Once the gyrating lead singer and bass guitarist for Ugly Rumours, a rock band, today he dominates English politics as Britain’s longest serving Labour Prime Minister. On July 21, Tony Blair marked his tenth anniversary as the man who led his party out of the political wilderness.
Blair restored his party’s fortunes in 1995 by removing the sacred Clause 4 of the Labour Party constitution, which called for “common ownership of the means of production, distribution and exchange.” In other words, he ditched the mantra of public ownership which still haunts his left-wing counterparts in other countries, including Canada. Assuming the mantle of modernizer, he coined the term “New Labour” to emphasize his party’s break from the collectivist dogma of the past. In 1997, he pledged to continue the economic policies of his conservative opponents, and was elected.
He kept his word. In stark contrast to the dark days of 1979 when a union stranglehold brought the country to the breaking point, Blair retained the Thatcher era’s legacy of privatization, tax cuts and deregulation. As a direct consequence of that consistency, the British economy is thriving relative to its continental counterparts. It surpassed the French economy in size in 2000 and, if the trend line holds, within 20 years will become the biggest in Europe by beating out Germany’s over-regulated welfare state.
Much of the British model remains foreign and frightening to the interest groups and aging thinkers that dominate the Canadian Left. But results speak for themselves. Private capital is routinely invested in major infrastructure projects, including roads and public works. Cities save money by contracting out many services, including mass transit. A deregulated and privatized electricity market delivers consumers better service and lower prices. Flexible labour markets have attracted investment while delivering the lowest unemployment rate of the G-7 economies. The place is richer: the average Briton produces US$30,200 annually, versus US$29,200 in Germany.
Re-elected in a landslide in 2001, and riding a prosperous economy, Blair also flirted with traditional remedies. He promised increased “investment” in public services that had remained unreformed under both the Tories and New Labour, and oversaw several years of plus 7% increases in spending on healthcare and education. As former Conservative Chancellor Nigel Lawson has said, the National Health Service (NHS) is the closest thing the British had to a national religion. Sound familiar?
Given the parallels now unfolding in Canada, the story gets interesting. In spite of increased inputs, there was little corresponding increase in outputs. Hospital waiting lists, for example, did not become shorter. The extra money was simply absorbed into higher salaries, more bureaucracy and waste. Spending without reform turned out to be a big mistake. Blair has now twigged onto the error of pouring more cash into unreformed public monopolies.
In 2002, he took New Labour into new territory. To prevent the system from filling its pockets with the extra money, he began to separate the functions of public funding and service provision. While tax revenue remains as the funding source, payments go to competing providers and are increasingly based on the preferences of the end user. The healthcare patient or parent of a student has a say in the choice of provider, either public or private, and the money follows along.
The NHS is now being reorganized into an internal market, with healthcare purchasing decided at a local level. Public hospitals have autonomy to compete, with their funding based on the volume of customers they attract. To push prices down, the government opened the NHS to foreign providers, who have won most of a five-year contract for elective surgeries. The entry of new competitors has sent a powerful signal to government hospitals, which face a loss of business if they remain inefficient. The same dynamic is unfolding in the education system, where the policy direction is to break down the public school monopoly and expand choices, albeit in a publicly funded marketplace.
In Canada, the British debate about all this might as well be happening somewhere on the moon. Governments here still “own” swathes of the economy. The political class is firmly committed to spending without reform as our parties chatter about more “investment” and “spending guarantees.” Former Health Minister Pierre Pettigrew offered a glimmer of hope for a few minutes in May when he mused that health services didn’t necessarily have to be delivered by government hospitals, but that was swiftly shot down by an electioneering Martin government on a disastrous tack to the unreformed left.
His Conservative opponents simply ducked. The obvious lessons from New Labour’s efforts to create choice and encourage competition between providers in the public service heartland of healthcare and education have never broken our intellectual surface. We will have to acquire some Blairite common sense the hard way.
Sooner or later, our politicians will realize that competitive delivery delivers better results than government ownership. We will focus on the ends, not the means, and make consumer choice a foundation of public policy. The longer it takes, the poorer we will be. Let’s hope there’s a Canadian version of Tony Blair sitting somewhere in the wings.