Muscular liberalism? The consequences for the Lib Dems of the debate on NHS reform

Nick Clegg

It is very easy to indulge in Kremlinology during the current ‘pause’ in the NHS reforms – although it is probably of limited value to do so.  As I have written before, I do not believe that the political rationale behind the ‘pause’ is a sound one and it is already clear that it has had unintended consequences.  However, the implications for the Liberal Democrats, who have ended up in the position as the very public, if unofficial, ‘opposition’ to aspects of the reforms bears particular scrutiny.  In particular, the coverage of the internal Coalition wrangling of the last week is worthy of consideration.

When Nick Clegg decided to zone in on the Government’s NHS reforms to show his strength in the Coalition, it looked to many like a masterstroke: the NHS is always relatively high up the electorate’s priorities, and during the reform process to date the Government has managed to conspire to create an unholy alliance of unions, right-wing think tanks, professional organisations, doctors, nurses, patient groups and MPs from all three parties all voicing their concerns. There was also the belief (which Paul Burstow would vehemently disagree with) that the reforms were ‘Lansley’s reforms’.  His party had expressed its disquiet and he was responding to this: party democracy in action.  In short, these were Conservative reforms, to a service which people care about, and they were unpopular. The Liberal Democrats would save the NHS from the Conservatives. Game, set and match.

But the ‘masterstroke’ suffers two flaws.  First, Nick Clegg had signed up to the reforms in July, again in December, and again when the Bill was introduced, had ordered his MPs to vote for the reforms at Second Reading and had – until the local elections came around – supported them in public.  The right-wing press (and, indeed, the Conservative Party) – until this point sceptical – has been incandescent ever since.  So Nick Clegg has rallied the Conservative Party around Andrew Lansley – an unlikely standard bearer of the Tory right – and steeled them for an epic fight over who runs the Coalition.  At the same time, the editorial lines of the right-wing press have shifted from criticism of the reforms to mild support (if not rapturously so).

In political communication, the holy grail when you’re in trouble is achieving a ‘change in the narrative': a rather mercurial occurrence which describes the situation when the lobby journalists – hunting in packs – suddenly get bored of kicking someone and decide to kick someone else.  Nick Clegg has changed the narrative.  But not in the way he would have wanted.  That’s the first flaw.

The second flaw is more fundamental.  Despite their vote at their spring conference, the Liberal Democrats are not a philosophically coherent entity on NHS reform, and preparing to go to war when you’re not sure which side you’re on is never a good idea.

In truth, no party is homogeneous on NHS reform: Conservatives range from those wanting the complete privatisation of the service on the right (meaning that they want to sell off the NHS’s assets and make people pay for their healthcare) to Blairite modernisers on the left (meaning that they want to maintain a NHS free at the point of use, but have a spectrum of options for the involvement of the private sector and the application of market theory).  And Labour members, for their part, range from arch-Blairite modernisers on the right to true ‘socialists’ on the left (where the state owns all of the means of production in health care).  But the Liberal Democrats span the entire range of views.  There are those (possibly including Nick Clegg) who would naturally side with the Conservative right.  There are those – Danny Alexander and Paul Burstow spring to mind – who would sit with the Blairite modernisers.  And there are those – Shirley Williams and Evan Harris – who would sit more easily with Frank Dobson on the left of the Labour Party.

So there are no concessions which Nick Clegg can extract from the Conservatives that will appeal to all of his party.  And, given that his own most ardent supporters are probably those to the right of the Liberal Democrats, it is even possible that any concessions achieved might further weaken him personally.  Whatever concessions are ultimately extracted by the Liberal Democrats, this episode will result in an unhappy Liberal Democrat party.

I suspect Nick Clegg knows this.  And the story leaked to The Guardian and the BBC – about Nick Clegg’s threatened veto over the ‘economic regulator’ – demonstrated perfectly the quandary he is in.If you sit with the Blairites, then the NHS needs to be economically regulated.  If there is a system where money follows the patient, someone needs to decide how much money follows which patients (“price-setting”).  If there is a system where hospitals are free-standing institutions, capable of making surpluses though – equally – capable of running deficits, someone needs to look out and help those hospitals which are running out of money (“managing failure”).  And if there is a system where patients (consumers) can choose where to be treated, someone needs to make sure that hospitals are not behaving in a manner which undermines that choice (“overseeing competition”). These are the functions of economic regulation.

All of these functions exist now: the first sits with the Department of Health; the second sits uneasily between Monitor, the Care Quality Commission and the Department of Health; and the third sits with the Cooperation and Competition Panel (CCP), the Department of Health, and – depending on how far competition law applies to the NHS (answers on a postcard) – the courts.  Now, there may be a case for maintaining the status quo; or there may be a case for consolidating these functions into a single body (a case which Labour first began to look at in 2006).  Whichever side you’re on, the basic principle remains: if you believe in an NHS which looks a bit like what it does now, someone – somewhere – needs to do economic regulation.

However, there are some Liberal Democrats who fundamentally do not want an NHS which looks like what it does now.  When Evan Harris confidently said last Wednesday, "[Liberal Democrats] will not vote for Monitor to be an economic regulator, so this is a veto”, my suspicion is that he is actually calling for a decisive shift away from how the NHS looks today: an NHS where money does not follow the patient; where hospitals are given a budget every year rather than competing for patients; and where choice for patients is heavily restricted.  This is a perfectly valid view to take and Dr Harris has been consistent over the years in his advocacy of it.  However, it is a view which I suspect that Nick Clegg does not hold.  Despite this, he was certainly playing to this side of his Party when he said:

“We cannot treat the NHS as if it were a utility, and the decision to establish Monitor as an ‘economic regulator’ was clearly a misjudgement.”

There may be a clear political misjudgement in describing the health service in terms more akin to describing the regulation of an unloved utility, but if the misjudgement goes beyond presentation then the Liberal Democrats need to ask some pretty searching questions of themselves about how they want the NHS to be run.  But this is where the Kremlinology comes in.  Because in the same article Clegg is quoted as saying:

"The CCP should become an advisory body to Monitor. We should agree a memorandum of understanding between Monitor and the Office of Fair Trading on this basis. We will also need to retain Monitor’s role in relationship to foundation trusts to be clear they are not "undertakings’ within the terms of EU law.”

Leaving aside the usual red herring of EU law (yes, we’re in the EU; yes, EU law applies; yes, no-one has the first clue of the extent to which it applies in the NHS; yes, lawyers are probably making lots of money from this one), this accepts that Monitor will oversee competition rules (albeit being advised by the CCP).  It also accepts that Monitor will manage failure in relation to foundation trusts.  It says nothing of prices, so we might well assume that Liberal Democrats are content with the price-setting functions being transferred from the Department of Health to Monitor.  Overseeing competition, managing failure and setting prices: if the Liberal Democrats want Monitor to do this, they want Monitor to be an economic regulator.

So, last week, the Liberal Democrats unwittingly walked into an awkward position.  They were arguing at once for Monitor to be an economic regulator, but also arguing that Monitor should not be an economic regulator.  The Liberal Democrats will not possibly achieve the latter – to do so would present fatal difficulties to the Coalition with the Conservatives – so at some point the rhetoric will clash with the reality.  When that happens, the Liberal Democrats could find themselves in a very unhappy situation.

Of course, maybe Nick Clegg has realised this now.  The latest list of Liberal Democrat demands briefed out last Friday didn’t mention Monitor.  To the extent it mentioned economic regulatory functions at all, it said that the Liberal Democrats want to, ensure that there is, “the removal of any suggestion that we are pursuing a dogmatic obsession with competition [rather than] the best healthcare system in the world" and to “make sure NHS providers are not needlessly pushed into financial trouble”.

These are surely objectives on which the whole country can agree.  The question is whether they will be enough for the very different schools of thought within the Lib Dems to unite around.