Revealed: the pamphlet underpinning Tory plans to privatise the NHS


9:00 am - June 3rd 2011

by Sunny Hundal    


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In 1988 two radical Conservatives wrote a pamphlet for the Centre for Policy Studies think-tank called ‘Britain’s Biggest Enterprise: ideas for radical reform of the NHS’.

It was written by John Redwood, who had just become an MP, and Oliver Letwin, then merely an acivist but now the Minister of State at the Cabinet Office.

Today we publish the paper for the first time online (a reader got hold of a copy and scanned it) because it offers the deepest insight yet into where health secretary Andrew Lansley wants to take the NHS, and how Conservatives regard this prized British institution.

Indeed, four out of five main recommendations made in the 20-page pamphlet are already being put into place.

Britain’s Biggest Enterprise :
– calls the NHS “a bureaucratic monster that cannot be tamed”.
– says the NHS needs “radical reform” and “revolutionary ideas”.
– claims waiting lists were caused by the “system itself” rather than a lack of funds, and that spending more money would simply increase waiting lists.

It makes these five recommendations:
1) Establishment of the NHS as an independent trust.
This is exactly what Lansley is doing now.

2) Increased use of joint ventures between the NHS and private sector
Again, this is central to Andrew Lansley’s bill

3) Extending the principle of charging
This is also being implemented and pushed forward.

4) A system of ‘health credits’.
Letwin explains these would be issued to a patient who could “spend” it in an NHS hospital or “he could choose instead to go to a private sector hospital”. It is virtually inevitable, as it matches up with Letwin’s choice agenda.

5) A national health insurance scheme.
This is the one that isn’t in Lansley’s bill.

However, Letwin and Redwood do outline several different ways in which such an insurance scheme could work differently, even likening it to Car Insurance at one point. They also say an insurance scheme could benefit the private sector, “To a great degree the divisions between the public and private would fade”.

Andrew Lansley is trying to bring forward a similar system where ‘insurance pools’ (GP consortia) would compete against each other in a similar way.

* * * * * * * *

A revolution then? In fact, Redwood and Letwin acknowledge that “it would be foolhardy” to try and achieve everything in one leap

But need there be just one leap? Might it not, rather, be possible to work slowly from the present system towards a national insurance scheme?

Perhaps Andrew Lansley can answer that.

At least now we have a better idea of what the Tories plan with the NHS and why the right of the Conservative party are cheering them on.

Update: Redwood has now distanced himself from his own writing.

Britain’s Biggest Enterprise

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


Are any of points 1 to 4 in any way inimical to the idea of a national health service, where healthcare is provided free when needed? If not, this is merely possibly sensible (feel free to disagree…) internal reform.

Indeed, I am struck that they seem to be moving us towards the one area where the UK consistently is top of the world health leagues – dentistry.

Incidentally, anyone else struck by how modern technology (you know – stuff developed outside of the ambit of government) has made production of high quality leaflets so much easier since the 1980s?

23 year old research paper shows what government is doing now.

Uhn hunh.

So, should we republish the 1983 Labour Manifesto to show everyone what Red Ed would do if he were in power?

3. Cynical/Realist?

@1 I think dredging up a leaflet from 1988 is dodgy – but using improvements in the quality of printed goods over 20 years to justify privatisation isn’t much better!

2
For better or worse, the labour party, over the past 28 years, have had a dramatic sea-change, which isn’t the case with the tories, they are the same old same old.
Had the research paper been published without informing readers of the date, I doubt if many would have thought that the contents were outdated.

5. Planeshift

Tim,

No, as Ed Milliband never even stood on that manifesto let alone wrote it.

You could reasonably say that was the case if people who wrote the manifesto were in power and produced a series of proposals that bore resemblance to the 83 ones.

And as a pendant, you’ll also enjoy being pulled up on the fact that 1983 isn’t 23 years ago as well 😉

6. Thatcherite Clegg

No wonder Clegg signed up to it.

Cynical/Realist,

@1 I think dredging up a leaflet from 1988 is dodgy – but using improvements in the quality of printed goods over 20 years to justify privatisation isn’t much better!

Sorry – wasn’t trying to justify privitisation, because I do not want health care privatised (provision is fine – that’s merely an operational issue). My point was simply that innovation is nowadays (and in fact generally in history) most successful away from government (with the obvious exception that government developments in warfare have been fairly important – but even here most developments are now by private companies, even if the funds may be from the state). If you do want an analogy to this argument, if government is less likely than private capital to produce useful innovation within an industry (lets set aside the problem of funding of research here – government probably has a role there), then surely productive innovations in healthcare have been held back by government control of provision as well as funding in the NHS?

“If you do want an analogy to this argument, if government is less likely than private capital to produce useful innovation within an industry (lets set aside the problem of funding of research here – government probably has a role there), then surely productive innovations in healthcare have been held back by government control of provision as well as funding in the NHS?”

The correct economist here is William Baumol.

He distinguishes between invention (thinking up new things) and innovation (using those inventions).

Invention is something that can be done in pretty much any socio-economic system. Innovation is hugely accelerated by market based (no, not capitalist, not private sector, not not government funded, it’s the market, the competition part) systems.

In the long term the solution to the increasing expense of the health care system is innovation. Thus we want to have a market based (but not necessarily not government funded, nor capitalist) health care system.

9. Planeshift

“The correct economist here is William Baumol.”

Exactly.

What we need to do is make policy based on the work of an 89 year old economist and ignore all the other literature and research on health economics that has developed over the past 30 years.

What we need to do is make policy based on the work of an 89 year old economist and ignore all the other literature and research on health economics that has developed over the past 30 years.

How much of that states that innovation is better in monolithic state-funded healthcare monopolies? Very little I would have thought, but still.

The truth is out. No more lies from tory trolls please. Watchman again trying to pretend to be oh so balanced, yet all the time spinning for the loopy Far right.

Just think your local hospital can go the way of Sothern Cross. Once it is in the private sector, it is free for any scum of the earth to come and buy it, and load it with debt.

It is now up to the Lie Dems. Get off the fence Clegg.

@2

“So, should we republish the 1983 Labour Manifesto to show everyone what Red Ed would do if he were in power”?

Labour went down the neoliberal route; they are not, inspite of your protestations, the same party. Whereas the Tories haven’t changed at all. Your point, caller?

“What we need to do is make policy based on the work of an 89 year old economist and ignore all the other literature and research on health economics that has developed over the past 30 years.”

We do seem to have people insisting that we should borrow to spend as Keynes would have had it. You know, an economist who has actually been dead these 65 years?

And yes, Baumol really is the guy here.

First, the NHS (like any other service) is caught in Baumol’s Cost Disease. It will, inevitably, become more expensive over time. Unless, except, if we can increase labour productivity in it faster than labour costs rise.

And what is our best chance of increasing labour productivity? Innovation: which happens best in a market based (again, note, this does not mean private insurance, does not mean capitalist, does not mean health savings accounts or rationing, just a multiplicity of competing suppliers) system.

As I say, Baumol really is the economist here.

http://www.voxeu.org/index.php?q=node/5428

“In recent research along with Rodrigo Moreno-Serra (Gaynor et al. 2010), we look at all admissions to hospitals in the National Health Service – around 13 million admissions – pre- and post-policy. We find that hospitals located in areas where patients have more choice are of a higher clinical quality – as measured by lower death rates following admissions – and their patients stay in hospital for shorter periods compared with hospitals located in less competitive areas. What’s more, the hospitals in competitive markets have achieved this without increasing total operating costs or shedding staff. These findings suggest that the policy of choice and competition in healthcare can have benefits – quality in English hospitals in areas in which more competition is possible has risen without a commensurate increase in costs.”

Oh my, look at that! It works in practice as well as in theory!

14. Planeshift

“How much of that states that innovation is better in monolithic state-funded healthcare monopolies? Very little I would have thought, but still.”

I’ve no idea, as I haven’t read it. I could therefore assume my own prejudices are correct, as most libertarians do with almost any social issue they haven’t researched in detail.

Or perhaps the sensible thing to do would be to look at what the professionals are saying – organisations such as the BMA etc.

And what do you know?- they are unanimously against the lansley plans. We’ve seen on here time after time people who work in the NHS – like Alien from Zog – are able to comprehensivly explain why they won’t work. Even Tory backbenchers like Sarah Woolaston are opposed to the plans – largely because she was a GP.

That to me at the very least suggests the burden of proof rests with the lansley supporters. There have been numerous attempts at creating internal markets, market simulations etc within the NHS over the last 30 years, so you would think supporters of lansley would be able to favourably cite some studies of the impact of these reforms – actual studies examining what has happened.

Instead of that we get offered as evidence an economist making a conclusion about innovation within a market system being preferable to a non-market system. Which, if correct, still ignores the fact that there are many ways to create competition within the NHS, not just lansley’s proposals. If the best you can do is cite generalists stating that markets are better than none, it doesn’t suggest any of you actually know the detail of what lansley is proposing or have any further supporting evidence that his proposals will work.

4) A system of ‘health credits’.
Letwin explains these would be issued to a patient who could “spend” it in an NHS hospital or “he could choose instead to go to a private sector hospital”. It is virtually inevitable, as it matches up with Letwin’s choice agenda.

Oh god, not vouchers…if the NHS is meant to be free at the point of use, what’s the point behind a vast bureaucratic system devoted to processing the NHS equivalent of Nectar points (or health bonuses on Call of Duty)? How many credits for cancer, as opposed to an ingrowing toenail?

sally,

The truth is out. No more lies from tory trolls please. Watchman again trying to pretend to be oh so balanced, yet all the time spinning for the loopy Far right.

Oh so balanced? Nah – I favour having private interests competing to provide healthcare; I just prefer the payment to come from the (technically less efficient) government rather than insurance, at least until I get over my distrust of large corporations (not particularly likely). I don’t think hospitals should be sold – government needs to retain the capacity to provide services that are not offered, or are otherwise only offered by one provider (thus ensuring competition). Hardly balanced – that’s pretty much one side of the argument over the NHS’s future.

But at least I make an argument. What is your position on this? How do you, in your opinion, believe we should run healthcare? Be nice to see you set your position out.

Oh and technical point – the care homes run by Southern Cross are not laden with debt – that is the problem. Southern Cross sold them, and is now struggling to pay the rents on the properties – the care homes themselves are actually not endebted as a result – they are the cause of debt, not the victims of it.

“There have been numerous attempts at creating internal markets, market simulations etc within the NHS over the last 30 years, so you would think supporters of lansley would be able to favourably cite some studies of the impact of these reforms – actual studies examining what has happened. ”

See link @ 13.

18. Planeshift

“Innovation: which happens best in a market based (again, note, this does not mean private insurance, does not mean capitalist, does not mean health savings accounts or rationing, just a multiplicity of competing suppliers) system.”

And it doesn’t just mean Lansley’s proposals. Which is why you should stop citing Baumol in support of them. Its like citing Joseph Stiglitz’s critiques of the IMF to support communism.

redpesto,

Oh god, not vouchers…if the NHS is meant to be free at the point of use, what’s the point behind a vast bureaucratic system devoted to processing the NHS equivalent of Nectar points (or health bonuses on Call of Duty)? How many credits for cancer, as opposed to an ingrowing toenail?

With you there. But then again, they seem to be curiously absent from the Lansley plan as well…

I love the idea of health bonuses lying around hospital corridors though – all we need is some dangerous pits, moving walls and the like and we’ve got an excellent new competitive concept for healthcare 😉 (sally, to clairify – this is a joke, not a serious comment).

Watchman: But then again, [vouchers] seem to be curiously absent from the Lansley plan as well…

For now… (Sadly perhaps the NHS needs to equivalent of a BFG-9000 to kill off Lansley’s plans.)

Planeshift,

I’ve no idea, as I haven’t read it. I could therefore assume my own prejudices are correct, as most libertarians do with almost any social issue they haven’t researched in detail.

I have read enough economics (and history) to understand the idea that government stifles innovation – what I have read infomrs my prejudices if you like. Not sure about what libertarians do in such cases – that is (pretty much by definition) up to them.

Or perhaps the sensible thing to do would be to look at what the professionals are saying – organisations such as the BMA etc.

And what do you know?- they are unanimously against the lansley plans. We’ve seen on here time after time people who work in the NHS – like Alien from Zog – are able to comprehensivly explain why they won’t work. Even Tory backbenchers like Sarah Woolaston are opposed to the plans – largely because she was a GP.

When the Telegraph broke the expenses scandal, those working in parliament were almost (and that is the key point) unanimous there was nothing bad going on. I’m pretty certain my team at work is doing nothing wrong, but I’m equally sure that an outsider coming in would see glaring missed opportunities. Being inside a system shapes your viewpoint – it does not make it wrong, but you tend to end up defending the system, and working to this. It is why relying on insiders’ views is stupid – they are valuable, but they will generally support the existing system.

Remember, even as communism collapsed in Eastern Europe, party functionaries still maintained it was the best system – because that was the system they were in, whilst the people outside could see better choices.

That to me at the very least suggests the burden of proof rests with the lansley supporters. There have been numerous attempts at creating internal markets, market simulations etc within the NHS over the last 30 years, so you would think supporters of lansley would be able to favourably cite some studies of the impact of these reforms – actual studies examining what has happened.

I agree – but unfortunately we do not have a spare NHS to experiment on, so have to use the one we’ve got. Seems to have been normal government procedure so far…

And Tim just quoted one of those studies…

Instead of that we get offered as evidence an economist making a conclusion about innovation within a market system being preferable to a non-market system. Which, if correct, still ignores the fact that there are many ways to create competition within the NHS, not just lansley’s proposals. If the best you can do is cite generalists stating that markets are better than none, it doesn’t suggest any of you actually know the detail of what lansley is proposing or have any further supporting evidence that his proposals will work.

Markets produce better innovation than any other known system at the moment – but as you say, there may be other ways to Mr Lansley’s proposals of doing this. And I do not know the intimate details of Mr Lansley’s plans, you’re right (because I bet there is lots of unnecessary stupidity in there, as government rarely lets go effectively), but from my point of view, that of a committed free marketeer, they are much better than the effective state monopoly in existence at the moment.

Interestingly, the evidence I do have (anecdotal unfortunately – in the real world I have to earn a living rather than go round reading healthcare economics (and it tells you a lot I am upset about that…)) is that where there is a choice of providers, people get seen much more quickly and the outcome is more effective (this second is hardly a fair test however, since the actual medical problems varied – then again, this is the case with all medical statistics).

At the 1992 election, Labour promised to steal homes from people who didn’t keep them maintained up to a certain arbitrary standard. Presumably this is still Labour policy?

I thought the original post was a good bit of digging – well done – but it gets kind of like the Muppet Show around here – something entertaining on the main stage is immediately followed by the same grumpy twosome saying “rubbish” , “not true” . A kind of free market obsessive Statler and Waldorf.

redpesto,

Vouchers would basically lose the support of the free marketeers, as they are basically a rationing by government (which seems rather unusable in a free-at-the-point-of-delivery system anyway). It does not seem to be in line with the thinking behind the reforms – minimising government interference and opening up services to all providers.

25. Planeshift

Muddled order here sorry:

” but unfortunately we do not have a spare NHS to experiment on, so have to use the one we’ve got. ”

Well you can. Health is a devolved matter so we have the potential for policy divergence. Plus you can implement policies in a small area, see what happens before rolling it out to the rest of England. (provided you choose the test area wisely for obvious reasons)

“And I do not know the intimate details of Mr Lansley’s plans, you’re right”

But thats the main point I’m making. Even if you want more choice in the NHS for the patient – something I’m inclined to agree with – that doesn’t mean you should support lansley. But most libertarians seem to be supporting him without looking at the detail – and in looking at the detail most people – even those like tory backbenchers – find numerous flaws in it.

“. Being inside a system shapes your viewpoint – it does not make it wrong, but you tend to end up defending the system,”

Counter example: how many teachers defend the current education system – I’ve yet to meet one?

You could say working anywhere shapes your viewpoint, not because you gain a vested interest, but because you realise what works and what doesn’t. Working in market research means I have a reasonably good idea of what research methods work and what methods don’t work. For example: A short telephone survey is pretty good at doing basic opinion polling but going to be a terrible method if you want to know characteristics about people who are homeless. Is this opinion based on knowledge and experience that outsiders should take seriously (and you should see the crap we get from some clients about what works) ? Or is it defending the vested interests of the market research industry?

Rather than assume people working in the NHS are against lanlsey due to vested interests is stupid. Deal with the arguments they are making.

Markets produce better innovation than any other known system at the moment

…innovative use of financial engineering which eventually comes crashing down around our ears.

Interesting to note that the cost of the NHS in 1988 was £21billion.

It’s now £75 billion.

But WTF, “we’re worth it”.

Aren’t we?

28. Planeshift

“ost of the NHS in 1988 was £21billion.

It’s now £75 billion.”

To what extent is that merely inflation (i.e same services for a higher price) rather than the political choice to spend more on it (i.e provide more services)

Cost of my rent in 2006: £340 a month
Cost of my rent in 2010: £575 a month

Is my spending on accommodation out of control and badly needs reform? or is it I just moved to a bigger house in a better area?

What, and make the NHS more like the French system, which is pretty much the best in Europe?

Sounds terrible, doesn’t it….

30. Planeshift

That isn’t what lansley is proposing.

….to finish what I was going to say;

I do find it amusing in a sad kind of way that many on the left here are having a go at Tim Worstall when he essentially wants an improved, more efficient NHS, still free at point of access and not necessarily privatised or run on a capitalist model – jsut a competition based one. Is it just because he is Tim Worstall that some people immediately turn their brains off and oppose what he writes?

I’d also say this – what would those arguing against reform of the NHS suggest instead? It’s cost is not something the nation can keep up with forever, as it is increasing faster than both GDP growth and inflation, and that is before our horrible demographics come into play. As Lansley rigtly said, doing nothing *really isn’t* an option.

@ 30 Planeshift

It’s not miles away….mixed providers, competition, reducing layers of management etc. French system still free at point of entry but users can be expected to bear some costs as well through charges or insurance.

For latest available healthcare costs as percentages of national GDP in OECD countries, try this link:
http://stats.oecd.org/index.aspx?DataSetCode=HEALTH

The percentage is lower for the UK than for most west European countries.

28
This is a meaningless comparison, for example, the cost of the introduction of new technologies, medicines and procedures, together with education, has added a considerable amount to the funding necessary. And an expanding population present and predicted has to be factored into creating more services.
I wonder if your landlord would be charging the same rent if h/she had extended your accomodatiion, added a swimming pool and employed a designer to re-furbish.

“I wonder if your landlord would be charging the same rent if h/she had extended your accomodatiion, added a swimming pool and employed a designer to re-furbish.”

If my landlord went out and got quotes from different companies to install the pool, do the designing and extend the accomodation, my landlord would get all that work done cheaper than if there was one monopoly supplier of building services.

Which is why we want competing suppliers of health care services, isn’t it?

21
Great, so you’ve read several books on history and economics but you feel that the clinicians working in the NHS aren’t qualified to have a realistic opinion on the way the NHS is run.
I wonder who you would approach if you wanted a house building.

35
Nice try Tim, but it doen’t address my post @34

38. Planeshift

“If my landlord went out and got quotes from different companies to install the pool, do the designing and extend the accomodation, my landlord would get all that work done cheaper than if there was one monopoly supplier of building services.”

My landlord would probably get his mate to do it at an increased price, and pass the cost on to me.

39. Planeshift

Also worth pointing out that we have competition in the NHS between suppliers in some areas already. Cleaning is contracted out, as is hospital food and some other functions. Buildings are constructed by private contractors who’ve won the bids. Drug Companies pay salespeople large salaries to ensure their brands are used by doctors etc.

The NHS has undergone numerous changes in the last 30 years, with each minister promising the reforms will improve things. Some of those reforms have explicitly aimed to increase cost and create market simulations. Why on earth is Lansley going to succeed where others have failed?

Citing economic theory on the benefits of markets is irrelevant to this specific question.

35
Also Tim, the sort of innovations utilized by the NHS are licensed and patented, there is no competition even though the suppliers are privately owned.

38
My post really didn’t refer to you, apologies, it was directed more at Watchman.

42. Parasite

Sunny clearly makes no attempt to read the paper before whining. The first chapter of that 1988 paper is entitled “What’s wrong with the system?” Clearly the answer in the Panglossian LibCon book is “Nothing, absolutely nothing”

43. Planeshift

“Clearly the answer in the Panglossian LibCon book is “Nothing, absolutely nothing”

You’ll of course have no problem in linking to the precise article where this is said.

BTW whatever has happened to John Redwood?

He seems to have disappeared into the thickets leaving no visible trace when he used to be shadow minister for deregulation, as I recall.

45. Watchman

Planeshift,

Muddled order here sorry:

” but unfortunately we do not have a spare NHS to experiment on, so have to use the one we’ve got. ”

Well you can. Health is a devolved matter so we have the potential for policy divergence. Plus you can implement policies in a small area, see what happens before rolling it out to the rest of England. (provided you choose the test area wisely for obvious reasons)

Fair enough. Hadn’t considered that.

“And I do not know the intimate details of Mr Lansley’s plans, you’re right”

But thats the main point I’m making. Even if you want more choice in the NHS for the patient – something I’m inclined to agree with – that doesn’t mean you should support lansley. But most libertarians seem to be supporting him without looking at the detail – and in looking at the detail most people – even those like tory backbenchers – find numerous flaws in it.

I’m also equally used to hearing the plan is flawed with no explanation – to be honest, my view is that anything that increases my choice is good (try getting an consultation for a bad back or (slightly concerningly) depression) round here. The one good thing is that the idiotic lists to get on waiting lists have disappeared for some reason…

It would be interesting to see what the flaws of this plan are though.

“. Being inside a system shapes your viewpoint – it does not make it wrong, but you tend to end up defending the system,”

Counter example: how many teachers defend the current education system – I’ve yet to meet one?

Ah, case in point. Schools are not run homogenously – even the most dictatorial local authority never controlled schools as tightly as the NHS controls hospitals, and there are a lot of local authorities, not one central ministry. In education (where there was always more prominent private institutions as well) there was always a clearer choice than in the healthcare system – apart from a few very old or very new ones, have you never noticed that all hospitals feel the same inside, whilst schools (even the identi-build 60s generation) all have different feels.

You could say working anywhere shapes your viewpoint, not because you gain a vested interest, but because you realise what works and what doesn’t. Working in market research means I have a reasonably good idea of what research methods work and what methods don’t work. For example: A short telephone survey is pretty good at doing basic opinion polling but going to be a terrible method if you want to know characteristics about people who are homeless. Is this opinion based on knowledge and experience that outsiders should take seriously (and you should see the crap we get from some clients about what works) ? Or is it defending the vested interests of the market research industry?

Erm, that’s professional expertise. The same as those working inside the NHS know best (I hope) how to treat illnesses and injuries. The analogy with market research would be with how you organise your company to do market research, not with the actual subject knowledge.

To the best of my understanding, no-one has suggested taking surgical care away from the medical professionals in the NHS – which is what they know about after all. I fear you are confusing professional expertise with knowing about the system as a whole, which is unfounded. I work in higher education nowadays, and I know my field well – but I could not necessarily improve the University system (other than saying let’s not abolish our better universities…).

Rather than assume people working in the NHS are against lanlsey due to vested interests is stupid. Deal with the arguments they are making.

Love to – but I never see the details – I just hear they oppose the reforms. In all honesty this argument is rapidly going the way of the Palestine question – set answers and set beliefs, with no consideration of facts.

I have set out my position, which to the best of my knowledge means that I agree the Lansley reforms are a good idea because they move the current system towards a position I would espouse. Most of the opposition seems predicated on the fact the reforms are not a good idea (probably a sensible conclusion for those opposed to a reform…), but I am not sure why many think this – the major left-wing claim of ‘privitisation’ is pure bloody idiocy, because it is untrue (no assets are being sold) and misleading. I currently know enough to support the reforms, and need specific reasons not to do so.

46. Oliver Smith

Lots of the points made in the paper were fairly sound. I would favour a true market in some (but not tertiary) areas of healthcare, with an insurance based system, because a state monopoly on health care is thoroughly unfair.

46
Most of the equipment and medications used by the NHS, including GPs and dentists are licensed and/or patented, there is, in effect, a private monopoly of supply, and this wouldn’t change even if the entire NHS was privatised.
It’s the old chestnut – what is the difference between a state monopoly and a private monopoly?

“Most of the equipment and medications used by the NHS, including GPs and dentists are licensed and/or patented, there is, in effect, a private monopoly of supply, and this wouldn’t change even if the entire NHS was privatised.”

Steve, you seem not to realise that most innovation is “new ways of doing things”. Not new drugs, new miracle machines. But quite literally, seemingly trivial things like. OK, to feed the patients best should we bring the food up and then have the bloke waiting for the trays to take back to the kitchen? This would be efficient perhaps, only one trip from the kitchen for him.

But maybe this will produce time pressure for the patients to eat quickly? Hmm, maybe that’s not a good idea. Maybe elderly patients will need nursing help to eat.So, perhaps he brings the food up for one ward, delivers it, goes off, gets the food for another, then comes back on collects the trays from the first?

Who knows which will work better? But that is innovation. A trivial example of it to be sure, but innovation it is.

And the NHS employs 1.3 million people, costs £100 billion a year. We really do want people experimenting with all sorts of things: how should appointments be booked? Maybe medical records on iPads is a good idea? Perhaps the hospital radio station should run ads telling everyone to drink three glasses of water a day? Maybe the Matrons of old should rule the roost? Doctors should/should not wear ties? What incentives system (perhaps fear of Matron?) will keep the wards clean and thus infections down? Hey, maybe it’s union shop stewards running everything, who the hell knows?

At the centre of Hayek’s whole approach to the world is the idea that you and I (and no central bureaucrat, politician or planner) could ever possibly either think up experiments to be tried nor evaluate them properly once they have been. For knowledge is local, it’s in the hands of the doctors and nurses and cleaning staff and cooks themselves.

So they must experiment, they must evaluate the results and they must then spread and adopt those that work and reject those (and the old ways) that don’t.

And it’s this very thing which markets encourage more than planned or centralised systems.

That’s why we want markets: so that the health care system will be made better.

49. Planeshift

“I’m also equally used to hearing the plan is flawed with no explanation”

I remember outlining my own objections to the process of competitive tendering a while back.

Which leads me onto this:

“my view is that anything that increases my choice is good ”

The proposals will not increase your own choice. What the proposals are that is that GP consortia will manage much of the NHS budget and commission services – which will have to be open to any bidder be it private, third or public sector. They will commission services in the same way a local authority puts refuse collection out to tender. Realistically you as a citizen will have no choice in who wins the contract – you’ll be sent to whoever wins the contract for back pain.

If lansley wants to go down the route of offering the consumer choice he is taking the wrong approach. This is more like the privatization of rail than that of telecoms.

50. Planeshift

“We really do want people experimenting with all sorts of things:”

They already do to some extent. Trials of different things take place in one area – if it works it gets spread. If patients are involved you do have to go through an ethics committee – but I don’t see anybody seriously suggesting we drop this requirement.

48
Tim, I’m talking about the new innovations in healthcare which are based on new technologies eg scanners and pharmaceuticals. They are researched and developed by private companies and are licensed, which I don’t think is unreasonable after putting thousands of pounds into said research. However, there is no competition, because only the licence or patent holder can manufacture the item. I would suggest that in the absence of this ‘protectionism’ many products that are around now would not be available to the masses.
As far as the service side of the NHS goes, I’m sure that improving practice does not need a market or competition to achieve that, just a matron who has an idea (as you point out) possibly an ‘ideas box’ on the wall.

Planeshift,

Perhaps you could give me some insight into why free market supporters tend to overlook some of the most basic and common sense principles of free market economics.

A (very brief) summary of the free market idea is that customers are able to choose between different providers, which gives providers an incentive to provide what the customers want and need. Providers which don’t respond to these market pressures will fail, and either reform themselves or go out of business, in which case new providers will spring up to take their place, and through this kind of attrition, the best possible providers succeed and are available to customers, and the worst fail. (This is ignoring a lot of details like price, etc., but gives the general idea)

Okay, that’s great, but it’s obviously based on quite a few assumptions. Namely:

Customer information/decision making: There will be no incentive for a provider to provide a good service if the customer lacks the information to choose between a good service and a bad one, or the expertise required to use that information.

Customer mobility: Even if a customer does have the right information and ability to make good decisions based on it, it’s of no use if they can’t actually follow through with that. This is a problem faced in many places in the US by people looking to get internet access, since many areas have only one operating ISP. It’s one reason that many people there are forced to still use dial-up: the lack of customer mobility means that there aren’t good enough incentives to provide DSL infrastructure.

Low barriers to market entry: A provider won’t face nearly as much pressure if it’s infeasible for new competitors to enter the market. This isn’t necessarily a deal-breaker, as existing providers can compete amongst themselves, but it does allow providers to settle into a kind of stable situation where there’s some possible efficiency to solve or problem to address which none of them have the incentive to do.

I believe there are others (such as provider mobility), but these tend to be the key ones when evaluating whether a service is best provided privately.

So how does healthcare fare?

Customer information/decision making: This isn’t entirely nonexistent. A customer can find out average waiting times for a given hospital, they can evaluate their own experience, and so on. At the high end of the scale, you get the situation in America where people travel from around the world to see particular doctors with a reputation of excellence. However, for a large portion of healthcare, the information customers have and their ability to make good decisions is rather poor. Again we can turn to America, where at least some of the healthcare system’s astronomical costs are due to a culture of over-testing, and prescription of new brand-name drugs over equally good off-brand alternatives. At the more extreme end we see alternative medicine like homoeopathy and acupuncture.

Healthcare has a particularly bad combination of being intensely personal and important to the customer, but very often requiring expertise that the vast majority of customers won’t have. These create perverse and counterproductive incentives, not towards efficiency and good healthcare, but towards the appearance of good healthcare. Yes, this might provide a nudge in the right direction for, say, waiting lists, or patient relations, but overall the impact on healthcare would be profoundly negative.

Customer mobility: Again, not nonexistent. Patients may have a choice between several GPs and hospitals. Or they may not. Obviously the aim of this “choice” drive is to increase the mobility of patients, so comparing to the current system isn’t completely fair. Mobility is always going to be a bit sluggish- you can’t just flit between courses of treatment and medication like you can supermarkets, nor is transferring to a new specialist or GP ever likely to be a speedy or efficient process. Overall, though, this aspect of mobility wouldn’t necessarily be too bad.

A more important point, though, is that healthcare choices are inherently less “mobile” because they are made so infrequently. A person may only make a handful of these choices in their lifetime, and each one may carry with it a huge amount of money (in hospital funding, or cost, or whatever). While a supermarket needs to ensure that somebody who does their first weekly shop there will do it another 500 times over the next decade to stay competitive, a hospital may only need to entice a customer in a few times. We see the effects of this looking at the ‘first time’ sweetners given by mobile phone service providers and banks, to draw in customers who either tend to, or are forced to (by contract) have low mobility. I’m not saying the same kind of thing would happen in a hospital, but again it gives a very perverse set of incentives.

Low barriers to market entry: Again, I assume that any attempt to introduce competition within healthcare would address this directly with grants or subsidies. Starting a hospital is by no means cheap, but probably well within the reach of business. So this one isn’t a major check against competition in healthcare, but it is a small one. I’m sure that realistically the time scales over which new hospitals springing up, or existing ones being bought and reformed, would happen would be extremely sluggish, slowing that whole attrition process down with it.

It also makes it less attractive to investors in marginal circumstances, so while, say, a restaurant may open on a highstreet which already has plenty, it’s unlikely that a hospital would do the same.

So the conclusion there is that healthcare isn’t suitable for the free market at all. Perhaps what I was addressing is a somewhat more extreme version of competition than you were thinking, (certainly it’s far more extreme than the government’s current plans), but it’s worth holding any plan to bring competition into a service up against those three points. You’ll find that universally, something which is well provided by the free market (food, clothes, shops, etc.) does at least pretty well, and that something which is badly provided by the free market (healthcare, military, roads, etc.) does badly. You can also find the direct consequences of each of these flaws in systems which attempt to bring the free market in anyway- for example the cumbersome, overpriced American system.

53. Charlieman

@51. steveb: “As far as the service side of the NHS goes, I’m sure that improving practice does not need a market or competition to achieve that, just a matron who has an idea (as you point out) possibly an ‘ideas box’ on the wall.”

The problems with a suggestion box or employee recommendations are that management regard many organisations as Systems. The System defines how all parts of the organisation work (private companies build Systems as often as the public sector), and recommendations are considered as tweaks to an almost perfect System. Management will tell you that the System is based on best practice, that operational practices are optimised and that customer satisfaction surveys suggest that all is well. PRINCE2 and ITIL will solve all of an organisation’s problems. SAP has worked out the best business flow for you already (indeed, for every organisation), and you should not worry your pretty head thinking about it.

This is complete bollocks, of course. Organisations are not Systems, but networks of people (mainly employees) doing things for one another. Within networks, people should be encouraged to run things themselves so long as they meet the quality standard for the users of their particular service. The role of management is to monitor the interfaces between those networks, to ensure that networks really are delivering quality products. And it is the job of middle management to manage the networks.

Once managers get away from the System idea, they can actually manage from the top. To identify where problems occur, managers only need to look at the interfaces of networks, and there is no need to analyse the entire System. Managers can even indulge in the old fashioned practice of walking around and talking to employees.


So when questions about quality of care in a privately managed versus publicly managed NHS arise, I shrug my shoulders. An NHS run by public employees seems just as bad as one run by health service consultants. Because they operate on the same System rules, the experience of customers will be similar, whoever is managing.

NB: When the NHS pop you into a private hospital for a minor op, you’ll probably be going to somewhere that has completely ignored health service consultants.

“Perhaps you could give me some insight into why free market supporters tend to overlook some of the most basic and common sense principles of free market economics.”

Err, we don’t.

At the heart, the root, o

53
The NHS, as you would expect, implements evidence-based practice, so I would expect private hospitals to do the same.
You also forget that clinical staff within the private sector have been trained by the NHS, or they have the equivalent training, so I would be surprised that any clinical intervention in a private hospital would be different from the NHS,
Possibly soft furnishings and furniture may be of a better quality and maybe the quality of food. Another important difference is that private hospitals haven’t paid towards the training of the doctors they employ, perhaps that’s why they can afford those things.

“Perhaps you could give me some insight into why free market supporters tend to overlook some of the most basic and common sense principles of free market economics.”

Er, we don’t. At the heart of it all is a simple observation.

Those places which seem to be free market seem to be richer.

That really is it. Less government seeems to lead to richer people

“Er, we don’t. At the heart of it all is a simple observation.

Those places which seem to be free market seem to be richer.

That really is it. Less government seeems to lead to richer people”

Except, for example, America’s healthcare system, which costs twice as much per capita as ours.

Actually, I don’t even know why I’m engaging with this comment, it’s so irrelevant. My post may have been a bit wordy, but quite simply it lays out criteria which are both common sense and basic economic theory as to why the free market may work better for some things than others. Obviously if you want to refute it you need to find examples where the criteria are not met, and yet the free market still works well. Referring to cases where the criteria are met and the free market works well is useless.

58. Charlieman

@55. steveb: “The NHS, as you would expect, implements evidence-based practice, so I would expect private hospitals to do the same.”

I suspect that you have misunderstood the points that I made @53. My apologies.

Employees rarely accomplish service change in organisations such as the NHS where a System overwhelms individual input and productivity. The system (the customer experience) is horrible because their legitimate requirements are beyond the System (a management construct).

Perhaps you have focussed too much on NHS clinical practice in your arguments. Face to face with a (really well qualified) doctor is a small part of patient/customer experience. The machines and the medicines are a small part.

Evidence-based practice *should* prevail, but that has nothing to do with who manages a service.

Steveb, I believe that Capita could run an NHS hospital in the same way as public servants. By the same managerial rules and just as badly

In the news on Friday night:

Hospitals must make deep cuts to survive
By Sally Gainsbury
Financial Times: June 3 2011 22:33 | Last updated: June 3 2011 22:33
http://www.ft.com/cms/s/0/6f497560-8e1a-11e0-bee5-00144feab49a.html#axzz1OFlrtUHJ

‘Tim Worstall

“Perhaps you could give me some insight into why free market supporters tend to overlook some of the most basic and common sense principles of free market economics.”

Er, we don’t. At the heart of it all is a simple observation.

Those places which seem to be free market seem to be richer.

That really is it. Less government seeems to lead to richer people’
E

Sorry…

Examples?

Examples?

The 20 th century provided us with that rarity in economics, a series of natural experiments.

Compare and contrast West and East Germany, North and South Korea. Eastern and Western Europe.

Need any more examples of freer markets producing greater economic wealth?

63. the a&e charge nurse

[62] “Compare and contrast West and East Germany, North and South Korea. Eastern and Western Europe” – then compare the difference in health cares standards between rich and poor once Lansley’s measures gather pace.

Great read here by the way debunking Lansley’s ignorance on health stats
http://www.bmj.com/content/342/bmj.d566.full

Please note (in 2008) France spent 29% more on health care than the NHS – yet today our Andy is proposing a 20% reduction in spend.

How on earth can we trust such people with something so fundamental to a civilised society?

“That’s why we want markets: so that the health care system will be made better”

No, the reason you (not “we”) want markets is because you and your pals stand to make lots of money from them. This idea that markets will improve the health service isn’t actually supported by any real evidence. Is it?

But you don’t live in this country. Do you?

“Need any more examples of freer markets producing greater economic wealth”?

So who possesses this wealth? The average bloke in the street? No. The ‘wealth’ is concentrated in a small number of hands and that will continue to be the case under a so-called free market system.

@62
Basically you are talking about east and west Europe and the cold war.
West Europe received millions of pounds under the Marshall Plan after ww2 not so Eastern Europe, who, arguably, suffered greater devastation.
The post-war settlement of the UK was a massive excercise in state planning.
The USSR also inheritted an area that was little more than a feudal system in 1917.
Are there any newly developed or developing countries who did not start their industrial life without central state-planning, very few I would guess.

“That really is it. Less government seeems to lead to richer people”

Poppycock. Where’s your evidence?

TW’s use of the phrase “seem to be” is rather revealing.

Quote:

Denmark is confirmed as the OECD’s highest-tax country, followed by Sweden, while Mexico and Turkey remain the lowest-taxing countries, according to figures in the latest edition of the OECD’s annual Revenue Statistics publication.
http://www.world.xorte.com/0,6,Denmark-Sweden-Still-the-Highest-Tax-OECD-Countries,7044.html

By other reports, Denmark is also the ‘happiest place on earth’:
http://news.bbc.co.uk/1/hi/5224306.stm

But then it is one of the most affluent countries in the EU.

the idea of a market in the nhs leading to more innovation and efficiency is an interesting one, but also begs the question; “what do private companies do when they face financial difficulties?”

-improve efficiency (good)
-reduce quality of service (bad)
-lay off employees (bad)
-receive gov. bailouts (who knows?)

how can one ensure that the only measure introduced by this “market” system is improved efficiency? will jobs not be lost, decisions for patients be made based on cost not benefit for the patient, and money be spent by the taxpayer anyway? surely there is some alternative to turning the nhs into just another brand name?

“That really is it. Less government seeems to lead to richer people”

read: leads to richer rich and poorer poor.
if thats what you want, the end of the 19th century was such a lovely time for you and me, lets go back to then.

sorry for the sarcasm

To all who spouting the benefits of a ‘Market’ system, please consider this.

Of the privatisations by the previous Tory government, how many have actually worked to create competition.

1, Electricity – Failed, there is competition at the point of purchase but the providers still dictate the cost of our energy creating a controlled market where prices have risen and risen to satisfy shareholders demands for profit with little consideration for the consumer.

2, Gas. Failed, as above.

3, BT, Failed, despite more recent providers such as TalkTalk, BT still charges line rental and dictates the cost of calls to consumers, the alternative being Virgin Media which isn’t the market leader and isn’t available everywhere so BT still controls the price. Any improvements have come from the meteoric rise in mobile phone usage rather than from BT being privatised.

British Rail, Failed, There is no competition in the vast majority of cases creating a rail system dominated by the needs of Network Rail and the fees they charge. This is probably the most likely outcome of any privatisation as NHS ‘consumers’ needs would be generally local as most people would use their nearest hospital.

Markets do not work in public service because shareholders are always put before the customer as the above clearly demonstrates.

72. Richard W

What system exists or has ever existed where providers did not dictate the cost of our energy? You could declare any market a failure if you are going to say providers setting prices is failure. The key thing for prices is whether consumers can go elsewhere. If they can’t go elsewhere then private monopolies will rip them off and so will public monopolies.

Some numbers for the real price of electricity up to 2005
http://www.psiru.org/reports/2002-08-E-UKImpactPriv.doc

Moreover, you can’t judge the success or failure on subjective personal prejudice. How do UK prices compare to other countries in Western Europe, and where are they in relation to Europe compared to where they were compared to Europe before privatisation is the comparison. The natural gas price is closely related to the oil price so what is happening with oil prices will determine what happens to gas bills.

73. ron chester

this fits the Adam Smith Institute model exactly..ie NHS becomes no more than funder not a provider…it wouldnt suprise me before long it would be made compulsory for patients to use private hospitals..that way they could close NHS hospitals down…its also a good way to channel tax payers money to their backers too…amazing – blame benefit scroungers for wasting tax payer money whilst redirecting tax payers money to the private sector…

Tim worstall

“”What we need to do is make policy based on the work of an 89 year old economist and ignore all the other literature and research on health economics that has developed over the past 30 years.”

We do seem to have people insisting that we should borrow to spend as Keynes would have had it. You know, an economist who has actually been dead these 65 years?

And yes, Baumol really is the guy here.

First, the NHS (like any other service) is caught in Baumol’s Cost Disease. It will, inevitably, become more expensive over time. Unless, except, if we can increase labour productivity in it faster than labour costs rise.

And what is our best chance of increasing labour productivity? Innovation: which happens best in a market based (again, note, this does not mean private insurance, does not mean capitalist, does not mean health savings accounts or rationing, just a multiplicity of competing suppliers) system.

As I say, Baumol really is the economist here.

http://www.voxeu.org/index.php?q=node/5428

“In recent research along with Rodrigo Moreno-Serra (Gaynor et al. 2010), we look at all admissions to hospitals in the National Health Service – around 13 million admissions – pre- and post-policy. We find that hospitals located in areas where patients have more choice are of a higher clinical quality – as measured by lower death rates following admissions – and their patients stay in hospital for shorter periods compared with hospitals located in less competitive areas. What’s more, the hospitals in competitive markets have achieved this without increasing total operating costs or shedding staff. These findings suggest that the policy of choice and competition in healthcare can have benefits – quality in English hospitals in areas in which more competition is possible has risen without a commensurate increase in costs.”

Oh my, look at that! It works in practice as well as in theory!”

Firstly, your comment about the costs of the NHS rising, I’m not sure in why context you are measuring cost? This really is the relevant point. Cost is not an issue unless there is inadequate resources. This fantastical idea that healthcare costs should remain static as inflation rises and the population grows is quite mad and hopelessly unrealistic. We need to get used to the idea that if we want decent healthcare that will incur costs – the issue is only who will pay, the patient or the state.

Secondly, I am aware of the research indicating the “benefit” of competition but there are significant downsides not least the closure of local hospitals which cannot compete with regional specialist centres and the loss of none competitive (but still necessary if not to the state at least to the patient who is being denied care). This is exactly why and how systems like choose and book are eroding the founding principles of the NHS. It is all well and good having a specialist centre that most people feel happier with if you are not one of the (often most vulnerable and needy) patients that is entirely denied treatment because of geography and poor public transport and is therefore never measured by statistics because they never get to hospital. Choice and competition are great for about a year, until all the uncompetitive services are shut down and replaced by private providers. You are a fool if you think this is the answer to the perceived (and largely fantastical) problems with innovation in the NHS.

75. Richard W

The problem I have with the right and their obsession with the NHS is they never demonstrate that our level of costs as a share of GDP are higher than comparable nations. Furthermore, are our rate of change in healthcare costs rising faster than elsewhere? Just saying costs are rising tell us nothing if they are also rising everywhere else. I can understand their ideological objection to the NHS and their reluctance to be less than frank. Reforms to make it a better system are fine. However, to frame it in terms of innovations to reduce costs are unlikely to yield positive results when the NHS model appears to have been quite successful in containing costs.
http://www.casact.org/pubs/forum/11spforum/Lieberthal.pdf

Healthcare costs devoted to the elderly will inevitably rise in an ageing society and that will happen under any model. Containing the real rate of change in costs to around the real rate of productivity in the economy will keep healthcare cost levels sustainable. However, doing that will mean as we spend more on the elderly we spend less on everyone else. Moreover, it is often said that healthcare inflation outpaces general inflation. However, it is not altogether clear whether inflation is the right way to think about changes in healthcare costs. For example, a medical innovation that makes an improvement in treatment and also costs more than the previous cost. Is that healthcare price inflation or just a better treatment? It might lead to higher headline costs for the NHS, however, how do we account for it if the person is discharged from hospital earlier and is back at work quicker? That saving will not appear in the NHS budget.

The absolute best way to contain the level of healthcare costs and the rate of change is for people to not get unhealthy in the first place. If the public stopped stuffing their face would do more to contain healthcare costs than almost anything.
http://gregmankiw.blogspot.com/2009/08/obesity-and-healthcare-costs.html

“This fantastical idea that healthcare costs should remain static as inflation rises and the population grows is quite mad and hopelessly unrealistic.”

“The problem I have with the right and their obsession with the NHS is they never demonstrate that our level of costs as a share of GDP are higher than comparable nations. Furthermore, are our rate of change in healthcare costs rising faster than elsewhere?”

That’s not what is actually being said. Rather, that health care costs have a higher inflation rate *for the same output* than the economy in general.

This is *after* we take account of the following: an ageing population, advances in health care and even the fact that health care is a luxury good (no, it’s a technical term, meaning that as we beome richer in general we desire to spend more of our incomes on health care. Part of the heirarchy of goods, sleep, water, food, sex……as we get the basics sorted out, food, clothing, housing, then we actively want to spend more of our newly increased wealth on health care. We would expect richer countries to spend more on health care for this reason alone).

The reason is given above, Baumol’s Cost Disease. Average wages in an economy are determined by average productivity in that economy. It is easier to increase labour productivity in manufactures than it is in services. Thus services will become more expensive relative to manufactures as the average productivity rises.

Inflation in services will be higher than inflation in manufactures. This is true of health care, education, whatever. Inflation in services will be higher than inflation in hte economy in general…..for the obvious reason that the general inflation rate is the average of that in services and manufactures.

And as that noted economist, Polly Toynbee, has noted the NHS has its own inflation rate. About 4%.

Given that this is built into the fact that it’s a service, a highly labour intensive service, ( this is entirely separate from how it is organised or paid for), then the only possible solution to it is to try an increase labour productivity in the health service. Which can only be done by innovation. What organisational method increases innovation? A market one…..

That’s the argument.

77. Richard W

I understand the BCD argument, Tim. I am just a bit sceptical that there are large savings in terms of containing the rate of increase in costs, which is really what we are speaking about rather than actually reducing the level of spending. As you say yourself, healthcare is inherently labour intensive and that will always prevent healthcare from making large productivity gains. There is no doubt that the NHS could deliver a better service and be better organised and that is how the argument for reforms should be framed rather than in terms of cost savings. In terms of innovation, yes that would obviously improve productivity. However, that needs to be innovation from the bottom-up as top-down so-called innovation will not work.

“I am just a bit sceptical that there are large savings in terms of containing the rate of increase in costs, which is really what we are speaking about rather than actually reducing the level of spending. As you say yourself, healthcare is inherently labour intensive and that will always prevent healthcare from making large productivity gains.”

“Always” is too strong there. Take one trivial example. Used to be that the cure for a headache was a bed and a nurse. That’s expensive. Now it’s 5 p worth of aspirin.

Appendicitis needed open bowel surgery. Days, weeks even, in a hospital bed. Now keyhole surgery, in and out in 48 hours (? 24?).

It is indeed very difficult to increase the productivity of labour in services: but it is possible to mechanise some/parts/bits of it. Which is just another name for increasing the productivity of labour in services.

Just think how much banking would cost if we hadn’t replaced counter clerks with ATMs?

“In terms of innovation, yes that would obviously improve productivity. However, that needs to be innovation from the bottom-up as top-down so-called innovation will not work.”

Which is precisely what markets enable better than command and control systems.

76
Because there are problems with bureaucratic management, it does not mean that markets are required in order to foster innovation.
I’ve already mentioned the protectionism surrounding most new innovations, and the purchase of those products is where a large amount of the NHS budget is spent. But purchasing such products is not the end of it, there are high costs imposed for training and the conditions of use involving a high degree of monitoring.
Due to the enormous number of ‘customers’ requiring healthcare, rationally, the only way that private companies are likely to address this to make any kind of profit would be because of economies of scale, in itself, it would require a bureaucratic system. Alternatively, it can be split into much smaller parts, but then this would increase the overall number of service staff required.
Another point, which is rarely mentioned when looking at costs within the NHS, is the massive number of volunteers working in the service, and the large number of excess hours that existing staff work for nothing. I doubt if that exists in private comanies.
@58
Yes, the light’s gone on, I slightly misinterpreted your argument.

“Because there are problems with bureaucratic management, it does not mean that markets are required in order to foster innovation.”

I’ve not said that markets are required.

Only that markets are better at it.

To take the extreme. Total factor productivity (ie, productivity of all inputs, not just labour). There’s serious doubt as to whether the Soviet Union managed to increase tfp at all, from 1917 all the way through to 1991 (this information comes from Paul Krugman, so it’s not just some righty talking point). All the economic growth they did have came from increasing inputs, none at all from raising the productivity with which those inputs were used.

At the same time, 80% of the 20 th century growth in the “west” came from increases in tfp, not increases in inputs (Bob Solow, another Nobel Laureate, quoted by Krugman).

Now, OK, entirely willing to agree that markets are not “required”, only that they do seem to be better at doing what we want to achieve. Which is to get more outputs for fewer inputs. Which is the same thing as saying “raise productivity”.

81. Richard W

It is getting a bit off subject, but Tim is quite right that you do not need markets to invent stuff. However, it is not the inventors who improve our lives, and that is why very few of them capture the full commercial value of their invention. The innovators who take the invention or new knowledge and find useful ways to apply it are the real stars and they get the reward. Discovery and invention of new knowledge or technology is quite different to innovation. Government agencies like defence and Nasa etc have always been good at inventing stuff and developing new technologies in their infancy. However, they are not innovators for the wider population. Markets do the innovation best by the price mechanism telling the innovators to discard what does not work. The Soviet Union with highly trained scientists was perfectly capable of inventing stuff. However, without a price mechanism how could they ever have known what worked for the masses.

http://www.thespaceplace.com/nasa/spinoffs.html

82. Planeshift

Oh dear oh dear.

“Compare and contrast West and East Germany, North and South Korea. Eastern and Western Europe.”

Compare and contrast post Siad Barre Somalia with its neighbouring countries, the DRC post 1996 with countries like Tanzania, or pre and post Taliban Afghanistan with Pakistan or Iran.

In these cases has ‘less government’ created richer people?

How much longer are you going to shift this childish sub-undergraduate drivel. Wealthy countries are all mixed economies with differing levels of government involvement. They all have markets, and they all have governments. You need both. (and also a nice stable history in which frequent civil wars do not occur).

Still doesn’t detract from the fact Lansley’s reforms won’t create choice for the consumer. A point repeatedly missed above.

83. Pete Lee

”It’s cost is not something the nation can keep up with forever, as it is increasing faster than both GDP growth and inflation,”

This old chestnut needs to be challenged.

First the NHS is relatively cost effective internationally

Second, the reason why costs have gone up is due to the idiotic reforms of the internal market in the late 80s. Labour should have returned to the pre internal market and that would have reduced costs.

Managing the internal market is expensive due to excessive profiteering from the private suppliers and constant monitoring.

I was disappointed with Blair and his failure to roll back privatisation in the NHS. Now the Tories want to do it full steam ahead, but just lie they aren’t.


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    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/j97E2i

  18. James Iain McKay

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/j97E2i

  19. Steve Rudland

    “@libcon: Revealed: the pamphlet underpinning Tory plans to privatise the #NHS http://t.co/h5wCLZu” no surprises here

  20. Robert Frost

    REVEALED: today, we publish the pamphlet that underpins Tory plans to privatise the NHS http://bit.ly/j97E2i

  21. Emrys Schoemaker

    “@sunny_hundal: REVEALED: today, we publish the pamphlet that underpins #Tory plans to privatise the #NHS http://bit.ly/j97E2i”

  22. UNISON NHFT BRANCH

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/j97E2i

  23. paurina

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/j97E2i

  24. Sally

    REVEALED: today, we publish the pamphlet that underpins Tory plans to privatise the NHS http://bit.ly/j97E2i

  25. Rep in the Region

    REVEALED: today, we publish the pamphlet that underpins Tory plans to privatise the NHS http://bit.ly/j97E2i

  26. Aaron Chandra

    REVEALED: today, we publish the pamphlet that underpins Tory plans to privatise the NHS http://bit.ly/j97E2i

  27. Tony Braisby

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS | Liberal Conspiracy http://t.co/daGVRll via @libcon << Hmmmmm

  28. UNISON Health

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://fb.me/HktLqG49

  29. Andy Gibson

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/j97E2i

  30. Oliver Kearns

    In 1988 2 Tories (1 now Minister of State) wrote a pamphlet on 'radical reform of the NHS'. Insight into today's plans? http://t.co/FCID80a

  31. Andy Cobley

    RT @libcon: Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/j97E2i (@girlgeeks for info)

  32. Paul Rooke

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS | Liberal Conspiracy http://t.co/7K5ZYsL via @libcon #saveOURnhs

  33. Paul Rooke

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS | Liberal Conspiracy http://t.co/7K5ZYsL via @libcon #saveOURnhs

  34. sunny hundal

    Our top story today: We publish a little-noticed pamphlet from 1982 that underpins Tory plans to privatise the NHS http://bit.ly/j97E2i

  35. ANDREW JENNINGS

    Our top story today: We publish a little-noticed pamphlet from 1982 that underpins Tory plans to privatise the NHS http://bit.ly/j97E2i

  36. Ross Pollard

    Our top story today: We publish a little-noticed pamphlet from 1982 that underpins Tory plans to privatise the NHS http://bit.ly/j97E2i

  37. Natacha Kennedy

    Our top story today: We publish a little-noticed pamphlet from 1982 that underpins Tory plans to privatise the NHS http://bit.ly/j97E2i

  38. Dave McDave

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/j97E2i

  39. Gemma Tumelty

    Wow, comparasons between Letwin and Redwood's 1988 vision for the NHS and Lansley's 2011 bill. Very interesting http://tinyurl.com/6yb3ca3

  40. criticalpraxis

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/j97E2i

  41. Hannah M

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS | Liberal Conspiracy http://t.co/330Bfzk via @libcon

  42. John O'Dwyer

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS | Liberal Conspiracy http://t.co/330Bfzk via @libcon

  43. sunny hundal

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS | Liberal Conspiracy http://t.co/330Bfzk via @libcon

  44. Ben Leto

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS | Liberal Conspiracy http://t.co/330Bfzk via @libcon

  45. Alex Andreou

    Shocking! In a George-Michael-coming-out, BGT-is-fixed way – Revealed: Tory plans to privatise the NHS http://bit.ly/j3cuso (via @libcon)

  46. Eric Watts

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS | Liberal Conspiracy http://t.co/330Bfzk via @libcon

  47. fauxpaschick

    Our top story today: We publish a little-noticed pamphlet from 1982 that underpins Tory plans to privatise the NHS http://bit.ly/j97E2i

  48. Political Scrapbook

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  49. Ziggy Stardust

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  50. shugyokem

    No surprises: Lansley implementing 4 out of 5 plans Thatcherite Redwood called for in 1988 http://bit.ly/jdjIEs @Save_Our_NHS via @psbook

  51. Nick Hider

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  52. Matt Jeffs

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  53. Matt Jeffs

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  54. sunny hundal

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  55. sunny hundal

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  56. Finola Robinson

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  57. David Walmsley

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  58. jamie

    “@psbook: Andrew Lansley implementing 4 plans Thatcherite John Redwood called for in 1988 http://t.co/CJFG5Cl (from @libcon)” @danwellings

  59. Spir.Sotiropoulou

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  60. Worried John Redwood disowns his own NHS pamphlet! | Liberal Conspiracy

    […] morning I published a pamphlet that John Redwood and Oliver Letwin had written for the CPS think-tank in 1982 on how the NHS could […]

  61. Watching You

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  62. Andy S

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  63. Peter Underwood

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  64. Grahame Morris

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  65. Matt Tancock

    REVEALED: today, we publish the pamphlet that underpins Tory plans to privatise the NHS http://bit.ly/j97E2i

  66. Simon Godefroy

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  67. John Gillibrand

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  68. DarkestAngel

    Brilliant exclusive at @libcon – how a Conservative pamphlet from 1998 reveals the Tories' true NHS agenda: http://bit.ly/igjzAn

  69. Anon Y Mous

    Brilliant exclusive at @libcon – how a Conservative pamphlet from 1998 reveals the Tories' true NHS agenda: http://bit.ly/igjzAn

  70. Nissemus

    Brilliant exclusive at @libcon – how a Conservative pamphlet from 1998 reveals the Tories' true NHS agenda: http://bit.ly/igjzAn

  71. JamieSW

    Brilliant exclusive at @libcon – how a Conservative pamphlet from 1998 reveals the Tories' true NHS agenda: http://bit.ly/igjzAn

  72. Bethan Tichborne

    Brilliant exclusive at @libcon – how a Conservative pamphlet from 1998 reveals the Tories' true NHS agenda: http://bit.ly/igjzAn

  73. kevinrye

    Brilliant exclusive at @libcon – how a Conservative pamphlet from 1998 reveals the Tories' true NHS agenda: http://bit.ly/igjzAn

  74. chickpea jones

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  75. QOFE

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  76. Máire McSorley

    This pamphlet is an interesting and useful if not surprising find. True colours. http://tinyurl.com/6yb3ca3

  77. Gary spolander

    Brilliant exclusive at @libcon – how a Conservative pamphlet from 1998 reveals the Tories' true NHS agenda: http://bit.ly/igjzAn

  78. Favstar Pop

    Brilliant exclusive at @libcon – how a Conservative pamphlet from 1998 reveals the Tories' true NHS agenda: http://bit.ly/igjzAn

  79. Broken OfBritain

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  80. Lady Karla

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  81. J P

    RT @BrokenOfBritain: RT @psbook: Andrew Lansley is implementing 4/ 5 plans Thatcherite John Redwood called for, 1988 http://bit.ly/jdjIEs

  82. Alan Thomas

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  83. BDB

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS | Liberal Conspiracy http://t.co/330Bfzk via @libcon

  84. Underthebed

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  85. John Farrar

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  86. simon trott

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  87. David Poole

    Andrew Lansley is implementing 4 out of 5 plans Thatcherite John Redwood called for in 1988 http://bit.ly/jdjIEs (from @libcon)

  88. ‘Shameful’ anti-reform Lib Dem peers, the slowest recovery for 180 years, and is the Labour shadow cabinet half asleep?: round up of political blogs for 28 May – 3 June | British Politics and Policy at LSE

    […] Sunny Hundal at Liberal Conspiracy reveals the pamphlet underpinning Conservative plans to privatise the NHS. […]

  89. NobodyLikesATory

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://fb.me/LnpWKEUS

  90. Clive Burgess

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS | Liberal Conspiracy http://t.co/X41Xe6P via @libcon

  91. Plymouth City UNISON

    @sunny_hundal: Want to know Tories ambitions 4 the #NHS http://bit.ly/j97E2i #privatisation

  92. Mike

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS | Liberal Conspiracy http://t.co/330Bfzk via @libcon

  93. philip lewis

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS | Liberal Conspiracy http://t.co/bvQJTzv via @libcon

  94. Shez

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/igjzAn by Letwin and Redwood 1988 #saveournhs

  95. DarkestAngel

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/igjzAn by Letwin and Redwood 1988 #saveournhs

  96. Liam McKee

    RT@Shezzle0: Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/igjzAn by Letwin and Redwood 1988 #saveournhs

  97. Abbas Premji

    RT@Shezzle0: Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/igjzAn by Letwin and Redwood 1988 #saveournhs

  98. Matt

    RT@Shezzle0: Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/igjzAn by Letwin and Redwood 1988 #saveournhs

  99. Clive Burgess

    Brilliant exclusive at @libcon – how a Conservative pamphlet from 1998 reveals the Tories' true NHS agenda: http://bit.ly/igjzAn

  100. James Goodhew

    RT @libcon: Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://t.co/R1aiAgV

  101. meme

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/j97E2i

  102. Revealed - The Tory Plan to Privatise the NHS

    […] Read the complete report on Liberal Conspiracy VN:F [1.9.8_1114]please wait…Rating: 0.0/10 (0 votes cast)VN:F [1.9.8_1114]Rating: 0 (from 0 votes) Bookmark the permalink. ← They don’t give ATOS! Despite all the disablist prejudice, I’m fighting on | Jody McIntyre → Comments […]

  103. Daniel Pitt

    The pamphlet underpinning Tory plans to privatise the NHS http://t.co/a5FHGN9 #ConDemNation #saveourNHS

  104. Shez

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/igjzAn by Letwin and Redwood 1988 #saveournhs

  105. Roberto Castro Ruz

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/igjzAn by Letwin and Redwood 1988 #saveournhs

  106. Mark Martin

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://bit.ly/igjzAn by Letwin and Redwood 1988 #saveournhs

  107. Mags W

    RT @Shezzle0: Revealed: the pamphlet underpinning Tory plans to privatise #NHS http://bit.ly/igjzAn by Letwin and Redwood 1988 #saveournhs

  108. Karen Webb

    RT @Shezzle0: Revealed: the pamphlet underpinning Tory plans to privatise #NHS http://bit.ly/igjzAn by Letwin and Redwood 1988 #saveournhs

  109. debbie dolan

    RT @Shezzle0: Revealed: the pamphlet underpinning Tory plans to privatise #NHS http://bit.ly/igjzAn by Letwin and Redwood 1988 #saveournhs

  110. Mags W

    RT @Shezzle0: Revealed: the pamphlet underpinning Tory plans to privatise #NHS http://bit.ly/igjzAn by Letwin & Redwood 1988 #saveournhs

  111. NHS: still on the road to privatisation | openDemocracy

    […] 1)    Establishment of the NHS as an independent trust. 2) Increased use of joint ventures between the NHS and private sector 3) Extending the principle of charging 4) A system of ‘health credits’. 5) A national health insurance scheme. [xviii] […]

  112. Pamela Heywood

    Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://t.co/661MobK

  113. Sam Liu

    In light of Cameron's recent comments & the take-over of Hinchingbrooke, it is worth re-posting this: http://t.co/m6ch18rt

  114. A few more notes on my ‘Tory days of Christmas’ « mikesivier

    […] Revealed: the pamphlet underpinning Tory plans to privatise the NHS […]

  115. corn flake

    Check point 10 #healthreforms; http://t.co/ogvV75lk. From personal budgets to health insurance in 1 easy move http://t.co/o3FVMZO0

  116. John Hully

    A reminder about origins of #NHSBill http://t.co/EizcZZhF Letwin and Redwood's paper for RW thinktank blogged by @sunny_hundal

  117. NORBET

    RT @libcon: Revealed: the pamphlet underpinning Tory plans to privatise the NHS http://t.co/y6y1hi1y





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