Encouragement of the privatisation of ancillary services

In the autumn of 1979, the Conservative government started to encourage the privatisation of ancillary services, such as cleaning and laundry, by sending a letter to health authorities encouraging them to tender contracts.

Compulsory competitive tendering (CCT) had been in place across local government before it was attempted in the NHS. The voluntary approach had little impact.

In September 1983, the government issued guidance that required authorities to offer work to the private sector. However, private contractors struggled to match NHS prices as their services were VAT applicable. They were required to match NHS terms and conditions.

By 1986, district authorities were able to reclaim VAT if they used private providers and the requirement to match NHS terms and conditions was relaxed. The privatisation of ancillary services was controversial and the Conservatives did not attempt to extend compulsory tendering to cover clinical services.

However, private provision of residential care began to grow during this period due to changes in the benefit payments for board and lodging. A loophole meant that it could be cheaper for a local authority to place a person in residential care than provide home care help.