The firm believed to provide the majority of technical support to London's PCTs, 2e2, is going into administration. Markets rely on failure. But for health services "failure" can be literally fatal.
"The problem is," our mole claimed, "they've [FTI] been very clear, they can't pay the next set of wages so need to get a deal done in the next two to three days...
Some 319 staff were axed on Tuesday, including the CEO, CTO, COOs and CFO as well as rafts of people from marketing, HR, pre-sales and other departments across the UK. None were paid for January. Onlookers took this to mean that FTI might break up the UK operation and sell it piecemeal...
Contractors working on smaller deals had their contracts terminated this week, though those working in top priority areas including the NHS were reportedly to be retained so as to ensure continuity of service. Some sources this morning told us this had still not happened." (The Channel)
Services 2e2 provide to London PCTs were previously done in-house but outsourced some years ago, according to a staff member. More details will surely emerge over the coming days but if the picture is accurate it highlights once again the dangers of mixing markets - and failure - with essential public services. When Railtrack failed - the ill-fated private owner of Britain's rail network - it had to be renationalised after scores of people lost their lives in three major crashes.
There are also concerns over the loss of skills and institutional capabilities when services are outsourced, the state's operational memory is not infinite and after prolonged periods it can be difficult and expensive to bring services back in-house.
At Lewisham last week a successful hospital was "downgraded" due to odious PFI debts accrued on struggling nearby trusts. Max Davie writes:
"The failure of these organisations was put off by rising funding levels until recently, but now we’re here as the South London Healthcare (SLH) Trust has ‘gone into administration’... In the private sector a buyer would be sought and probably the business shrunk, closed, or merged into another. But this can’t happen to SLH - people would start dying fairly rapidly, and in its current state no-one would touch it with a bargepole financially."
For essential services the reality is that the buck stops with the government and they will not allow catastrophic operational "failure" because it would lead to serious loss of life. The private providers involved are well aware of this. Despite ramping up costs for the supposed burden, who is really bearing the 'risk'? And how much public money will be poured in to fix the "failures" so essential to the running of Lansley's health market?
To be clear, there is no market without failure; it's not a question of if these problems will arise but when. Labour are clearly implicated here, but the Coalition's finger wagging on PFI loses its credibility when you consider that George Osborne signed off nearly £7bn worth of fresh PFI contracts within his first year alone. Successful hospital units are facing closure due to PFI schemes that are sucking vast amounts of public funds into offshore havens, some paying as little as 0.3% tax. Indeed, so lucrative are the profits accrued under these PFI deals that there is a flourishing secondary market generating, on average, over 50% profits.
Market failure, excessive profiteering and critical public services do not mix well and yet, with the Coalition's Health & Social Care Act soon to come into full force, we can expect to see much more of it.