NHS and Privatisation? Look at the Military!

By Peter Anson

February 11th 2018

We all know that when discussing the NHS and privatisation, a heavy debate can ensue about the advantages and disadvantages it presents. However, privatisation of public services has occurred in other areas, and it is somewhat surprising that little is discussed in other areas when making a judgement on privatisation within the NHS. In this case, I will present an alternative case study – the Ministry of Defence. Elements of privatisation in the military have been occurring since the 1980s, well before the NHS came onto the table. For the sake of discussion, it is a very effective parallel to draw, whereby one can pick the successes and the frankly grating failures where bad agreements fostered by governmental uncertainty, and quick decisions have caused such a mixed bag. I wish to use this article merely to point out elements of warnings and considerations, as I do not necessarily have a strong opinion on whether the NHS should be further privatised and some form of reversion.

     With the drawdown of the Cold War, the Ministry of Defence stood in a precarious state, whereby it wholly acknowledged that its funding, size and collection of responsibilities would rapidly reduce. Indeed, in 1990 with the Options for Change paper mandated a force size cut of 18% from around 300,000 down to 250,000. This trend continued as various capabilities were eliminated and reduced, following the trend of a decreased budget, while contradicted at the increasing cost of obtaining cutting edge equipment. Leaving a significant dilemma at the hands of the Ministry of Defence, it had to maintain a significant operational capability while simultaneously cutting equipment. And even then, there was still uncertainty over further cuts (or indeed future wars such as Afghanistan and Iraq).

     The military has had to find cost cutting methods to resolve this, where services could still be provided but at less of an upfront cost as was before. In example during the mid 1990s, the Ministry of Defence first found its major issue being housing. It possessed a significant number of properties that were dilapidated (having been originally built in the 50s to only last for ten years) it was unable to renovate, did not know how many were needed, but still needed a significant amount of accommodation. The MoD sold housing amounting to 57,400 properties for £1.67 billion to Annington, having agreed that the MoD would receive a 58% discount rate if it rented any of the properties. As it stood in mid 2017, it rents 39,400 of these with nearly 8,000 being vacant for £167m per annum. Given that it is over twenty years since the properties were first sold, the MoD has lost out a fair amount (though it is hard to predict how the properties would have been renovated under the MoD directly). In addition, the original 25-year agreement that stipulated the 58% discount is due to expire in 2021, and Annington is no longer bound to maintain that discount. It is evident, that while the initial £1.67 billion may have been appealing to the MoD in the short term, the long-term effects may be irreversible. The implications of this are stark. The MoD has three choices, either continue in possibly more unfavourable terms, construct its own accommodation (which seems highly unlikely), or remove accommodation as a part of the package of being full time in the armed forces. Worryingly, the latter seems increasingly likely, though thousands of armed personnel have stated they will leave the armed forces if so (even more negative when brought into consideration that the British Army is four thousand short).

     There are, other negative issues. Though this issue is multi-faceted, there is the premise of private military contractors whom have grown significantly in the last two decades. They first came to the forefront in the late 90s, in which they were termed as ‘Sponsored Reserves,’ first consisting of the Reserve Forces Act 1996, and then part of the 1998 Strategic Defence Review. As it stands, parts such as the Royal Fleet Auxiliary, Mobile Meteorological Unit, Joint Cyber Reserve all have private ventures with them. There are positives to this. Firstly, it is fiscally sounder having individuals employed from the civilian world rather than directed through those from the mainstream military, a greater ability to embed its capabilities with civilian organisations that have similar roles and an ability to rapidly expand and reduce capabilities depending on need. However, there is also a clause permitting Sponsored Reserves to serve on the front line in combat. The premise is dangerous on multiple accounts. Firstly, it removes accountability. Politicians have the option to send private forces into dangerous conditions over one’s own forces, such that if losses are taken there is no responsibility in announcing it to the public as they are not part of the state. In this sense, particularly with recent wars it has become almost a scandal in itself if someone from the military is lost and robs the public from evaluating whether the war is worth the losses by hedging to losses elsewhere.

     Secondly, these private forces with an offensive capability rarely train with state militaries encompassing a disconnect of cohesion when facing an objective.

     There are conversely advantages worth elaborating upon. Aspects such as the RAF’s Search and Rescue facility have been closed, and are instead contracted out to Bristol Helicopters, which so far have provided better response times, more flexibility and safety in civilian search and rescue operations. In addition, there is AirTanker, which owns 14 aircraft which have a transport capability and air refuelling capability for the RAF. The RAF does not need to maintain or maintain as much responsibility of the aircraft, in which it regularly operates ten of, with the remaining four being wet leased with Thomas Cook Airlines and can be called in military service if the RAF calls on it. Once more, instead of having an embedded fleet such as the older C-130Ks, VC10s and L1011s with special in-house maintenance for rare types, AirTanker can strike deals with existing airlines for cheaper maintenance operations. In the face of uncertain budgets, the provision for the MoD to have cheaper peace time operations while have the capacity to rapidly increase in times of stress is extremely beneficial.

     However, the greatest concern that stands are when contracts are placed to large companies time and time again, becoming so heavily intertwined between each other that they become overly interdependent. This isn’t necessarily new – but it isn’t the form of liberal economics that much the privatisation argues for; the idea of competition, lower prices and choice. Instead, the existing iteration of privatisation is closer to that of state capitalism, whereby industries such as BAE Systems, Rolls Royce, ISS, and Babcock are effectively assured that they will receive the same contracts for decades to come as militaries look to security in future contracts rather than venturing in higher risk programs. Indeed, very few small businesses have the capacity to cater to the military’s needs, which forces the military to very often go to the same circle of contractors, feeding the continual cycle of greater interdependence amongst the businesses and the armed forces. Indeed, looking at the company Serco, which also serves in other public services areas such as the NHS, assist the military in over 9 categories, such as maintaining the ballistic missile early warning system for the RAF, maintenance in five major airbases, and one of the three partners in the Atomic Weapons Establishment responsible for design, manufacture and support of warheads as part of the UK’s nuclear deterrent. If a company such as Serco fails, the consequences could be catastrophic, and far worse than the collapse of Carillon, which has potentially jeopardised the housing of 49,000 homes.

     I personally stand doubtful that the private market can cater effectively to the needs of the military without state capitalism, given the technological complexity modern militaries need in order to remain competitive. However, with the inverse relationship of increased sophistication of arms and reducing in-house services, the MoD has been forced to continually rely on the same set of companies to maintain the same capabilities. In this case, I would posit that the increased entrenchment of privatisation within the MoD, while more immediately a short-term incentive, will have fundamental consequences for the future if privatised even further. I fear companies such as Serco which maintain our nuclear warheads have been economically unstable for the last four years. The government needs to evaluate what it expects from its military in which I argue two fronts: Either spend more in the military to maintain services expected of itself instead of pushing off problems to create more, or cut military services already existing and accept a lesser military role, rather than whipping the taxpayer to pay billions in the future for private companies.