Who can deliver the public interest?

It is an apt comment on our times that a speech by a Labour Chancellor of the Exchequer defending the survival of the NHS as a free public service should occasion such widespread comment - and that it should be seen, moreover, as a further dramatic chapter in his growing rupture with the Prime Minister. Certainly, Gordon Brown's speech to the Social Market Foundation last Monday made a cogent and intellectually robust, if hardly poetic, case for keeping markets out of some public services. In health, consumer "choice" must in large measure be a nonsense because patients cannot choose when they need treatment and will always lack the information to judge what they require and who will best provide it. In schools, too (though Mr Brown did not say so), a genuine market is impossible because the act of choice pollutes the information available. The most important contributors to a school's performance, whether measured by test scores or less quantifiable things such as behaviour, are the children it recruits; a very good school can make a big difference but not, alas, as much as the pupil's home background and prior attainment.

There should be little argument on the left about this. Nor should social democrats waste time disputing the predominant role that the market should play in providing most goods and services. Indeed, the left should favour competition, thus frustrating capitalism's natural tendency towards cartel and monopoly, and it should encourage new businesses since these are likely to challenge established power and privilege. As Mr Brown said, barriers to enterprise - including, sometimes, too much regulation of employment conditions - hit lower-income groups and poorer regions of the country hardest: for every business created in the poorest areas of Britain, six are created in the wealthier areas.

What is less certain is that, in trying to map out the respective areas where the private sector and the state should operate, Mr Brown has got his bearings quite right. The dotcom bubble showed that markets can misallocate resources almost as prodigiously as state socialist regimes did in their five-year plans and great leaps forward. Just as, in Mr Brown's words, it is wrong to "equate the public interest with public ownership", so it is also wrong to equate efficiency and value for money with the private sector.

Mr Brown comes very close to doing this when he digs in his heels over the private finance initiative, as he did in his speech. As he says, procuring a state service from the private sector is not the same thing as delivering that service to consumers through a market mechanism. There should be no principled objection to the PFI. But Mr Brown is wrong to insist baldly that it "is in the public interest". In recent days, the PFI has had the better of the argument, since a National Audit Office report shows that, in two respects, the projects so far (which include 25 hospital schemes) have done what was promised. First, they kept within their budgets: only 22 per cent of those due for completion in summer 2002 overran on costs, against 73 per cent of the public sector projects on which the audit office reported two years ago. Second, they were generally completed on time, with only 25 per cent of them late against 70 per cent of the public sector projects.

So far, so good. But the whole point of the PFI is not that companies build fast at minimum cost; it is also that they are responsible for maintenance and service thereafter. The acid test is the quality of what they deliver and their long-term performance in managing it. Moreover, the report does not cover the biggest single area of PFI activity - the schools, which, being controlled by local government, are separately audited by the Audit Commission. Here, the picture is less encouraging. The commission reports that the PFI schools were no quicker, cheaper or better-built than those built by local councils. On the contrary, they were worse for light, space, heating and acoustics. The commission found no evidence that, because they had to maintain the buildings, the private companies were less inclined to cut corners. It stated explicitly that local education authorities "with a long established track record of excellence in school design" did better.

In truth, ministers are oddly muted on the best argument for the PFI: that only in this way can they raise the money to make up for years of Tory neglect. It may be unfair to leave future generations to pick up the bills; but it would not be fair either if this generation had to pay the whole of an 18-year backlog. In that limited sense, the PFI is undeniably in the public interest. But we should remain more agnostic than Mr Brown on whether we actually welcome the private sector playing such a central role in public projects.

Iraq needs a classier tyrant

Newly released ministerial diaries on Edward VIII's abdication reveal precisely why Stanley Baldwin, then prime minister, objected to the king marrying Mrs Simpson: she was not "a respectable whore". "The country", Baldwin said, would not stand for it. (This was presumably the same "country" which, a duchess reportedly said in 1945, would not "stand" for the election of a Labour government.) Respectability is indeed important. What brought the Tories into such disrepute in the 1990s was not that they committed adultery, but that they did so with a succession of actresses. Respectability is also vital for tyrants. They should preferably be educated at Sandhurst, speak English with a pre-war BBC accent and, above all, do just as Britain and America tell them. Then, regardless of their domestic brutality and any weapons they hold, they will come to no harm. All Iraqis need is a better class of dictator.

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