James Gubb: Yes, competition is crucial for NHS, but these reforms are deeply flawed

WHILE tuition fees may have grabbed the headlines, Andrew Lansley, Secretary of State for Health, has faced fire from left and right, doctors and managers, the Health Select Committee and – if headlines are believed – the Cabinet Office over his plans for the NHS. It explains David Cameron's charm offensive yesterday.

Yet – and perhaps unsurprisingly – there is little clear narrative behind this opposition. Concern, at least from the British Medical Association, other trade unions and think tanks such as the King's Fund, has focused on moves to introduce greater competition, through extending choice for patients and placing commissioning and supply under the influence of competition law.

Such unease is wide of the mark. Yes, the effectiveness of competition, particularly in a field such as health care, depends significantly on the "rules of the game" being effective. But this can be achieved: recent academic evidence suggests what competition there has been in the NHS has driven clinical quality, improved management and reduced waiting times.

As one leading surgeon said to me recently: "You can't lose money through poor practice in the real world, and you shouldn't be able to do it in the health service. This is why we need competition."

More poignantly, competition – genuine competition – offers the most likely route out of the overarching issue facing the NHS currently: how to get greater value for every pound of taxpayer funding. Quite simply if the NHS fails to drive productivity at some four per cent per annum then explicit rationing of treatment, long waits, pressures for private insurance will return (and already is).

The NHS is very unlikely to achieve such productivity gains alone; there are simply too many hefty overheads and vested interests in the status quo.

Instead, as has been the experience of other industries, such gains are far more likely to come from new providers (NHS or not), with new ideas; ideas that incumbents will then be forced to adopt for the benefit of patients, no matter how hard change may be. This is competition at work: Lansley is right to embrace it.

Where Lansley gets it horribly wrong, however, is in commissioning. It is here that opposition should lie. To put it simply, any market will only as effective as the awareness, aptitude and ability to act of "buyers" within it; without this, there is little incentive for providers to improve.

And yet, by 2013, the Government plans to abolish all Primary Care Trusts – the geographically-based organisations charged with commissioning (buying) appropriate health care for their local populations –and replace them with "consortia" of general practice.

This is a big risk. First, in the space of a three-year period when finances will be increasingly squeezed, 80bn of taxpayer resource will be universally transferred from organisations that have built systems, processes and relationships supporting the commissioning of health care, to new organisations starting largely from scratch. This will have a negative impact on productivity in many areas.

Second, the reforms follow a long line of centrally-driven initiatives that "move the chairs" in the NHS, without fundamentally altering lines of accountability. GP consortia fundamentally will be statutory bodies placed in a hierarchical framework reporting first and foremost to Whitehall, and not to patients or the public.

Third, it is unclear that GP consortia in general will do a better job than PCTs. For one, while greater clinical input is needed in commissioning, GPs also have commercial interests as providers and a powerful trade union (the BMA) staunchly against the idea of competition in the NHS. Not all consortia will work above these influences.

The problem Lansley is grappling with is, of course, that all is not well with PCTs as things stand: some are doing a good job, many are not. Yet, there is much that could be done to improve their effectiveness without structural reform: not least giving them the same political support and competitive tools now being given to GP consortia.

More fundamentally, in mandating the universal abolition of PCTs by 2013, the Government risks embarking on a dangerous course of what Sir Karl Popper once called "utopian" social engineering: a romanticism that has often led to drastic errors on a huge scale.

Far better to lead reform on a human scale: allowing the undertaking of the small-scale experiment, the watching of results, the mimicking of what works and the discarding of what doesn't.

What might this entail? First, take the shackles off PCTs and assess commissioners by the outcomes they achieve, not processes followed. Second, enable entrepreneurial GPs (such as the 52 GP "pathfinders") and other organisations to take over PCTs following a rules-based procedure and failure regime, not central direction. Third, allow commissioning organisations to change organisational form and governance structures, including to mutuals or co-operatives. Fourth, work towards a system where patients could choose who they want to commission their health care, rather than the state deciding it for them.

With such an approach the NHS could build on the best of what currently exists, and unleash a wave of entrepreneurialism in areas where it is failing. Most importantly of all, it could focus squarely on driving productivity like never before.s

James Gubb is director of the health unit at Civitas, an independent social policy think tank www.civitas.org.uk/nhs