The people must decide their fate

Small-minded conservatives regard 'choice' and 'consumerism' with disdain but, says Nick Herbert, together they can save the public services There's a new buzz word at Westminster: choice. Michael Howard is promising it for public services. So is Tony Blair.

Bemused journalists are asking, with reason, if there is anything to choose between them.

The answer lies in a little noticed passage in Howard's speech last week: 'We must transform the government's role from being a monopoly producer and manager of healthcare and education, to one where it guarantees and funds everyone's right to choose.' In this single sentence lies a potentially revolutionary policy and a path down which Labour is unlikely to tread.

Currently, government funds schools and hospitals via a multitude of intervening quangos. A growing army of civil servants is required to administer the resources and direct how they may be spent. The bureaucrats siphon off quite a bit of the money, so that by the time it gets to schools, for example, headteachers only have full control over 60 per cent of their funds.

In its true form the choice concept, like all the best ideas, is simple but radical. Instead of funding schools via local education authorities, government effectively puts the money directly in the hands of parents. Armed with formidable spending power (about £5,000 per pupil a year), parents are then allowed to choose the school in which they spend it. This could be state or independent. The same principle can be applied to healthcare.

The effect would be dramatic. Dynamic and innovative new producers could supply services as the barriers between state and private provision are broken down. They would be strongly incentivised to be efficient, because consumers could choose between them. Services would cost the taxpayer less, but would receive more investment. Professionals would be rid of political and bureaucratic interference, and would look instead to their customers. Politicians would no longer try to manage services, a task for which they are illqualified. Perhaps most compellingly, the poorest in society would for the first time get the same choice and quality of service that the most affluent in society routinely expect.

Those of us who evangelise about choice are no longer dismissed as Hayekian ideologues. Never mind the theory: we can see it work in practice. In 1917, as the Bolsheviks seized Russia, more enlightened reformers 1 gave parents in the Netherlands a constitutional right to choice. Today about 70 per cent of children attend independent schools — funded by the government. In 1990 a Democrat mayor, John Norquist, gave choice to the poorest parents in Milwaukee. Today his scheme is spreading across the United States, with teachers' unions and the Democrats finding, to their discomfort, that support for choice is strongest among the black and Hispanic communities.

It is the potential for choice to empower the poorest parents and patients that is causing some on the Left to re-examine their opposition to the idea. In a brave speech last year, Tony Blair himself pointed out that the welfare state has never delivered equity. And of course this is true. The poorest in society suffer the worst healthcare, the weakest schools and the highest levels of crime. When the Prime Minister's lieutenant, the famously ex-communist John Reid, sets out the 'leftwing case for choice', arguing that government should 'extend to the public services the benefits of consumerism that have been won by working people in many other aspects of their lives', you know something is afoot.

But the forces of conservatism, for whom 'choice' and 'consumer' are dirty words, are marshalling. Left-wing Labour MPs now brandish a little known book by Professor Barry Schwartz, a psychologist who argues that too much choice makes us miserable. Perhaps he has a point, and we should abolish Sainsbury's and Tesco in order to return to the cheery days of food rationing and powdered egg.

Other politicians — including rather too many Conservatives — say that people don't want choice; they just want better local services. At the core of this argument is the patronising belief that MPs are sophisticated consumers who know how to organise a foreign trip, but the public couldn't really be expected to exercise such discrimination. On this logic, we would have a nationalised holiday service on the grounds that the state could decide destinations so much better than customers of lastminute.com. Of course people would like to have choice but, as Henry Kissinger said, the absence of alternatives clears the mind marvellously.

But it is the former health secretary, Frank Dobson, who reveals the deepest seam of Labour opposition to reform. The government 'should stop ... prating on about ... the merits of the private sector'. Even Blairite reformers have an ambivalent attitude to the notion of profit-making in public sector delivery, variously beating up the private sector (Railtrack was a favourite target) or contracting with it, depending on the expediency of the day. Half of the government's new diagnostic and treatment centres are commercially run. Yet ministers still attack the Tories for policies which they claim will 'take money out of the NHS'.

So when Tony Blair talks about choice, he means choice and greater diversity within the public sector. Last week he pointed out that half of secondary schools are specialist schools. But if that's the case, and they have the same curriculum, inspectorate and constraints on headteachers, how special are they? Real reform doesn't mean rebranding a school as a 'beacon', or a hospital trust with 'foundation' status. It means dismantling the controls and targets which have constrained these institutions, breaking the state's monopoly of supply and — here's the rub for the Left — allowing competition to drive up standards.

At the last two elections, the argument about public services was about money. Not any more. Public services have never had so much cash. Healthcare and education spending now exceed the EU average. The NHS will shortly be more expensive than France's budget-busting health service. Although they have questioned the effectiveness of such spending, the Conservatives now want to pay as much, if not more. 'Invest to reform' is their new cry. Like Ken Clarke's ludicrous 'spend to save' programme, it's not a phrase to try on your bank manager.

When their slogans are the same, how can we judge whether the political parties will deliver? Michael Howard set the yardstick last week. Our ambition', he said, 'is to give everyone the kind of choice that today only people with money can buy.' Mark his words. The same standard of healthcare as you could buy with Bupa; the same standard of education as you could buy at a decent independent school — for everyone.

The state's rising spending power could now bring such apparently improbable outcomes within reach. After all, everyone has health insurance in France and Germany. The question is whether the politicians have the will to move beyond the rhetoric of choice to deliver such fundamental change.

Nick Herbert is Director of the independent think tank Reform, www.reformbritain.corn.