30 September 2005


Labour Party conference: Prime Minister, Chancellor and public support reform.  Tony Blair used this year’s Labour Party conference to make one of his strongest arguments for reform of public services, on the grounds that only reform will give to ”decent hardworking families” the choices available to the “wealthy”.  Gordon Brown also expressed his support for reform, arguing for “value for money”, “real choices” in public services and for “a home-owning, share-owning, asset-owning, wealth-owning democracy”.  His speech, however, runs counter to his record in office which (with the exception of Bank of England independence) amounts to spending without reform.  Recent polls show that a majority of the public supports reform of the public services rather than increased public spending but despite this trade union leaders were vocal in their opposition.  To meet the public’s expectations the Government must accelerate reform.  The forthcoming White Papers in education and health provide the Government with a vital opportunity to expand pluralism in the health service and create real choice in education.  Only in this way will the Prime Minister achieve his goal of “higher standards” of public services “not only for Britain’s elite but for all”.




§         At this year’s Labour Party conference, Tony Blair used his platform speech to argue for “choice” and “competition” in public services to ensure that all in society receive high quality services:


“It isn’t fair when parents have no option but to send their children to a poor local school.  Or a patient can’t get diagnostic tests done in six months when the technology and capacity exist to deliver it in days.  The wealthy by their wealth can change that in their lives.  I want decent hardworking families to have the same power.”


§         He argued that the Government’s current reform programme had been successful and made the case for further reform in health and education:


          “Specialist schools, denounced at the time, have performed better than traditional comprehensives.  Fact.  City academies are massively over-subscribed.  Fact.  And the beneficiaries are not fat cats.  They are some of the poorest families in the poorest parts of Britain.  We only got big falls in waiting times after introducing competition for routine surgery.  Fact.  That is why the NHS reforms, to break down the old monolith, bring in new providers, allow patients choice, must continue.  Money alone won’t work.”


          “This autumn, we will publish our Education White Paper. It will open up the system to new providers and new partners, allow greater parental choice, expand foundation, academy and extended schools.  Again reform, again some of it difficult.  But all with one purpose: to let nothing block the way to higher standards, and greater achievement for our children.  The greatest injustice I know is when good education is the preserve of the privileged.  We are changing that injustice.”


          “Today is not the era of the big state; but a strategic one: empowering, enabling, putting decision making in the hands of people not government” (Tony Blair, speech to the Labour Party conference, 27 September 2005).


§         Tony Blair’s speech was well received:


          “Mr Blair showed yesterday that he is still Labour’s master strategist.  He understands far better than any of his colleagues the need to relate the Party’s political values to the aspirations of an upwardly mobile country” (leader, The Financial Times, 27 September 2005). 


§         It is, however, important to note that he has used equally strong language before, nearly three years ago, but that reform has been very slow to follow:


          “Choice mechanisms enhance equity by exerting pressure on low quality or incompetent providers.  Competitive pressures and incentives drive up quality, efficiency and responsiveness in the public sector.  Choice leads to higher standards.”


          “The over-riding principle is clear.  We should give poorer patients or parents the same range of choices the rich have always enjoyed.  In a heterogeneous society where there is enormous variation in needs and preferences, public services must be equipped to respond” (Tony Blair, Speech at the South Camden Community College, London, 23 January 2003).




§         Gordon Brown also indicated his commitment to choice and the use of the private sector to deliver public services.  In his platform speech, he said:


“We will and must continue to pursue what we promised in our manifesto … efficiency and value for money, a more personalised service, and accountability and real choices and the highest of standards in our public services.” 


§         He went on to argue that the Labour Party should no longer say that “the man in Whitehall knows best” and that “the only future of the Labour Party is as the Party of reform”.  He argued that the Government has “mobilised the private sector as partners for the public interest”.  Mr Brown also said that individuals have a “duty to seek work and skills for work” and advocated “a home-owning, share-owning, asset-owning, wealth-owning democracy”. 


§         This represents a significant departure from Mr Brown’s previous rhetoric.  In a speech to the Social Market Foundation in February 2003, he argued that there are areas of the economy and society in which markets are “not appropriate” and where “market failure can only be dealt with through public action”.  Healthcare was given as an example of an area that is too complex for markets to operate successfully:


“We can make the case on efficiency as well as equity grounds that market failures in healthcare, as in some other services, are not easily subject to market solutions ….  In healthcare we know that the consumer is not sovereign.” 




§         There is a clear contrast between Gordon Brown’s record as Chancellor and his reform rhetoric.  Despite the Chancellor’s promise in 2001 that “there is not going to be one penny more” until public service reforms have begun (The Sun, 30 November 2001), the Treasury has been a key opponent of reform ideas such as foundation hospitals, which have worthwhile freedoms to develop new services in the interests of local patients, and tuition fees, which spread the cost of degrees on to those who will benefit most from them.  In addition, the complex web of targets and regulation that the Treasury has imposed has restricted the ability of public sector managers to adapt their services to the wishes of those who use them.


§         Reform’s Director, Andrew Haldenby, wrote:


“What is immediately obvious, however, is the glaring contrast between the agenda of Prime Minister Brown and the record of Chancellor Brown.  Prime Minister Brown’s vision is built on reform of the inefficient public sector and value for money.  But Chancellor Brown has opposed reform and spent taxpayers’ money as if it were going out of fashion” (The Daily Telegraph, 27 September 2005).




§         Two opinion polls in the last week both showed the public’s appetite for reform:


          An ICM poll in The Sunday Mirror on 25 September showed that 80 per cent of voters agreed that “the NHS costs hundreds of millions of pounds more each year due to advanced treatment, cost of drugs and a growing population.  It’s time for a radical review of how we run and fund the NHS.”  50 per cent also agreed that “instead of paying taxes for the NHS, we should have a European style system where everyone takes out health insurance and the Government tops up payments for people who can’t afford them”. 


          Another ICM poll in The Guardian on 27 September revealed that 62 per cent thought that extra spending since Labour came to power has failed to improve services, while 35 per cent disagreed.  The message on Government reforms was less clear: 63 per cent thought that the Government is putting too much emphasis on the use of the private sector, but 49 per cent wanted private companies to continue to carry out NHS operations. 




§         Despite the speeches of the Prime Minister and the Chancellor there is still strong opposition to reform within the Labour Party.  The trade unions used the conference to argue against reform, both in formal conference motions and on the conference fringe. 




§         Unison tabled a motion against the further use of the private sector in the NHS.  Dave Prentis, the general secretary of Unison, argued that there would be a “fragmentation” of the NHS and asked: “An NHS driven not by patient need but by profits and markets.  Is that really our vision?”  Unison’s motion was carried by 71 per cent to 29 per cent.  A further motion supporting the Government’s policy, tabled by Birmingham Hall Green Constituency Labour Party, was voted down by 70 per cent to 30 per cent.


§         Other members of the Party also opposed the reform of the NHS.  On 26 September, the former Health Secretary Frank Dobson launched the Keep our NHS Public campaign alongside other NHS campaign groups and doctors.




§         The unions also expressed their opposition to education reform.  Speaking at a fringe meeting on 27 September, Steve Sinnott, the head of the NUT, argued against city academies.  The NASUWT general secretary, Chris Keates, argued at another fringe meeting on the same day that the Government should “drop the mantra of reform”.  She said that she had “concerns about some of the proposals on pensions, school self-evaluation, the expansion of city academies and increasing the autonomy of schools”.




§         A motion against raising the public sector pension age to 65 and in favour of compulsory contributions to occupational pensions and a basic state pension indexed to earnings was tabled by GMB.  It passed overwhelmingly.  Tom Brennan, Northern Regional Secretary of the GMB, said that the motion would enable pensioners to “avoid the humiliation of poverty in old age” and that the country needed a system that did not compel people to “work until they drop”. 




§         In addition, members of the Government, including the Prime Minister, themselves imposed limits on the reform programme. 


Limited use of independent sector in the NHS


§         Despite arguing for greater use of the private sector, Health Secretary Patricia Hewitt made it clear that there would be a limit to the budget for and the amount of care provided by the independent sector.  She stated last week and repeated continuously throughout the conference that “by 2009 the independent sector will only account for about 1 per cent of the overall NHS budget and about 10 per cent of elective operations to NHS patients” (The Guardian, 22 September 2005). 


§         Ms Hewitt’s statement represents a retreat from previous policy.  The NHS Improvement Plan, also known as the “Five Year Plan” (July 2004) stated: “To support capacity and choice, by 2008, independent sector providers will provide up to 15 per cent of procedures on behalf of the NHS.”  Even this slightly higher proportion is not enough to ensure a real increase in standards across the service.


§         Andrew Haldenby, Reform’s Director, said:


“Other European countries, with far better health services than Britain, do not have hang-ups about the delivery of healthcare by private sector companies.  In Germany, where there are no waiting lists at all, 50 per cent of hospitals are run by private or voluntary organisations and are available for all patients.  In England private sector companies are already reducing waiting times, increasing choice and providing better value for money.  In order to accelerate the pace of improvement in the NHS and to control costs, the Government should go further.  It should aim for a third of elective care to be provided by the private sector by the end of the decade rather than only 10 per cent” (Press Association, 22 September 2005).


Co-payment in the NHS ruled out


§         The Prime Minister stated in his speech: “I will never allow the NHS to charge for treatment.”  There is, however, a powerful case for co-payment.  Direct charges would improve the responsiveness of services, increase funding while moderating demand, encourage responsible behaviour and increase efficiency.  A mixed funding system in the NHS is a necessity if it is to meet the population’s ever increasing demand for more expensive treatment.


§         The Prime Minister’s statement represented a retreat from his previous comments on co-payment in 2003:


          “We should also stimulate new entrants to the schools market, and be willing to experiment with new forms of co-payment in the public sector” (Where the Third Way Goes From Here, Policy Network, 2003).


          “In parts of the welfare state, like pensions and transport, we have to find new ways of funding them, based on contributions from individual citizen and state ….  We need to keep direct taxes low to incentivise work.  But unless we want the result to be poorer services, we need to address the balance between what the citizen pays individually or collectively” (Speech to the Progressive Governance Conference, July 2003).


Concessions on education reform


§         In her speech to the conference, Education Secretary Ruth Kelly stated that she would reverse the policy of teachers at city academies not having to be registered with the General Teaching Council.  This was one of the unions’ major complaints against academies.


§         The Prime Minister describes academies as “independent state schools”.  Like independent schools, academies are able to hire the teachers they feel are most appropriate for the job and their pupils.  While it is unlikely that the loss of this freedom will lower standards it is a clear concession to the unions that runs against the principles underpinning academies.


Chancellor argues against the flat tax


§         In his conference speech, the Chancellor said: “The millionaire to pay exactly the same tax rate as the young nurse, the home help, the worker on the minimum wage.  The price tag – £50 billion of cuts in public services.”  He also dismissed the evidence of flat taxes in eastern Europe, stating: “An idea that they say is sweeping the world, well sweeping Estonia, well a wing of the neo-conservatives in Estonia.” 


§         In fact, a flat tax with a generous personal allowance would take low-paid workers out of tax altogether.  This is a considerable benefit given that a worker on the minimum wage working 27 hours per week currently pays 33 per cent in income tax and National Insurance for every additional hour worked.  A uniform rate of tax would also reduce tax avoidance and evasion, and hence would be likely to increase tax revenues.  The reductions in the top rates of income tax in Britain and the US in the 1980s led to an increase in tax paid by the richest 10 per cent. 


§         Already nine eastern European countries have adopted flat taxes, with more likely to follow.  Reform’s recent research on flat taxes showed that those eastern European countries that have adopted flat taxes have grown by 5.3 per cent annually for the past decade compared to 2.6 per cent for non flat tax countries in the region (see Reform bulletin, 8 September 2005). 


Warwick agreement


§         In their speeches both the Prime Minister and the Chancellor reiterated the Government’s commitment to the Warwick Agreement, signed by the unions and the Government in July last year.  The Agreement goes against reform.  It significantly extends employment regulation, including four weeks paid holiday in addition to bank holidays, trade union bargaining rights on pensions, the extension of two-tier workforce protection in local government across the whole of the public sector and a commitment that the “vast majority” of NHS employees should remain in the public sector. 




§         In his speech Tony Blair stated that “every time I’ve ever introduced a reform in Government, I wish in retrospect I had gone further”.  The forthcoming White Papers on education and health present a vital opportunity for him to do so.  Writing in The Business earlier this year, Andrew Haldenby, Director of Reform, stated:


“This autumn is the British Government’s last chance to reform the public sector ….  The health White Paper should aim for a third of NHS patients to be treated in the private sector and for a real internal market that will move resources from expensive and inefficient traditional hospitals to new and convenient local units.  To really make her mark, Patricia Hewitt must reopen the debate on the financing of healthcare which Gordon Brown, the Chancellor, closed down at this stage of the last Parliament with the Wanless Report. 


“On education, Ruth Kelly needs to use the mandate in the 2005 Labour manifesto, which said that the party would welcome ‘new educational providers’ to ‘boost standards and opportunities’.  That is enough to justify her introducing school choice by allowing education funding to follow pupils into the independent sector, coupled with the deregulation of school places.  At the least, a school choice scheme should be introduced in deprived areas where standards are lowest and choice for people on low incomes non-existent.


“Economic policy needs a clear change of direction.  Gordon Brown needs to face up to reality: public spending increases haven’t worked, governments can no longer provide welfare over a lifetime and the competitiveness challenge requires a much more flexible and enterprising economy” (The Business, 28 August 2005).



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