TCS Daily

Is Reform Possible?

By Eamonn Butler - October 6, 2004 12:00 AM

Policy experts talk long and often about the need to reform state-run services like education, pensions, and healthcare. I used to talk the same way. But I've come to believe that state services are simply incapable of being reformed. What we have to do is replace them with alternatives.

Back in 1982, Mrs Thatcher had been in office for three years, but not much had happened. We asked friendly ministers where the promised reforms had gone. "Well," they said. "We stand on the bridge and give the order to turn, but the ship of state just carries on in the same direction."

We saw we needed to connect the bridge to the engine-room and the rudder. We needed people who knew how to re-connect the hydraulics of this rusty vessel. So the Adam Smith Institute set up what we called our Omega Project.

We set up 20 working parties of practical experts -- policy analysts, business people, retired civil-servants and politicians -- who knew how the policy-making process worked and who could chart out options that were politically, organizationally, and commercially practicable. And the 20 reports that came out of the Omega Project helped revitalize Mrs Thatcher after the election of 1983.

Ninety percent of people in the UK relied on state health and state education. So even if we could double the private sector, it would still serve a minority. Our priority had to be reforming the state sector.

So we devised ideas like internal markets. Instead of money and decisions coming down from the top, we would empower local people. Family doctors would have a budget so they could shop around for their patients' care between different hospitals. Hospitals would compete for this income instead of getting a guaranteed living from the Treasury. Parents, similarly, should be able to shop around among state schools, taking their bit of the education budget with them, and benefiting from competition among schools.

But it was a struggle. Unions hated the idea of competition. Bitter political campaigns prevented schools from opting into the new system. Doctors, too, were slow to change. By the time they had seen the benefits of the new system, Tony Blair's incoming New Labour administration had already promised to bow to the unions and scrap it.

But reverting to the old top-down Soviet-style system of managing health and education has been a disaster, and now Blair's government is keen to re-introduce choice into schools and healthcare. Once again, though, the message has not got down to the engine room. Reform has stalled.

We have wasted 20 years trying unsuccessfully to reform the big state services. It is clear that the only solution is to replace them. We must create completely new sources of supply, and give citizens the financial power to patronize them. And that is the theme of the second Omega Project which we have just embarked on.

At present, popular state schools cannot expand if there are 'surplus places' in an unpopular one nearby. And starting a new school is almost impossible because everything has to be done the Education Department's way. So we want to see good state schools able to expand, and to enable communities to set up new schools with radically new ideas on delivering learning -- using more home learning, more technology, less of a classroom environment, whatever they think will work. Likewise, we want to see new medical providers springing up to challenge the monopoly of the National Health Service -- and to give patients a voucher so they can shop around in either sector.

Even if many people think the state has to pay for essential services as the only way of ensuring they are fair and accessible to all, the world is at last coming to realize that the state does not have to try to deliver these services, too. It is better to put the money into the hands of individuals and let them buy what they need in an open, competitive market.

Our second Omega Project panels will face a challenge not only in refining these ideas and making them practicable, but in communicating the strategy to the wider public. Opinion polls suggest people are not turned on by the vague concept of 'choice'. They are more anxious to know that essential services are guaranteed.

Well, the truth is that when there is a flourishing private market, your access to service is much more certain than when there is a state monopoly that rations service by waiting. After half a decade of appalling state provision, perhaps it will not be so much of a challenge to communicate that after all.

Dr Eamonn Butler is Director of the Adam Smith Institute.


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