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Is the EU a threat to the NHS?

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In a recently revised edition of his book ‘Europe Restructured: Vote to Leave’, former Foreign Secretary and Social Democratic Party founder, Lord David Owen dedicates a whole chapter to the threat of European Union competition law to the NHS. EU competition law tries to prevent organisations from engaging in economic activity that undermines competition and, as a result, goes against consumers’ interests. It is usually concerned with the formation of cartels, abuse of dominant market position, state aid, and mergers and acquisitions.

Claim: EU competition law is likely gradually to be applied to British healthcare, as services are opened up to external competition. This could then leave the NHS at the mercy of large corporations, with commissioners often forced to contract out service provision to private providers.

Lord Owen claims that the social market of the EU is changing, with a diminution of the social element and the expansion of the market. He argues that when Britain joined the European Community in 1973, it was always envisaged that our health system would remain outside the scope of European law, but that this principal is being eroded. He claims EU competition law is likely to gradually be applied to British healthcare, as services are opened up to external competition, and that this will leave the NHS at the mercy of large corporations, with commissioners often forced to contract out service provision to private providers.

Crucial to whether this occurs is whether the commissioning of NHS services becomes classified as an ‘economic undertaking’ or remains regarded as simply serving a ‘social function’. An ‘economic undertaking’ is any entity that’s engaged in economic activity, whereas organisations that operate on the principle of solidarity (everybody has access to the NHS) and on a non-profit basis fulfil a ‘social function’. The former situation would bring such decisions under the EU’s competition law but the latter would not. This exemption has been confirmed by the Court of Justice of the European Union (CJEU) on several occasions[1]

Lord Owen’s concern is that, as commercial enterprises start to become more involved in our health system’s provision, it makes ever more likely that NHS commissioners are judged by EU law to be undertaking an ‘economic activity’. If we leave the EU, Lord Owen suggests that we have a chance of changing the government in Westminster and throwing out the NHS’s external market, restoring the ‘real NHS’. 

Are these worries valid?

There are theoretical situations where EU competition law could apply to specific NHS activities. For example, the King’s Fund have argued that, if commissioners utilize open competition between public and independent providers in the delivery of health services, ‘it seems almost certain that those providers will qualify as [economic] undertakings’ and must respect UK and EU competition law.[2]

However, the UK government has complete control over whether areas of the NHS are opened up to competition.[3] Nothing in EU law requires member states to open up publicly funded healthcare to competition from the private sector. All EU member states have the right to decide how much of their health service is publicly funded, and they are free to outsource some services while keeping others in the public sector. Once outsourced to the private sector, member states can also bring these services back into the public sector.[4] As a result, a decision to privatise has to be made here in Britain before EU competition law could be enforced.

Because of the UK government’s competence over the NHS, most of the current increases in competition that Lord Owen mentions have been brought in by past and present UK governments, not by the EU. He speaks of the previous coalition government ‘endorsing the abandonment of the concept of the internal market and instead introducing a full-blown external market with no evidence basis for such a decision.’[5] But this is exactly the type of increased external competition he fears the EU will enforce. Examples he gives of movement towards an external health market similarly come from inside the UK, such as chairs being appointed in Monitor (the NHS’s competition regulator) and the NHS Blood and Transplant Service who are privatisation ‘specialists’. These examples seemingly weaken his argument that the EU, and not the British government, are forcing an external market on the NHS.

Lord Owen is, however, correct to be concerned about EU competition law. Whilst it can’t push the UK government to open the NHS up to competition, it may limit the UK’s independence over how it regulates competition in the NHS in the future. This is because UK rules governing competition, set out in the Competition Act (1998) and Monitor’s licensing regime, are largely based on and subject to European competition law. In 2003, EU member states agreed to apply EU competition law in parallel with national competition law. Also, gaining exemption for the NHS from EU competition law at the EU-level would be extremely difficult because EU competition law is enshrined in the Treaty on the Functioning of the European Union (TFEU). As a result, the more the UK opens up the NHS to competition, the more EU competition law may become restrictive of UK competition law. This limits the policy options open to a UK government if they wish to independently reform and run the NHS.

 

  •  Edmund Stubbs – Health Research Fellow
  • Christian Stensrud – EU Research Fellow

Notes

[1] The Fenin case (T-319/99 and C-205/03) is an example where a national health service was not deemed an economic undertaking by the European Commission and the CJEU. Information is available at: http://www.reckon.co.uk/open/Fenin and NHS European Office, What do EU competition rules mean for the NHS?, 2009, p.2, http://www.nhsconfed.org/resources/2009/06/what-do-eu-competition-rules-mean-for-the-nhs

[2] B. Collins, Procurement and competition rules: Can the NHS be exempted?, The King’s Fund, March 2015, p. 8, Available from: http://www.kingsfund.org.uk/publications/nhs-procurement-competition-rules

[3] The EU has very little say over how the NHS is run. Article 168(7) of the Treaty on the Functioning of the European Union (TFEU) states that member states are responsible for the definition of health policy, management of health services and medical care, and the allocation of the resources assigned to them.

[4] B. Collins, Procurement and competition rules: Can the NHS be exempted?, The King’s Fund, March 2015, p. 2, Available from: http://www.kingsfund.org.uk/publications/nhs-procurement-competition-rules

[5] D. Owen, Europe Restructured: Vote to Leave, p. 127.

 

Photo: Chatham House