Does the NHS still reside in a grey area for EU competition law?

To what extent does EU competition law apply to the NHS, given a changing landscape shaped by the Transatlantic Trade and Investment Partnership (TTIP), a government keen to ramp up private involvement and the spectre of a Brexit, asks Fuse Deputy Director Professor David Hunter.

Assessing the precise impact of EU law on the NHS is far from straightforward because of the large number of known unknowns.

Nothing in EU law requires member states to open up public services to competition from the independent sector. That is entirely a matter for member states.

However, should any member state decide to introduce the market into the provision of public services then those activities would become subject to the strictures of EU procurement and competition law.

Uncertainty remains because so far no company has chosen to use EU competition law against an NHS decision. The NHS’s own mechanisms to promote greater competition seek to ensure just that there is no need for any company to submit itself to the expense of an EU court case.

What is the impact of EU law on the NHS?

EU competition law aims to prevent anti-competitive practices that act against the interests of consumers, and seeks to uphold ‘fair play’ within the EU’s internal market. Despite the concerns of many observers about the NHS being subjected to the full force of EU competition law, the reality is that the application of EU competition policy is complex and characterised by legal uncertainty.

While European legislation states that competition law applies to ‘undertakings’ (which are defined as any organisation engaged in economic activity) a distinction is drawn when an organisation is fulfilling a purely social function. Its activity is based on the principle of national solidarity, which is a core EU value, and is non-profit making. Such organisations are not considered to be an undertaking and therefore not subject to EU competition rules.

Once upon a time, the NHS could be considered to meet the test of fulfilling a social function without much debate. But thanks to the reform efforts of successive governments since the late 1990s, which have been focused on introducing choice and competition into the NHS, the extent to which it continues to do so has become less clear.

The issue is fuzzy and fraught with confusion and disagreement, compounded by the peculiar position of Wales and Scotland who, it is claimed, and in contrast to England, do not have to respect EU procurement rules. This may be because they have eschewed adopting choice and competition in their devolved health systems and have also done away with the purchaser-provider split.

What has changed?

For many years the European Commission stayed out of interfering in the NHS, and the same has applied to other member states’ health services. The EU had a general interest in public health but not in the running of countries’ health services. These were subject to the subsidiarity principle and remained the preserve of national governments.

What has changed has its origins in British governments’ growing interest in diversifying the provision of health services in England to allow a plurality of providers to enter the market.

This trend came to a head with the Coalition government’s ill-fated health changes announced in 2010 although the origins of introducing a market into the NHS long precede this date. Despite opposition from many quarters both inside and outside the NHS, the government pressed ahead and in 2012 the Health and Social care Act became law.

The Coalition government’s health reforms were largely based on an intention to withdraw state involvement from public services in policy areas like health, where it has been dominant – as both a funder of services and a provider of them.

More hawkish

The emphasis in the NHS, following its chief executive’s 2014 Five Year Forward View, may be about cooperation rather than competition but, reinforced by the Conservative government’s firm wish to encourage private sector involvement in the NHS, there is nothing to stop future private companies bidding to run whole swathes of services covering particular areas and communities. If that happened and the solidarity principle was breached beyond doubt, then EU competition law would apply.

At the same time, it is argued that the EU has moved some way from its social model origins and has too enthusiastically embraced the neoliberal agenda that swept across governments during the 1990s and has maintained its grip since. If true, this might make the EU more hawkish when it comes to applying competition law to the NHS.

Irreversible forces

Then there is the vexed issue of The Transatlantic Trade and Investment Partnership, a proposed free trade area between the US and EU. Concerns have been raised that the TTIP could result in the NHS being subjected to even greater market forces that would, some lawyers believe, be irreversible.

The European Commission’s position is that enhanced trade and investment will not be at the expense of Europe’s core values of health and safety, and consumers’ and workers’ rights.

Moreover, TTIP will not automatically overrule, repeal or amend EU laws and regulations. Any changes to these would need to be approved by EU member states and by the European Parliament. It is unlikely that elected representatives will allow the TTIP to result in further marketisation of the NHS or other European health services.

Despite UK government assurances that the NHS would be protected, many critics remain to be persuaded. They want to see the NHS excluded from the trade deal which the government has the power to secure but has so far resisted.

Staying in the EU or coming out: does it matter?

To end once and for all the risk of EU competition law being applied to the NHS means removing not only the sections of the Health and Social Care Act that permit such intrusion into the NHS but, more importantly, also changing the 1998 Competition Act and 2002 Enterprise Act since the market in the NHS was created through the introduction of the ‘internal market’ during the Thatcher era which was taken further by the Blair government. Removing the market from the NHS is possible if sufficient MPs decide to support such a cause and it would not require leaving the EU.

Indeed, leaving the EU is an irrelevance when it comes to what many regard as the creeping marketisation of the NHS. It simply means returning to the idea of the NHS as an integrated organisation or a managed system rather than being a market. If the government of the day chose to do that then membership of the EU would have no bearing on such an outcome.

For such a state of affairs to exist would mean reversing the last 25 years or so of a policy direction pursued by governments of all political persuasions. While not an impossible outcome, it requires a significant act of political will that is currently not evident among any of the parties.

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Last modified: Thu, 02 Jun 2016 14:54:57 BST