Milton Friedman lives again

Observations on gurus

Last July, the Nobel Prize-winning economist Milton Friedman entered his tenth decade. As the inventor of monetarism and a leading exponent of public choice theory, Professor Friedman is the Thatcherite par excellence. But in the past week it has become clear that Friedman is the hidden story behind new Labour's public sector reforms. His ideas remain alive today, and growing, at the very beating heart of new Labour.

Alan Milburn recently introduced an NHS voucher. He didn't call it that, but you know what they say: if it looks like a duck and it quacks, it's a duck. Milburn announced: "From December 2005, by when extra capacity will have come on stream, choice will be extended from those patients waiting longest for hospital treatment to all patients. They will be offered choice at the point the GP refers them to hospital. Patients needing elective surgery will be able to select from at least four or five different hospitals, again including both NHS and private sector providers."

If Milburn's words are matched by his deeds, he is proposing the most revolutionary change in the history of the NHS. All patients are to be given a choice as to where they are treated, and by whom - including private hospitals. Tariffs are to be set for procedures, and anyone who wants to can compete for that business, with patients getting the right to choose between them.

That is the very essence of the voucher idea, first enunciated by Friedman in his 1955 article "On the role of government in education". As he put it in a recent interview: "What happens now is that those who are well-off have the choice to school their children wherever they'd like, and they can afford to pay twice - once through taxes and once through tuition. Most of the population is not in that position. The vouchers would allow the lower classes to have nearly the same opportunity as the upper classes. So it would tend to reduce the difference between the rich and the poor. The only reason it has been argued the other way is . . . well, I don't know."

The same logic is behind Milburn's proposals, which are specifically designed to ensure that wealth is no longer a prerequisite of access to choice and excellence.

Friedman's influence on the left extends well beyond the NHS voucher. The congestion charge, introduced in London last Monday, has been lifted straight out of the professor's 1951 essay "How to Plan and Pay for the Safe and Adequate Highways We Need": "[On] a crowded road . . . it would be desirable to discourage traffic . . . the people who drive on a road should be charged . . . in proportion to their use of the service". As Ken Livingstone has put it: "I nicked the idea off Milton Friedman."

Third Way, Schmird Way. Stand back, Tony Giddens; step forward, Milton Friedman, guru of the left.

Stephen Pollard is a senior fellow at the Centre for the New Europe, a Brussels-based think-tank