Category: Politics UK

Reflections on general political developments and ideas in the UK

NHS reform – the politics is a smokescreen

Ever since the NHS was formed over 60 years ago, politicians have struggled to manage it.  Assorted ministers and policy wonks have dreamed up elegant reform plans, while the NHS’s insiders have undermined them in a bid to carry on much as before.  The NHS does change, but never quite along the path that the politicians have in mind.  That is as true now as ever.  The difference is that NHS management is promoting reform rather than resisting it; but they are going about it in their own way.  The fire and fury of the current political debate is mostly irrelevant.

I have already posted some thoughts on the NHS.  I considered the question of the timing of the reforms, alongside the £20bn cost-saving challenge posed by NHS Chief Executive Sir David Nicholson (referred to alternatively as “the Nicholson challenge” or “the QIPP*programme”).  My conclusion was that the main organisational damage has already been done, so we do not have much choice but to follow through.  I left aside the question of whether the reforms are wrong-headed.  I would like to consider this, before coming to an equally pragmatic conclusion.

What is being proposed?  A continuation of the big idea of the last 20 years or so: to create a purchaser/provider split, and to use this to introduce market mechanisms, under the banner of improving choice, to help ensure that the NHS is effective and efficient.  The problem that these reforms are supposed to solve is that the NHS is too dominated by hospitals, and the doctors who run them, who do not have enough incentive to change to meet new needs or to become more efficient.

In this latest incarnation, the purchaser element (now usually referred to as commissioners) of this set-up will be a combination of consortia of general practitioners (GPs), and an arms-length NHS Commissioning Board operating at national level (i.e. for England – the reforms don’t cover the other parts of the UK).  The intermediate commissioners under the current system, regional Strategic Health Authorities (SHAs) and district Primary Care Trusts (PCTs), are to be phased out.  On the provider side (i.e. the hospitals and other facilities), the idea is that all NHS facilities should be run by more or less independent Foundation Trusts, but that the commissioners will be allowed to secure services from “any qualified provider”, which will not be restricted to these trusts.

These reforms are a natural, if rather accelerated, continuation of the previous government’s NHS reforms.  Commissioning by GPs was already being piloted, and the idea of moving all hospitals to Foundation Trusts was the previous government’s idea too.  What is newer, and perhaps more radical, is the proposed regime of accountability that is being imposed on this.  Previously the NHS was run by the Secretary of State for Health, with very little restraint or accountability.  Now a complex framework of powers and accountabilities is being imposed, giving both parliament and local authorities a greater role.

The government argues that this is just evolutionary change.  But there has been vehement opposition from people who think that the new regime will end the NHS as we know it.  One problem is the commendable desire by the government to establish much of the framework in parliamentary law, rather than simply letting the minister rearrange things by fiat.  People now have the opportunity to project all their worst fears into the legislation on the basis that it does not specifically ban them.  In fact we are still being asked to trust ministers to do the right thing, only with more accountability.

Two lines of criticism that I can see have some kind of traction.  First is that the framework will open up the health market to competition law (and specifically European law) in the same way as for gas and electricity.  This means that the NHS trusts and the private sector would have to compete on a level playing field – and this might literally drive some NHS trusts out of business.  A lot of what NHS hospitals do is a natural monopoly (accident and emergency work, complex surgery, etc) , like the railways.  The fixed costs are so high that the market cannot sustain competition in most localities.  However, so the argument goes, these fixed costs also support activities where private sector competitors could undercut the NHS; if these are competed away then many hospitals would cease to be viable, and so the service on core activities would deteriorate.

Frankly I’m not stressed by this.  If a train wreck is on the way, it will be in very slow motion, giving time to take corrective action if need be.  More to the point, NHS professionals are masters at keeping the private sector at bay (except for NHS doctors doing private work on the side…), and they will only be seriously vulnerable in places were the service offered is ludicrously bad.  And as for European competition law, judging by its impact (not) on the French and German energy markets, there shouldn’t be anything that the politicians can’t handle.

The second criticism is more cogent.  It is that the rules for setting up GP commissioning consortia are a bit vague.  They could be set up in such a way that makes them very difficult to hold to account, or to act in partnership with other agencies.  For example, they may not be geographically coherent, cross local authority boundaries, and so on.  This does need some more thought – though again the worry is the direction reforms could take, rather than what is actually likely.

Personally, I don’t place a huge amount of faith in the purchaser/provider split and the marvels of choice anyway in this context.  There are two big problems: that the buyers (you and me) don’t know enough about what they are buying, and have to rely on intermediaries, whose incentives distort the picture.  The second is that so many providers are natural monopolies.  After decades of reform, the NHS does not remotely resemble a market economy.  It reminds me of a large company trying to introduce market-style rules for internal transactions; these systems never achieve as much as their proposers hope, since everything is trumped by politics in the end.  There have been two big achievements of the NHS reform process.  First is that hospitals are gradually being forced to be more efficient and accountable; this has mainly been achieved by good old-fashioned management, of which the “Nicholson Challenge” is but the latest example.  The second is that commissioning processes have forced NHS managers to address the question of what society actually needs, and then try to reorganise the service to meet these needs.  This last development is the more recent, and the the reorganisation of PCTs has interrupted it – but the new arrangements will probably be more effective in the long run.

The big prize to be won from the current reforms is hardly spoken of at all.  It is that GPs will start to come under the same sort scrutiny as hospitals have.  The consortia themselves will do some of this; the NHS Commissioning Board, which must authorise the consortia, will also be on the case.  The PCTs were supposed to be doing this, but were mostly pretty ineffectual.  The important point is that we should be in no hurry to authorise the consortia, to allow this scrutiny process to have real bite.  This seems to be exactly what Sir David Nicholson (who will chair the NHS Commissioning Board) has in mind.

Meanwhile the over-large number of PCTs has been reorganised into a more manageable number of “clusters”; these and the SHAs will no doubt live on as embodiments of the Commissioning Board.  The NHS will become much more centralised in the short term.  With some very sharp minds at the centre, including Sir David, this doesn’t have to end badly.  But the politcal arguments are mostly a smokescreen.

*QIPP stands for Quality, Innovation, Productivity, Prevention

AV referendum – the return of the old politics

So the Nos won the UK AV referendum comprehensively, with 68% of the vote, on a higher turnout than expected.  Their campaign only seemed to gather momentum as time went by.  This is a bitter blow to me, as I actually liked AV – while having reservations about proportional representation (PR).  Now it will be considered politically toxic, probably forever.  It doesn’t help that most people that voted No did not understand what they were voting against.  In fact very few voters seem to have understood the system or its implications.  It is highly frustrating that so many nonsense arguments were tolerated, and even encouraged by the media (turning back on hundreds of years of history; would cost £250m; gives some people but not others more than one vote; and so on).  What went wrong?

There were clearly tactical errors by the Yes campaign.  They failed to find compelling reasons to change.  Their two favourites, making MPs work harder and ending safe seats, were very weak as AV would not make a huge difference.  They took a tactical decision not to explain the system to voters, on the basis that it would turn them off.  So they left that to the Nos, until finally they found a good way of communicating it (the Dan Snow broadcast with pub vs coffee shop).  That broadcast proved that you can communicate new ideas if you apply enough thought and creativity to the task.  There seemed to be too much time spent online, and not enough trying to get through to proper floating voters.  It is more difficult to say whether the later idea to portray a Yes vote as an anti-Tory one was right; it certainly swayed some.

Why was the No campaign so effective?  The use of the Tory machine clearly helped.  The campaign was very well funded, so they were able to put much more, and much better produced literature.  They weren’t even trying to win the argument, simply repeating a whole series of misleading sound-bites endlessly.  But particularly striking was their use of of mainstream politicians.  David Cameron and the Conservatives put on a strong, united front.  And enough Labour politicians supported them to rally many traditional Labour supporters.  By comparison, the Yes campaign had only the much weaker Lib Dem machine behind it, and tried to use non-politicians much more.

So the voters were not engaging with the arguments and trying to make sense of them, but taking a lead from people they trusted.  Conservative supporters rallied to a very impressive extent behind the official Tory line (80-90% according to one poll).  The newspapers may also have helped.  If all these respectable people were reinforcing even the more spurious No arguments, people thought there must be something to them.

So people actually have quite a lot of respect for good old-fashioned politicians when it comes to political arguments.  A year ago we thought that disillusion with politicians was ushering in a new politics.  The surge for the Lib Dems after the election debates.  The coalition with political enemies coming together in the national interest.  But this new politics seems to have been a mirage.  People are happier in the more familiar, tribal territory.  They will follow the old politicians, who don’t seem to care what they say in support of causes they think are in their interest.  The expenses scandal is completely forgotten now.

There also seems to be a deep conservatism amongst British voters.  They are sceptics of almost any change, though they are quick enough to get used to changes when they happen.  This is quite comical at times.  I remember huge resistance to the London Eye being erected; now nobody would want it taken down.  David Cameron’s and Boris Johnson’s appeal to “hundreds of years of history” to support FPTP is comical in the same vein, given how recent our democratic institutions actually are.  The idea of a “progressive majority”, popular with some on the left, is a nonsense.

A further lesson is that we should be highly suspicious of referendums to decide constitutional changes.  If people just follow the politicians, then shouldn’t just let the politicians decide?  Independence for Scotland – yes to a referendum; electoral systems, European Union treaty changes – no.

So the old politics is back.  What does that mean for progressives?  And what does it mean for the Liberal Democrats?  Topics for another day.

Yes or no to AV?

Truly my last blog on the arguments for and against AV for Thursday’s UK referendum on AV.  It’s been quite a campaign, but the arguments made by either side are weak or worse.  This may get a little better in this last week.  In its broadcast tonight the Yes campaign is at long last explaining what the system is and why it is a good idea, and even toning down some of its exaggerated claims.  The Yes campaign had left too much of the explaining to its opponents, while spending too much time twittering to to the converted.  By contrast the No broadcast seems much more about rallying the converted, especially Labour supporters; it rehashes the usual arguments in quick soundbites, using a variety of politicians and vox pops.  Up to this week the No campaign has been much more vigorous, albeit scurrilous.

First, for the benefit of those that haven’t decided, and want to get beyond the soundbites, let’s have a quick round up of the usual, weaker, arguments before identifying the stronger ones.  First the Yes:

  • It will make all MPs work harder.  The idea is because most MPs will need second preference votes to win, as well as a good haul of first preferences, then they will be more sensitive to people’s needs.  Well maybe.  But they are already trying quite hard for the first preference votes of minor parties.
  • Tackles “jobs for life”, duck houses, etc.  Well it should reduce the number of safe seats – but there will still be plenty left.  So some change, but not that much.
  • All MPs will need 50% of support.  A stronger argument, but of course this is 50% before abstentions.  Some voters will not offer second or third preferences so they will drop out, meaning that the winner gets a bit less than 50% of the voters who turned up.  The Economist newspaper seems to think this is a big problem, but if voters are indifferent between candidates then surely that’s fair enough.
  • It’s change.  True, but is it for the better?  Change would certainly rock the older politicos – but this is weak stuff.
  • It will keep the Tories out of power forever.  Not an argument to persuade Conservative supporters.  Frankly, I’m not at all convinced.  The Lib Dem vote could implode, the Tories scoop up second preferences from UKIP; if Labour fluffs it that could easily deliver the Tories an outright victory.  And if David Cameron succeeds in “de-toxifying” the Tory brand, it’s all to play for.

It says much about the Yes campaign that they haven’t said much more than this until this week.  The Nos, on the other hand have given us a massive battery of arguments:

  • It will cost £250m which is best spent on other things.  There has been a lot of heat generated by this claim, based on the costs of running the referendum (too late) and buying counting machinery (unnecessary).  Still, there will need to be an information campaign to explain the system, and it will take longer to count the votes, which will mean a bit more overtime.  Cheaper not to vote at all, of course.  What price democracy?
  • More countries use FPTP than AV.  My Tory leaflet says 2.4 billion to 29.5 million.  So?  I don’t know who they have counted into their 2.4 billion, but a large part of it is India, where there are literacy issues (and which doesn’t deliver stable government either).  The US has got round many of the weaknesses of FPTP through primary elections (which really are more expensive!) .  Many states also use run-off elections which work a bit like AV, and AV itself is not unknown.  And for President, if they used FPTP then Al Gore would have beaten George Bush in 2000 – but in fact they use an electoral college system.  New Zealand abolished FPTP for proportional representation.  That leaves Canada amongst developed countries; that country’ electoral experiences are not an advertisement for the system.  Today the Conservatives won a general election because the left-wing NDP took votes away from the centre parties.  What’s more many other nations, including France and Italy, have a single member run-off system that works a bit like AV.
  • The Australians don’t like AV.  My Conservative leaflet claims that 60% of Australians want to go back to FPTP.  That isn’t what the poll in question actually asked.  What many Aussies don’t like is that they are forced to preference ALL candidates, even if they are indifferent.  We aren’t proposing that in the UK.  In fact the principle of preferential voting (as they call it) is not controversial there.
  • AV gives weight to extreme parties, like the BNP.  Extremists will find more difficult to win under AV.  But they find it hard enough under FPTP (though George Galloway did sneak in in 2005).   But their second preferences will count.  Just as they would if there was no candidate of their party at all.  This is true, but it’s called democracy.
  • Soppy centrists will get elected.  This is the exact opposite of the extremist argument.  It isn’t made by the mainstream No campaign, but it is the argument of choice of the magazine Spiked, and Matthew D’Ancona.  The idea is that the trawl for second preference votes will put a premium on being unobjectionable.  But you still need first preference votes to be in contention, since you will almost always need to be in the top two on first preferences to stand a chance (and this is the Australian experience).  Soppy centrists are likely to get knocked out.  Besides appealing to the centre is how marginal seats are won under FPTP too.
  • There will be permanent hung parliaments and coalitions.  This is a valid argument against proportional representation, but not AV.  The argument runs that the Lib Dems will get more seats, denying a majority to Labour or Conservatives.  You have to believe in a Lib Dem recovery to think that; they will have a real problem to get enough first preference votes to be in contention in enough seats.  Even if you accept this, the balance between the top two parties is likely to favour the winner (because they get more second preference votes as well as first preference votes), and this will offset the effect.  One academic has suggested that the only election since the war that would have given a hung parliament under AV was last year’s, which, um…
  • We want PR.  AV is not remotely proportional; that’s why a lot of people like it.  But FPTP isn’t either.  PR isn’t on the menu.  The danger is that a No vote will put people off electoral reform of any kind for a long time.
  • We’ve been using FPTP for 300 years and we should stand by our traditions.  Well I’m exaggerating, but only slightly, based on Mr Cameron’s utterings.  One person one vote has only been around in the UK since 1950 when the university seats were abolished.  It’s not all that long ago when we abolished rotten boroughs.  We forget how much our constitution changes and adapts.

Enough.  What are the arguments that count?  For yes:

  1. It reduces the chances of rogue candidates splitting the vote and letting the enemy in.  This will make it easier for MPs to take an independent line against party managers.  Perverse results where people vote for the left and let a right wing candidate in (which seems to have happened in Canada today) are prevented.
  2. It’s more transparent.  Today a lot of voters vote for their second preference because they don’t think their first has a chance of winning.  The importance of first preference votes under AV will not stop this entirely, but it will be a big help.  And the winning candidate will know where his or her second preference votes came from.  Today they like to claim that all their votes are positive first preference ones – time to expose this.
  3. It’s a majoritarian system, like FPTP.  Coalitions only happen when the public really can’t make up its mind.  Of course many people prefer coalitions…but see above.  We aren’t turning the political world upside down, just making it a bit better.

And for the Nos:

  1. There is clearer bond with the voter, who needs to make a binary decision, which then gets counted in a highly dramatic process.  There is a little magic in the old ways.
  2. If No wins then the Conservatives will have to give the Lib Dems a consolation prize, perhaps in Lords reform.  If Yes wins then the opposite applies.

And that’s enough!

Are the cuts necessary?

In the latest issue of Liberator magazine there is a letter from Peter Wrigley, a retired economics teacher who blogs as KeynesianLiberal.  It’s actually about a review of David Laws’s book, but it contains a wonderful statement that summarises why some people think the the government’s strategy of cuts is wrong-headed.  It is deeply flawed, but it strikes me how very little attempt is made to explain the UK’s economic plight beyond shallow sound bites.  I will try make a small contribution to correcting this.  But first, the quote from Mr Wrigley’s letter:

Distinguished economists and commentators, including David Blanchflower, Martin Wolf, Jospeh Stiglitz, Paul Krugman and William Keegan, have all pointed out that Britain’s debts are not historically high (in fact the debt-to-GDP ratio is quite modest by comparison with many similar economies); that Labour’s expenditure was reasonably prudent up to 2008, the year of the crisis; and that the current deficit is a result of falling revenues arising from the recession rather than profligate expenditure.  Above all, we are not Greece, are not and never have been in danger from “the markets”, which are, after all, largely institutions within our own economy, including many pension funds, lending to their own government.  Clearly, the “savage cuts” are far from a matter of necessity but are ideologically driven.

The interesting thing is that the facts cited in the statement are not widely out, if you separate them from the opinions.  But the last sentence is a glaring non-sequitur. Of the various people he cites in support, all are critics of the government’s policy, but I have only followed the writings of two: Martin Wolf (of the FT) and Paul Krugman (Nobel Laureate and New York Times columnist).  Mr Krugman has not made any commentary on the British economy to anything like the detail that Mr Wrigley implies, or not that I have seen – but he does seem to come to the same conclusion – that Britain’s austerity is madness and not an example for the US to follow.  But it is the US that is his interest.  Mr Wolf has given some excellent, clear analysis (such as this article, behind the paywall I am afraid).  I don’t think he would describe Labour’s expenditure up to 2008 as “reasonably prudent”.  He actually says of the deficit before the crisis struck:

The deficit was surely too large for that stage of the cycle, even on what was then thought about prospects. But it was not a disaster.

A quibble, perhaps, since coalition politicians certainly imply it was a disaster.

Britain’s debts are indeed not frighteningly large. Yet.  But the same cannot be said about the deficit – i.e. the rate at which we are adding to the debt.  Over 10% per annum will soon take the debt up to the 90% level where most commentators suggest it really starts to weigh the economy down.  The frightening element is the estimate that 8% of the deficit is structural; in other words such a deficit won’t disappear as the economy bounces back.  This is the point that Mr Wrigley appears not to have understood, or perhaps not to have accepted.

That 8% number is truly astonishing because it suggests that much of the economy pre-crisis was built on air, and has been lost never to return.  We can’t just bounce back.  Remarkable, but it isn’t seriously disputed.  Certainly not by Labour’s last Chancellor, Alistair Darling, and not Mr Wolf either.  I can’t speak for the other commentators.  In a later post I will return to how this situation arose.

It will be necessary to close this deficit – and nobody denies that either.  A lot of people are suggesting that the government is doing so too quickly and too aggressively (and I’m sure that goes for all the distinguished names cited).  It hardly follows that the cuts “are far from a matter of necessity”.  To understand the problem it is necessary to put aside the timing issue, and to ask how will the finances be put straight when they are eventually addressed.  There are three ways: growth, taxes and cuts.

Let’s think about growth first.  To claw back 8%, the economy has to grow by at least 16% (though 20% is probably more realistic).  If we can get the economy to grow by about 4-5%pa this looks reasonably feasible, perhaps.  But if you accept the view that there is not a lot of spare capacity, then a growth rate of 2.5% is more realistic, and this, or close to it, is already built into the government’s plans.  The government can’t stimulate such high growth rates by increasing the deficit – because ultimately this growth must come from the productive part of the economy.  The argument about austerity is about the government not making things worse, not about stimulating a boom.

So how about higher taxes?  Many on the left hope that the UK can move to a more Scandinavian style of economy with perhaps 50% of income taken in taxes, rather than the typical 40% odd typical of the British economy.  Many hope this can be done by just taxing the rich more.  Actually it is hard to see how this last can be done, beyond what the government already has.  Not much money can be made from corporate taxes, contrary to popular belief, because there just aren’t enough taxable profits around.  The various soft targets postulated don’t look so soft closer up, and wouldn’t make enough difference anyway.  It is a game of diminishing returns: the more you tax, the less incremental revenue you get – and there are costs to the wider economy.  It gets worse, since if you actually succeed you become over-dependent on rich people and big corporations to fund government.  There is clearly a problem that companies are making too much money, and that a lot of people are being paid too much; but taxing this inequality even further not a sustainable solution to the country’s fiscal problems – even if you think it is right to do anyway.  To raise taxes sustainably you have to aim lower.  At the “squeezed middle”.  There are two problems.  First that this may be economically inefficient, by reducing incentives to work; so you keep having to raise the bar.  Second, and more certain, it is politically toxic.  To say the least we do not have the necessary political consent across society.

Which leaves cuts as carrying the main burden.  This seems to be what the last Labour government concluded.  And if you are going to make big cuts, to public services, and to benefits, there is a lot to be said for getting on with it to let people get used to it and move on – rather than leave the Sword of Damocles dangling – and especially with public services.

But what if you think the government is cutting the deficit too quickly?  The best thing to have done would have been to delay the increase to VAT.  The second thing would be to delay cuts to benefits.  But benefit cuts have been pretty limited so far, and may yet take place slower than planned.  Perhaps other tax cuts might be considered.  The logic of the public service cuts is powerful, I am afraid.

Which leaves with two questions.  How did we get into this mess?  And is the government right to move so quickly?  More of that another day.

The Economist shoots itself in the foot. Twice.

This week The Economist has come out for a No vote in a leader on the UK’s referendum to the voting system.  It argues that AV is no improvement on FPTP, so we should vote no.  It wants the system to be more proportional, with 20% of parliament’s seats reserved selected by proportional representation (PR), and the rest on FPTP.  It dismisses the argument that a Yes vote would make further change more difficult, without really saying why, beyond “It might exhaust the national appetite for reform.”  This is pretty weak stuff, but on two counts the paper has undermined its own argument.

Update.  Having read more of this week’s edition, the Economist’s hidden reasoning looks a bit clearer.  They are worried that a Yes vote would make the Conservatives so angry that they will derail other reforms, such as that for House of Lords.  Alternatively if there is a no vote then these reforms are more likely to go through as a consolation prize.  They appear to think that these other reforms are more important.

Also they are making a big deal out of the fact that because many voters will not preference all candidates, then some candidates will be elected with less than 50% of the vote.  They think this is a major problem with the Yes case; and yet I think this is simply equivalent to an abstention.  Nobody suggests that MPs should be elected with 50% of the whole electorate.  And enough people will cast preference votes, especially if there is a major left-right polarisation, to make the change in system worthwhile.  This article on NSW and Queensland state elections, which use the same preferential system envisaged here, makes that quite clear.

In the first instance, in the very same edition, the paper covers the Canadian general election, held under FPTP, with the sub-headline “A last-minute surge for the left might end up benefiting the right.”  This is exactly the sort of perverse outcome that AV can do much to prevent, because it reduces the problem of the split vote.  In Australia, which uses AV, the rise of the Green party has not benefited the right.  Under FPTP, using first preferences, the right would have benefited royally from the Green’s success in the last Australian general election.  So, “no improvement”?  The Economist makes the case against its own editorial with wonderful succinctness.

Next, the paper has changed its view.  It used to be a strong advocate for AV in the UK.  Admittedly that was a long while back (and certainly before 1997, when the paper’s online archive starts).  But the paper routinely refers to previously held positions, sometimes dating back to the 19th century.  And yet the paper’s leader makes no reference to this earlier view, and why it has changed its mind.

I have been reading the Economist since 1984 (and its position on AV swayed me in its favour back in the 1980s – one of the reasons that my support is not as lukewarm as some).  This is very disappointing.  The editorial team was probably deeply split.  Its Bagehot columnist, burnt by experiences elsewhere in Europe, hates PR and fears that AV might eventually lead to PR because more people will cast first preference votes for minor parties.  Others no doubt favour full PR.  I can imagine the poor leader writer trying to reconcile all this.  And failing.

 

NHS: the net is tighteneing around hospitals

September 11, 2001 was a good day to bury bad news, a government spin doctor famously emailed on the day.  What about a royal wedding day?  Sure enough, via the Department of Health (DH) there was this announcement, saying that hospitals are expected to make an even higher rate of “efficiency” savings than before: from 4% per annum up to 6-7%.  This press release seems to have come out so late yesterday that neither the DH website nor that of Monitor (the regulatory body that made the announcement) have published it.  So I have been unable to access the details.  But make no mistake, this is a highly significant development.

What on earth is going on?  So far almost all the heat has been around the Coalition’s health reforms, and the dramatic changes to the commissioning side of the NHS, which are already in rapid progress, regardless of what is happening in Parliament.  This is the side beloved of politicians and policy wonks.  The idea is that the NHS will be shaped by more or less local organisations assessing their needs and then “commissioning” it from the supply side – mainly hospitals.  Hospitals, formerly in the driving seat of the NHS, would be put in their place.  It is a chaotic, market driven vision of change.  Under Labour commissioning was being led by the primary care trusts (PCTs); the coalition is moving this towards consortia of general practitioners (GPs).  This is all very well, but there is something else going on, and this is much more Stalinist, and which pre-dates the Coalition.

Or rather the model might be the Chinese leader Deng Xiaoping, who masterminded China’s recent astonishing growth.  Deng ensured the process was centrally directed, with no challenge to the Party’s authority; he worked by manipulating the incentives open to his underlings.  The centrepiece of this dynamic in the NHS is the £20bn of savings that I described in my last post.  This money isn’t being cut from the NHS budget; it is being “redeployed”, spent somewhere else, although it is very unclear where.  What today’s story suggests is that most of this pressure will be felt by hospitals.  The drive is to take 25% out of their budget over a mere four years.  Wow.

Regardless of where the chaotic process of commissioning takes us, the central leadership of the NHS (and it is not difficult to identify Sir David Nicholson as the driving force) has decided that hospitals are going to play a smaller role.  This is pretty conventional thinking in the medical field.  Hospitals are old-fashioned places where people are as likely to catch an illness as be cured.  The idea is to reduce them to a smaller number of centres of excellence, with the very best professionals supported by the very best technology.  Meanwhile more illnesses will be treated “in the community”.  I can’t express an opinion on how valid this view is, though I instinctively feel that it is missing something.

Never mind.  What it means is that many of the country’s hospitals will be closed.  Regardless of the chaos that has hit the commissioning side, the NHS bosses are turning up the heat.  I don’t know how ready our politicians are for it.  It has Labour’s fingerprints all over it, but it is the Coalition that will be in the firing line.  The only upside is that it should release money that can be spent on other things.  That and the knowledge that the government is doing the right thing.  Probably.

NHS reform: we’ve started so we’ll finish

The NHS, probably rightly, is one of the main controversies in current British, or rather English, politics.  The Coalition government has put it there after Labour, by dint of a massive increase in spending, had managed to take most of the heat out of the debate, bar a few controversial hospital closures.  Personally I am a bit perplexed.  From one side I am being constantly lobbied by the Social Liberal Forum, a Lib Dem pressure group, to express disapproval of what looks like almost the entire reform process.  On the other side is 18 years experience as a business services manager, reinforced by my regular reading of the Health Service Journal (HSJ), the weekly magazine aimed at NHS managers.  This takes the need for reform pretty much as read, almost on a continuous basis – and gives me an inbuilt suspicion of people who resist change.  Partly because I have been trying to get a management job there, I am better informed than most on the NHS; but I have found it very difficult to make up my mind.  Will writing a blog post help me?

First, let’s understand that there is something of a crisis in the NHS.  The figure of £20 billion of savings required by 2015 is widely accepted as a fact.  This is quite interesting.  The figure first emerged a couple of years ago from a leaked McKinsey report, which the government tried to deny.  But it is a now central theme of NHS Chief Executive Sir David Nicholson’s management.  But the NHS’s budget isn’t being cut: the Coalition is protecting it in real terms.  In response we get some rather airy stuff about the increased demands on the NHS from an ageing population, medical inflation and suchlike.  But if we are cutting £20bn, we must be adding the same sum back somewhere – but we aren’t being told where.  I have a dark suspicion that a lot of it is about large PFI rents coming back to haunt us from all the capital investment of the last decade, though I’m not sure if that quite adds up either.  I find it strange that so little is being said about this.  It has the signs of a manufactured crisis to inject a sense of urgency across the organisation.

If so, then I don’t particularly disapprove.  There is a massive inertia about the organisation, with almost any change proposal meeting outraged resistance.  When I reflect on my career as a manager in the private sector, we were in an almost continuous state of crisis.  As a result we pushed through change after change, so that after 18 years the business had been transformed out of recognition both in efficiency and business model.  This was the result of simple competitive pressure.  Such competitive pressure is largely absent from the NHS, so Sir David’s success in stoking up a comparable level of crisis is to be commended.  It is clearly helping him deal with the resisters and rally supporters of change.

There seem to be two main challenges to the government’s reform strategy.  First is along the lines of “we don’t need this” – it will disrupt the process of making the £20bn worth of savings.  The second is that the reforms themselves are wrong, because they will “privatise” the NHS.  The answer to the first depends to a great extent on how convinced you are that the previous government’s infrastructure was up to the job.  This rested on three levels of organisation to commission services from a series of notionally independent providers, in turn answerable to various parts of the bureaucracy.  It is easy to think that this was over-complicated, but the three levels (national, regional and district) have a resilience about them; the NHS seems to revert back to such a structure every time people try to cut a layer out.  A more valid criticism is that the system is accountable only upwards, to the Secretary of State, meaning that managers spend too much time managing their chain of command, and not enough on the patients.  Another criticism, which may follow from this, is the sheer volume of management blather that the system generated.  Heaps of guidance, toolkits, methodologies, procedures, silly names, acronyms, and such.  The commissioning framework was called “World Class Commissioning” and involved developing eleven competences, progress on which had to be reported up the system.  This sort of thing is a charter for mediocre management.  People who manufacture millions of words that somehow don’t get to the point.  A particular worry is the lack of management with any clinical experience, and a failure to integrate clinicians into management generally.

To many this management structure was incapable of driving through the change needed, except in a few lucky pockets.  The blather merchants would succeed in populating scorecards with green spots and burying their peers and seniors in verbiage, but be unable to deal effectively with entrenched resistance from clinicians, and politicians nervous about reactions to reconfigurations.  To these critics it was essential to tear this structure up, while trying to salvage some of the best bits.  I wasn’t so sure.  I would have opted for keeping most of the infrastructure intact but bringing local political accountability into the picture, while trying to cut back on some of the thickets of blather.

But it’s too late now.  Many managers have lost their jobs; many more face the prospect of their job disappearing an uncertain future.  The damage has been done.  Far reaching reform may not have been the best idea, but we must capitalise on the current fluid situation to create something that works better than the previous version.  This may well slow down the march towards the £20bn savings in the short term – but maybe these savings aren’t quite as urgent as it suits many to claim.

But are the reforms going in the right direction?  I’m nearly up to 1,000 words already.  this is a topic for another day.

Is Vince Cable right about AV?

The AV referendum campaign is hotting up.  The No campaign are throwing a lot at it, and seem to have captured the initiative.  By and large they are deploying the same old arguments (e.g. “save one person, one vote”), which are nonsense to those that know about the system, but which still serve to muddy the waters.  What has changed is the weight of campaigning.  David Cameron is taking a very high profile; it looks like the full Tory machine is distributing literature.  The Tory friends in the press, like the Evening Standard here in London, are throwing their weight in.  Opinion polling seems to show this is paying off.

But the campaign looks more Tory by the day.  So perhaps it is natural for Vince Cable to hit back to suggest that first past the post (FPTP) is a Tory plot to win power against “the progressive majority” of Labour, Lib Dem and (not usually mentioned, but relevant) Green voters.  What helps this argument is that the Conservatives clearly seem to believe it.  They are so vehemently opposed because they think it kills their chances of ever winning a majority.  One of the Tory papers (the Mail, I think) suggested with horror that Mrs Thatcher could never have won under AV.  Mr Cable clearly thinks that Tory voters are beyond hope, but that the Yes campaign may be able to do a better job of mobilising Labour voters.  Given that the Conservatives seem to command about 40% of the vote, and that many Labour activists and older voters are sceptical, this looks like a bit of a gamble.  But how solid is his argument?  Just because the Conservatives believe it doesn’t make it true after all.

The “progressive majority” is an old idea, hatched in the 1990s (if not before) when the Conservatives were last in power.  It is founded on the observation that if you add Labour and Lib Dem votes together they pretty consistently get a 3:2 advantage over the Conservatives.  Certainly, it is difficult to see that small-state Conservative policies (much lower taxes, much lower benefits abd public spending), beloved of the Tory right, will ever command majority support.  There is an anti-right-wing-Tory majority.  But to call this majority “progressive” is a stretch.  Much of the opposition to such a right-wing agenda is conservative – something that characterises large parts of the Labour party (and dare I suggest some Lib Dems?).  Remember Tony Blair railing against “conservatism” in his own party?  It may be truer to suggest that there is an inbuilt conservative majority that opposes radical ideas, left or right.

Semantics, perhaps.  Would AV permanently stop the Tories?  It wouldn’t have stopped Mrs Thatcher.  The SDP-Liberal Alliance would have picked up some more seats from the Conservatives, no doubt.  But the Labour party of the time was so distrusted that they would not have picked up enough second preferences to take enough further seats off the Conservatives; they may even have lost one or two more seats to them.  AV is good for a political party with momentum (which sways second as well as first preferences) – and Mrs Thatcher had that.  She won because the Labour Party was strong enough to block the SDP-Liberal Alliance, but too weak to be a credible alternative to the Conservatives.  This dynamic would have been almost as deadly under AV as it would under FPTP.

But the Labour Party is a much superior political machine now, that knows it has to win votes at the centre.  For the Conservatives to beat them under FPTP and get a full majority they need other parties to undermine Labour, be they Lib Dems, Greens, or a future left-wing threat.  Meanwhile they need to hang on to at least 40% or so of the vote themselves.  This is a tall order if the Tory right was in the ascendant…but it would be more difficult for them to pull this off under AV, provided that the Labour Party made some attempt to attract middle ground voters.   Strategically Vince is mainly right.

Tactically – by which I mean up to the next election – the picture is much less clear.  As I have observed before, the Conservatives will be under attack from left and right simultaneously.  UKIP are showing real resilience and are gradually earning the right to be seen as a proper political party (like the Greens, but unlike the chaotic BNP).  The Lib Dems will want to make the best of their coalition nightmare with the voters by appealing to softer Tories.  The more Mr Cameron tries to appease one group, the more he will put off the other.  AV would make this situation much easier to manage.  So far he is keeping this nightmare at bay quite successfully – but there’s a long way to go.

AV will help stop a radical party on either side of politics take exclusive power without  genuine near-majority support.  Mr Cable is right about that.  But there is no progressive majority.  And the effect of AV (or FPTP) on the next General Election is much too hard to call.  The best reason for voting Yes is that AV is a fairer system that preserves the essence of the present one (single member constituencies; likely one party government).  Voting Yes or No because it will be good for the party you support is the road to disappointment.  For all three main parties.

Vickers Commission: so far, so good

I have deliberately paused before commenting on the interim report of the Vickers Commission on UK banking reform.  I wanted to read more about it; it didn’t help that the post office delivered my Economist several days late.  Unfortunately I still have not had time to read the report itself; let me come clean on that.  Most of the commentary seems to be that the banks have largely got away with it, and are heaving a sign of relief.  My answer is “not necessarily”.  It may be clever politics not to go for the more totemic ideas, like a full split between retail and investment banking, since that clears the path for the reforms that really matter.

The report primarily concerns itself with two things: preventing a future UK government being forced into bailing out or underwriting banks, and increasing competition between the banks.  The latter was behind one of the more controversial recommendations: the breakup of Lloyds Bank.  But I don’t think that’s the main battle.  I despair about the lack of competition in UK retail banking, but I don’t see that the costs to the economy are that large.  The main game is preventing the next bailout.

The suggested strategy makes plenty of sense.  Ring-fence retail banks, force them to hold more capital, and leave investment banks to their own devices.  The significance of the second part of that proposition needs to sink in (as this article from John Gapper in the FT (£) makes plain).  An investment bank may be “too big to fail” in global terms, but the UK government will say is that this is somebody else’s problem, so long as our retail banks are protected.  This is an entirely realistic admission that the UK government is now just a bit part part player in the world of global banking.  If one our big investment banks fails, then we don’t mind if it is bought up by foreigners.  This is a striking contrast to the approach taken by the Swiss government.

But it leads to an obvious issue.  How do you prevent a meltdown in investment banking infecting the supposedly ring-fenced retail banks?  The collapse of Lehman’s in 2008 caused such chaos not because it was so big and important in its own right, but that it was too entangled with banks that had big retail deposit bases.  A retail bank will gather in lots of retail deposits; the question is where does all this money go?  If the bank is to make money it needs to get lent out.  If this lending gets into fancy investment banking products, then the ring-fencing has failed.  There must be some pretty heavy restrictions; the assets don’t need to be absolutely safe, but we want to insulate these banks from the complexities of the investment banking melee.  This will not be easy, as John Kay points out (in another FT paywall article, I’m afraid); all that is needed is an oversized treasury department, which is supposedly there just to oil the wheels of the machine.  Mr Kay knows this from bitter experience; he saw (as a non-exec director in the earlier days) how a runaway treasury department at the former building society The Halifax took that institution down a route that led first to demutualisation and eventually its own destruction; each step presented as innovative and sensible.  The detail must be subject to intense scrutiny.

But what of those excessive bankers’ bonuses and all the outrage that goes with them?  To the extent that this is a retail banking problem, the Vickers reform surely deals with it adequately.  The only way of tacking with it properly is to turn these banks into less profitable, lower risk utility organisations which can’t afford to pay big bonuses.  That is what ring-fencing and higher capital requirements should achieve.

But the bigger problem is investment banking.  This is an international issue, and Vickers is really about damage limitation.  As I have said before, the answer is not directly regulating remuneration, but cutting the profits.  This industry must be made much smaller and less profitable.  The two most important ways are through increased capital requirements and choking off its finance (or “leverage” as they like to call it).  The Basel committee is already making headway on the first.  Retail ring-fencing, if it is done properly, will help a lot with the latter.

Banking reform is a long hard road.  There is a danger that we have “wasted a good crisis”, and the passing of the crisis’s worst peak means that the pressure on politicians to deliver has eased.  But the crisis has not passed, though many financial types waving graphs seem to disagree.  A lot of banks are still in a shaky condition – and so are many governments’ finances, including those of the USA and UK.  There may well be a steady stream of aftershocks to remind our leaders that the journey is not over.  So far the Vickers Commission is playing its part.

Why vote no to AV?

In my earlier posts on the alternative vote (AV) in advance of the forthcoming referendum, I have focused on the positive case for the reform, and considered some of the practical consequences.  Now it’s time to consider some of the arguments being put forward by people advising us to vote No, in support of first-past-the-post (FPTP).

The leading argument from the No camp, to judge by the reporting on the BBC, is that AV undermines the principle of one person one vote.  Partly this argument is used simply to confuse matters, alongside the idea that AV is complicated.  But the more serious point is that idea that people who vote for candidates who are eliminated get another go, so it seems like they get a bonus.  Meanwhile, as my local Conservative leaflet puts it: “This means that supporters of the major parties, the Conservative Party and the Labour party, will not have their votes counted more than once”.  This is a candy floss argument that disappears if you try to think about it.  AV is in effect a succession of run-off elections, with the loser of each election being eliminated between each round.  The voters of the top two parties are counted in every vote, without their votes needing to be transferred.  Far from being disadvantaged, they are setting the agenda.

But this argument leads to a more subtle one.  Voters of the eliminated candidates  influence the outcome, and these voters are less deserving.  This is endlessly backed up by a quote from Winston Churchill that AV would give power to “the most worthless votes for the most worthless candidates.”  A group of prominent historians were somehow persuaded sign a letter to The Times in support of the No vote, that managed to put this quote alongside the argument that AV undermined “one man, one vote”.  We can summarize this juxtaposition so: “FPTP means one man, one vote as long as you are not worthless.”  Supporters of AV argue that it is precisely the principle of one person, one vote that means that we must count the views of people who initially back less popular candidates.  Even if they support the BNP.  Far too much has been said about the BNP in this debate already; the BNP does not support AV for reasons that I talked about in my last post on AV.

There are rather better No arguments on offer, though you rarely hear them.  Brendan O’Neill of Spiked offers two.  The first is that AV will tend to promote insipid middle of the road candidates.  He doesn’t try to justify this claim very hard, but I think the argument goes like this: when making their choices voters will put less offensive candidates above ones that are more offensive to them.  That means that major parties with a real chance of winning a seat have an interest in selecting inoffensive candidates.  A conservative candidate, for example, will be trying to pick up second preferences from both UKIP and Lib Dems; Labour candidates will be after the Lib Dems too, and the Greens and any fringe left candidates, as well as hoping for some of the UKIP votes; this might be done simply by being less offensive than your main rival.  But it is hard to make the case that this is any more true under AV than FPTP, where the major parties fight hard for these voters’ one and only vote on the basis that only the top two parties count.  Also if a candidate is too insipid voters won’t preference them at all.  There is a more strategic argument too: FPTP suppresses spoiler candidates (i.e. breakaways from the major parties) because by standing these candidates might simply let the real enemy in.  If it is more likely that major party candidates will be challenged by breakaways, as would be the case under AV, won’t politics become more dynamic?  Mr O’Neill spoils his own argument by praising the spikiness of Australian politicians, which he puts down to compulsory voting.  But since Australia uses AV, this shows that at worst AV is not much of problem on this front.  Australian politics is full of challenges by independent candidates, many of them successful; AV helps them. (Incidentally there is an interesting analysis of the impact of AV in  recent Queensland and New South Wales state elections here, important because they use the same system that is being proposed in the UK, rather than the full preferential system used in Australian federal elections.)

But Mr O’Neill also fields a much stronger, if less tangible, argument for FPTP, which comes close to the real reason why most ordinary No voters are going that way.  FPTP is simple, direct and dramatic.  The voter focuses his or her mind on making a single, dramatic choice.  The votes are counted and the election resolved in a very clear process.  This strengthens the bond between the system and the ordinary voter.  AV is by no means a complicated system, but it does reduce the immediacy and drama of the process.  Is this enough to tolerate the problems of FPTP, with the power it gives to unaccountable party machines?  I say no.  And if it was, I would replace FPTP with a system of run-offs, like they use in France and Italy, which have the best of both worlds, but are much more expensive.

Which leaves me with the real reason that major party establishment types want a No vote.  FPTP makes it very hard for rebels in their own ranks to challenge the officially selected candidate, for fear of letting the opposition in.  AV makes it much easier for party rebels.  Candidate selection processes are subject to heavy influence from party hierarchies and give the established order real power over our political system.  Now, ask yourself, is that a good reason why ordinary voters should vote No?  Ed Milliband is very brave to see through this to wish for a more democratic political process, and support the Yes campaign.  He is consistently under-estimated by the politicos that dominate what passes for political debate in Britain.  It will be good for the country if he wins this vote.