Most of Labour's public service reforms make sense. The new focus on individual choice does not. The "super-modernisers" who are pushing it make a false analogy with the private sectorby David Lipsey / December 17, 2005 / Leave a comment
Eight years ago I wrote an article in Prospect (January 1997) attacking the idea that ever-increasing consumer choice was a panacea for happiness. I hardly addressed the extension of the notion of choice to the public sector because it did not occur to me it might become a serious policy prescription.
What did I know? Today, less than a decade later, the extension of individual choice in the public services is one of the main policy initiatives of this third- term Labour government. In Labour’s first term there were few harbingers of this. The government chose, for good reason, not to increase spending for two years. Since effective choice requires an excess of provision over demand—that is to say it requires increased spending—it was not high on the agenda. But the second term saw the descent of a Niagara of public money, into health and education in particular.
This did not lead to a complacent defence of the public services as they had been run. The lessons of America’s “new public management” had been absorbed: there is state failure as well as market failure. What could readily be targeted was targeted. What could sensibly be privatised was privatised. Internal markets did what internal markets do best.
Most of this made sense. For every British Rail, where the complexities of the new systems went wrong, there were several British Telecoms, where competition and reform worked. In health the waiting list target was crude, but it was a price worth paying for tumbling queues. Without the internal market in health (which Labour triumphantly abolished then sheepishly restored), the extra resources would have seeped out into myriad inefficiencies.
If anyone doubts the value of the government’s reform of the public services, they should visit Wales, where I live. The Welsh and their assembly have a traditional view of how services should be provided. As a result, the health service in Wales is now performing far less well than in England.
There is a place for competition and even choice in public services. For example, a primary care trust (PCT) responsible for commissioning care for its area can now seek quotes from a variety of hospitals for treatments or operations that do not exceed a nationally set maximum.
This is sensible competition to drive down costs and contain producer power. Without some such mechanism, inefficient hospitals that run up large deficits are rewarded…