Andrew Lilico: The value of choice for those that don't choose

“Choice” is a buzz-word in many policy debates. Politicians from all parties now talk about expanding choice in public services such as health and education. Osborne has attempted to paint our point of disagreement with Brown as being about "choice versus voice". Yet promoting choice remains controversial for many, and even those in favour often seem confused about who should be choosing what, and why.

The most common argument against the extension of choice usually runs something like this: extra choice is all very well for those that have the time and resources to research what is available, or those that have sufficient wealth to choose widely. In contrast, ordinary people do not want choices — they just want reliable, high-quality services in their neighbourhood.

Behind this argument lies the assumption that the only people to benefit from choice are the ones who actually choose. So if well-informed parents choose to send their children to a better school, all those left behind won’t gain anything. Or if a minority of patients choose to be treated at a shiny new hospital in the next town, the majority using the local hospital will be stuck with the same poor service. Extra choice seems to benefit the middle-class or the savvy, but is of little help (or even harm) to those that are poorer, less well informed or more vulnerable.

I wish to show you that this need not be true. In fact more choice typically benefits everyone, not merely those that take advantage of it.

A simple example

Consider the following example. There was a town in which there was just one established shop in which to buy milk. The milk cost £1 per pint, it was only possible to buy it in pint cartons, and sometimes it went off very quickly after people took it home. People often complained, but the owners of the shop never did anything about it – after all, where else were their customers going to buy their milk?

One day a new shop opened, offering cartons of milk at the same price but of more reliable quality. Some people that used to buy from the old shop started switching to buying their milk at this new venue. Clearly these people were made better off by the extra available choice – they got better quality milk for the same price as before.

That evening the owners of the original shop reflected upon their day’s takings. They were upset to lose the revenue from their former customers, and were concerned about losing more custom. So when the shop opened the next day they cut their prices a little, so that they were lower than at the other shop. Furthermore, they started being more careful about how their milk was stored, so that it didn’t go off. Over time, they also started thinking about ways they might attract back customers of the other shop — they thought they might offer milk in different sized cartons, perhaps some in two-pint cartons, and some in six-pint cartons.

So after a while, even those that stayed with the established shop were better off — their prices were lower; the quality was higher; and over time there were new innovations.

Choices in the real world

This example does not reflect some unlikely theoretical possibility dreamed up by ivory tower policy wonks. This is how competition works in ordinary businesses every day. The availability of alternative choices creates competitive pressure on providers to reduce their prices and increase their quality, even for those customers that do not switch. Over the longer term it also stimulates innovation, so that those that do not switch will benefit from new product options from the same supplier.

Schools and hospitals are obviously more complicated than milk, but the same mechanisms are at work. The way that even a minority of people respond to new choices sends signals to existing providers that they need to improve their service, or change the way they do things. And it does so far more effectively than any system of centralised targets. The special nature of schools and hospitals may mean that safeguards are necessary – closing down an under-performing school or hospital is clearly not the same as a poor quality grocery shop going out of business. The power of choice can still be harnessed within a regulated system, but it is important that patients and parents should be provided with information on which to base their choices; that providers of health and education should have the freedom of manoeuvre to allow them to respond to the choices people make; and providers should face real consequences if people choose alternative providers. These issues are the proper scope of detailed policy debate — without their being addressed properly then, indeed, the gains for those that do not take advantage of their choices will be limited.

So, when we seek reform in public services to expand choice, we should not accept the criticism that this is because of a desire just to help the powerful at the expense of the vulnerable, or because of some strange attachment to theoretical dogmas about practically unlikely outcomes. It is because when there is more choice, all customers typically benefit — wealthy and poor; powerful and vulnerable alike. The extra choice is precisely how these reformers hope to get good reliable services for ordinary people — including those that don’t or can’t take advantage of the choices on offer.

Tomorrow our Wednesday columnist Peter Franklin looks at the way in which the blogosphere is lopsided to the right.

Comments

[Teck Khong]

Andrew made some valid points, but the situation of choices in medical services (referred to widely as healthcare) is that there are barriers to entry that perversely favour large commercially based healthcare organisations that by necessity have to consider and maintain profitability thereby compromising and even omitting adoption of those components that are never likely to be financially viable unless incentivised and inordinate amounts of money pumped in by the state.

Much of the chaos, escalating and ultimately high cumulative costs of healthcare services are the consequences of transitioning the provision from the public into the private sector.

Uniquely, health has not only been too dominated and dictated centrally and even by remote control through the PCTs and Hospital Trusts, real autonomy does not exist. Many of the problems we encounter are borne out of management of services by people who lack that special understanding of the nuances of medicine, its potential and its limitations, but above all, compassion for human life itself. And fragmentation is the order of the day.

There are changes afoot, but under present government policies, these are unlikely to reverse the decline in many areas of healthcare delivery and standard of care.

My colleagues and I are looking at ways within the constraints set by government policies to alleviate some of the burgeoning difficulties faced by both the profession and the public.

Our party must be bold, in readiness for government, to take whatever steps necessary to reinvigorate and strengthen our health system. As I have always said to both my patients and colleagues, the NHS is hanging together not because of sound policies but because of the dedication and ingenuity of the people who are in the frontline of care.

In the tripartite compact that formed the basis of the NHS, the government has become too big. It's time we connect the public and the medical professions more effectively.

Only then will choices make sense.

[Jennifer Wells]

Good piece Andrew. We should have kept the Patient Passport. Just its existence would have kept the NHS staffers on their less than nimble toes.

[Baskerville]

Teck Khong. You sound like you have the experience, commitment and knowledge to help formulate policy - have you been in touch with Andrew Lansley's team? If not, please do so.

[David]

So scrapping them, removing the state's involvement and handing the whole thing over to the private sector isn't on the agenda then?

[TomTOm]

Whenever this argument by analogy is trotted out it is always a comparison of Private Product Market versus Public Service Provision - I know why - but it is so flawed as to be invalid.

The mindset that relates to buying a discrete tin of beans or carton of milk lacks the sophistication to understand the intricacies of systems, and that is the biggest failure of our political class best illustrated in the old rhyme about "for want of a nail......"

A hospital or a school has sophisticated interconnects and you do not consume a unit of education or a unit of healthcare - go have a road traffic accident and see how many specialists are needed - eye surgeons, plastic surgeons, orthopaedic surgeons, A&E Surgeon, plus OP, plus ICU or HD bed, plus medical labs, plus scanner and radiology......the integrated medical services are far different from saying I would like a Charnley Joint for my hip-replacement because......and I want to pay whatever it costs to get Mr Surgeon X to do this operation on Wednesday afternoon

There is a distinct failure to comprehend follow-up costs.

Currently there are no spaces in Catholic Primary Schools in some areas and children are turned awaty - yet according to our politicians popular schools should expand and unpopular ones contract....so why aren't the over-subscribed Catholic Primary Schools expandinf ? Where are the resources ? The bricks, the builders, the teachers ?

We are in danger of telling people who want bread to eat cake

[Andrew Lilico]

In case of doubt, this article is not about why privately-funded healthcare or privately-funded education would (or would not) be better than publicly-funded. The point is that certain of Labour's reforms, and many of those under discussion in Conservative policy discussions, have amongst their (at-least-intermediate) objectives that of enhancing choice for users.

But such objectives face criticism - particularly from left-wingers, but sometimes from "practically-minded people" along the following lines: "Ordinary people don't want more choice. They just want better services. They don't care about whether they have five schools or hospitals to choose from. They just want one that provides what they need. What will happen if you create choices is that those with the flexibility and the wealth to send their children further from home, or to travel more for hospitals, or those that have more time or education to check out all the alternatives, will take advantage of the best choices available. Then those that are more vulnerable, because they can't travel or because they are less well educated or have less time and energy to check out all the alternatives, will lose out - all the better-off people will take the best options, and the less attractive options will become even worse. For example, the less good schools will lose the middle-class pupils or the children of energetic and intelligent working class parents, and so will become sink institutions for the residual vulnerable few. So exactly the people that State provision is supposed to help will suffer if there is more choice. Choice-based reforms should be opposed, because they help the powerful at the expense of the vulnerable."

This is an important and widespread critique, which deserves (and requires) an answer. I have offered (at least part of) one.

[Teck Khong]

The point Andrew is making should form the philosophical basis of the direction of a future Conservative government, and as he rightly says, the motive is not about private versus public FUNDING of key services, but the policies that dictate the complexion of the services. Indeed, it is a misnomer to blanket-classify the changes in health policies as “privatisation” because NHS access per se would not change – it’s the delegation of provision-cum-attendant management that is being devolved to the private sector while the NHS in character becomes that of a “super-insurer”.

I believe that the issues, in broad terms, that have aroused so much anxiety and suspicion amongst various interest groups and polarised viewpoints about the whole process are the apparent lack of coherence, uncertainty of direction and blurred end objectives.

As with most British institutions – and there are historically many to be justifiably proud of – such changes fundamentally alter the ethos of the service. Healthcare is uniquely emotive.

I will on this occasion leave education, avoiding opening a whole and different arena of discussion, but the principles upon which policy arguments are based are broadly similar.

The conundrum that Andrew has raised is the tension between state provision with a compassionate welfare-biased ideology and a free-market democracy, where choice has a tendency but not a foregone monopoly to favour the more prosperous end of the social spectrum.

[Teck Khong]

Thank you, "Baskerville", for your encouragement. I am a PPC, devoting my efforts to getting selected while continuing the role of leading my colleagues and championing the cause of patients at the same time.

I have spoken with Andrew Lansley on several occasions, and I hope to finalise a cogent proposal and then discuss the details with him.

[Matt Wright]

Good points well argued but we need to be very careful how we interpret competition in terms of public services. Even in business we can see problems and put into the context of some public services those problems can be serious. Take Andrews eg of the shops selling milk. In my experience of companies and innovation (have worked many years in this field), it would not be unfair to say that a shop prepared to sell such a lousy product will tend to continue to sell lousy products until it goes bust. In the commercial world this can be painful but doesn't matter too much as the few good companies grow and replace them. Certainly their are important lessons the public sector can learn from the private sector but there are vital nuances between the two that can have major repercussions if not understood. A hospital or school closing down will lead to hundreds of letters to a local Conservative MP and the answer that "oh well it doesn't matter, its competition" will mean that MP is no longer an MP. I think Andrew gets some of the nuances between public and private but many don't. I think people do generally like choice but sometimes they actually don't want to choice, they do actually just want a good local hospital and school. Our ability to get all this right is the test of whether we can make ourselves electable and elected,

Matt

[Andrew Lilico]

Matt@06:10

You note that under the current system, if we don't get what we want from public services, we write to our MP. It isn't directly the topic of this column, but as I have discussed before, I want that to end. If we buy a fridge and it doesn't work, we don't write to our MP! If we hire builders to extend our house and they are hopeless, we don't write to our MP. So why should we have to do that if we don't get the healthcare or education services we ought to?

I want to have a specified set of healthcare services, and have a property right on receiving them. If I don't get the healthcare I have purchased (from the State), then I shouldn't be writing to my MP - I should be consulting my lawyer. We need to take politics out of individual cases in health and education, and focus it on the overall policy environment.

[voreas06]

I think what Andrew is really arguing is that the profit motive will push down costs and drive up standards, choice or actually competition is the byproduct of the profit motive. The problem with this is I don't particularily want my local hospital in competition with five others over how much profit they make. As a patient what I actually want is the best patient care, or as a student I want the best education I can get.

You don't necessarily get these through organisations in competition and it is not realistic to believe that people are going to get the level of choice that will drive up standards and drive down cost due to barriers to entry lack of available land and infrastructure etc, etc.
So we do need to harness the profit motive but not at an organisational level at the individual pay packet level. If I am satisfied as a patient with the outcome of my operation and six months down the line I have had no complications and I feel the hospital has been excellent then I should have to fill in an anonymous feedback to that effect and whatever I say will affect the wages of the people in that hospital.
By doing this people are motivated not to meet targets or to empire build or to necessarily maximise profits but to maximise patient well-being with scarce resources.

[Richard]

"As a patient what I actually want is the best patient care, or as a student I want the best education I can get."

But are you prepared to pay for it yourself?

[voreas06]

Yes through my taxes.

[Andrew Lilico]

voreas06@9:14

It's fine if you don't want lots of options. You will, nonetheless, benefit if others have options and if the providers face real consequences if others choose away from them. That is what my article argues.

You state "it is not realistic to believe that people are going to get the level of choice that will drive up standards and drive down cost due to barriers to entry lack of available land and infrastructure etc, etc.". I disagree. So does the government. So does our Party.

[voreas06]

Andrew Lilico "I disagree. So does the government. So does our Party."

That may be the spin but what we are seeing on the ground is hospitals closing, A&E and maternity wards being downgraded or closed. So where exactly is the choice going to come from and if we are to see all of a sudden a massive private hospital building programme to provide this choice where is the land, roads, accomodation skills going to come from in an already seriously crowded island.

[Matt Wright]

voreas06 is touching on some of the issues I was saying, Andrew. I think the point is that there are certainly lessons the public sector can learn from the private sector but there are important differences too. Getting that balance right is the real test. One of my points was that in fact in the commercial world bad businesses tend to go on being bad and go out of business and the few really good busineses grow and replace them. My point was that in the real world we cannot casually allow hospitals and schools to close. As Voreas 06 says there are also relative barriers to entry to which I would also add there are some limitations to choice in the case of such technical products. These all make the issue more complicated than some like to think. We have to find ways for largely existing systems to be more innovative and less centrally dictated.

Matt