LEAD ARTICLE Reshaping the Health Service
Publications Posting a profit | What's right with it? | Taking the initiative | Why and how
Activities Receiving Mr Rifkind | The world according to Sir Clive | Welfare farewell | Economy in government | Frank Field's pension book | David versus Goliath | Past the best
Focus on Friends NCPA


Focus on Primary Care

The Adam Smith Institute has been holding discussions on the future of the National Health Service, and the need for further changes to its structure. As the 1990 NHS reforms settle in, it is time to assess the effectiveness of the various elements of that package, and to see which can be built on.

The ASI's approach is to concentrate on what the NHS should look like in the next decade, and to find ways to accelerate the desirable trends. The split between purchasers and providers has not been an unqualified success, since some of the purchasers have simply block-bought from the same providers as before, without any attempt at imaginative or innovative purchasing of health services.

On the other hand, the budget-holding practices have been far more successful than many originally suspected. Many of these buy competitively on behalf of their patients, and introduce new services and facilities into their practice. Some have ploughed funds into upgrading their surgeries, and have made procedures such as physiotherapy available within the practice.

Not surprisingly, the budget-holders now cover over 60% of patients in Britain. Labour Party policy so far has been to abolish budget-holding, but there is no reason to suppose this is any firmer than the other policies which disappeared. The ASI takes the opposite view, that budget-holding is a success to be expanded.

Under the ASI's view of the new look NHS, primary care will dominate. Much of the work which now requires hospital visits will be done within the GP's surgery. Consultants, who today have to be visited in hospitals, will come to doctors' surgeries to see patients. Many of the procedures which today require hospitalization will be done in extended facilities within the general practice. Most GP's surgeries will develop into mini-clinics, turning themselves into the new 'cottage hospitals' of the twenty-first century. This will greatly improve the NHS, with treatment available more locally and more quickly than hitherto, and at less cost. When offered a choice, patients overwhelmingly opt for local treatment where they can be visited, and for day-care in preference to hospital admission.

The Institute envisages that some general practices will even add overnight facilities which can be manned periodically by staff brought in for the purpose. Even without this, however, the range of procedures done in general practice by visiting specialists will reduce the need for admissions to hospital.

For GPs who choose not to become budget holders, the ASI suggests that they should choose between different Health Management Units, taking their patients with them. The HMUs would receive the annual health allocation per patient, and would be responsible for purchasing all of the health needs of the patients thus registered with them, including the payment of the GPs themselves.

Further changes envisaged by the ASI include the privatization of the NHS Supplies Authority, and the opening up of health supplies to competition. Private insurers are expected to play a much greater role in the tertiary sector. Those who will nursing home care are in a minority of, perhaps. one in five. The average stay is roughly two years, making the risk easily insurable. The Institute is exploring ways of making private cover affordable and attractive to most people.

As for the secondary (hospital) sector, the Institute expects it to play a less significant role. With the expansion of primary care to cover part of its work, and an extension of private nursing home care via widespread insurance, the secondary sector will be squeezed to some extent. Those who espouse Public Choice Theory should expect dire warnings of NHS crisis, a need for extra cash, and terminal collapse, all coming from hospital consultants, of course.

Spider's web

With a flourish of scissors to cut the red tape in front of the computer, technology minister lan Taylor gave the mouse its final click to put the Adam Smith Institute officially on the Internet.

Laborious hours by Mark Griffin of Cyberpoint gave the ASI's home page an attractive and informative layout. Browsers can find about the ASI's record of achievement, its current activities, and the text of its latest Bulletin on line. Explorers can find full details of the ASI's Conference Division and of its International Division.

ASI publications are listed, with brief descriptions, and order forms enable distant readers to obtain its reports, together with the increasing range of Adam Smith memorabilia. The Next Generation Group is prominently listed, with details of Its activities.

Mr Taylor, in putting the ASI on line, pointed out the importance to Britain's future competitiveness of adapting to new technologies, and he praised the work of the ASI round the world in promoting free markets and free trade, and in helping nations to adapt to modern economic realities.

Net surfers can find and browse the ASI home page at


Posting a profit

The first of the one-day post office strikes provided an admirable launch date for an ASI publication bearing the title Post Office Reform: its importance and practicability. This is the same title used by Rowland Hill for his report of 1837, which led to the penny post.

Author Ian Senior points out that Hill himself never supposed that a uniform charge over the whole country was essential. On the contrary, he thought that those who lived in remote, inaccessible areas, would have to pay more, or accept lower service levels. He suggests that this rule could be applied today, with ingenious variations. The idea that people on Scottish islands might receive free fax machines in return for less frequent delivery is one which attracted notice.

Ian Senior's basic suggestion is that the Post Office is being bled away by competition while it occupies a limbo between government control and freedom of action. His solution is to put privatization back on the political agenda. Parcelforce could go as a separate entity, and the mall services sold as a single entity, but subject to competition.

What's right with it?

The title What's Wrong with the Welfare State might imply a very big publication, but the ASI's report of that title by Eamonn Butler and Matthew Young packs masses of detail into its 40 pages. The full impact of demographic change is covered, as is the ever-escalating cost. The authors also cover what the ASI calls the 'social pathology' of the welfare state, with its standing temptation to fraud.

The plain fact is that unfunded pay-as-you-go systems looked attractive at the time they were started, but are built upon sand. It is in everyone's interest to get the maximum out while putting the minimum in. The answer, say the authors, is the Institute's Fortune Account, based on individual funds which are the property of the holder.

The publication is part of the Institute's effort to win the intellectual battle in favour of funded pension and welfare systems. It represents a very useful source-book of state welfare.

Taking the initiative

As revealed In the last Bulletin. the government's Private Finance Initiative (PFI) is in trouble. It has fallen well short of expectations, with contracts set to fall 40% below the government's 14 billion target. Contractors are pulling out, saying that the cost, the bureaucracy and the delays combine to make it not worth while to participate.

The new ASI publication Winning Back the Initiative, explains all of these points. It points to projects split between several ministries and agencies, all of which have to poke their oar in before each stage can go ahead. It picks out the tendency to include projects which are completely inappropriate for PFI. It singles out costly over- specification as something which plagues PFI documents.

The report is the first part of a three stage attempt to win back the PFI and set it on track. A larger and more detailed publication will feature reaction from the contractors themselves, and their experience of the process. In the Autumn there will be an Institute seminar dedicated to ways in which the whole operation of the PFI can be improved.

Why and how

Two short executive summaries have been issued by the Institute to guide readers through the welfare and pensions maze. The first of these, The Why and How of Welfare State Reform, gives the basic facts about welfare, how much it costs, and what the money goes on. It shows the British Social Security budget at 90 billion per year, roughly 40% of all public spending, and equal to the entire GNP of Turkey.

It points out that the only way to have stakeholders is for people to have a stake. They must be able to build up their own pot, to watch it grow, and to add to it for their future welfare and pension needs.

In similar vein, the ASI has produced a summary of its proposals for The Fortune Account. This highly abbreviated account shows how Fortune accounts can solve the problems of security and investor confidence, and how a simple regulatory framework could protect the public.


Receiving Mr Rifkind

The Institute's Summer Reception at the end of June was an occasion for ASI subscribers, friends and supporters to get together at the Great Smith Street offices to exchange news and ideas with Institute personnel and with each other.

The guest of honour this year was the Rt Hon Malcolm Rifkind, the Foreign Secretary. He met as many of the guests as possible, and gave a short speech in which he pointed out how valuable and how much appreciated was the work of the ASI, not just at home, but in the formerly Socialist countries, especially in Eastern and Central Europe and the former Soviet Union.

The world according to Sir Clive

Sir Clive Sinclair gave the July lecture to members of The Next Generation Group. He used the event to make six specific predictions about the coming century, none of which was quite what it seemed. For example, the prediction that everyone in the audience would die before they reached retirement age sounded dire, until he explained that there would no longer be a retirement age ...

Similarly, a prediction that most vehicles produced in the year 2,000 would not run on fossil fuels seemed remarkable, until Sir Clive explained that they would be bicycles!

Sir Clive joined TNG members afterwards for the wine of the month, which was a delicious Blush de I'Ardeche, and gourmet sandwiches. The next TNG meeting is not on the traditional first Tuesday because the group takes a six week break. It will be at 6 pm on Tuesday September 17th.

Welfare farewell

The Institute held one of its best ever seminars on the subject of "The Future of the Welfare State - defining a new model." The event, in early July, featured a speech from the Rt Hon Peter Lilley, Secretary of State for Social Security, and the leading 'big spender' of the Cabinet. Mr Lilley did point out, though, that spending would be very much higher but for the reforms he had already put in place.

Sir Norman Fowler chaired the seminar, opening the day with a declaration that most people were now coming to accept that personal and funded pensions and insurance were essential to ensure the nation's future security.

Barry Riley of the Financial Times spoke of the coming crisis, and dubbed it the "farewell state." Peter Davis, the man from the Prudential, outlined discussions with both government and opposition on creating simple new second tier pension systems.

From the ASI, Madsen Pirie and Eamonn Butler spelled out how Fortune Accounts would work, and how the transition could be handled and financed. The mood of the conference, attended as it was by many of the big players, was that privately-based solutions were entirely practicable.

Economy in government

Entries for the ASI's 1996 Economy in Government Competition are now closed. There was a minor hiccup when the wrong date appeared in the press, but everything was handled smoothly. A great number of practical and innovative suggestions to make government more cost-effective has been received,

They include a proposal for 'employment bonds,' with low interest long term private finance for new jobs, perhaps up to one million of them within five years. The purchase of group insurance for NHS patients in each practice could cut waiting lists and save public funds. The sharing of ambulance and fire resources is suggested, as are tax cuts for those who opt out of welfare services.

5 billion could be saved by a reorganization of the civil service grade structure, suggests another entrant, while further ideas include reorganization of the welfare and benefits system. All in all, there is a high standard of entries, making the task of the judges harder than ever as they pick the final winners later in the year.

Frank Field's pension book

Actually it belonged to José Piñiera, the man who turned Chile's pension system from an unfunded to a funded system. He showed his pass book to Frank Field while appearing before the Commons Select Committee on Social Security. Frank Field now has it; no doubt the rest of his committee will acquire their own when they visit Chile in the Autumn.

José Piñiera's trip was organized by the Adam Smith Institute, and co-sponsored by the IEA and the National Association of Pension Funds. He gave a morning press conference, made his Westminster appearance in the afternoon, and gave a lecture to an ASI audience In the evening, followed by a reception.

The lecture was rated by many as one of the best they had ever witnessed. Dr Piñiera was on top form, and answered all questions with confidence and style. The story he told was of success with few qualifications, and most of the audience left with the view that it can only be a matter of time before Britain sets off down a similar road.

David versus Goliath

The David in question is Professor David Marsland, Adam Smith Institute author, and frequent radio and TV spokesman on its behalf. Goliath is the welfare state, and the latest slingshot is a book published by Macmillan Press, entitled Welfare or Welfare State. There is an introduction by Lady Thatcher.

The book gives state welfare the most vigorous philosophical pounding It has ever received. Prof Marsland begins with the notion that the welfare state is a failed utopia, sought from high ideals, but fatally flawed, even in its inception, let alone in its execution. The author describes the welfare state as 'incoherent,' pointing out that what today is called 'relative poverty' would in former times been thought of as prosperous.

Not only is the welfare state philosophically unsound and full of internal contradictions, it is, says Prof Marsland, both inefficient and very costly. Further than that, it destroys moral worth and promotes fraud and dishonesty as well as dependence. This is a must read book. You can order a copy from Carol Monoyios at Macmillan on (01256) 302690.

Past the best

Andrew Selkirk, editor of Archaeology Today, has written a report for the Institute about the state of modern archaeology. His thesis, broadly speaking, is that archaeology has been far too dominated by public funds and state organization. The result has been an unnecessary over-professionalization of the subject, to the detriment of genuine study.

His book Who Owns the Past sets out the faults of the subject and makes important recommendations to set them right. It will be published by the ASI in September.

Focus on Friends

In a new feature for the Bulletin, the ASI intends to focus from time to time on other think tanks, both in Britain and abroad.


The National Center for Policy Analysis is based in Dallas, Texas. Its director is John Goodman, ably assisted by Jeanette Nordstrom who worked with him for several years before they married. The NCPA is unusual, in that it is a regionally based think tank which operates on a national scale. Most national groups choose Washington or New York as their base, but the NCPA operates from Dallas.

The Center produces excellent economic research, some of which the ASI republishes in Britain. They produce a first class newsletter, Executive Alert, which is in full colour. Conferences on key issues are a strong element in their programme. The ASI hold a joint conference with them each year at Windsor Castle, and takes part In their yearly conference at Balleroy Chateau in France.

The NCPA has a huge impact on the US scene, with health and pension issues featuring strongly. They have actually led the debate in both areas for some years.

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Updated: 28/10/96