Those worrying about the transatlantic trade deal should look closer to home

There has been a lot of concern expressed about the planned free trade deal between the European Union and the US and the impact it will have on the NHS. But just how big a threat is TTIP to the way the NHS works?

Blog post

Published: 06/10/2015

Since this blog was written in 2014, the information available about the TTIP negotiations has continued to evolve with a range of independent reports, and statements from the European Commission. While many of the points here remain relevant, we would encourage anyone wanting to learn more about this issue around the 2016 European Union referendum to make sure they consider the most recent sources.

There has been a lot of concern expressed about the planned free trade deal between the European Union and the US, the Transatlantic Trade and Investment Partnership, and the impact it will have on the NHS.

TTIP seems to combine a number of popular demons in health circles: privatisation, US healthcare, competition and Europe. The fact that the Department for Business, Innovation and Skills is leading UK negotiations on behalf of the NHS might also make those who remember the Working Time Directive nervous.

So just how big a threat is TTIP to the way the NHS works? The surprising answer is that it does not seem to have the potential to create the dire effects attributed to it. In fact, those worrying about what it means for the NHS might be better off looking closer to home at procurement regulations and how they are being interpreted.

Concern about the overall impact of TTIP seems to have been overstated.  Nigel Edwards, Chief Executive, Nuffield Trust

The current negotiations are about investor protection. The key area that is causing most concern relates to provisions that would allow corporations to take governments before arbitration panels if changes in policy cause them to experience financial losses.

These have to be unheralded major shifts in policy that lead to “expropriation without compensation or other arbitrary treatment”. In other words: the government changing the conditions of an arrangement, for example by cancelling a contract to provide a public service.

Anxiety and lack of imagination

But under TTIP governments can change policy as long as they give notice and (uncontroversially) follow due process. So a new government could overturn previous contracts if it gives proper notice.

Contract law already provides for compensation for loss of profits where one side is in breach of contract. So existing procurement rules already tie the hands of government with or without the poison pill clauses being inserted into some current large procurements to deter the cancellation of contracts before the term has expired.

The use of the investor state dispute settlement arbitration panel under TTIP adds protection for investors and – like many other pieces of international trade machinery – it is a supra-government body. This is another element that has made some people anxious, as the accountability and decision making processes of these bodies are opaque.

But concern about the overall impact of TTIP seems to have been overstated. The TTIP protection offered to investors does not include circumstances where a particular arm of government decides not to conduct a procurement of a particular service. 

Nor would it cover a situation where an in-house provider was awarded a contract through open procurement. These are already covered by the EU and UK procurement rules and many of the anxieties about these seem to be as much connected with the way that the NHS is interpreting them, which seems to be risk averse and in some cases rather bureaucratic and unimaginative. 

Removing the ratchet

A surprisingly clear letter from the European Commission to John Healey MP also points out that the EU agreements have allowed for member states to have fully reserved powers in areas such as healthcare. Where there are not restrictions, the powers for them to be introduced later are still available. In some other agreements there is a “ratchet” where once an area has restrictions removed they cannot be reintroduced. This does not apply in TTIP.

A reason that TTIP covers the NHS at all is because, in previous trade negotiations, the UK has sought powers to limit the access of overseas doctors and to make this subject to NHS workforce. But this does not seem to compromise the ability of the UK to protect the NHS in other areas if it wishes to do so. 

TTIP makes no difference to procurement rules: that horse has already bolted. The agreement also does not produce a situation where litigious foreign companies can sue for access to the NHS: they already have it for individual cases, and TTIP does not provide them with the ability to do this. Nor would a previously announced change in policy – for example, if Labour were to implement the preferred provider policy – allow this either.  This might break other rules but TTIP would not be one of them.

Much more significant changes are taking place driven by existing procurement and competition rules and how these are being interpreted. Little attention has been given to the new EU procurement rules that abolish the difference between part A (priority services) and B (residual services), and introduce a lighter touch arrangement for healthcare. These were announced last week but will take a year longer to take effect in the NHS than in the rest of Europe.   

It is very interesting how policy discussions on complex and obscure issues can get such attention when the overall effect seems so small, although my Brussels source points out that the negotiations have not concluded yet and it would be wise to monitor their progress.

Blowing up TTIP beyond its true significance obscures many other things that really require more serious attention.

This blog first appeared as a comment piece in the HSJ.  

Suggested citation

Edwards N (2014) 'Those worrying about the transatlantic trade deal should look closer to home' Nuffield Trust comment, 6 October 2014.