Is it a market, or isn’t it?

Why is Virginia Bottomley like Mikhail Gorbachev? They both believe in managed markets, and they have both failed.

The NHS is falling apart, and with the implementation of the Community Care Act this April, those social service departments that have survived until now will go to the wall. Hospitals are running out of money, purchasers cannot afford to pay for what their populations need, and soon social services will be restricted to the most needy. We are into rationing in a big way, with echoes of the Poor Law’s notion of ‘less eligibility’ - you may be needy, but you are less eligible for help than your even needier neighbour.

Rationing may be right, but it is not what a real market does for long. In conditions of shortage supply should expand to meet demand, but expansion is exactly what the government is trying to prevent. The NHS reforms, introducing the idea of an internal market in medical care, were meant to make the service more efficient and more sensitive, and also to deflect political criticism from the government.

Instead, they have made it less effective and have focused criticism on the government, precisely because under-capitalisation was imposed on the health service. London’s chaotic health services were exposed for what they are - competing teaching hospital fiefdoms - by the market and Tomlinson is trying to manage the ensuing chaos, but without resources. The seemingly unstoppable transfer of public money into private residential homes was the spur to the Community Care Act, which aims to control that flow but at the expense of reduced services to many other people.

The Thatcherites have unleashed a market genie and Virginia Bottomley is trying to get it back into the bottle. She can no more succeed than Gorbachev could make Soviet socialism’s command-and-control economy into a managed market. Resources simply run out, and no corrective mechanism is allowed to kick in to replace them. The government must either let market forces rip - which means dismantling its paternalistic apparatus of ‘purchasing’ and ‘needs assessment’ and truly letting money follow the patient - or it must stand by rationing and dump the market mechanism, together with its sprawling bureaucracy.

The second option is the current choice of what remains of the old left, which has a simple faith in ‘planning’ and an instinctive attachment to ordering people about, but it could also appeal to wet and hard-pressed Tories. A well-rationed NHS is the best recruiting sargeant the private medical sector could want, after all. Planned medical care in short supply for plebs and a burgeoning private market for better folk is probably part of the Tory vision of the perfect society.

The first option means that big money must be found, quickly, to pump-prime the medical market. Tory dogma says that this can come from the growth of the private sector, but this is an unlikely saviour in a recession. Full scale privatisation might raise the cash needed to renew the hospital sector, sort out community services and give the whole service a quality hike, but who will gamble on that in the City? Public money remains the safest source, and that means taxation.

Can the Conservatives make the U-turn and raise taxes? For that matter, could Labour?