"Osborne needs a rocket up his rear" says Tory MP who fears Chancellor has become leading obstacle to profit-making groups delivering public services

By Tim Montgomerie

Interesting Daily Mail piece by Iain Martin this morning setting out the tensions within the Conservative Party on NHS reform. All of the attention has been focused on the "yellow b**tards'" opposition to key planks of the Lansley reforms but Iain Martin notes that the Chancellor is siding with Clegg on many key questions and against Steve Hilton* who is a cheerleader for dragging the NHS into the 21st century. I know this to be true. Earlier this week one well-connected Tory MP told me that George Osborne needed a "rocket up his rear".

In this debate we are seeing one of the Chancellor's worst qualities in operation. Osborne coasts whenever the opinion polls look good. It's only at moments of crisis that he will act decisively and imaginatively (I think of his inheritance tax pledge and promise to stop Labour's NI rise). In opposition he looked at the pre-election opinion poll leads and, as General Election Co-ordinator, took the foot off the pedal. The party machine became cautious, even complacent, about killing the Labour brand and generating enthusiasm for the Conservative alternative.

Osborne's caution is back again after this month's local and AV results. Ben Brogan wrote about the problem on Thursday:

"The success of the Tory local election and AV campaigns has emboldened those, led by the Chancellor, who say that an outright Tory majority at the next election is in sight and nothing must be done to jeopardise that goal. Mr Cameron’s implementation chief Steve Hilton, a key reformer, could be forgiven for fearing that the revolution in how state and society are organised, which he argues is vital to the nation’s future, is quietly being ditched."

Without endorsing every component of the Lansley plan, I'm sure Hilton is on the right side of this debate. Unless the NHS is reformed and taxpayers get better value for their ever greater investment in the service, it will be in crisis by the time of the next election. The pressures on it are enormous according to a Department of Health document that came into ConHome's hands. Here are a few of the pressures mentioned:

• "The prevalence of multiple morbidity (the presence of more than one chronic condition) rises with age: 57% of those aged 60 and over report having an LTC, with 25% of over 60s having two or more. There are more pensioners in this country than people under 16. Number of people aged over 85 will double in the next 20 years. And the number of people in England who are over 65 is predicted to rise by 51%.
• Over 75-year old people have around twice as many GP consultations, on average, than working age people.
• Other areas of technology in which costs have been shown to start rising are telecare, telehealth and other assistive technologies.
• Areas that are predicted to grow significantly with high (but as yet unpredictable) costs are regenerative medicines – stem cells and tissue engineering, genetic and DNA-based diagnostics and treatments – genetic screening, DNA vaccines, pharmacogenomics and miniaturised diagnostics
• Long term in health care expenditure as proportion of GDP has risen across all OECD countries. From 1970 to 2008, average health spending in OED countries rose form 5.2% to 9.0% of GDP.
• Evidence from OECD countries suggests that ageing alone could increase acute care spending by two percentage points between 2000 and 2050."

Central to the NHS debate is fear about private sector involvement in the delivery of patient care and by private sector we mean, of course, the profit-making sector. Cameron and Osborne need to be more robust in defending the use of regulated private sector firms in the healthcare system. The British people trust profit-making companies to supply them food and fly them to their holidays. Greater private sector provision and competition may be hated by self-serving public sector unions but patients, I'm convinced, can be brought onside.

Reform is also convinced. Earlier this week it set out the benefits of "for-profit" delivery of public services and favourable public reactions to the possibilities. This week's Economist shows how Britain is out-of-step with the rest of Europe in use of the private sector:

"Britain is unusual among rich democracies not in how much private involvement there is in its public services, but how little. Only 4% of acute-care beds are provided by private companies. In Germany, the proportion of hospitals run for profit (32%) overtook the number of publicly run ones (31%) two years ago (charitable and voluntary organisations account for the rest). The Spanish region of Valencia allows for-profit firms to run over 20% of its health-care services, with the sort of long-term deal British providers hanker for. New European democracies are experimenting with similar public-private mixes. Two-fifths of Slovak hospital provision is delivered by private operators."

Britain won't get a free schools revolution or European standards of healthcare if we retreat before the trade unions' scare campaigns.

* Proof again that the caricature of Hilton is unfair.