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Private is Better Than Public

by David G. Green
Published in the Guardian, 6 July 2001.

At the time of its July 2000 national plan Mr Milburn declared his intention of transforming the NHS into a ‘modern, 21st-century, consumer-focused service’. But, he said, it will be ‘a personalised service, not a privatised one’. In other words he intends to provide a consumer-driven service by means of a public sector monopoly, hitherto understood to be the exact opposite of a consumer-led system. The latest announcements about the role of the private sector confirm the contradictions at the heart of policy making.

A misguided contrast between public and private lies behind the Government’s strategy. The real issue is monopoly versus competition. Three intellectual confusions explain their mistake.

First, the Government associates ‘private’ activity with self-interest and ‘public’ activity with altruism. It has not recognised that self-interest is a universal element in the human condition and that putting a service in the public sector does not eradicate it. A glance at the activities of public sector trade unions is surely ample testimony to this enduring truth. Moreover, the Government has not understood why private activity is preferable to public. It is not that self-interest is a better motivator than altruism but that in the private (that is, non-government) sector goals are self-chosen not centrally-chosen. Whether individuals choose to serve their own narrow private interest or the common good is a moral choice which may go either way. This moral choice is not avoided by putting services into the public sector. The same conflict between our own interests and the interests of others exists in both the government and the non-government sectors. And this is why competition is important. Whether public or private, consumers should be able to escape bad service. If they are unable to escape, producers are more likely to slip into self-serving habits.

It is also why professionalism is important. In the provision of personal services like health care there is a potential danger that experts will take advantage. The oversight of colleagues is an important safeguard and the reinforcement of their efforts by competition is indispensable. It is true that professional codes of ethics have often been a disguise for trade unionism, but the professional ethos acknowledges that there is a potential conflict of interests between the client and the professional and encourages the professional to put his interests second. Reform of a personal service like health care should seek to reinforce this ethos and this is where the NHS model differs crucially from many other European countries. One of the fundamental precepts of French health care, for example, has always been that patients must have complete freedom to choose their own doctor. Doctors organisations in France also accept that choice reinforces their professional ethos of service. Competition is not seen as the enemy of high standards but the essential guarantor. The BMA should take note and so too should Mr Blair, who seems to think that professionalism is one of the ‘forces of conservatism’ on which he has declared war.

The second confusion is the result of the tendency to regard the market as a system of incentives not a realm of moral choice. The Government intends to use the private sector in a technical capacity to ‘deliver on’ (in the jargon of the moment) its objectives. Instead, the Government should look upon private providers as ‘explorers’ who will discover new and better ways of serving customers. To fulfil that role they must be freed from political control and permitted to experiment and to learn from the experience of other pioneers.

Mr Milburn is emphasising that there will be contestability within the NHS. Whitehall will decide which hospitals are doing well and reward their managers with additional responsibility for badly performing hospitals. Whitehall will also use the private sector when necessary, but only as a sub-contractor. The NHS will continue to be a centrally planned bureaucracy. The private sector and internal contestability are nothing more than the management tools of central managers to incentivise local managers. The Government is going through the same thought processes as the Soviet Union before it finally collapsed. Its leaders recognised that central plans did not work and they tried to ‘cherry pick’ management techniques from capitalism. The NHS continues to be based on the soviet model which sought to manipulate producers to meet the central targets, not a free enterprise model which liberates producers to explore new and better ways of serving patients.

To achieve this aim the Government should seek to de-politicise the NHS. It is in this sense of de-politicisation that privatisation is a good thing in itself. It allows the objectives of producers of goods and services to be self-chosen not politically-chosen. It does not guarantee that they will all choose reasonable objectives. Railtrack has surely taught us that. Public policy should aim to privatise under conditions of competition. Competition does not only allow consumers to escape bad service, it also encourages a process of emulation. Doctors or hospitals who evolve higher standards or better methods of care can quickly be emulated by others.

There is a third confusion which has led the Government astray. It tends to associate private activity with for-profit companies. In many walks of life and especially health care, however, the favoured method is the non-profit organisation. In America, for instance, over three-quarters of hospitals are local non-profit institutions.

The Government should reform the NHS with a wider social objective in mind: to renew the social fabric by creating institutions which can serve as a focal point for community spirit. The local hospital is the perfect outlet for community service, but Labour thinking continues to be dominated by dirigiste thinking. We now need to rebuild the social fabric and here there is a link with reform of the public services. We should not just assert the importance of competition and consumer choice as means of improving health and education; we should also emphasise the importance of non-government schools and hospitals as outlets for public service.

Privatisation is desirable because it transfers services from the realm of political choice, where decisions are too easily corrupted by the interests of one party, to the realm of moral choice, where the battle between individual interests and the common good is likely to be won by selfishness without the aid of competition. Ironically, the Government’s policy of strengthening competition law recognises this truth for most of the economy, but it has yet to see that the French, Germans and many other Europeans were right when they recognised that it also applies to health care. It is not so much the NHS, but the Government’s thinking which is in need of some modernisation.

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