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Last Updated: Monday, 2 May, 2005, 10:42 GMT 11:42 UK
Is increased choice always good?
By Steve Schifferes
BBC News political reporter

primary school assembly
Schools might become more selective if capacity didn't increase
The issue of choice is now at the centre of the political debate, with Labour and Conservatives both proclaiming their commitment to increasing choice in health and education.

Tony Blair has proclaimed that "choice puts the levers in the hands of parents and patients so that they as citizens and consumers can be the driving force for improvement in public services".

And Michael Howard has said that "we need to give power back to the people: to the parents and patients who will make the right decisions if only they are given the chance".

The Liberal Democrats are sceptical about the "illusion of choice", saying people just want good schools and hospitals near to their home.

So, can the policy of increased choice in the public sector produce everything that the public and the politicians seem to want - better schools and hospitals that are accessible to all at a lower cost to the public purse?

The Magic of the Market

According to both Labour and Conservative parties, parents and patients should have the choice of as many hospitals and schools as possible - and it should be provided by whoever has the capacity to provide the service, whether it is publicly owned, independent and voluntary, or private.

Although the Conservatives go further in their plans to allow patients to have part of the cost of their operation in the private sector, or the cost of their tuition to a private school, paid by the state, Labour also wants to pay the private sector to provide public services (at least in the health sector) and wants more industry-funded City Academies in inner cities.

The key hope is that more choice, and particularly more competition, will improve standards - if parents and patients are allowed to vote with their feet.

The use of crude measures of quality or output gives both providers of health care and education incentives to choose patients or children who improve measured performance
Dr Deborah Wilson, Centre for Market and Public Organisation

But academics highlight two particular problems in applying the magic of market-based competition to the public sector.

Firstly, the consumers, the public, may not be able to judge properly the quality of the service provided. This is particularly true in health care, where GPs may be a better agent than patients in deciding which surgeon to use.

Secondly, the supply of health care or education is not very elastic - it is not easy to add more capacity, because that involves expensive and time consuming training of additional doctors or teachers.

Local schools

Professor Steve Machin of the London School of Economics warns that there is relatively little evidence that competition improves performance in state education.

That is partly because education, at least primary education, is very local, and there are only certain areas where meaningful choice is possible, says Prof Machin.

But it is also because, for every winner in the race to find a better school, there will also be losers who find they have less choice than before, he says.

Nurse and doctor with patient on stretcher
Hospitals might be more careful in choosing to treat patients

For example, if parents are given more choice of schools but there is no increase in classroom places, there is likely to be increased "sorting" of pupils by ability and income - as schools will aim to choose the best out of their larger pool of pupils, he says.

He believes that, to be meaningful, competition has to involve the closure of bad schools as well as the creation of good ones.

But that could be expensive, and it is not clear it would make sense - a school can change from good or bad in a few years, with a different intake and different head.

Professor Simon Burgess of the University of Bristol's Centre for Market and Public Organisation (CMPO) says the only way to create choice without losers would be to vastly increase the number of school places so as to put more slack in the system.

But that would jeopardise one of the less publicised goals of such reforms, which is to save money by making schools and hospitals more efficient as well as better.

If increasing choice requires adding spare capacity to the system, this will initially lower productivity, he warns.

Health dilemmas

According to Professor Carol Propper of Bristol University the difficulties of ensuring choice in the health system are even more complex.

Giving complete freedom to patients could mean that they make poor choices based on inadequate understanding of their medical needs, she says.

In fact, under both parties' main proposals, it will be the health authorities and GPs (primary care trusts) who will be paying hospitals for treatment, and they will determine how much choice patients actually have.

But the method of payment - a nationally fixed tariff for each medical procedure - could encourage hospitals to "game the system", she says.

Indeed, they could decide to treat more profitable - and less sick patients - more intensively and to "under-treat" very ill patients who would be more expensive to treat, Prof Propper said.

The publication of hospital "league tables" of surgical death rates could provide another disincentive, since the severely ill patients are more likely to have higher death rates.

The increased use of private sector providers to do minor operations - which both parties are supporting - could also have unintended consequences, she said.

The private health care firms could "cream off" the more profitable procedures, leaving the big district hospitals with reduced ability to cross-subsidise other important activities.

And that could lead to hospital closures if the big teaching hospitals find that their procedures are being out-sourced, Prof Propper says.

Measurement problems

Others believe that competition and efficiency will only work if outcomes can be properly measured and accessed.

Some say current measures - such as school league tables based on GCSE results or hospital operations - do not adequately capture the value added by the school or hospital, and may merely reflect the characteristics of the patients or pupils who entered the institution.

"The use of crude measures of quality or output gives both providers of health care and education incentives to choose patients or children who improve measured performance," said Dr Deborah Wilson of Bristol's CMPO.

So, according to the academics, it seems that if carefully designed, it is possible that policies designed to increase choice in the public sector can work. But they will cost money, and they will not be the panacea that some politicians may believe them to be.

Even Professor Nicholas Barr of the London School of Economics, one of the architects of Labour's policy on student fees, argues that to choice in the public services has to be "constrained" to be meaningful - with students, for example, having more choice than primary school pupils.



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