How reform of public services cuts across the party political divides

One can imagine two dinner parties: one with Blair, Milburn, Laws and Letwin, the other with Brown and Kennedy

With a characteristically bold flourish the former leader of the Liberal Democrats, Paddy Ashdown, once predicted that party boundaries would collapse over the issue of Europe. He suggested the internal differences were so great that a dramatic realignment in British politics was inevitable. As is turned out Lord Ashdown of Norton-sub-Hamdon was wrong about Europe, an issue that has been pushed to one side. But is it possible that another big policy area, the reform of public services, will bring about the sweeping changes he once so energetically sought?

With a characteristically bold flourish the former leader of the Liberal Democrats, Paddy Ashdown, once predicted that party boundaries would collapse over the issue of Europe. He suggested the internal differences were so great that a dramatic realignment in British politics was inevitable. As is turned out Lord Ashdown of Norton-sub-Hamdon was wrong about Europe, an issue that has been pushed to one side. But is it possible that another big policy area, the reform of public services, will bring about the sweeping changes he once so energetically sought?

Senior shadow cabinet members suggest persistently that if Tony Blair and Alan Milburn were unconstrained by their party they would go much further in their radical zeal. As one Tory frontbencher put it to me: "Blair and Milburn are as keen on markets in the public services as we are but they would get shot down by the Chancellor and most of their party." This is a view shared by a number of Labour MPs who view the rise of Mr Milburn with wariness. It is thought, also, that Gordon Brown is at least as worried about the policy implications arising from Mr Milburn's return to the Cabinet as he is about the consequences for his own leadership ambitions.

Mr Milburn at least enjoys a high profile in his new role. The Liberal Democrat MP David Laws has hardly been seen since he enthused about the need to reform public services. Along with others Mr Laws published the Orange Book on the eve of the Liberal Democrats' conference. In the book Mr Laws condemned the NHS for "failing to meet the needs and expectations of today's population". He proposed alternative ways of funding hospitals and suggested there should be a variety of providers. As the Liberal Democrats are supposed to support the NHS as an institution, Mr Laws' public silence since is not altogether surprising.

Yet some Tory shadow cabinet members are watching Mr Laws closely hoping to find fruitful common ground. One raised with me the extraordinary possibility of a new Conservative-Liberal Democrat partnership should Mr Laws' views prevail in his party after the election. Meanwhile those close to Mr Laws suggest that they are nearer to articulating the private views of Mr Blair and Mr Milburn. The situation is even more fluid. Another prominent Conservative outside the Shadow Cabinet tells me he agrees entirely with the public words of Mr Milburn on the future of the NHS.

In contrast Mr Brown is wary of Mr Milburn's approach, arguing that there are limits to the benefits of markets and hailing the virtues of the NHS in terms of efficiency and patient care. Such a view would have been cheered to the rafters at the recent Liberal Democrats' conference.

The situation is so fluid that it is easy to envisage two imaginary dinner parties: one at No 10 attended by Messrs Blair, Milburn, Laws and Letwin; the other at No 11 hosted by Mr Brown with Charles Kennedy and senior Liberal Democrats as his guests.

At one they would raise their glasses to the healthy impact of markets. At the other they would toast a better-funded NHS and reflect on the problems of introducing markets to such an organisation.

Even so, I do not believe that the two dinner parties would proceed quite as smoothly as that. Mr Letwin's policies include a big public subsidy for those wanting private operations. As I argued last Thursday, Michael Howard is seeking to portray himself as the honest leader proposing to implement a few incremental policies. In reality he has a repertoire of vote-losing policies that are ill thought through in their revolutionary fervour.

In contrast Mr Blair is nimble in his proclaimed radicalism, avoiding too many pre-election policies.

Mr Blair and Mr Milburn do not seek to spend taxpayers' money on subsiding private operations. Mr Laws explicitly repudiates the policy arguing correctly that it would only benefit an affluent minority. On this Mr Letwin would be drinking alone.

Mr Laws, though, would have more in common with Mr Letwin in his opposition to national targets. Mr Blair is a firm believer in targets set by the Government. Indeed Mr Letwin and Mr Laws would get more support from Mr Kennedy in the imaginary dinner next door. It is Mr Kennedy's official policy to scrap targets, although he does so as a supporter of "localism" rather than out of sympathy for market-based solutions. All the guests face a still-unresolved conundrum: how do national governments achieve better local services while giving away their powers to bring about improvements in delivery? The Conservatives for example have pledged that hospitals would be cleaner if they won the election. But they are also committed to let hospitals run themselves. So how can they ensure hospitals will be cleaner?

Mr Letwin is in no doubt. In his view markets will always deliver. Mr Laws would almost agree, arguing a little vaguely that government should be responsible for no more than the "overall regulation of health services". Mr Blair and Mr Milburn would nod hesitantly. They speak often of markets and their benefits, but support those controversial national targets as a mechanism for ensuring high standards across the country.

Mr Kennedy backs the funding of the NHS out of taxation, but wants to leave the responsibility for delivery in the hands of local institutions. Mr Brown seeks more pluralist solutions, but is aware also that if governments take the political flak for raising the cash it must retain some powers over how that money is spent.

There is considerable fluidity within the parties and between them partly because this is a debate that is only beginning. Previous attempts at reform were doomed because of the severe under-funding. It is to the credit of Mr Blair and Mr Brown that spending levels are more realistic now, enabling senior political figures to seek ways of changing the culture of the NHS and other publicly funded institutions. All of them begin haltingly.

Mr Letwin has not explained convincingly why a big expansion of the private sector would improve rather than undermine the NHS. Nor has he proved that markets always work, not least in the privatised hospital cleaning services. In their different ways Messr Blair, Milburn, Brown, Kennedy and Laws must reconcile their support for greater local flexibility with the responsibilities of national governments to seek a high quality of health care.

At the end of our imaginary dinner parties it is quite possible Mr Blair and Mr Brown would conclude to their own surprise that they have a fair amount in common, exclaiming in unison "Thank God those guests have gone!"

They have been in power. They know what it is like to take risks in raising cash for the NHS. With varying degrees of emphasis they want to let go of the strings and recognise also the need to retain some control. As policies develop unlikely alliances are probable. For now senior politicians across the political spectrum are stumbling in the dark. Paddy Ashdown must wait longer still.

s.richards@independent.co.uk