Mr Blair is right to explore how the private sector can help the NHS

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Blair tells unions he will not flinch from change

Tony Blair was right in his speech at the Royal Free Hospital, in London, yesterday to pursue his theme that the choice for public services is "reform or bust". He raised the subject of private-sector involvement in the provision of public services before the election, much to the horror of the unions. The electorate gave him a mandate to proceed – and that is what he must do now. The issue is not with the general principle. It is with the practicalities. And on these, the Prime Minister is still woefully imprecise.

John Edmonds, the general secretary of the powerful GMB union, yesterday warned of a "considerable campaign" against moves towards greater private-sector management. But the unions' objections seem to be based as much on self-interest as on the interests of the users of public services. The status quo fails notably to deliver what people need, in health and education especially. Even if the National Health Service or other parts of the public sector get the injection of public funds that the Government is promising, there can be no guarantee that this will deliver the goods. Structural reform is needed.

In many circumstances, private-sector involvement can deliver a better standard at a better price. The allergy to private refuse-collection services, for example – once a bugbear for all good liberals – has now, rightly, passed into history. Private companies have, in any case, for many years built NHS hospitals and NHS ambulances. Why should other areas automatically be seen as sacrosanct? If the private sector can do the job more efficiently – and if voters are not expected to pay through the nose for the privilege – then so much the better. Some collaborations between private and public sector have been fruitful and imaginative – including, for example, an effective way of rewarding private prison management for the successful rehabilitation of prisoners.

We should be wary, however, of Mr Blair becoming so enamoured with the private sector that he espouses its virtues even where its involvement brings no advantage and may even make things worse – as with the public-private partnership (PPP) planned for the London Underground, which has been rejected by the public, by London Underground's own management and by most economists.

The Institute for Public Policy Research recently published a 300-page analysis of PPPs, which warned that the private sector's success in some areas does not necessarily mean that it can remedy "deeply ingrained problems in a failing institution". The institute also pointed that private-finance initiatives, which supposedly help to magic new funds into public services, are sometimes less cost-effective than they seem.

The private-finance initiative (PFI) has already been tried out in hospitals – with results that have been mixed or worse. Thus the British Medical Journal pointed out that the first 14 PFI hospitals brought about a 30 per cent average reduction in numbers of NHS beds and shrank clinical budgets by a disastrous 20 per cent.

There is a clear case for using the private sector to mop up waiting lists. There is a more obvious case for using private companies to supply services to hospitals. There is a possible case for private-public specialist hospitals. There is a less obvious case for PFI involvement in the long-term care of the elderly or chronically ill. Accident and emergency remains a deeply contentious issue.

It is the specifics that matter. And it is the specifics that the Prime Minister is still studiously avoiding. Until he gives concrete suggestions, the debate will remain mired in an argument over general principles that has become entirely irrelevant to today's needs.