Speaking at a fringe meeting at the Conservative Party Conference in October 2002, Ruth Richardson, former New Zealand finance minister, outlined what real reform of the British public services would mean.  

Public services remain very largely owned, purchased and regulated by governments.  Their poor standards are an example of government failure, not market failure.  

On health and education, the “gold standard” of reform would be to end state monopoly, with competing private provision and total consumer choice.  Services should be funded by a mixture of state entitlements (such as vouchers or tax credits), private insurance and payments out of income.  

There should be prices so that people can judge where resources will be used most effectively.  

The winners would include the least well-off, who could exercise choice for the first time, and public service professionals, who could be better rewarded.  The losers would be poor service providers, bureaucrats and trade unions (but not their members) who put producer interests before the public.  

Her lecture can be viewed at www.reformbritain.com.

Against Ruth Richardson’s criteria, the Government’s new policy of foundation hospitals, finally settled last week, does not match up.  

The hospitals have welcome elements – in particular they will own themselves and set their own pay rates.  However they will be tightly regulated by the state, for example being subject to the targets set by the Department of Health.  

In a leader, the Financial Times called foundation hospitals “political posturing to hide the government's own inability to let go”.  Their freedom to set pay, likely to lead to large pay rises, could mean higher public spending.  

There could be even worse consequences for public spending under Conservative proposals to allow them freedom to borrow, which the Financial Times referred to as “Railtrack on a trolley.”

Like the other political parties, the Conservative Party last week offered much rhetoric on choice in public services, but limited policy to make it a reality.  

On education, inner city parents will be given the opportunity to move their children away from failing schools, but only at the discretion of the Government.  The vast majority of parents would not be able to exercise choice and the vast majority of schools would be owned and run by government.  

On health, the key policy announcement was financial support for people buying private health care.  

The conference season has been dominated by talk of decentralisation, but no party yet has the policies to reform public services around the principle of choice.

From Reform bulletin 17.10.2002