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The new NHS market

Dr Eamonn Butler of the Adam Smith Institute looks at how the latest reforms make the NHS market more robust and far-reaching

Here we go again. The last time the NHS market idea was tried was back in the 1990s. Margaret Thatcher tried to create an internal market by making providers more independent and introducing GP fundholders.

That was undone by Labour Health Secretary Frank Dobson and hasn't been tried again since. Until now.

The model this time round is like the voucher system in education. Parents are given a voucher of a certain worth that allows them to choose where to spend it on behalf of their child.

In health, it is slightly more complicated – whereas in education it can be presumed that most parents know whether or not their child is getting a good education, it's much more difficult for people to know whether they are getting good or bad health treatment.

What you do instead, is that you give the ‘voucher' to the GPs, who should have a better idea of what to spend it on.

I see two main components in these latest reforms: one, giving GPs budgets and two, the presumption that providers from outside the NHS can enter the market, creating a much greater diversity.

Independent provision had been growing previously, but in the past, the only criterion was that you had to be slightly better than the NHS. Providers abroad have been much more innovative. Other countries have managed to get them coming into the market and doing things in different ways.

But these UK reforms mean that it won't take long for a new generation to emerge with different and radical ideas. That's basically because of the presumption in favour of it. When that has become apparent in other countries, it hasn't taken long for the provider base to broaden. And

it won't take long here. Among other things, we're going to see NHS staff grouping together to be private contractors.

There have traditionally been limits to what GPs could do – because they are independent, small businesses, working separately. But consortia will give GPs much more power in the marketplace.

In the school system in Sweden, for example, we've seen chains of schools forming. These are very efficient because functions like personnel management can be housed in a central hub. The same will happen in health with UK GPs.

They will now be able to share costs that they couldn't in the past. And there are many ways in which GPs will be able to do this within consortia.

In any period of reform, there is always going to be huge resistance, as the article on market forces outlines on page 22. But there will also be pockets of pioneering people who will come forward quickly to change the way things are done. At the moment, we don't know which will work and which won't, but that will soon become apparent.

Looking at what the Government is introducing, I don't see any impediment to a free market developing in the NHS. Give it a few years in which we will be able to correct things that aren't working properly and watch what happens. It's a one-way street.

Dr Eamonn Butler is director and co-founder of free-market think tank, the Adam Smith Institute.

The new NHS market