The Two Negotiations of the NHS

There is a simple test for whether an institution is weak or merely selective in its weakness: watch who it chooses to fight. An institution that is genuinely powerless fights nobody. An institution that fights its own workforce to a standstill while conceding 20% margins to its contractors is not powerless. It is making choices, and the choices tell you whose interests it actually serves.

The National Health Service fails this test spectacularly, and it fails it in public, with documents.

The concession

In April 2026 the Centre for Health and the Public Interest published its analysis of £12 billion of NHS England and Integrated Care Board expenditure on 760 private service providers over two years. The findings were straightforward. £1.6 billion of that spend left the system as profit — enough, on the CHPI's arithmetic, to have employed more than nine thousand doctors or nineteen thousand nurses. Some 131 companies made margins above 20% on their NHS work, against a normal corporate return of 8 to 9%. Over half a billion pounds flowed to firms whose owners reside in tax havens. A further £353 million of NHS income went not on patient care but on servicing the debts that private equity owners had loaded onto their own portfolio companies.

None of this is fraud. Every pound was paid under contract, at prices the NHS itself set. That is precisely the scandal. The national tariff prices a procedure at the NHS's average cost — an average that includes the complex patient, the emergency admission, the teaching hospital's overhead, the standing cost of being open at 3 a.m. on Boxing Day. A private day-case unit that accepts only the fit, the simple and the elective, and returns anything complicated to the NHS the moment it becomes expensive, collects the average-cost price for below-average-cost work. The margin is not earned at the operating table. It is manufactured at the point of contract design, and the NHS is the designer.

The Department of Health's response to the CHPI findings was instructive: it declared that it would not tolerate gaming of the tariff to cherry-pick the simplest, most profitable cases. One does not warn against a practice that isn't happening. The department was describing its own procurement system, accurately, in the voice of a bystander.

The alibi

The standard defence is helplessness. The NHS, we are told, cannot negotiate harder because it cannot walk away: waiting lists are politically intolerable, NHS capacity takes a decade to build, and the private sector is the only lever that works inside an electoral cycle. A buyer who must buy, visibly, on a deadline, takes the price it is given.

It is a tidy argument, and large parts of it are simply false. The dependence runs the other way. The cataract chains, the diagnostics firms, the community-services providers — these are businesses constructed almost entirely on NHS revenue. In one year, £536 million of NHS eye-care funding went to just five companies. Remove NHS commissioning and most of this sector has no customers, no self-pay market of any depth, and no enterprise value. In any textbook, a buyer facing existentially dependent suppliers holds the whip hand. It can demand open-book pricing. It can set the tariff at efficient day-case cost rather than system-average cost. It can run the auction it has never once run. The suppliers would still turn up, because they have nowhere else to go.

So the helplessness is an alibi. The power exists. What is missing is the will to use it — and we know the will could exist, because we have watched this same institution deploy it, at length, in public, against a different opponent.

The counterexample

In 2015, Jeremy Hunt, then Health Secretary, decided to rewrite the junior doctors' contract. What followed was the most protracted industrial confrontation in the history of the NHS: months of failed talks, repeated strikes through 2016, and eventually the first full walkouts by doctors in the service's history, including the withdrawal of emergency cover. Operations were cancelled in their tens of thousands. The most publicly trusted profession in Britain was at war with its employer, and its employer did not blink. When agreement could not be reached, the contract was imposed.

Set aside, for a moment, whether the contract was wise. (The subsequent decade of collapsed morale, emigration, rota gaps and an exploding locum bill suggests it was not; the 2023–24 strike wave was in many ways the delayed invoice.) Focus instead on what the episode proves. It proves that the machinery of the British state can absorb cancelled operations, hostile headlines, and a year-long standoff over healthcare — and hold its position. The claim that the NHS "cannot walk away" from a negotiation died on the picket lines of 2016. The state walked away from its own doctors, deliberately, and called it strength.

Now hold the two negotiations side by side. Against salaried junior doctors — the people who actually deliver the care — the state was willing to endure open industrial warfare over a few percentage points of unsocial-hours pay. Against contractors extracting margins at more than double the normal corporate rate, the same state has never had so much as a public disagreement. It has never imposed a price. It has never let a framework lapse to make a point. It publishes the tariff, pays it, and expresses periodic regret about the outcome, like a man who keeps leaving his front door open and writing to the newspapers about burglary.

The explanation

The asymmetry is not economic. It is political, and it is not complicated.

Fighting the doctors carried a political payoff. It could be framed as facing down union militancy; it advertised resolve; it served a manifesto pledge. Every week the confrontation continued, there was an audience applauding. The fight was not a cost incurred to achieve a saving — the fight was the product.

Fighting the contractors offers no such audience. No front page celebrates a minister who compresses a cataract chain's margin from 22% to 9%. The savings are diffuse, invisible, and credited to nobody. The risk — a provider withdrawing capacity, a waiting-list uptick — is concentrated, measurable, and lands on the minister's own scorecard within the quarter. And the sector, unlike the junior doctors, is well represented in the places where health policy is actually made. The revolving door between the department, its advisers and the independent sector has been documented for years; the picket line has no equivalent lobby.

So the toughness is rationed by political price, not by public value. It is spent where the target is politically cheap — a salaried workforce that can be caricatured as greedy — and withheld where the target is politically protected. The taxpayer, meanwhile, pays for both decisions: for the retention crisis and agency spend that followed the imposed contract, and for the £1.6 billion conceded to contractors through prices the NHS wrote itself.

The verdict

The NHS is routinely described as a national religion. It is more accurately described as a political instrument — the largest budget in domestic government, deployed by each administration for whatever the moment requires: a fight to advertise strength, a contract to advertise delivery, a waiting-list announcement to survive a conference season. Patients and taxpayers are the constants in this arrangement; their interests are the variable.

The £1.6 billion is not the cost of a weak buyer. It is the cost of a strong buyer whose strength is reserved for its own employees. Until the day a health secretary is willing to have with SpaMedica and Spire the argument Jeremy Hunt was so eager to have with 55,000 junior doctors, every subsequent report on private profit extraction from the NHS should be read not as a study of market failure, but as a study of choice. The system is not being taken for a ride. It is driving the car, and it knows exactly where it is going.