Editor's blog Friday 23 September 2011: Backfiring politics and economics - PFI, magic money, tariff and tough times

Oops.

The political strategy to attack 22 trusts' PFI debt burden adopted by Andrew Lansley (saviour, liberator) and colleagues, and excitedly taken up by the BBC and Daily Telegraph yesterday, rather backfired.

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Click here for details of 'PFI in the sky; not NPfIT for purpose - DH magics up money without menaces', the new issue of subscription-based Health Policy Intelligence.

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Hats off to Polly Curtis in The Guardian and Oliver Wright in The Independent for following up on the story properly, and accurately deducing the presence of smoke and mirrors.

NHS finance is not usually an issue to set the mainstream media's world alight. However, it was interesting to see clear, concise explanations of the downwards pressure on tariff as a key factor in financial woe.

To this, we must add the excellent analysis for HSJ of its former news editor Sally Gainsbury, whose indefatigable data divadom can now be found in the pink parish of the FT. She points out in this outstanding article for HSJ how the DH's accountants have tried to do something really rather clever with numbers.

They have been comprehensively rumbled.

The theme of financial woe is the subject of HSJ boss Alastair McLellan's editorial, reporting the Shelford Group of elite teaching hospitals' dire warning about the future under the pressurised tariff. The Shelford Group's case is more fully explained elsewhere in HSJ.

The national payment tariff - payment by results - was the correct approach to drive more activity when there were enormous waiting lists; and had the useful by-product of giving the NHs overall some actual data on its activity and costs.

That was in an era of funding growth.

The tariff's limitations are more apparent in an era where funding will be flat at best.

As we pointed out on its publication, the proposed failure regime creates a situation whereby "a provider can apply to Monitor for a price modification without commissioner agreement".

This offers one way around the problems of tariff.

It has a couple of obvious drawbacks.

The first is that it makes Monitor hugely powerful, and directly contradicts the stated aim of policy to have powerful commissioners for the first time ever by making them powerless.

The second problem is that Monitor is, alongside this power to levy an over-tariff rate on commissioners, also to retain its oversight role over FT providers. This creates a conflict of interests for Monitor which is quite as intrinsic as that when PCTs were both purchasers and providers of care.