Markets Regulation and Ethics

One of the government’s main arguments for its current reforms of the NHS is that they are necessary to meet the economic challenges which stem from the financial crash of 2008. But by directly drawing on the failed models and institutions of pre-2008 economics the reforms fail to learn from recent history.

Government and regulators should be looking at how to embed responsibility and ethics in healthcare organisations, rather than importing the institutions and values that were implicated in the greatest market failure for 80 years.

In looking to develop its policies for whole person care Labour must also learn the lessons from its period in government.

We need to begin to consider how Labour can develop its care policies within a wider context of a reinvigorated responsible public sector, not within the confines of some kind of regulated market.

Labour’s path to responsible NHS reform agenda

As Ed Miliband is trying to do with reform of the market, Labour must own the responsible public service reform territory. It can do so by setting out the moral critique of the Government’s plans. But in so doing, it risks reverting to – or being painted as – representing the status quo, and of having learned no lessons itself from recent history. So Labour needs a critique of what went wrong in reform before, and a direction towards a responsible reform agenda for the future, as well as an attack on the present. This has the advantage of beginning a unified narrative for the Party across reform of the market and the state, based on a responsibility agenda.

On the NHS, Labour’s political strategy has moved on from re-toxifying the Conservative brand while retaining a positive perception that Labour saved the NHS, rebuilt hospitals and cut waiting times. But there is a risk of complacency in the safety-first defence of Labour’s own record and trust. The Coalition narrative of ‘Labour waste’ infects the perception of Labour’s NHS productivity. The continual noise about care failures – most notably at Mid Staffs – raises questions about whether compassion and dignity – or responsibility, in the Miliband narrative – was somehow lost in the last decade.

On the positive side Labour has started the process of establishing a more radical vision for an integrated care service through “whole person care”, and will be consulting widely on the key principles over the coming months.  Initial reactions have been generally enthusiastic, but some significant issues, such as how to fund social care and how to make radical change without structural reorganisation have to be developed.

Set in the wider context Labour needs to make three shifts of emphasis to own a pro-change agenda.

Learning lessons

Firstly, it needs to acknowledge the mistakes of the past, including – but neither exclusively not absolutely – mistakes made in the use of the private sector. Under political attack from the Coalition, Labour’s default is understandably to stand by its big-picture record and try and turn the tables back on the current administration – defending the past and attacking the present. Labour’s answer to questions about PFI value, for instance, is to celebrate 100 new hospitals and the speed with which they were built. Perhaps this is the best communications tactic, but it smacks of an incumbency mindset rather than a desire to reflect and renew.

Whilst setting out a clear and radical vision as an alternative to the Coalition approach Labour must be seen to have reflected on its period in office, although it can rightly point out the problems faced in the noughties (lack of capacity, poor infrastructure, lengthy waits, demoralised staff) are different from those faced today (issues of long term conditions, fragmentation, expectations of shared decisions making, reduced access to funding).

Some worry about defending our record where we have real successes to celebrate, but the next election will be won on the vision for the 2020s not by the waiting time or patient choice achievements of the 2000s. (Others on the Left of the Party seem more determined to fight old ideological battles and blame New Labour for paving the way for the Coalition – an argument that provides the only good PR for Hunt and Cameron.) Communications-wise, being outflanked on the Left on private sector profiteering by a coalition pursuing a flagrantly neo-liberal agenda makes it harder for Labour’s critique of irresponsible predatory values to cut through.

As an example, if Labour had its own critique of PFI it would be able to expose the mistakes that the current Government is making by denying NHS Foundation Trusts access to public capital, and to propose its own reforms of capital development and private sector partnerships.

Labour could celebrate the reduction in waiting times but still critique mistakes in the first wave of Independent Sector Treatment Centres, forcing excess capacity onto local health economies and allowing private companies to walk away with un-earned income. On the partial-failure of the national IT programme Labour could claim the successes more belligerently, but also own the critique and show it had learned, thus allowing it to side-step blame rather than having to take it on the chin.

A key lesson from many of these New Labour reforms is not that they were conceptually or ideologically flawed in themselves, but that they were too rigid and un-adaptable, and poorly managed often even after expensive advice from the usual suspects. Under pressure to achieve breakthrough changes across the whole system, Labour’s default was for reforms to be implemented on a national scale, from waiting time initiatives to the IT programme to the ISTC subsidies and the “PFI or bust” edict. This made it harder for local innovation to develop, and once a programme had been rolled out it was harder to adapt according to lessons learned on the ground.

Labour needs to show in Opposition that it is able to learn and adapt in a more diverse and networked world. It must develop a policy framework that is more localist, permitting innovation and adaptation rather than attempting to solve problems with a national solution.


The second shift for Labour is to re-claim the territory of empowerment. Both sides have mis-used the rhetoric of patient choice to promote a marketisation agenda. But the lesson of the financial crisis – and of the utility markets – is that markets are not necessarily empowering for consumers. It is possible to have markets – like in energy and railways – that do not feel empowering for consumers who find it hard to switch and who are vulnerable to cartel behaviour. It is also possible to have managed democratically accountable services (Sure Start, New Deal for Communities?), without a real market that still provide control and voice for users.

Those on the Left who argue against ‘choice’ as an intrinsic value are however running down a blind alley. Labour’s core values put redistribution of power at their heart, so giving decision making control to communities and individuals where possible should be a political imperative. But if we are sceptical about the invisible hand of the market in areas like healthcare then we need to develop the alternative models for providing real control and empowerment to users and families. And Labour should avoid mixing the end and the means. If the ‘end’ is a feeling of control and autonomy then we should seek ways to achieve that sense, rather than assume that a particular method – be that an elected commissioner or an individual budget – necessarily achieves that.

Forcing a particular model of ‘empowerment’ onto users can have the opposite effect, for example where a blanket direct payment policy takes away the choice of direct provision and leads to worse quality, casualised agency care. Labour should not cede this ground – rhetorically stolen by the ‘no decision about me without me’ mantra (a slogan borrowed from a Department of Health campaign on learning disability circa 2002, as it happens). It should be actively seeking examples across public services where real involvement and user power has been achieved, and making this the model for innovative empowerment.

Cameron communicated his core philosophy by saying, as Leader of the Opposition, “I believe in Society, it’s just not the same thing as the State”. Miliband’s response should be that he believes in Empowerment – but it’s just not the same thing as the Market.

Responsible NHS organisations

The third shift that Labour must make, to show that it is learning the lessons that the coalition has not, is to bring the ethic of responsibility into its public service reform debate. The groundwork for this shift has been made in the critique of irresponsible capitalism in the care market. The asset-stripping behaviour of private equity companies in the care home market, leading to the collapse of Southern Cross, played into the Miliband narrative of predatory capitalism. As with the financial crisis the policy environment that allowed these asset-stripping deals developed under the Labour government, and there is a need to admit that and set out an alternative framework in order to own the agenda.

As long as the Coalition sees issues like Southern Cross and PIP implants as technical market regulation issues rather than examples of a deeper moral problem with market ethics then the space will be there for a progressive critique that is in touch with public concerns.

Miliband’s narrative on Southern Cross and PIP implants – in line with that on News International, utility companies and the financial crisis – focuses on the irresponsibility and values of those making decisions and deals. This needs to be fleshed out into an agenda for reform of public services. If this is to be achieved, the spotlight of responsibility should be shone not just at the market but at public organisations as well. Capitalism does not have a monopoly on irresponsibility and greed. Labour should develop its critique of irresponsibility to encompass issues such as public sector wage inequality, the merry-go-round of failed leaders and the all-too-common cultures of bullying and buck-passing when things go wrong. Front line staff, patients and families too often feel that management is distant and unaccountable.

At ward level, there is a growing crisis of confidence in the compassion of nursing care (often delivered by unqualified assistants). This Parliament’s recurring theme has inquiries and reports into undignified care, particularly of the elderly.

These are sadly not isolated incidences. It is too easy to turn a blind eye to suffering, to wash our hands of the issue or to blame someone else – the politicians, the managers, the doctors and nurses. Of course, individual managers, professionals and support staff involved in have responsibility for their actions and their shortcomings. If, as Miliband has emphasised, we all share a responsibility for the society we create, then we need to ask ourselves collectively the tough questions about how we value for older people who are making up a greater share of our country. Labour needs an inquiry into the values of public sector institutions and professions that challenges the status quo and involves employers, unions and professional bodies into tough debates about staffing levels and wage inequality as well as personal accountability and job security.

There is a rich territory here for Labour to occupy if it wants to bring ethics and responsibility into its narrative of public service reform as well as its reform of the market place. This would provide a space for a new debate about the ethics of ownership and governance that the Coalition tried to dominate but have left open. The orthodoxy of the last decade – continuing under the Coalition – is that what matters is what works. The implication of Miliband’s responsibility agenda is that what matters is what is good. The ownership and governance of organisations providing care to the vulnerable in society is a valid question for policy makers, but it is not a return to public good, private bad. Some privately or socially run organisations – in public and private services – are more in touch with staff and users than very big and hierarchical structures in the public sector. This is an agenda for reform within public institutions, rather than just their replacement by alternatives.

The Social Enterprise sector is disenchanted with the Coalition after the promise of the Big Society has been undermined by the reality of a pro-private sector procurement model. Central Surrey Healthcare – the staff-owned darling of the Big Society agenda – lost out on contracts to a Virgin-backed private consortium because it could not raise the equivalent levels of capital. Where formerly PCT-employed community services staff have been coaxed or strong-armed into creating social enterprises, their contracts are strictly time-limited and will be opened up to the global private market in due course. Meanwhile the label of social enterprise is tarnished with big chains controlled by private investors rather than genuinely socially driven and community controlled enterprises. The real community-managed sector is understandably losing faith in the vision set out for the NHS to be the biggest social enterprise sector in the world, as it sees the creation of an open market where the big beasts will dominate.

Labour could outflank the Coalition in its enthusiasm and practical support for social enterprise, challenging the colour-blind orthodoxy of procurement law by actively promoting and then protecting organisations that have a social purpose rather than being driven by the bottom line. Given the productivity premium that is achieved by better staff engagement, there is a financial as well as a moral and political rationale.


Labour’s job, according to its leader, is to establish the arguments about what is wrong with our country and what needs to change. Miliband has begun this process in his narrative on markets, the media and welfare with his theme of responsibility versus predatory behaviour. This echoes the theme of values in his leadership campaign. But the Party needs to extend these themes into reform of politics, the state and public services, offering both a consistent critique of government reforms and future alternative direction.

Miliband’s narrative of responsible values provides a starting point. Labour’s advantage is that its leadership is trying to learn from the mistakes leading to the crash of 2008, while the Coalition, united in neo-liberal ideology, is doomed to repeat them. (The fact that the media and the public perceive public sector waste rather than capitalist failure as the cause of our problems is a bigger challenge.)

Current reforms in the NHS, dressed as choice, import the same values and bottom-line obsessed institutions that failed in 2008 – right down to the maligned credit rating agencies that green-lighted the predatory Lehman Brothers and legitimate a growth-denying ordinance in national budget setting. This offers an opening for Labour’s attack and space for an alternative pro-reform agenda.