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Missing An Open Goal – Scotland’s Politicians Must Wake Up To The Opportunity Of Public Service Reform 28/06/2004

Battle has begun. But it is one of those strange fights where both sides agree with one another, but cannot admit it because of their mutual antipathy. Michael Howard and Tony Blair are at it hammer and tongs on the issue of healthcare in England. Their policies are remarkably similar, and reflect a refreshing new consensus south of the border about how public services should be provided. Only the Liberal Democrats, bizarrely, stay wedded to the past. Should they consider a name change? Illiberal Bureaucrats might better reflect their position on this issue. By contrast, Labour and the Conservatives both think that consumers of health (and education) should be able to choose their provider. This will force providers to compete for custom, driving up standards.

For that to work, providers must be freed from state control so that they can adapt to the new market conditions. Hence ‘foundation hospitals’ and the privately run ‘diagnostic and treatment centres’ (DTCs). The only difference between the two big parties’ policies is that the Tories want to extend choice a little faster, and to include existing private hospitals in the new system. This distinction will blur as reforms are implemented – after all, DTCs are private hospitals in all but name, run by BUPA and others.

Both parties are making seemingly extravagant claims about reducing waiting lists. John Reid’s 5 year plan aims at 18 week maximum waiting times, and the Tories hope to abolish them altogether. They are right to be so ambitious. In a competitive health market, waiting becomes a thing of the past. We know this, because these policies are hardly new – in fact they are tried and tested. Most continental countries introduced them decades ago. Nobody waits for operations in France or Sweden. And trials in London have shown how competition galvanises hospitals into improving processes. Waiting times wither away.

These reforms are simple, uncontroversial, equitable and effective. The only surprise is that it has taken the English so long to implement them. Sadly, what is less surprising is that in Scotland this debate has not even begun. We are stuck, alone in the world, with the disaster of a state-run monopoly provider of health. As a result waiting times are high and outcomes are poor. This is despite massive spending on health in this country – some 19% higher than in England.

The evidence is there for all to see. A recent book published by the David Hume Institute is called “England vs Scotland - Does More Money Mean Better Health?” It shows how this higher spending is being wasted, despite greater resources in terms of resources like doctors (25% more than in England) and acute beds (60% more). Poor lifestyle choices play a part in poor health outcomes in Scotland, but it by no means explains the worrying gap between spending (at 6.4% of GDP, nearly the EU average) and results (near the bottom of the league). It concludes by recommending a French-style social insurance system for healthcare. Reforming the way health is financed, as well as how it is provided, would allow a more sophisticated market in which competition on price helped to drive down costs. But while we should aim for something like this in the long term, it would be complicated and controversial to implement. However, many of the gains from choice and competition can be realised rapidly within a state-funded system. The Policy Institute published a paper by Professor Nick Bosanquet last year which shows how this can be done (and indeed has been done in Denmark and Sweden), bringing swift benefits to Scots who need fast and efficient healthcare.

The same principles can be applied to education, and in England the debate will shortly focus on how to introduce choice and diversity there as well. Again, Scotland lags behind our neighbour and the rest of Europe. The shame is that reforming public services does not just benefit patients and schoolchildren. It benefits the whole economy, as Professor Nicholas Crafts explained in his recent lecture to the Fraser of Allander Institute. The Health and Education sectors make up more than 10% of our GDP. Exposing schools and hospitals to competition would result in massive and rapid productivity improvements in both sectors – boosting growth across the board. Something like this happened when we introduced competition into the telecoms, electricity and gas markets (though sadly not water). Costs fell by between 2.5% and 4% annually, and quality rose, bringing benefits to all of us which would be vastly magnified if public services were given the same treatment.

The open goal is there, and it’s just a question of blasting the ball into the net.

Tom Miers is Executive Director of the Policy Institute, a Scottish think tank. “A Healthy Future For Scotland” by Professor Nick Bosanquet is available on www.policyinstitute.info . “England vs Scotland” by Benedict Irvine and Ian Ginsberg can be found on www.davidhumeinstitute.com, while the Professor Nicholas Crafts lecture is on www.fraser.strath.ac.uk/Allander/.
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