[A-List] UK corporate state: rampant privatisation

["Michael Keaney" <michael.keaney@xxxxxx>]

Here's the latest wheeze from one of the greatest vandals of the 20th
century British state apparatus: "Sir" Steve Robson, the man who boasts of
having dreamt up rail privatisation. Now he's looking closely at the health
service. Get your exit visas ready.

------

Driving a better deal in public services
By Steve Robson
FT.com site; Apr 07, 2003

Tomorrow's Budget is being described in the media as a "Budget for
productivity". It is important that this is what it should be. Productivity
drives our living standards as a society. It is equally important that the
public sector should be required to contribute to improving productivity
just as much as the private sector. All too often we have viewed it as
solely a private sector issue.

Productivity in the public sector contributes in two ways to the economy.
First, it directly increases the output of resources employed in the public
sector. Second, it means that a given level of public services can be
delivered at a lower cost in taxes. This reduces the adverse impact of
taxation on incentives across the economy.

If we are to improve productivity in the public sector, it is essential that
we reform the way public services are delivered. The government has made
clear its commitment to reform but progress in many areas has been slow.

In a report published yesterday, I and my co-authors examine what reform
should look like in health, education and law and order. On the face of it,
these are quite different services and it might be imagined that they
require quite different solutions. There certainly are differences but these
are overshadowed by what they have in common. This is the role of the
government. In all three, the government has three roles: funder, provider
and regulator. The bundling of these roles creates conflicts of interest and
perverse incentives.

The solution is to unbundle the roles. In both health and education this can
be done in a similar way. The customer, the patient in health and the parent
in education, needs to be given real choice on where to go for the service.
This means that the money needs to follow the customer in full, including a
proper capital charge. The capital charge means that successful schools and
health trusts have the resources to expand facilities and it means that new
entrants can establish facilities.

By introducing real choice and competition, the state retains its role as
funder but is no longer the sole provider; indeed, over time it may become
responsible for only a small part of provision. By introducing competition,
the need for a regulator falls away.

It is also important to note that under this approach, accountability for
the performance of the local school and hospital rests locally. Can its
managers provide a service that customers choose? At present accountability
for the performance of an individual hospital runs right up to the secretary
of state. His understandable response is to set targets for that hospital.
National targets get in the way of local decision-making based on local
needs.

In the case of health it would be possible to go further. I have talked of
the money following the customer. This is essentially a system under which
the money gives access to treatment, and the National Health Service is one
provider of treatment. The money alternatively could be used to give access
to healthcare, with the NHS acting as an insurer and potentially leaving the
provision of services entirely to others. A more radical approach would be
to shift funding on to the basis of compulsory insurance, with the state
being a funder only through paying the premiums for the less well off and
the chronically sick.

Law and order is different. This is not a service into which choice and
competition can be introduced. We cannot change the state's role as funder
and provider. We need to address its role as regulator. In some other areas
of monopoly provision we have seen the introduction of specialist
independent regulators, and much the same is needed in law and order. The
regulator would publish reports examining the costs and performance of
individual police forces and of the authorities purchasing police services.
It would also provide these purchasers with tough but realistic forward cost
estimates and advise them on output-based forward delivery agreements. It
would be an economic regulator. We all know that unregulated monopolies are
unlikely to serve customers' needs.

Unbundling the roles of the state is the way to get value from public
services. It does so by driving quality improvements through the producer
incentives generated by consumer choice or independent regulation. Simply
spending more money does nothing to get producer incentives, and so quality,
right.

Sir Steve Robson is a former second permanent secretary at the Treasury and
a co-author of 'A Better Way', www.reformbritain.com