruption. The 2012 Health and Social Care Act abolished strategic health authorities and primary care trusts, created clinical commissioning groups and NHS England, and cost an estimated £3 billion. Now, it’s all change again despite having little to show for the previous exercise.
There is a similar failure to learn from experience with the legislative ‘duty to collaborate’ between the NHS and local government. There have been decades of such ‘mandated collaboration’ imperatives with little to show for the endeavours. The reasons for these failures – differences in funding, accountability, staffing and incentives – are well known but the White Paper has no suggestions for addressing them. Similarly, all other parts of the UK have already adopted their own versions of the ICS model and have messages to share that could warn of pitfalls for England, but the White Paper content suggests little interest in comparative policy learning.
Lack of transparency, accountability, and engagement
Placing ICSs on a legislative footing should offer some clarity on accountability, but bringing organisations together into joint decision-making forums always renders them remote from public gaze. The White Paper offers few clues on how clarity will be brought into the new arrangements. It remains unclear what powers an ICS would have over an NHS Foundation Trust and even less so in relation to local authorities holding their own line of democratic accountability. Provider collaboratives between NHS providers might make sense but there is no word about how the relationship with providers of social care (almost entirely independent companies) or the voluntary sector will fit in to any arrangements. Indeed, it is not even clear what is meant by the key organising concepts of ‘place’ and ‘integrated care’. Even murkier is where patients, users, carers and the public fit into this grand scheme – something with which the NHS has always been notoriously weak.
Lack of understanding of social care
Given the recognition of ‘care’ in the White Paper title and the emphasis on ‘integrated care’ throughout, there is remarkably little recognition or understanding of the sector. There are some minor proposals that are helpful, notably giving the Care Quality Commission new powers to assess the commissioning of social care, collecting new data on those who fund their own care and new obligations on assessment after hospital discharge, but these are small beer. Notwithstanding the award of a seat round the ICS table for local government, there is little to dispel the fear that social care is simply perceived as a handmaiden to the priorities of the NHS, especially the reduction of hospital costs. Not only will the local government voice be relatively weak, but the powers given to the Secretary of State could see councils losing control of their social care and public health services to the priorities of the ICSs. In such circumstances, it would no longer be clear what the purpose of democratic local government might be. Meanwhile the long-promised root and branch reform of social care has been yet again kicked into the long grass.
What needs to be addressed going forward
Given the political reality that the government will press ahead with the changes, there needs to be some attention paid to these dilemmas. First of all, the hidden wiring (if it exists) need to be brought into view. It is these practicalities that can make the difference between a successful shared endeavour and an acrimonious shouting match.
Secondly, all of the parties need to have collaborative capacity – the ability to enter into, develop, and sustain robust partnership working. NHS partners might have this but local government and the voluntary sector have been pared back to survival mode. Joint working has no qualities of spontaneous growth or self-perpetuation; it needs perpetual attention and support.
Thirdly, explicit measures need to be put in place to ensure ICSs have some accountability to those who use services and to the wider public. The most influential discourse in adult social care right now is around co-production – developing more equal partnershipsbetween people who use services, carers and professionals – but this seems like a foreign land to the White Paper. Some way has to be found to invest in building the voice of users, patients, carers and citizens into these new arrangements. And finally, given the enormity and complexity of the exercise, there needs to be a smart and accessible policy support function, possibly along the lines that were developed for the Care Act 2014.
Finally, the government needs to snap out of the idea that a policy lever can be pulled in Whitehall and things will magically happen across the length and breadth of the country. Shared endeavours work best when there is a negotiated relationship between all of the local stakeholders based upon a high level of trust and mutual respect. This alchemy is built locally from the bottom-up, not by edict from the top-down. The policy landscape is littered with the corpses of failed top-down experiments; this organisational re-set of the NHS is at serious risk of adding to the number.
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About the Author
Bob Hudson is a Visiting Professor in Public Policy in the Centre for Health Services Studies at the University of Kent
The Care Act 2014 reinforces the expectation of leaving housing wealth as an inheritance, which perpetuates inequalities across generations, argue Nicholas Hopkins and Emma Laurie. Intergenerational fairness requires homeowners to use a greater proportion of their housing wealth to fund social care rather than relying on the state.
The issue of funding social care costs is one that provokes strong feelings. Many homeowners resent the idea of having to sell the family home to pay for residential care costs. But with an ageing population, a real concern is raised over who should pay. The Commission on Funding of Care and Support (the Dilnot Commission) was an independent body tasked by government with reviewing the funding system for care and support in England. Its report, Fairer Care Funding, provided advice and recommendations to government and was subsequently enacted in the Care Act 2014.
The Dilnot Commission’s overriding objective was to make the system of funding adult social care fairer as well as sustainable. The Commission took the view that it was fair to limit the extent to which an individual is required to draw on their own wealth, including housing wealth, to pay for the costs of their care. It also recommended that the home should not have to be sold during the owner’s lifetime in order to pay for social care costs.
To achieve these two objectives, the Care Act 2014 places a cap on individual liability for care costs and provides a scheme of Universal Deferred Payment (UDP). UDP is intended to prevent ‘forced sales’ of the home. Despite its name, it is not intended to be available to everyone. We consider that the measure is justified and that its operation could be confined to those who would otherwise have to sell their home. This could be achieved by making UDP available only to those who could not pay the capped sum from non-housing assets.
Our concerns with the Care Act 2014
Our principal concern lies with the Act’s treatment of housing wealth through the cap. Its effect is to preserve individual wealth and, in practice housing wealth, at the expense of the public purse. Ultimately, it will benefit those who will inherit that wealth. The use of public funds to preserve an inheritance lies at the heart of our criticism.
By passing a greater proportion of the costs of social care to the state, the Act will inevitably have undesirable – and unfair – consequence for the younger generation of taxpayers. We therefore advocate a phased scheme which would aim to change the expectation of leaving housing wealth as inheritance and, instead, inculcate an expectation of using housing wealth to fund social care costs.
This will be a controversial argument for many people. We understand the sense of unfairness felt by current homeowners at having to use housing wealth to pay for their social care costs and the desire to leave housing wealth as an inheritance. The ability to provide an inheritance is one of the bases on which homeownership has been promoted. Equally, there is understandable confusion about the different funding models for health and social care. While health care is provided free at the point of delivery, social care is means-tested and incorporates an assessment of a person’s assets to determine eligibility for financial support from the state.
The need for intergenerational fairness
Nevertheless, the wider concern of intergenerational fairness requires homeowners to use a greater proportion of their housing wealth. There is a growing recognition that issues of intergenerational fairness must form part of the ‘social contract’ between individuals and the state. In the UK, life expectancy has been growing while the birth rate has been falling. The consequence is popularly referred to as a ‘demographic time-bomb’, and the phenomenon of an ageing population is a policy concern that has been taken up at international, European and national levels.
But government policy on the need for intergenerational fairness is inconsistent. On one hand, the government has taken steps to increase the age of eligibility for the old-age pension and further increases are planned. On the other hand, it has passed the Care Act 2014 which entails a greater proportion of the costs falling on the state and, inevitably, the younger generation.
Changing expectations
Inculcating an expectation of drawing on housing wealth to fund older age care can address our concerns of intergenerational fairness. Such a policy reflects the principle of asset-based welfare, which entails expanding asset holdings among low-income households as a means of reducing wealth inequalities and promoting wealth-creating behaviour among citizens.
Successive governments since the 1950s have consistently encouraged homeownership and, as a result, housing wealth now exceeds other forms of investment to become by far the largest element in personal disposable assets. Homeownership has spread wealth more widely than any other form of asset or investment. Despite doing so, housing wealth is unequally distributed. Many older property owners have seen large, tax-free capital gains over the past few decades due to the rising value of property. The proportion of housing wealth held by older people is forecast to grow, while the term ‘generation rent’ has been coined to refer to those younger people who have no realistic prospect of buying their home. Inculcating an expectation that people will look to their housing asset, rather than to the state, to fund their welfare can reduce those intergenerational disadvantages by requiring homeowners to use the wealth in their lifetime.
Homeownership has not been explicitly promoted with the idea that the wealth will be drawn upon to fund the owner’s older age. Combined with the lack of understanding of the difference between health and social care, it is perhaps unsurprising that a strong sense of unfairness is felt at the prospect of housing wealth accumulated over a lifetime being dissipated by the requirement to fund a few years of social care. However, rather than attempting to change expectations, the Dilnot Commission’s proposals, as implemented by the Care Act 2014, appear uncritically to accept the perception of unfairness. The Act reinforces the expectation of leaving housing wealth as an inheritance, which perpetuates inequalities across generations. As a result, the funding model provided by the Act is neither fair nor sustainable.
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