The worst of worlds

Robert Whelan argues that public private partnership is
not the saviour of the NHS or social services, but rather its
nemesis because it ties the freedom provided by the market to the
demands of the state and local authorities.

Frank Field recently gave a speech to the think-tank Politeia in
which he said that those people who have been unfortunate enough to
use the NHS recently will have been able to form some idea of what
the Soviet empire was like in the last days before its collapse. It
is almost unbelievable that people who live in one of the richest
societies the world has ever known are prepared to tolerate the
appalling levels of health care service that the NHS provides.

The standard of welfare services in Britain is now so low that
critics and commentators are straining for adjectives. While making
allowances for the tendency of journalists to exaggerate crises,
the Daily Mail series Britain’s Third World Wards, is not a long
way off the mark. In international league tables the UK comes so
far down the list we are only just above places like Estonia, Korea
and Mexico. We are nowhere near France and Germany.

And, of course, the health service is only one example. Wherever
we look, from inner city housing to sink schools, which should have
“Abandon hope all ye who enter here” inscribed over the portals, we
are confronted with problems which simply should not exist in the
twenty-first century.

The measures that are put forward to deal with the problems,
like packages to tempt some nurses back into the NHS or six-figure
salaries for “super-heads”, are pathetic. They are like applying an
elastoplast to a severed artery.

The public private partnership is one of these measures. The
rationale behind it is this: everyone knows that the market is more
efficient than the state. Welfare services are inefficient because
the state is supplying them. Therefore the solution is for the
state to use the market to supply the services, so that the
consumer of these services will benefit from the efficiency of the
market, in terms of rising standards and competitive costs.

Sounds convincing, doesn’t it? There is just one flaw in the
argument. A market isn’t a market when the politicians are running
it.

The reason that market transactions work is that they are
voluntary. Goods and services are supplied at a price, and to a
standard, which makes both the buyer and the seller happy. Either
party can withdraw from the arrangement: the seller, if the buyer
is demanding something at a price at which there is no margin for
profit, and the buyer if the goods or services can be obtained at a
higher standard or a lower price from another supplier.

Now let’s compare that with homes for older people that are run
by private companies, who sub-contract with local authorities.
Theoretically, the homes should be more efficient and more geared
to keeping their residents happy because they are in the private
sector. Except that the bills are being paid by social services,
whose main interest is keeping down costs to stay within budget.
The social services department may be the only customer of the
company running the home; it will almost certainly be the largest
customer. So when the department decides to reduce what it is
willing to pay, or refuses to meet increases in costs, the home is
running at a loss. The result is that the home has to close.

This is not a theoretical case. Places in old people’s homes are
disappearing at an alarming rate all over the country, as managers
find themselves caught between the Scylla of rising costs imposed
by greater regulation, and the Charybdis of local authorities
refusing to meet them. Even Help The Aged has now said that it will
dispose of its residential homes, although “we will continue to
campaign for higher standards and adequate funding in the sector”.
To which one can only say, good luck to you. If Help the Aged, a
large, respected, charitable body, can’t make its homes work, what
hope is there for anyone else?

And what of the consumers of these services, the old people
themselves? How do they feel when they find they are losing what
they have been used to call home, and moved into a geriatric ward,
or to another home miles away from their friends? Unfortunately,
their feelings are irrelevant, because they are the consumers, but
they are not the customers. The market works because of what
economists call the power to exit. If you don’t like the service,
you take your business elsewhere. The power of exit does not exist
in the public private partnership simply because you cannot take
your business elsewhere – unless you can afford to go completely
private, which few can do.

A real programme of welfare reform will have to ask far more
radical questions than any political party is posing at the moment.
How much can we reasonably expect the state to supply? Are there
ways in which people can be encouraged to make their own provision
for entirely predictable states of dependency like old age? Should
we at least point out to people that, if they manage their private
lives on the principle of serial monogamy, they will end up with no
one to look after them in sickness and old age except state-run old
people’s homes which, by that time, will probably be trailing
behind the countries of sub-Saharan Africa in the international
league tables?

Robert Whelan is the deputy director of
Civitas.