Dr Michael Fitzpatrick

Fundholding, New Labour-style

I well remember the sombre moment when my old senior partner told me that he had broken the habit of a lifetime and decided not to vote Conservative. That was in the June 1989 election for the European parliament, when he opted, like many others, for a protest vote for the Greens. He returned to the Tory fold in 1992, but by May of this year, he had decided that enough was enough, that New Labour was indeed New Labour, and that it was time for a change.

It is a sign of the times that the medical profession - loyal to the bitter end both to Hitler and to Thatcher - has decisively abandoned the Conservative Party. As my colleagues celebrate the New Labour victory, there are high hopes of better days for the national health service.

New Labour's key promise in health is to end GP fundholding, one of the most controversial of the reforms introduced by the Tories. Even though more than half the population now attends a fundholding GP, Labour pledged to abolish this delegation of budgets to surgery level, which allows GPs to purchase services from hospitals and elsewhere on behalf of their patients. Labour is committed to suspending the internal market, to cutting the waste and bureaucracy and to restoring the NHS to its former glory.

Furthermore, Labour plans to do all this without spending more money; indeed it is committed to Conservative projections which mean a reduction in health spending per head of population. The key to squaring this circle is 'locality commissioning', a scheme which began as an alternative to fundholding, but has evolved into a complimentary programme.

To grasp the coming role of locality commissioning, we have to look back at the advance of fundholding. Fundholding took off in the shires and in suburbia in the mid-1980s among GPs keen to combine a traditional approach to medical practice with a more entrepreneurial spirit. The Conservative government zealously nurtured the early fundholders, many of whom were ideologically attuned to the values of Thatcherism.

Aneurin Bevan, the Labour health minister who introduced the health service in the face of fierce resistance from senior doctors, once explained that he silenced them by 'stuffing their mouths with gold'. The Tory government followed a similar method in popularising fundholding: the 'first wave' subscribers found that their budgets were calculated generously to give them substantial surpluses. While these could not quite be stuffed into brown envelopes, they did lead to the construction of new premises around the country of which President Mobutu could be proud.

Locality commissioning is a radical response to fundholding from inner-city GPs, who resent the consolidation of a two-tier health service as a result of the government reforms. The inner-city GP has abandoned the tweed jacket with leather elbow patches in favour of the woolly jumper and corduroy trousers. In place of the mentality of the small shopkeeper is a spirit of altruism and self-sacrifice, though the progressive GP is careful to maintain a good income. There is a strong commitment to moralising the masses through the gospel of the new public health: don't smoke, don't drink, take exercise, eat sensibly and have sex safely. In many ways the new wave GP was New Labour even before New Labour.

Locality commissioning means a group of practices covering a population of between 50 000 and 100 000 get together and organise the purchasing and provision of healthcare. Instead of having a budget for each practice, the funds are collectively administered and distributed by GPs and other professionals, working with the local health authority and the hospitals.

Locality commissioning is a godsend to New Labour. It offers a means of overcoming the fragmentation and the loss of strategic regulation and control that have resulted from the operation of the internal market. Above all, it offers a way of solving the government's problem of how to curtail healthcare expenditure without provoking public resistance.

It was already clear before the election that New Labour had no intention of abolishing fundholding. Locality commissioning provides a mechanism for incorporating fundholding. In the inner cities, locality commissioning will predominate, absorbing the few fundholding practices that exist. In suburbia and the country, commissioning will provide a discreet umbrella bringing fundholding practices into a wider framework for the purposes of budgeting and planning.

Locality commissioning is an ideal means of rationing resources. Even before the election, pressures to curtail expenditure on health were mounting. After the early days of plenty, fundholders have been increasingly squeezed: in West Surrey all fundholders had their budgets cut by 10 per cent this year. The health authority under which I work - City and East London - reported a deficit of £18 million last winter and imposed a series of cuts and restrictions on services as a result.

In East London, where GPs have been experimenting with commissioning for some time, the cash crisis revealed how the rationing process works. At meetings about the spending crisis, radical GPs who have been involved in the commissioning process found themselves apologising for the authority and urging their colleagues to take responsibility for rationing and for passing on the austerity message to patients. While the authority pursued extensive consultations about decisions that had already been taken, doctors drawn into what will become the full structure of locality commissioning were effectively endorsing drastic reductions in services.

Last September Tony Blair himself declared a 'crusade' to save the NHS. Meanwhile New Labour's academic advisers at the Institute for Public Policy Research and the London School of Economics proclaimed the virtues of fundholding - though a major study by the Audit Commission last year could discern no particular benefit. Though the NHS may be safe with Labour, so also is fundholding, in the modified form of locality commissioning. The casualties of this characteristic piece of New Labour cynicism will be those in need of healthcare, especially in the inner cities.