A Manifesto for Lord Mandelson- 8 (Public Services)

Hurricane Trump
The nation’s security fundamentals are in crisis, so it may seem untoward to deal with other details of the relationship with the US and Europe. We take no satisfaction that the US has demonstrated so insensitively the asymmetry in our defence relations with which we began our post on the subject. We will return to security in our conclusion next week. Here, we turn to the final piecemeal subject in which relations with both sides might be cultivated: public services. 

Fundamental situation in public services
After the chaos and disorder of the 1970s engulfed local authorities, Thatcher and Major encouraged them to replace “direct labour” provision with contractors. Some came from Europe, including RATP for buses and Veolia for sanitation. After Blair registered that education was held back by the collusion of local education authorities with teachers’ unions, Blunkett instituted academies, privately run and directly funded by central government. These have brought standards up smartly, but their independence is now under attack by Phillipson’s Children’s Wellbeing and Schools Bill. This threatens a return to the conditions making for Britain’s pre-academy underperformance in education.

Regardless, the balance of this note extends this approach to the largest item of public service, health, together with the fastest growing, social care. As with last week’s  post about energy, this is not current policy, so once again it should be taken as a Plan B. It is not clear how this might be triggered. British healthcare is largely publicly funded and provided, all under the aegis of the NHS. For decades, it has been viewed by the Treasury as a money-pit, with its post-Covid productivity failings becoming notorious. In consequence, the Head of NHS England has just been forced out and her organisation is to be shredded as duplicating activity elsewhere. One day, the NHS will cease to be able to turn lack of provision into an argument for more money. So far, we are not there. It retains its grip on the public imagination and marshals a formidable lobby. Policy may be reversed by thee increased military spending now in prospect, presaged in our post on defence. Social care presents different prospects, as although it is generally funded by central government and disbursed by local authorities, it is almost entirely provided privately. 

Negotiation objectives
Thes premise of these posts has been that the UK should engage in parallel negotiations with the US and Europe. They have argued that, where possible, eg, tariffs, taxation, piecemeal inward investment and free trade, Lord Mandelson and his colleagues should orchestrate a bidding war between the two; or bargain British strengths in one field, eg, labour markets and  energy for concessions elsewhere, as well as, more narrowly, fishing rights for border control. Then again, in some sectors only the US has something to offer, eg, defence and housing. In the instance of public services, we see the US and Europe as having distinct and non-conflicting attractions, if only we can open our eyes to them. Specifically, the US offers skills and technology in healthcare provision; Europe in funding. This simplifies the task of our negotiators - always assuming they can bring themselves t0 raise the topic!

Dealings with the US
Four out of the world’s top five hospitals are in the US; none of the top 25 is British. Cleveland and Mayo Clinics already operate here. This introduces scope for Lord Mandelson to explore best of class provision. Even so “privatising the NHS” is unsellable at present. If, however, the Treasury were to do its sums, it would discover that the realisable value of the NHS’s hospitals approaches £300bn, not a sum to be sneezed at. Parenthetically, the US also has world-class integrated systems, combining funding and provision of hospitals, specialist clinics and general practice. The largest private provider is Kaiser Permanente, whose labour productivity is 40% above that of the NHS. Unfortunately, Lord Mandelson will have to set this aside as impolitic. Neither public nor professional opinion in this country is in a mood to lift its gaze in this direction, for as long as Brits remain possessed by the cautionary tale they take from American healthcare insurance. As to social care, the US provides attractive counterexamples of retirement communities (so too Australia and New Zealand), but the principal issue is land use, where we’d like to think there may already be some movement - see our earlier post on housing. This should open the door to domestic investment.

Equivalent to Europe
If Lord Mandelson can steel himself to raise healthcare provision in the US, his colleagues in European capitals should be doing likewise for funding. As noted above, while we were in the EU, the precedent was established for public provision by European contractors. This continues successfully and could make exploring European models for healthcare funding an easier domestic sell than the US equivalent. Insurance companies would shell out for future healthcare funding according to its continuity. The net present value of the earnings stemming from public cash flows is some £250bn, if funded from taxes indefinitely; reducing to £100bn, if migrating gradually to private provision beginning after five years. These figures exclude social care, where similar calculations show values of £20bn, if publicly funded indefinitely; and £12bn, if migrating to private provision. More sums not to be sneezed at.

Next: Conclusion