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NHS Reform: Goodbye Year Zero

Paul Mason | 10:19 UK time, Monday, 9 May 2011

What's changed over the weekend, in the light of the Lib-Dems' drubbing, is not the Coalition's willingness to re-look at the NHS reforms; it's the scale of the re-appraisal.

Having tried to do several things at once, they may now struggle to achieve just one.

Having drifted into presenting the reforms as a kind of market-led Year Zero (and allowed numerous private sector participants to hail it as such) there may now be just a series of incremental changes. But this creates its own problems.

At the heart of the NHS White Paper (July 2010) were three principles:
1) Money follows the patient, allowing GPs to choose the best care provider, cutting out the last part of the Labour-invented health bureauracy (the PCT/SHAs)
2) A focus on outcomes not inputs: so an eventual move to patient reported outcome measurements (PROMS) rather than targets for numbers of operations done
3) Clinicians rather than politicians or managers in charge of decisions on care; this meant the effective "denationalisation" of the NHS, creating an arms length body nationally and allowing failing hospitals to go bust.

The White Paper was, if nothing else, intellectually coherent. The Conservatives, in opposition, had concluded that the internal market introduced by Labour was functioning badly; failing to boost productivity; failing to bear down on costs; failing to give bang for bucks to the patient or the taxpayer.

Being Conservatives they concluded what was needed was a more perfect, less interrupted or constrained market. So they set about constructing a more pure one.

First there would be a clear "customer": the GPs, who would hold up to £80bn a year spending power on behalf of the patient.

Second there would be a clearer measure of value: PROMS - patient reported outcome measurements would replace input measurements (ie number of operations done, lengths of stay in hospital etc).

Third there would be a completely level playing field between the public and private sectors in terms of provision of the service: a free as opposed to an unfree market.

In addition the move to private and charity-sector provision would "create the largest social enterprise sector in the world" - fulfilling the touchiest, feeliest of the Big Society goals; mutually-owned clinics etc.

It's important to unpack where it's all gone wrong, and how it might be put together again, because the Bill is currently being torn apart by three sets of people: the Libdems, responding to their left-leaning voting base who want no private involvement (none at all, as Simon Hughes said yesterday); the NHS workforce and professions, who all have varying degrees of concern about the workability of the project; and Conservative health policy wonks and civil servants who fear (to their despair) that the whole thing only works if you do it all at the same time.

If you take the "pure" market as designed by Andrew Lansley, with its GP customer, its PROMS measure of value and its newly neutral stance on who can provide services, what was the ideal outcome supposed to be?

Actually it's the one numerous Labour reforms hinted at but never enacted: a publicly financed market in NHS care from which the private sector can at last make serious profits and into which, eventually, middle class customers (aka patients) can add-on services through insurance, co-payment etc.

Early on, Tory ministers and outsourcing company chiefs envisaged a mass of mutually-owned clinics (with protected pay and pension rights for the medics and nurses etc who formed them, but not for the next generation of employees); they envisaged that 30+ NHS trusts would go bust, allowing the private sector to take them over and estabilish a new footprint in the secondary healthcare sector; and that private "commissioning support" companies would swarm into the GP group practices, providing profit-generating services there.

It was supposed to be win-win. The health outcomes would get measurably better; patients would feel they had some modicum of choice; the professions, especially primary carers like GPs and practice nurses, would feel like they had a bigger stake in the NHS; the private and mutual sectors would gain access to business opportunities in the NHS.

There was only one problem. As numerous medics and health experts pointed out, there was no guarantee it would work.

The transition costs alone, in disruption, would be huge. But above that, the reason serial Labour health ministers had constrained the market, adopting state-ist rather than truly market measurements of performance, was: a pure market can go chaotically wrong, or begin to deliver benefits to the wrong participants.

So first, there's been a marked reluctance among health professionals form mutuals. As one leading consultant at a London hospital put it to me: "yes we could take over our clinic and run it ourselves; but it would pit us in competition against our neighbouring hospitals whereas our medical ethos is one of collaboration".

GPs apart, there were very few material inducements for health professionals to take part; meanwhile a few former managers were going around claiming to have enhanced their salaries by moving to the "commissioning support" sector. True or not, this has played very badly with NHS staff.

Second, there is fear among the public that the majority gets a second-class service. One health outsourcing company boss, who'd been influential with Mr Lansley at an early stage, put it to me this way: "even though there's no co-payment, what you could get are GP surgeries totally dedicated to serving professional middle aged men, specialising in prostate screening, cholesterol etc; and then next door maybe there could be a private health company offering the stuff you don't get on the NHS - prompt physio for all those squash injuries; alcohol counselling; a gym etc".

This appealed to me, put that way, as I am a professional middle aged man. But as the thought occurred to non-professional, non-sharp elbowed groups that they would be left dumped in surgeries with no middle class people at all, indeed a surfeit of the neediest and unhealthiest, the term "cherry picking" gained currency. As measures were put in place to reassure people about cherry picking, some of the advantages to the middle class (who governments are perennially worried will "desert the NHS" if they are not molycoddled) seemed to fizzle out.

Third, there is an obviously un-won argument about private provision. One boss of a private treatment centre group complained to me, during the Labour years: "The NHS is a learning organisation; we will start out beating its performance but given time it will copy us and do it cheaper; we don't need a level playing field; we need the playing field tilted in our direction." One measure he requested was to pay, like the NHS, zero VAT.

Though private provision - of core NHS services - is at the heart of the White Paper, large sections of the public remain unconvinced that this will deliver anything more than profits to the private sector at the expense of care.

One reason is that the lessons of Labour's experiment with ISTCs - factory style treatment centres staffed by indefatigable South African and Aussie eye surgeons - was not 100% successful. Outsourcing overnight GP services to private companies has, likewise, not been acclaimed as a major success.

If this argument about private provision had been aired in the general election, the government might have had less trouble winning it now; but it wasn't.

And then there are the minor, cultural niggles which turned out to be major. Many GPs don't want to be businessmen, wielding their part of the £80bn. They don't want to be part of a giant clinic but want to go on being family doctors. It took some time for this feeling to filter through to the GP organisation leaderships, but eventually it did.

Meanwhile, many patients, wondering already whether the amount of time their GP spends staring at a computer screen during consultations, were worried that the new arrangements create a conflict of interest: how does the GP take the best decision for the patient when his/her profits depend on the most efficient use of the money attached to that patient?

So, predictably once people realised what's involved, the reform has stalled. But what, logically, can be saved?

The patient-reported outcome measurement was always something that, given time, might supplant the pure measurement of inputs, if it can be proven technocratically to be better. Given time, in any kind of market - even a constrained one - a better measure of value can deliver better results.

Private involvement: well that is already looking more constrained at the level of care provision; private providers were complaining they did not have the capacity to deliver in the short term much more than 5-10% of care (Labour's ceiling on private provision, once, in the last days of Blairism before Andy Burnham took over, was 15%, if you remember). So what you could do is let the private provision angle - and the mutualism - evolve over time.

What you cannot do is compromise half-and-half on who spends the budget. Either it is the old commissioning system, half dismantled but now having to be reinstated; or a new one based on GPs. To save the latter proposal you would have to address the problem of conflict of interest, cherry picking and place a limit on the amount of a GP's budget that can be spent on "commissioning support".

The problem is, then, none of this becomes a revolution; it becomes a technocratic evolution of the old system by trial and error.

But then what you do not need is the "denationalisation" of the NHS. This has been at the heart of the White Paper, and is what many of the Royal Colleges etc are worried about; creating an arms' length service, where the NHS is not controlled by politicians; where there is no duty of the Secretary of State to provide healthcare as now; and where a hospital can - like a university - go bust, disappear, be privatised etc.

The White Paper's problem lay in trying to do many things at once: solve a productivity problem; a health outcomes problem; to create biggest mutual sector in world; to mend what they said was a malfunctioning half-market system; and to save money - all at the same time. We will never know if the system as designed would have worked, because it is already clear parts of it will not get through.

If you started with just one of the aims outlined above it would choose itself: saving money is a given; and health outcomes are the only measure the public actually cares about.

All the rest could be scrapped, or left to evolutionary non-legislative change if you wanted to. But it would not exactly be a great example in systems design, and you could not present it as Year Zero.

Finally there is a missing player in all this: Labour. Apart from campaigning to "defend frontline services" and stop an "expensive top down reorganisation" there is little sign of a comprehensive policy (it's in review of course). As 2015 gets closer, health professionals are going to want to know how much of what gets through this year Labour would unpick.

There are huge strategic problems facing healthcare in Britian: fiscal austerity, an ageing population, the patchy outcomes of the present system and the growing expectations of patients; de facto rationing; plus the timebomb of an essentially privatised adult social care system.

What they demand is a comprehensive strategy. What's probable now is that we get a less comprehensive one.

Comments

  • Comment number 1.

    GP's - heal thy selves. These essential private cottage enterprises are simply not equipped to make optimum and strategic healthcare decisions and that is why PCT's originally primary care lead, grew into fully professional organisations subject to regional and national demands. There are also enormous potential conflicts of interest and governance issues.

    Shamefully the proposals were anticipated in Labour's creation of its own internal market and in particular the character of foundation trusts which was no small step in the direction of privatisation and disengagement for the National bit of the NHS. Privatisation will inevitably lead to marketisation of health services because that is what private companies do - marketing, margin and yet more margin.

  • Comment number 2.

    It's going to be a shame when the comments here move to the news less than (interesting, the mathematical character one can use to save space, saves a lot of space after being applied, unfortunately) 400 chars coming onstream and doubtless, ultimately, twitter levels so worshipped from on high.

    And if also imposed on authors too, more so.

    But then, as always, maybe exceptions will be made. Uniquely.

    Progress, eh?

  • Comment number 3.

    The Coalition Government has done it again: juggling while trying to solve productivity, health & budget problems, save money...Intellectual coherence is not a synonym for making sense.
    A completely level playing field between the public and private sectors in terms of provision of the service is no longer NHS; it is two-tiered service.
    You cannot, CANNOT, change the NHS into a pure, capital market, as in profit and loss. When you open the NHS thus that the private sector can at last make serious profits what you will get is profiteering.
    The huge problems facing health-care in Britain from austerity to aging are facing most other countries, including my own - Canada.
    Strong accounting and accountability will be required in Canada, but Health Care itself is sacrosanct; in other words we adjust where adjustment proves needed.
    Not a huge amount was said by the Conservative Party about health-care reform before the last election. Over the last year, a series of proposals and white papers have been launched - which suggest that the Tory commitment to the NHS is to maintain it by changing it into something unrecognizable.
    There is a bit of conciliatory news: Research conducted with GPs in Cumbria, where the new system has been tried, shows that many prefer it, while others await hard evidence, knees shaking. Rushing into reform could leave a system that looks a great deal like the current one, under a different name.
    What about new medicines? How will the new value-based pricing mechanism work out? Can VBP really guarantee greater patient access when it continues to use cost thresholds, above which the NHS refuses to reimburse? And will this pricing system simply reinforce the one-size-fits-all approach to health-care in the NHS, which concentrates on the value of drugs to all patients vs the individual patient that needs them?
    I'm not sure where I stand...Will all these reforms (too many at the same time, confounding my poor little brain) reduce NHS costs, or simply leave more people to suffer mental agony while they get sicker and sicker, or worse watch their beloveds get sicker and sicker?

  • Comment number 4.

    In a capitalist world only one value matters - profit.

    All barriers to profit are to be broken down.
    Health care in the UK - the NHS - is a barrier.
    Private providers want to take control of the hospitals.
    This will then open the door for two-tier health care (yes, we already have it - those with money go private), whereby sold-off hospitals will provide basic state paid cover, but charge for 'upgrades'.
    Profits will be made from taxpayers & patients paying for 'extras'.

    The NHS isn't safe.
    Principles sold for money.

  • Comment number 5.

    What is needed is re-nationalisation of Foundation Trusts, get rid of the Dad's army of Non-Executive Directors, democratise PCT's (or consortia), create a real role for local government, restructure GP surgeries into proper health centres with most patients dealt with by healthcare technicians and nurses. Allow the retirement bulge to take its natural course.

  • Comment number 6.

    WHAT COMES OUT OF A MANGLE DOES NOT NECESSARILY TELL OF THE TRANSIT

    And the ubiquitous 'Manglish', spoken by ethnic staff - from surgeon, right through to drongo - though clearly a lingua franca in a mangle, only serves to increase the pain.

    What is more, assessment IS NOT SIMPLY ABOUT PATIENT OUTCOMES it is also about COLLATERAL DAMAGE to all those 'support troops' who must go through the NHS mangle - albeit incrementally and differentially - during the 'patient experience' (going forward).

    My post #5 on the 'Monday' thread is germane. Westminster lacks institutional intelligence/aptitude and, due to its structure and ethos, is not primarily conducive to good outcomes OF ANY SORT.

    Nuff sed.

  • Comment number 7.

    (1) Part of the problem of "free" market ideology, is that very few major markets are free: they are usually biased towards major providers.

    (2) An example is what has happened to the NHS dental service. Some people now pay through the nose for private treatment; others have difficulty in getting treatment at all. We did have an NHS dentist renting space in our local doctor's surgery. Last year, the surgery gave him notice to quit and he chose to retire. At the same time, the doctors applied for the contract to treat dental emergencies in the local area. They didn't get it. Now former NHS patients need to travel (ie drive as public transport is limited) to a small town about seven miles away.

    (3) We are a crowded island. Do we have space for competing hospitals? Not in the cities. On the other hand, in rural areas there aren't enough people to justify them. It would end up with even more of us needing to travel 50 miles for treatment.

    If significant numbers of trusts were allowed to fail, would the PFI companies be allowed to make a loss or would they be baled out?

    (4) http://www.bbc.co.uk/blogs/newsnight/fromthewebteam/2011/05/monday_9_may_2011.html? (To avoid repeating myself.)

  • Comment number 8.

    To Adam Smith, laborers, like any other commodity, could be produced according to
    the demand. "... the
    demand for men, like that for any other commodity, necessarily regulates the
    production of men."

    In the brutal logic of a new health market fiscal drag and profit maximisation will get the numbers of defunct post industrial ex-working class down to a number sufficient to clear the market. Just a case of no country for old men (or women)

  • Comment number 9.

    Private health firms will continue to be paid for procedures they did not do, is that to continue? Will the NHS be turned into a giant version of the care homes 'business'? What a nightmare.

  • Comment number 10.

    they are after your NHS......fight them off, it is yours!

  • Comment number 11.

    Milligan's modified epitaph may have read...

    'I told you I was ill....and that I would be paid at the end of the month!'

    ...had he lived a little longer.

  • Comment number 12.

    AH YES - THE PFI FACTOR (#7)

    Need you ask Sasha? PFI means PERSONAL FRIEND INTRANET. 'They' are close chums with 'them'. Failure is not a perception - well, not PERSONAL failure. And they just leave the wreckage and cost for us.

    It's what Westminster terms: HONOURABLE. While the Westminster Ethos endures, 'trickle-down' is working a treat. Not wealth and wellbeing but lies, deceit and hypocrisy. It's as good as on the curriculum. The shite hour?

  • Comment number 13.

    Paul writes:

    GPs don't want to be businessmen, wielding their part of the £80bn. They don't want to be part of a giant clinic but want to go on being family doctors. It took some time for this feeling to filter through to the GP organisation leaderships, but eventually it did.

    This is a very important point. GPs see themselves as providers of care, not rationalisers of care. Moreover, they want to be seen by their patients as providers. Once patients feel that their GP does not have their interest at heart all hell will break loose. The least worse result will be patients going to A&E and WICs instead of their GP. The worst result could be violent!

    Overall it seems very simple minded to think that the private sector is more efficient and effective than the public sector purely because it's driven by profit. The public sector is driven by a strong sense of public service. I don't think you can compare the two, or use them both in the same system.

    If you want the NHS to be more efficient and effective then we should nationalise all the GP surgeries so they are more accountable and responsive to public needs. GPs can be paid like the way consultants are - by salary. Primary Care is a monolith within the NHS that opposes change and only serves the taxpayer when money is thrown at the practice managers and lead GPs to 'incentivise' them to help their patients.
  • Comment number 14.

    WHAT PROFIT A MAN (#13)

    No one seems to know (or want to realise) that if you move a not-for-profit enterprise into the commercial arena, IT HAS TO MAKE CUTS/EFFICIENCIES TO PAY OUT THE PROFIT. So, initially, nothing is gained. This comes violently home when (say) the private railways sub-contract, and sub again (say) track maintenance. Nuff sed.

    If integrity was part of our culture, state services would function well. But with Westminster as our beacon of honour and decency, we are stuffed.

  • Comment number 15.

    Speaking as a descendant of both English and Scottish puritans I do get bothered when politicians pursue purity when all that most of us want is something that works. There are a lot of things wrong with the Health Service but there are a lot of things that are right. What is needed is a competent shirt-sleeved management to sort the wheat from the chaff and not rewarded for closing things down.

  • Comment number 16.

    A relative of mine runs a university department in a science discipline but because he is a good teacher he runs a department that trains good researchers who then go on to work in other university departments run by more commercial professors. The two complement each other. The same applies to General Practitioners. Some will be brilliant at dealing with patients but others better at organising and running clinics. Thus we improve productivity and value by allowing everyone to do what they are good at.

  • Comment number 17.

    You are all missing the point. We are too good at finding ways to cure or temporarily mend 'things' that are 'wrong' with us. The NHS has no mechanism for making choices about what will be funded and what will not. Meanwhile the potential spend by the NHS in response to increases in available treatments continues to go up. But the electorate, in their wisdom, demands that taxes are reduced, BUT not at the expense of the NHS. What is a politician to do?

    He cannot be seen to take decisions to reduce the availability of NHS services. That is politically unacceptable. So we reach the point where yet another attempt is made to devolve the problem to the GPs. Give them responsibility for budgets. Then reduce NHS spending and pass decision making buck to the GPs by many devious slights of hand.

    It's actually not that bad as a way of giving local populations the service that is appropriate to their needs. Demands are different in different parts of the country. No national policy can determine the range of services that is 'right' for every locality. Avoid the flack, delegate decision making on priorities to the GPs - what a win.

    There simply is no equitable system for allocating limited health care resources to unfettered demand created by free at the point of delivery services of increasing ability to 'treat' more and more 'things'.

    The answer lies in the market. The ultimate democracy. Vote for cosmetic surgery/ a few more months of suffering by being prepared to pay for it.

  • Comment number 18.

    wetshave - great post. The electorate needs to grow up rather than demanding more whilst asking for lower taxes. Plus the oldies need to stop living so damn long. They don't enjoy the last years in most cases anyhow. We see this pattern over and over with the silly Brits.

    Everyone should go to uni, no matter how dumb they are, because it's their right. Never mind that as the percentage of people going increases the return diminishes, thereby increasing the real cost to all.

    Everyone should get full health-care, no matter how hopeless the case, or how trivial. Again as you note, as spending increases returns diminish.

    We have to be grown up about this. I think youngsters need make these choices though as the current generation seem unwilling to tackle them, preferring to take refuge in liberal platitudes rather than real-world choices. NICE needs to be a bit less nice. Let's start by starving fat people instead of stomach ops! No representation without responsibility.

    I fear we are already in a real mess. We should have taken to the streets when Davina McColl was a Question-Time guest. This was a clear red flag on the declining standard of our education system.

  • Comment number 19.

    @Ben

    You have fallen for the TINA myth hook line and sinker. Vested interests want us all to keep taking the bait.

  • Comment number 20.

    Interesting read, but let me caution you on "outcomes". Who determines them?

    PROMs are an issue because patients are not qualified and do not know what their condition would have been had they not had the medical intervention. Recently, "evidence" from PROMs have been used to deny patients hip replacements because it is said that a proportion of patients did not report a benefit from the procedure and this is used to justify denying others. Sorry, but I want a clinician to make that decision, I don't want that decision to be made based upon a patient who cannot remember how much pain they were in before they had their hip replaced.

    If outcomes are based upon clinicians then we obviously will have a conflict of interest because if the surgeon determines the outcomes of his/her work they will be inclined to be more optimistic. If another clinician determines the outcome then you have an additional expense of a consultation.

    We have to decide why we want to measure "outcomes". The current policy is to use "outcomes" to determine productivity and hence it is a financial measure. I want the patient to be central. All of this, of course, is driven by the internal market. The NHS should be treating people according to need. The internal market does not recognise this.

  • Comment number 21.

    #3

    "Research conducted with GPs in Cumbria, where the new system has been tried, shows that many prefer it, while others await hard evidence, knees shaking"

    The system in Cumbria is not what the Bill is suggeting. (FWIW, I think Lansley actually DID want the Cumbrian system, all of his previous policy documents suggest that, but he was stymied by his ludicrous pre-election pledge to "cut administration by one third" and PCTs/SHAs were identified as the natural third. Lansley's original plan was to keep PCTs and SHAs, and reform them.) The Cumbria system has GP commissioning support from the PCT, the new Lansley plan will remove that support, hence why many GPs are against Lansley.

    Also in Cumbria the commissioning not done by GPs (opticians, dentists, pharmacies and primary care itself) is done by the PCT *locally*. In Lansley's plan the commissioning not done by GPs will be done *centrally* by the National Commissioning Board. Currently PCTs spend 80% of the NHS money, GP consortia will spend 60%. So the difference - 20% - spent locally will go to the central NCB. Lansley's bill is a *centralising* bill, not a *localising* bill.

  • Comment number 22.

    Carol - actually no. I'm able to think for myself and I've reached the same conclusion as the Tories. Even if there were an alternative I'd still say cut the state, btw.

    Thanks for just putting me in your big liberal box of conspiracies though, where citizens cannot think for themselves and are led by the nose.

  • Comment number 23.

    Ben

    Alas, you might have another characteristic in common with the Tories too. And that is to not once raise the issue of deficit problems prior to the financial crisis. Funny how the neccessity of cuts only came to the fore after the (private sector) banks were (unilaterally and undemocratically) bailed out by the taxpayer (i.e. public purse).

    You need to view this policy prescription of yours as one of "privatised profits and socialised losses". For that is what you are advocating. This isn't my phrase, though. In fact it was used by the head of financial stability at the BOE:

    http://www.bis.org/review/r091111e.pdf

    Here are another two economists who view our situation differently to the one being peddled in the mainstream media:

    http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=6653

  • Comment number 24.

    Hawkeye - I don't share that with the Tories. I thought the level of state spending and private lending were insane.

    Alas opposition parties have to promise ever more to an insatiable electorate to match the expected oxymoron of lower taxes +and+ more spending. I find it a little sad that people criticise the opposition. Labour were in power and made a total mess of everything. To shift the responsibility like this is very daft.

    Ah the BoE. Another absurd fan chart today from Merv. Those guys are a total joke so I wouldn't cite them on any topic under the sun. The crash was obvious. Teachers in houses worth £500K. Where on earth would the next generation of teachers live if it were not a bubble? Plenty of the losses covered by the state were on loans into absurd property bets. This has yet to be shaken out as we won't raise interest rates to protect home owners at the expense of everyone else (ie young people). This is not just banking.

    How much of the deficit is government overspending - most of it!? If you thought the Labour years were a sustainable position you need help! Mainstream media said "it's all ok - go buy yourself a big house on your rubbish salary - houses always outpace wages!". I didn't buy into that, thanks, as it makes zero sense. I did buy into capitalism on the presumption that rates would be up by now and the pips would be squeaking. I should have known to follow the large crowd of fools as enough wrong people win in the short term.

    I'm not advocating private profits socialise losses. Let's tear the whole thing down. Don't bail out the banks, up interest rates and let people dumb enough to buy a house in excess of 5 times their wage loose their home. There are plenty of losses - let's spread them right out. Sadly the first option has already been nullified by G Brown, desperate to prove that he wasn't the worst chancellor in the history of humanity.

    Young people have no assets to write-down, no job to loose and a mountain of debt. They can't loose from writing down all the "assets" that people in this country hold so close to their hearts. It's not for them that this corpse is having blusher put on.

  • Comment number 25.

    @Ben

    "Even if there were an alternative I'd still say cut the state, btw." Even though the debt is steadily increasing under the current austerity measures.

    Whilst real wages continue to decline where is the demand to come from which could engender growth? Of course this is all to plan for the Tories. They like mass unemployment - it keeps the workers down. Eventually they will have to relax the controls, just like they did in the 90s, which is when growth will restart. By that time we'll have forgotten what decent public goods and services were like.

  • Comment number 26.

    Carol - that logic could be used to spend more and more of our GDP via the state, forever. We've had 15 years of ever-increasing state spending. My local GP is absolutely useless, if you can get an appointment. Schools are, according to business, churning out under-educated people. The law is completely broken after an insane number of new laws. New businesses have to comply with umpteen laws, all of which need cross-checking with paper-pushers.

    You "replied" to my post to Hawkeye. My main point was the majority of the deficit is down to the government spending more than it takes in, due to poor planning. Please address this assertion or the one about throwing more good money after bad at the top of this post. If it's just more about how the Tories are planning to impoverish everyone for their gain then spare us, please. As I said to Hawkeye - only one party has totally failed to govern in the past 15 years and only one can be held accountable for this.

    Gordon Brown bailed out the banks because he didn't want the house of cards to fall down on his watch. That and because he is a deeply incapable man and perhaps the worst chancellor we have ever seen. His "light touch" regulation and the absence of house prices from inflation figures was beyond stupid. House prices rising well above wages led by unfettered lending, where people had a phrase, "liar loans" to describe them - how is this a firm grip on our country's finances? The man on the street has a name for them yet the treasury thinks this is all good.

    How can house prices rise well above wages without a large correction at some point? The pattern here is short-term thinking. In the medium term neither this nor growing government spending are supportable. In the short-term, if like a child we refuse to pull the plaster off, they make sense. This is where we have to be adults. None of this denies massive problems in banking also. As I said - let them go bust - but we can't because Gordon Brown created a situation where the bubble was so big we had to deflate because the "pop" would have had fallout.

    Trying to engineer a soft landing in this mess is like trying to make an explosion from a distant star look like a bunch of roses using mirrors. It's complex, but in the short term, you can do it. However, however many light years away the star was, the event has already happened. Just as we have wasted over a decade on pointless financial engineering to support insane government spending and a housing bubble instead of producing true wealth.

  • Comment number 27.

    ps of course real wages are declining. The pound fell 25% in value after everyone realised that our economy was in a complete mess and we had to crank up the printing presses to devalue our currency rather than calling in the IMF. This is only cost-push if you ignore the devaluation of our currency in the wake of 15 years of ineptitude. Which of course Merv King is only too happy to do, safe in the knowledge that our press have the memory of a goldfish and a limited capacity for cause and effect. Merv is seeking to inflate away our debts in a desperate rear-guard action, so yes, real wages will fall. That is how we are "paying off" our debt to real people in other parts of the world who are holding our increasingly worthless bonds.

  • Comment number 28.

    @Ben "My local GP is absolutely useless, if you can get an appointment".

    Satisfaction with the NHS peaked last year. Your individual experience does not count for much.

  • Comment number 29.

    @Ben

    You are too young to remember this, but the house price boom/bust scenario is just a re-enactment of the mid 70s and early 90s when the Tories were in power. High inflation disguised the collapse periods though. So don't have any delusion that if the Tories had been in charge they would have done anything different. (Fred Harrison predicted the last two peaks precisely - but no one then was listening).

    You also seem to have no memory of the state of public goods and services after 18 years of Tory misrule when the proceeds of North Sea oil taxes (introduced by a Labour government - Tony Benn, actually) and privatisation gave them ample revenues. Instead this bonanza was spent on maintaining a high level of unemployment in order to keep the workers down - part of the current plan.

    Even given the high revenues the Tories left office in 1997 with a big deficit. One of the first acts of GB as chancellor was to pay off £50bn of this with a windfall tax and auctioning off part of the radio spectrum (£22.5bn). I don't call that mismanagement.

    How GB then ended up listening to the siren calls of the City and big business I would sincerely like to know. But the Tories would have done the same, instead of making the necessary public investments, they would have further cut taxes to the rich. External factors would have brought on the same if not worse financial crisis and they would have bailed out the banks just the same.

    You have not addressed the fact that the deficit is growing, so all this ConDem mantra about stemming the increase in interest payments is tosh.

  • Comment number 30.

    @Ben

    Did you bother to take a look at the Times' Rich List? Please don't tell me that we as a country are bankrupt. We are a grossly unequal nation, that's the problem.

  • Comment number 31.

    Are the Newsnight blogs going over to the new format?
    http://www.bbc.co.uk/blogs/theeditors/2011/05/our_next_step_in_news_blogging.html

  • Comment number 32.

    Like Odysseus or (maybe Ullysses if you're Irish ) the destination is the same, an epic cycle - The new Phenomonology of $pirit :

    http://ftalphaville.ft.com/blog/2011/05/12/566141/bagehot-bailouts-and-banks-the-entwining-continues/?updatedcontent=1

  • Comment number 33.

    Carol - from your main reply

    First paragraph - this is all stuff that happened decades ago. Maybe the Tory party were dire then and totally to blame. Let's say they were. This is history and not relevant. 15 years is long enough to own the deficit. That's the upper end of medium term.

    Second paragraph - Labour's public sector resurgence was sadly in large part funded on an unsustainable trajectory. As you note auctions of new spectrums provided a once in a century boost. Even with such a windfall they still went off the deep end. Loads of money came in from stamp duty based on a clearly unsustainable situation. Even that wasn't enough so they went nuts with PFI, which my son and perhaps his son will pay for. This graft shows the ponzi scheme in action: http://www.statistics.gov.uk/cci/nugget.asp?id=206. Because a ponzi scheme is fine until it's not. To think that the Labour years were real growth followed by a distinct secondary problem is a severe mistake. The latter is the former coming to the surface. Again, what part of teachers in 500K houses in the SE sounds sustainable to you? Why has manufacturing shrank so much? Why so much PFI, which is basically a credit card? Why such high private debt? How many people do you know with a massive mortgage and no savings? Maybe not so many as you are older but in the 30-something let me assure you they are dreading rates going up.

    Finally - to say the deficit is still growing is more short-term thinking. The economy is like an oil tanker - it takes time to turn around. Especially when you first 6 months is spent trying to cancel insane defence contracts, and the next 6 will be spent arguing with people in the public sector, enjoying their cushy paper-pushing for a big pension and scared to enter the private sector with a CV that lists filing and microsoft word as headline skills.

    I just don't get where you are coming from here. Are you saying Labour did a good job? That we are not in a complete mess? Do you think Merv King is in league with the Tories now and exaggerating the problems, even though he sat by as Labour went nuts? Do you think it was just "a global recession"? How many political parties nearly went bust in 2010 globally? I know one, and it was run by GB! And his Treasury Secretary left a note: "there's no money left". All just a fun game to them? What state of mind would someone have to be in to think that was funny?

    You don't seem to address any of the points in my post, which you initially "responded" to. Instead just talking past me about things that happened 40 years ago or happened in a parallel universe where the Tories won the 1997 election. Plus the usual "the Tories just want to push down everyone". Low quality.

  • Comment number 34.

    Ah - interestingly one of the most telling moves in displaying zero confidence in our currency has been reversed, the National Savings index linked bond is back!

    http://www.bbc.co.uk/news/business-13370892

    Think I might pile into this yet again as I have zero confidence in Merv King! That or gold. Still this time it's 5 years only, no 3 year option.

    Home repos up: http://www.bbc.co.uk/news/business-13372555

    Probably not even cuts starting to kick in - just more of Merv inflating away part of the debt. Got a new job and want to move - glad I rent or I'd be waiting ages to sell up my "cash-cow" home.

  • Comment number 35.

    Anton - great link. We are in a nether-world. An afterlife following the death of capitalism in order to save the establishment.

    "Instead of accepting losses on unsound investments—which would have led to the probable collapse of some banks—it was decided to transfer the losses to taxpayers via loans, guarantees and opaque constructs such as the European Financial Stability Fund …"

    In a desperate back-fill to save the reputation of GB (who will in time be known as the worst chancellor ever) and to keep Merv King, who always goes with the flow, in a job. Remember how GB claimed to have saved the world in the wake of all this? He was in fact digging us into debt as a people whilst saving banks and those in debt to them.

    Now we can't raise rates because it would lead to a new crisis as all the property lending is based on the current "reality" and so instead we must devalue our currency so that the sands shift under our serf feet. Oh and all the pension promises can be met "in kind".

    ps my wife has just been told she will not be part of the final salary pension scheme. They omitted to note that older members will doubtless carry on in it and that it's an unsustainable ponzi scheme! Clever boomers! Defined +benefit+.

  • Comment number 36.

    Anton

    A profound quote from the Finn:

    "In a true market economy, bad choices get penalized. Instead of accepting losses on unsound investments—which would have led to the probable collapse of some banks—it was decided to transfer the losses to taxpayers via loans, guarantees and opaque constructs"

    Bank bailouts and austerity measures are not Free Market solutions. In fact quite the opposite. They are protecting the lending class at the expense of the public at large. Austerity & Inflation assures that the lender bears no responsibilty whatsoever for their faulty judgement in lending out in the first place. It is debt maintenance by any means necessary. In fact it is taxation without representation.

  • Comment number 37.

    @Ben

    OK, you think the Tories have the correct policies. So can you tell me why it is that the deficit is rising again, after starting to fall under Labour policies?

  • Comment number 38.

    Oh and Ben, you keep telling us that we are in a similar position to Greece and Ireland with regard to debt. We are following similar austerity measures. Look what's happening to them.

  • Comment number 39.

    I am not exactly disagreeing about some of the comments here, vis a vis banks being relieved of moral hazard etc but some of the comments are disingenuous.

    I certainly think the financial crisis could have been handled better, such as nationalising Northern Rock when it first started to flounder, and creating the means by which banks could be punished in some way. We ordinary people have really been well and truly (* insert preferred f-term) on that one, and granted, Brown was very much part of the economic experiment that brought about the crisis.
    However I think it is highly likely that his arms were twisted relentlessly both by the powers across the two stretches of water, the Atlantic and the English channel, and by the banks themselves. They are not actually 'powerless'. they have levers, regardless of whether this is desirable, or right, and I am sure they were prepared to pull them to minimise their losses. I am sure Brown was faced with a pretty stark choice, and he chose the less (or least) harmful of the options he was faced with.
    Ok it was maybe kicking the can of worms down the road a bit, but we really needed a little bit of space then, so it was probably the best option art the time.

  • Comment number 40.

    Why isn't David Laws going to jail?
    He wrongly claimed over £40,000 in expenses since 2006 and didn't repay it until he either came out or was forced out when his homosexual relationship was about to appear in the Daily Telegrapph in 2010. 
    There were also some interestingly creative property house deals with and for his male friend.
    Others got jail for less money. Why not hi? 
    Oh yes, I forgot - he's a friend of Clegg and Cameron, as well as public school and Cambridge. That's alright then.

  • Comment number 41.

    The last of the blogs with the sensible (now old) format.

    When this one goes over to the new format I won't be going with it, shame really as I have enjoyed reading Pauls (and the other Editors) posts and the high standard of debate from the well informed commenteers (myself excluded obviously :)

    Cheers Paul and all the posters

    bob.

  • Comment number 42.

    It's a global recession! Warning - do not mix the aforementioned quote with thinking for yourself: http://www.bbc.co.uk/news/business-13386113

  • Comment number 43.

    Bob @41 I agree.

    Also, the new blog is quite unfriendly as you can't scroll down easily to see who's commented. Is the service is being degraded so that it only suits mobile phone users?

    I agree that some posts are too long, and others are unreadable because of lack of punctuation etc. In general they just don't get read. From considerable experience as a press officer, I know that self-discipline is crucial to readability and to attracting interest.

    My suggestions would be: (1) impose a reasonable limit FOR DISPLAY of, say 150 words/1200 characters. (2) Hide anything more, but make it readable on clicking as some other blogs/social networks do.

    (The above comment contains 111 words and 653 characters)

  • Comment number 44.

    Ben

    Fair point. But I wouldn’t call 1.5% growth "Fantastic". Notice how the media rarely mentions the double digit growth figures for countries like China and India (unless trying to use this to give a shallow explanation for commodity price rises).

    The media also never discusses the importance of cheap energy on absolute growth levels, or the prospects of currencies losing purchasing power. Shame on them. This article is perhaps one of the most lucid articulations of our global predicament:

    http://gregor.us/economics/paper-vs-real-exit-from-normal-ecological-economics-and-probabilistic-regimes-in-one-chart/

  • Comment number 45.

    44 cont....

    “All institutions and individuals eventually use financial assets to purchase energy, natural resources, and labor. The end of cheap energy after 2002 marks the end of economic growth in real terms.

    The balance of global population, resource availability, and innovation enters transition. Paper assets lose stability and begin their decline against natural resources as technological innovation runs into the harder limit of energy availability.

    Modern economic theory, the operation of governments, and risk models are all predicated on the restoration of available cheap energy.”

    (Earlier attempt to post comment of 165 words and 1195 characters failed!)

  • Comment number 46.

    @45 Hawkeye - re growth: Given that inflation may well be underreported at the moment, I would be very suspicious about GDP figures.

    Re your blogging problems. I have not found any such difficulty using Firefox on Linux. Are the IT "experts" using browser specific code I wonder?

  • Comment number 47.

    Ahhhh!... a well designed blog that encourages debate with some familiar posters.

    Thank you Sasha Clarkson for providing this link on poor Steph's blog.

    I owe you.

  • Comment number 48.

    About 18 months ago, I was contacted by the research assistant of one of the BBC blog team. She was helping plan a possible future programme and was soliciting the thoughts of some regular bloggers. I understand that she had contacted a number of people with different views, which had been expressed adequately enough to attract her attention. We ended up talking for about an hour and a half.

    The 400 character limit and new blog format would have made her task much more difficult.

    NB The above comment would be rejected by the new system, as it contains 485 characters.

  • Comment number 49.

    Hawkeye: "Notice how the media rarely mentions the double digit growth figures for countries like China and India (unless trying to use this to give a shallow explanation for commodity price rises)."

    Usually the BBC report China double-digit growth as a real problem due to "overheating". I wonder what paleolithic man thought, half-freezing as he looked across to another tribe who had invented fire:

    "I'd rather freeze than have to mess about taking a few logs off that fire to prevent overheating!"

    It didn't matter in the end a third tribe who had invented steel using fire shot the lot of them. Poignant, no?

  • Comment number 50.

    deepgreenpuddock - when you paint yourself into a corner you loose the ability to manoeuvre. Again this is looking at the problem as though GB hadn't been in power for a long time and hadn't chosen this path. He had and he did. In life we make choices and we live with them. How can you defend this man after we had years of "no more boom and bust" when he was in fact building into the system the biggest guaranteed boom and bust ever. Regarding arm twisting, the US had to repeatedly loosen regulation after Brown's "light touch" took business from NY to London. http://www.bbc.co.uk/news/business-12535837. If anything GB was twisting their arm for quite a while. This was a central plank of the Balls-Brown reign. He might have said "go on - twist my arm" after a lovely dinner with a bunch of bankers, if this is what you mean.
    The choice was the lest bad option at the time. However it would have been better had he not made choices 1,2,3....10001,10002 that got us into such a mess. For these succession of choices he is culpable. To just say he handled the crisis as best he could is to ignore the wider context. Are we to congratulate a man who has just put himself out after playing with fire and petrol?

  • Comment number 51.


    Carol: "So can you tell me why it is that the deficit is rising again, after starting to fall under Labour policies?" - clearly you didn't read #33 para 3.

    I didn't mention Ireland or Greece anywhere in these posts. In fact you are the first person to use either word on this page. They are part of the Euro so under different pressures - that is one good thing GB did - keep us out. They can't start printing money to devalue their currency which harks back to one of my first comments about this not just simply being cost-push because prices rose after people realised the pound was in trouble and Merv was going to inflate away our debt.

  • Comment number 52.

    Ben @ 26

    "My local GP is absolutely useless, if you can get an appointment."

    But GP surgeries are privately run businesses aren't they? If you nationalise them and put GPs on a NHS salary you'll get a better service. It's not unusual for PCT run surgeries to be open later in the evenings and having nurse led walk-in clinics for their patients. So, if you required the need, you could have just turned up at the surgery and the nurse would have seen you.

  • Comment number 53.

    dceilar - not sure what you are talking about on the GP surgery bit. All I can say is they are totally useless and everyone I speak to about it in my area hates them. Not replying to the GB bit then?

    What did you think about Geithner saying GB was a big problem with his "light touch" foolishness? That was one of umpteen bad decisions Brown / Balls made well before they made the "best" out of the big mess they had made. "light touch" was a central plank in his bragging along with "no more boom and bust". Ought we not to vilify him for this? Is Geithner wrong in attributing him as one of the causes?

    Again banking shares the blame in this. Bankers are now vilified, possibly rightly so.

  • Comment number 54.

    Ben,

    Judging by comments made by Cameron and Osborne at the time we should count ourselves lucky that they were not in charge. By all accounts they would have had an even lighter touch than GB and AD. Geithner, if he's looking to blame one person for the whole crisis, should blame Ayn Rand's lover Alan Greenspan for his even lighter touch.

    Let's not delude ourselves. This is a problem caused by PRIVATE DEBT, and to save capitalism that debt was passed on the taxpayer. All talk about eradicating the public sector is the wrong solution to the wrong problem.

  • Comment number 55.

    So you are resorting to a parallel universe to defend GB. Can you not see that this is the sort of logic one encounters when sorting out a child? Only they have obtuse "what if?" scenarios. Is that really the best you can muster?

    "to save capitalism that debt was passed on the taxpayer. All talk about eradicating the public sector is the wrong solution to the wrong problem."

    I think that logic speaks volumes. I'd put it to you that we didn't have a capitalist system under Labour. We had a pretend economy, utterly unsustainable (as we have seen) that saw resources squandered on items that do not benefit the majority in the long-term. eg putting all our money into housing and paying loads of people to do nothing of worth in parts of the country where then needed to buy votes.

  • Comment number 56.

    Ben

    The complete lack of criticism at the time by the Tories on GB's 'light touch', and Osborne's comment that he wasn't 'light' enough has been widely documented. You must be either obtuse or deceitful to think both that Cameron and Osborne would have done any thing different, and that GB is solely to blame for the financial crisis.

    If you seriously think the problem is public debt and not private debt then it is you who is in a different universe. The public sector did not bring the banks down or have you forgotten?

    I hope you are not one of those silly billys who think it is the regulators fault for not stopping the banks breaking the law. That's like blaming the Police for your house being burgled because they didn't stop the burglar.

  • Comment number 57.

    I didn't say private debt was not a massive part of the problem. The banking industry, together with a demented British public, borrowed / loaned in a really dumb / corrupt way. I'd never contend otherwise. In parallel with this the government spent recklessly. By 2007 both public and private systems were in a real mess. Now we have a massive debt and a massive deficit. The debt is thanks to the banks (and the public), the deficit is down to GB as interest payments on the debt are not the bulk of the deficit.

    When teachers were living in 500K houses and people openly referred to liar loans GB was out saying everything was fine. You'd have to be a complete fool to think that was sustainable. Fast forward a few years of complacency and you have a house of cards that you can't let fail. Then it does, then GB bails out the banks, making private debt public. And here we are. How, in this sequence, does GB do a good job? At best you seem to be saying he is a naive moron and so cannot be held responsible for his actions.

    Comparing Osborne light-touch to GB light touch isn't really possible because one didn't happen in real life so we don't know the implementation. There are more than enough rules to form an effective system. The tax rules are 6ft tall yet loopholes are everywhere. Brown / Balls created a totally ineffective environment with their tripartite FSE / BoE / gov where everyone was responsible for nothing. GB made a massive fanfare about this system, end of boom / bust and fiscal responsibility. He totally failed on all three counts, leaving public and private debt at insane levels. Surely you can accept he is an utter failure? TBH I think you are probably just trolling as you are coming back with the same thing over and over now...

  • Comment number 58.

    Ben @ 57

    I know not of any teacher living in a 500k house (house prices do not reflect their worth either). I know some who are living shabby bed-sits though. These liar loans you mention - that wasn't GB's problem, it's the banks job to ensure it gets its money back - it has nothing to do with the State. If banks want to give large mortgages to people with little income why is it the State's fault? What brought the house of cards down were these toxic CDS from the USA which were packaged as AAA by our lovely rating agencies but were actually worse than junk! Do you want to blame GB for that too?

    The Tories were notoriously quiet when the banking crisis happened. It was GB that was the world leader in quickly sorting out the mess while the Tories said nothing for three months. I never liked GB even when he was popular for five minutes. We will never know what would have happened if Cameron and Osborne were in charge, and quite frankly I don't want to know. They think by having a contractionary economic policy that they will expand the economy. To make things worse they can't even tell us how the economy is going to expand. They are going to discover that Adam Smith's invisible hand is more invisible than they think.

    Do I think GB a failure? You bet. But he is following the tradition of all previous incumbents. Cameron and Osborne will be following that tradition too!

  • Comment number 59.

    "Do I think GB a failure? You bet."

    Glad we both agree GB is a failure. As for the future, we will have to wait and see.

    "I know not of any teacher living in a 500k house (house prices do not reflect their worth either). I know some who are living shabby bed-sits though."

    If you don't know people on average jobs in houses they could never afford today you must be unique in Britain. I'm sure you do know some living in bad accommodation - I bet they aren't 50 plus as this is largely a generational divide.

    I'm not blaming GB for everything. I've said on nearly every post and even my two year old would have remembered this by now, so many times have I repeated it: the banks were largely to blame for this mess. GB presided over it, the whole time trumpeting the opposite. He then "led the world" in bailing them all out. This is why he is deeply incapable and partly to blame for our +debt+. We didn't need to make this debt public.

    The +deficit+ is in large part what the cuts are about and the deficit is down to GB.

    "We will never know what would have happened if Cameron and Osborne were in charge, and quite frankly I don't want to know."

    Then stop bringing it up in every reply :-)

  • Comment number 60.

    What is missing from an otherwise excellent analysis of the situation and a scan of the comments is the recognition that the market in healthcare in the US costs well over twice as much per head as the UK while covering (as a proportion of the population) a third fewer of those heads, at least until they're so ill they end up in a public A&E.

    The 'savings' to be made by bringing in market competition are mythical, part of the canon of market cultists whose practical agenda is not really to have a 'free market' but corporate/bank take-over. The admin involved with tendering processes, insurance (not just that of middle-class patients - the easient way to make UK doctors blanch is to tell them could see US-style malpractice premiums once the regulatory system here is fragmented), the need of for SE's and for-profit providers to borrow at private interest rates: these factors will all make costs spiral far faster than new medical technology or the ageing population.

    The Labour Party has been left standing on this issue because they've made all this possible. They brought in the current commissioning systen which institutionalises in internal market in the NHS, and prusued the 3-8X as expensive PFI in the face of all facts of increased cost to the public purse. Those of us opposed to these policies made no headway as long as hospitals were being built and cuts were sproadic and localised. It would have been interesting to see the LP's stance no if they had been re-elected and didn't have the Tories to hide behind - most of the cuts coming through now, particularly in the PCTs, were planned long before the election. It is also worth remembering that the oxymoronic 'Competition and C-operation Board' is a Labour invention. As much as I despise the man, Lansley has good reason to be miffed that his reforms are causing such outrage.

    Indeed the Tories' mistake was not to leave things be and let Labour's 'World Class Commissioning' PCTs bed down over time, and gradually increase the involvement of private providers.

    The tragedy is that now all the parties are on record as agreeing with having a market, internal or otherwise, in 'NHS' services and it is difficult to get politicians to drop the mantra. Even if, as I reckon will happen, the GP consortia are eventually devolved back into PCTs with more input from the doctors, the PCTs will remain what they turned into this March anyway: pure commissioners. Whether 'free' or not, the basic chaos of the market will rule, as we've already started to see in many of the hospital trusts, and with the great irony that for-profit providers will be brought in to impose their 'market efficiencies'.

    That is not to say the proposed reforms aren't significantly worse - all I could think of when I read the white paper last summer was that it would lead to something like the dreaded Health Management Organisations in the US. Lansley's ego-driven over-reach has at least woken more people up to what has been happening to the NHS for the last fifteen years, but without real alternatives from the opposition, may not be in time to save it.

 

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