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Why Labour MPs Must Back Reform

Published in Observer Comment Extra, 4 May 2003

Should NHS hospitals be ‘hospital trusts’ or ‘foundation hospitals’? To many onlookers this choice seems rather technical, but for many Labour MPs it has become the acid test of Labour loyalty, not unlike earlier disputes over Clause IV of Labour’s constitution, which called for the nationalisation of the commanding heights of the economy.

It was difficult enough for many Labour MPs to accept that, in the organisation of industry and commerce, market-liberal principles worked better than state collectivism. But, to be told that market-liberalism also works better in health care is going too far. Yet, this reality has long been accepted by socialists and social democrats elsewhere in Europe. In France about one-third of hospital beds are private and in Germany about half, but in both those countries the poorest people have access to a higher standard of care than in the UK.

But the Labour MPs who sense that foundation hospitals are a vital turning point are right. It is not an arcane dispute about theories of hospital administration, but a struggle between two very different views of the world: let’s call them ‘liberal socialism’ and ‘mechanical socialism’.

Both approaches share the belief that no one should be denied health care because they lack the money to pay. Mechanical socialists are convinced that this must be accomplished by public ownership of hospitals, whose aim is equal care throughout the country. Liberal socialists are equally committed to the ideal of access for all, but regard state ownership of hospitals as only one among several methods of achieving it. If another one works better, as experience in France and Germany shows, they discard the old one. Essentially liberal socialists put ideals first, and look upon means as mere techniques for achieving them; mechanical socialists have become attached to the means (in this case public ownership of hospitals) as ends in themselves, even when they don’t work.

There is another fracture which explains why the dispute is so emotive. Until very recently it was routine for Labour manifestos to make a sharp contrast between competition and co-operation. But this is a false contrast. The real opposite of competition is monopoly. What we call competition in economic matters describes a system under which teams of people co-operate with each other (in hospitals or companies) to produce goods or services that customers will prefer over those produced by rivals. At every stage the rivals are trying to learn from each other, itself a kind of co-operation which the philosopher Karl Popper called ‘friendly-hostile co-operation’. This underlying public spirit is so deeply entrenched in our culture we no longer notice it, but its importance quickly comes to light in countries where it is missing. After 1989, when Russia began to liberalise its economy, in some towns state monopoly bus companies were split into two or three and told to compete with each other. In one town on the first night before competition began, managers of one company went out and slashed the tyres of their rivals. No one had told them that economic competition is not about destroying rivals, it is about trying to find better ways of serving customers than them, or if they beat you to it, learning from their experience. Liberal socialists in the Labour party understand this; mechanical socialists do not.

There is a third fundamental precept at stake: equality. All socialists want everyone to enjoy access to health care but, again, there are two traditions. For liberal socialists equality means that no one should go without care because of poverty, whereas for mechanical socialists it means that no one should ever get more than anyone else. This belief explains why foundation hospitals raise the spectre of a ‘two-tier system’. Initially about 30 foundation hospitals are planned and the additional discretion they enjoy will put them at an advantage compared with the others. The diehard mechanical socialists object to any disparity in service, however momentary it might be. Secretary of State for Health, Alan Milburn, concedes that differences will emerge in the short run but that within a few years all hospitals will be foundation hospitals. Moreover, the whole point of decentralising hospital management is to permit local managers to find better ways of serving patients so that other managers can learn from the front runners. Through such comparisons standards are ultimately raised for everyone. No less important, if all differences are suppressed, then patients are put in a weak position. If the local service is slow or care is denied (the postcode lottery) patients are powerless. Having a choice allows patients to inflict economic pain on hospitals, encouraging them to do better next time.

Similar turning points have been experienced by the labour movement elsewhere in Europe. Take Sweden, where there is also a state-run health service. During the 1990s the Swedish Government introduced an internal market and privatised some services in the Stockholm area. It even sold a complete hospital to a private for-profit company. Initially, the unions were hostile, particularly the municipal workers union which dominates the health sector. But after 18 months experience the union decided that the new system benefited its members because it gave individuals the chance to ‘shop around’ for the best working conditions. The Swedish nurses union took a similar line. Eva Fernvall, its president, came out in favour of privatisation and her union even set up a system to help members establish franchises to take part in the competitive process. Labour MPs who believe they are defending the interests of NHS workers should take an unbiased look at Sweden.

What would the Aneurin Bevan, the wartime minister responsible for establishing the NHS, have thought were he alive today? In his book, In Place of Fear, he argued that democratic socialism ‘knows that all political action must be a choice between a number of possible alternatives’ and consequently ‘eschews all absolute proscriptions and final decisions’. It must ‘achieve passion in action in the pursuit of qualified judgements.’ These words could have been written for today’s predicament. Foundation hospitals are open to criticism, but they take us a step closer to realising the ideal of health care for all, whether rich or poor.

Dr David G. Green is Chairman of the Health Policy Consensus Group, whose members represent all points of the political spectrum.

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