This prescription might do some good

Labour's policy for the health service, revealed yesterday, is a clear indication of the strength of the modernising influence in today's Labour Party. By accepting many of the key elements in the Tory reforms, New Labour has demonstrated a willingness to be open-minded in its own approach to health policy.

Knee-jerk opposition to the Government's policies has been replaced by a thoughtfully discriminating response in which Labour has sought to retain most of the best aspects of recent changes, while reversing those elements which it opposes.

At the heart of Labour's approach is its acceptance of the value of a separation of purchaser and provider responsibilities within the NHS. This will be used not to promote competition between hospitals but to ensure efficiency in the use of resources. Labour has recognised the need to avoid a return to the old system, in which those running hospitals dominated health authority decision-making.

Hospitals will therefore have their own governing bodies and these will be separate from the boards of health authorities. This should enable health authorities to maintain their focus on public health and primary care, provided there is a statutory separation of responsibilities, and not simply arm's-length management of hospitals under overall health-authority control.

Labour has also acknowledged the need for GPs to be closely involved in decisions on the use of budgets. This will be pursued through GPs working with health authorities in planning the future of services. GP fundholding will be brought to an end, although this will not happen overnight. Recognising that a commitment to abolish fundholding would antagonise many GPs, Labour has decided to place a moratorium on the expansion of fundholding and to make alternative models so attractive that GPs will volunteer to give up their budgets. Whether they will do so remains to be seen. In this area, Labour's policy bears all the hallmarks of a compromise which is unlikely to satisfy anyone.

To reduce the bureaucracy in the present system, annual contracts will be replaced by long-term comprehensive health-care agreements. These agreements will be based on co-operation between health authorities and hospitals, and not competition. This is consistent with Labour's desire to return to traditional NHS values and avoid the disruptive effects of the market. It also reflects what is already happening in the NHS, as managers learn from experience and seek to develop longer-term contracts.

Under comprehensive health-care agreements, the freedom of GPs to refer patients to hospitals of their choice will be restored. Health authorities will be responsible for agreeing with each other transfers of funds to ensure that money does follow the patient. Again, this is intended to reduce the paperwork involved in the internal market, in which hospitals have to bill health authorities for referrals from outside their area on an individual patient basis.

The democratic deficit in the NHS will be tackled by changes to the membership of health authorities and hospital boards. In future, these bodies would include more members drawn from the communities they serve and the appointments process will be brought into line with the recommendations of the Nolan Committee. This is designed to introduce an independent element into the appointments process, and to avoid the accusations of political patronage that have been levelled at the Government.

More radical options, such as giving local authorities control of the health service, have been rejected, at least in part to avoid the need for another major reorganisation. Community Health Councils will be retained as the patient's watchdog, and their powers strengthened.

The extent to which Labour's policy has moved since the last election will not please those who argued for a return to the status quo ante. It will however be welcomed by many in the NHS who feared that a new government would bring further organisational change. The last thing the NHS needs is another structural upheaval and Labour's policy of stability and continuity will be greeted with relief.

What is also striking is the degree of convergence between Labour and the Tories on health policy. In part this reflects the willingness of the Labour Party to adapt its own thinking in a pragmatic manner. It also illustrates the changes in approach introduced by Mrs Bottomley. The Health Secretary has emphasised the need for partnership and co-operation in the NHS and she has distanced herself from the commercial rhetoric of her predecessors. Convergence exists not only on organisational issues but also on policy objectives, with both parties advocating greater priority for public health, primary care and evidence-based medicine.

This means that after a decade of acrimonious disagreements there isthe prospect of a new consensus emerging on the future of the NHS. It would, however, be wrong to exaggerate this point. Not least, the priority given by the Government to the private finance initiative - the treasury policy of attracting private money to pay for NHS building projects - will inevitably result in a mixed economy of service provision, in which public money is used to fund care in public and private hospitals. On this point, at least, there appears to be clear water between the parties, with Margaret Beckett expressing strong opposition to the private finance initiative and sending out a clear signal that Labour would not continue this policy in the NHS. If her view is shared by Labour's treasury team, the electorate will, on this issue, be faced with a real choice.

On some questions Labour has avoided specific commitments. Foremost among them is the funding and provision of long-term care. A Royal Commission will be set up to examine this aspect and to outline options for the future. This is a welcome proposal but the remit of the Royal Commission should be extended. Rationing is a pervasive feature of health and social care provision and demands urgent attention. Indeed, it is this question that poses the biggest challenge for politicians of all parties, and an open and honest assessment is long overdue.

By demonstrating a refreshing capacity for "policy learning" on this and other issues, New Labour has established its credibility to regain stewardship of the NHS. With further work to resolve areas that are currently still ambiguous, the party will have a firm basis for a credible alternative health policy.

The writer is director of the Health Services Management Centre at the University of Birmingham.