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This transcript is produced from the teletext subtitles that are generated live for Newsnight. It has been checked against the programme as broadcast, however Newsnight can accept no responsibility for any factual inaccuracies. We will be happy to correct serious errors.

Can the NHS ever measure up? 19/2/02

When it was created, it was the envy of the world - but few would suggest that now. It's no disaster, but it doesn't match the noble aspirations of the founders. Indeed, what it excels at, is being cheap. Now, Britain is in the midst of a collective re-think on health services, and how to improve them.

When Bevan set up the NHS in 1948 he said the great thing about the NHS the new NHS is going to be if a bed pan falls off the bed in Northampton its sound will reverberate throughout the House of Commons. The whole problem since then has been the House of Commons has been deafened by the sound of falling bed pans, it is ridiculous when the Prime Minister has to stand up and defend the action of one particular hospital, one particular occasion in respect of one patient.

There is still plenty of din in the House of Commons, but there is also a more serious debate, or two debates as it happens. One, how to organise and structure health services in Britain, and how much power should be given to hospitals. Call that the "supply" of health services. And two, the "demand" and how do we pay for health services? Taxes or some other way. How are our health debates going? Start with demand - the funding. Look at enviable health systems abroad, like that in France. Here's a man who runs a hospital in London and here's one who runs a hospital in the southern French city of Nice. Jonathan Michael runs Guy's and St Thomas's Trust, across the Thames from Westminster. The Government may have eased funding difficulties, but they remain a constant problem.

In reality we know the moment we are, we are not unique in this part of London but we are struggling to balance next year's budget, we are having discussions about what we think we need to deliver the targets for next year against the amount of money available and there is a significant gap.

El Hadi Benmansour runs the L'Archet Hospital in Nice, part of a publicly owned chain around the city. When talking about funding, the main contrast with France is the amount spent. Over there, they spend over a third more on health - and it shows.

More individual rooms by that I mean one person a room, clean well maintained room and equipment replaced at the right time. We don't wait for equipment to be obsolete before we replace it.

More generous funding, yes, but France's system is complicated social insurance, private top-up fees and private insurance. It's not clear the French model is actually that attractive.

Social insurance is basically a tax on employers and employees and the employers get angry about it as a tax pushing up their costs so they have been pushing strongly to getaway from the social insurance system and one based upon taxation

A look at Nice, France and other health systems tells us the UK debate on funding will conclude we need more money. Funding is only half the subject. What about the other half - the organisation of health services? Jonathan Michael may run a hospital - but he is never alone. He has the friendly man from Whitehall to help. Health in the UK has been centralised - daily initiatives on things like cleaning and food.

There are large numbers of priorities and documents and guidance and so on. There is no doubt about that. They are not all do-able at the same time. Particularly within the financial framework.

Monsieur Benmansour does not have complete freedom either, but he doesn't get a constant stream of directives.

On a day-to-day basis, absolutely not. If tomorrow I want to paint the wall I won't have to wait for instructions from our government. It is our responsibility and we are autonomous for that.

But Britain isn't standing still. England, for example, is getting its traditional solution to health problems - a reorganisation. From April 1st, we'll have new strategic health authorities. We'll have primary care trusts to provide GP services and buy hospital services, and more local management for the best hospitals. The name of the game is decentralisation - that's been recognised as a need already. Devolution, decentralisation, everybody is in favour of those, But it might be there is a whole lot more to those issues than meets the eye. Instead of devolving power the existing institutions what the NHS needs is different institutions. This recent paper for example, compares the NHS to an American health service, it finds that compared to the Americans, the NHS puts too much weight on hospital treatment as oppose to GP clinics.

At the moment we don't know whether we ought to have large or small hospitals, specialised centres, really the evidence isn't in on all of that so what we need is a system which allows experimentation and allows different flowers to bloom.

The Austrian-American economist Joseph Schumpeter put it well. The competition which counts, he said, is not simple competition between existing firms, but:
"competition from the new commodity, the new technology, the new source of supply, the new type of organisation." He saw the process of "creative destruction" as the driving force of progress. There is a debate to be had about how far Britain wants to go down that route. But it's a lesson from France, there's more patient choice more competition between different types of provider public and private. This is a private specialist in Nice. He sees patients without referrals and works in a private hospital for public patients it is a more fluid system.

There are huge differences between France and UK. This is due to the competition because if the French public hospital work as the UK system, there will be out of patients.

Out of patients, talk like that is enough to raise the blood pressure of health insiders. It remains a controversial view, decentralising, increasing competition and adversity may happen but it does make the NHS less of a National Health Service.

The key to a good health system is one that allows for experiment, innovation and change. There was an economist who talked about waves of creative destruction and in some ways that is what we would like. We would like the creative bit but the destruction is more of a problem and that is always a bit that every health system has got to get right. What do you do with the experiments that fail?

At last though the NHS is getting some treatment. A long-term view, a look back at first principles but there will be no return to the unshakeable faith to the early days. The view that a solution will be found to the problems of the service, that there is a perfect somewhere. Today's debates will improve things but don't ever expect them to arrive at a solution.

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