Julian Le Grand argues in his book (The Other Invisible Hand, Princeton University Press) that the way to ensure high quality services in health and education is to offer choice to users and to encourage competition among providers, writes Mary Harney.
Anyone interested in a succinct, engaging account of new ideas for public service modernisation in the UK, in health and education particularly, will race through Julian Le Grand's latest book, The Other Invisible Hand: Delivering Public Services through Choice and Competition.
Le Grand is professor of social policy at London School of Economics. The fact that he was Tony Blair's senior policy adviser from 2003 to 2005 adds spice. As the title suggests, Le Grand is advocating an increased role for competition between providers of public services in health and education, and increased empowerment of users through choice. While the style is light, the thinking is certainly not simplistic.
This is not an argument for the privatisation of public services or the nonchalant handing out of money to patients or parents to fend for themselves on health and education. Nor is it, thankfully, concerned with the method of raising finance for health, which can often distract from other policy issues. It is, rather, about harnessing the positive aspects of competition between providers and choice for users. The purpose is to support interlinked social goals of equity, efficiency, improved health outcomes, social cohesion, the avoidance of segregation and better social mobility.
Le Grand sets out four models of the organisation of public services: command and control, trust, voice and choice and competition. Command and control is where performance measures and targets are set centrally in the administration.
From a policy point of view it has some advantages in terms of budgets, planning, and setting priorities. But there are problems of those in the system gaming the targets and not sharing priorities. Most of all, a system that relies wholly on instructions from above will be demotivating and demoralising for professionals like teachers, doctors, nurses and social workers.
But is the alternative, as favoured by professionals, "just trust us"? Relying on trusting providers to do the right thing for patients and pupils can't get over problems of ensuring that limited resources will be used fairly and effectively. Le Grand also points out that while providers see themselves as well-motivated "knights", some will inevitably behave as self-interested "knaves".
The issue of knightly and knavish behaviours is real. Knavish behaviour could even become institutionalised, and one professional group may not trust another, all to the detriment of the public.
The third model he calls "voice". Here, patients, pupils and parents would communicate their needs to providers, and the government would fund the outcome of that interaction. Individual and group advocacy would have a much greater role in determining what happened. The difficulty here is that an excessive reliance on voice clearly favours those with the wherewithal to give voice to their needs: the middle classes, the well-connected, the talented advocates.
Le Grand says: "No system of public service delivery can or should dispense with targets (or command and control, more generally), voice or trust". Each has a role, but what they don't provide are the right incentives for providers. There's where new elements of choice and competition come in.
Le Grand takes some trouble to set out what he means by choice and competition and challenges some myths, too. For example, he refutes the notions that choice is a middle-class obsession and that people don't really want choice. He cites studies to show that majorities want choice of schools, choice of doctor and choice of hospitals if a treatment can be arranged faster.
As regards competition, Le Grand also claims that ownership (for-profit, not-for-profit status) is not the issue. Not-for-profit institutions work to increase their power and diminish threats from competitors as much as for-profit providers. All this leads to ideas for how competition and choice can be introduced into health and education services to achieve public policy goals mentioned above that are widely accepted.
Choice has to be real. He cites positive results and value from cash payments to support patient choice for community-based long-term care supports. But he recognises that patient budgets and choice for areas like cancer care would not be appropriate.
Interestingly, in relation to choice in education, he puts forward an idea for a higher budget or capitation payment for children from disadvantaged backgrounds.
Competition also has to meet certain conditions to be real. Effective rules to avoid cream-skimming in health and education have to be in place too. This means that total control over admissions - whether to schools or hospitals - can't be left solely in the hands of those with an economic interest in different types of admissions.
There is an end chapter about the politics of choice in the UK, and two afterwords: one by Alain Enthoven, the legendary Stanford University health economist, and Lord David Lipsey of the Social Market Foundation.
Both give praise, more interestingly in the case of Lipsey, because of his own scepticism about choice in public services. He says the breadth of Le Grand's evidence "has weakened me as the banderillo weakens the bull. Headlong charge against this remarkable volume is not possible."
I suspect that many other readers will react in the same way.
Mary Harney TD is Minister for Health and Children
