Saturday, 11 July 2009

Health and education, think fruit and veg

All enterprises operate according to the pressures they face. If you have a market stall selling fruit and veg you have to buy produce and sell it for a profit or you pack up and find something else to do. The pressures on such a business are almost all about profit. What are the overheads? How much does stock cost? How must wastage is involved? At what price can the stock be sold? Wastage involves a number of factors some of which are imposed by law. If you sell produce of unsatisfactory quality your customer can claim redress and your reputation might suffer. If you sell produce that is unfit for human consumption you might face prosecution. The law imposes a quality threshold and it dictates the minimum you should pay any staff you employ, but apart from that everything is about making a margin between buying price and selling price. The position is essentially the same for every business in the private sector. There are certain legal constraints on what you can do but apart from that you either create a sufficient profit to make it worthwhile or you close.

Privately-funded education thrived for generations without government targets and league tables. Not all schools in the private sector survived. Those who couldn't make the grade had to close and others arose in their place where there was perceived to be unfulfilled demand that could be met at an affordable price. So also with privately-funded hospitals. If they were not delivering a service people were prepared to pay for they would go to the wall.

One freedom the private sector has is to reject potential customers who cannot afford the fees or who would cause trouble. That does not apply in the public sector for so long as there is a legal right to medical treatment and a legal obligation on parents to send their children to school. But leaving these special factors to one side there is a particular pressure on state schools and medical services that the private sector does not have, and that is political interference.

If the government is running schools and hospitals it knows that problems can cost votes, so it feels the need to be seen to be acting to anticipate difficulties that might arise and correct those that have arisen. This is why we have countless initiatives being forced on teachers and medical staff, often before the previous initiative in the same area has taken full effect. The emphasis is on what's good for the politicians rather than on delivering the best possible service at ground level. And with every change comes a stream of paper going through numerous layers of bureaucracy, it flows down from the top and then another stream of paper heads in the opposite direction in order to report back on how the initiative has operated.

Contrast this to the position in the private sector in which the overriding need is to keep administrative costs to a minimum so that the best possible service can be provided for the lowest possible price. Of course they have quality controls but these are the responsibility of the hospital general manager and the head teacher who knows that failure means the possible loss of his job and collapse of the whole business.

A further contrast is that there is no pressure for uniformity in the private sector. To my mind this is one of the most costly, damaging and misguided aspects of state provision. There is no more a single correct way to provide medical care or to teach than there is a single correct way to bowl a cricket ball or butter a slice of bread. Seeking uniformity of practice stifles the sort of initiative that leads to improved practices. Seeking uniformity of outcome is simply absurd. There is no logical basis for saying that, for example, lung cancer recovery rates should be roughly the same all over the country or that resources in every hospital should be allocated so as to ensure that no patient has to wait longer than an arbitrary target time before being seen by a consultant. The former ignores inevitable regional differences in lifestyle and the latter is both administratively expensive and hugely wasteful as other work is put on ice in order to meet the target.

What is often overlooked when state provision of services is discussed is that the political pressure to fiddle with everything is both inevitable and entirely reasonable. No government can afford to sit back and say "we are not seeking to improve things" without risking its political future. Part of the reason for this is an apparently widespread belief that the government can effect improvements. I have grave doubts about this but then it really depends on how you define improvement. Can they change things to create an impression that an identified problem has been alleviated in the short-term? Yes, of course they can. But at what cost to other aspects of the service? Take a few million out of the budget to pay for a new gimmick and you might buy a good headline but that money has to be taken from another part of the system; there is no way of knowing whether the perceived solution to one problem is a price worth paying unless you can measure and compare the detriment suffered elsewhere.

I do not see how political interference can be avoided for so long as the government has direct responsibility for running things. This applies not just to schools and hospitals but to every other service it provides, but it is seen most keenly in the electoral battleground of the three Rs - reading writing and rheumatism. Remove direct political control and you remove the massively expensive need (for, in reality, it is a need) to fiddle with the system and monitor every aspect of it from on high.

Are health and education too important to be left to local decision-making by individual schools and hospitals? It is often asserted that they are, but I cannot see them as more important than providing food. Yet no one seems to be suggesting that Tesco should be nationalised because making sure we have affordable food is too important to be left to the private sector. And who would trust the government to run supermarkets? Stand for election on a platform of establishing the National Grocery Service and see where it gets you. Education and medical services are no more natural monopolies than are the sale of food and drink. Of course it is unrealistic to seek to run so many competing hospitals that there is not enough custom to allow any of them to receive the income it needs, but the same can be said of theatres, professional football clubs, hairdressers, solicitors, accountants, plumbers, architects and every other service business.

The best services are those providing good quality for an affordable price. Quality is maintained in the private sector by the need to be good in order to attract custom. The customer is a far better judge of quality than a government minister or any number of civil servants. Of course there are lapses in the private sector and failure to maintain proper quality can cause great harm before the customer base learns about it and votes with its wallet, yet state control does not prevent mistakes being made. Indeed we hear a lot about "superbug" infections and expensive lawsuits over negligent medical practice in the state-run system but few if any such stories about privately-funded medicine.

Bureaucracy is kept to a minimum in the private sector by the need to control costs in order to be affordable. Quality does not require bureaucracy but political control does, political control requires vast bureaucracy. And that costs a lot of money. To my mind, it is wasted money because there is no need for the state to run these services. That money could be used better in other ways and the services themselves will be subjected to far more telling and relevant quality controls if they are localised. Parents know if their children's state school is providing a poor service but can do nothing about it at present. Patients and their families know when a state hospital is not clean or is not providing a reasonable level of care but can do nothing about it at present. The inability of the customers to affect the service they pay for with their taxes tells us all we really need to know about the central failure of state services. When have you ever heard of a BUPA hospital not being clean or not keeping dependent patients clean and properly fed? When have you ever heard of a fee-charging school having no one the parents can turn to when their child reports on the inadequacy of Mr Quelch's pedagogic abilities? Maybe you have heard of such things, I know I haven't, yet they are the daily fare of reports about state services.

The whole thing is upside-down at present. Demand for private healthcare and private education has never been higher. How can that be if state control is a workable and effective system? Morale in both the HNS and state education is said to be at a low ebb. How can that be if state control is a workable and effective system? Politicians must be removed from day-to-day involvement in both fields except in two respects. For most people both education and healthcare are only affordable if paid for out of taxation; just as replacing their car if it is stolen is only affordable if paid for out of insurance premiums. Government must still fund the services but it must do so by passing the money directly to the most local possible level and trusting those who run schools and hospitals to use their allotted funds to best advantage. The other part government has to play is, in truth, a responsibility for Parliament rather than government. It is to set the legal framework within which services must be provided. Just as it sets the legal framework for a fruit and veg stallholder. Except in these two respects, politicians should leave things alone because they do far more harm than good.


Mark Wadsworth said...


While I am rabidly anti-EU, it is also true that there is a lot we can learn/copy from other European countries. Both health & education can be fixed at a stroke - with taxpayer funded vouchers and competing providers.

If you want more than the basic level, you have to pay a bit extra.

And your rhetorical question about what would happen if Tesco were privatised is easily answered - it's called "rationing" and what a disaster that was, eh?

Anonymous said...

Dammit, I wish I was as erudite as you Mr FatBigot.

In the 80's in New Zealand we had a Labour government that was far right on economic policies (a result of the previous National (Conservative) government drifting way to the left).
That Labour government introduced State Owned Enterprises to this country, very much expanding the role of the market in what had been areas of state monopoly.
Unfortunately this revolution never reached the health and education sectors.
The saddest thing though is that the architect of the change, then minister of finance Roger Douglas, has been widely vilified in this country even though those changes have hugely benefited the NZ economy. Fortunately few of the changes he made have been reversed - despite a markedly left of centre Labour government running things for the last 9 years (voted out last November).

Another big cost of government monopolies is how they create externalised costs people can't escape; people sitting at home unable to work because they can't get a relatively simple operation performed, or (in my case) having to travel over 600 miles each week taking the kids to and from school because the family court judge (4 month since the hearing, with no subsequent complications), hasn't gotten around to making a decision.

So perhaps we could make that "Health, education and justice, think fruit and veg"?

Best wishes
Andrew W

Chris said...

I agree with all that you say about political interference, but the market (Tesco) only applies where there is competition. What about monopolies?

Despite Tony Blair, I don't want a choice of schools or hospitals. I want my local school and my local hospital to be good enough.

The rail service is another monopoly and I want that to be affordable too.

TheFatBigot said...

Welcome to my little world Mr Chris and thank you for taking the time to comment.

Competition does not need to involve a choice of schools or hospitals. The relevant competition is between those interested in running the facility.

The National Lottery is a monopoly but there is great competition for the franchise. Last time it was up for grabs Camelot were able to fight-off Virgin by demonstrating that their way of running it would result in greater proceeds for "good causes" even though Virgin's model was not for profit.

In fact I don't see a problem in having competing schools in the same area. Hospitals are a little different, primarily because of their very heavy overheads. I'll try to put a piece together about this in the next few days.