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The London School of Economics and Political Science A Giant Leap by Small Steps: The Conservative Party and National Health Service reform Tony Hockley A thesis submitted to the Department of Social Policy of the London School of Economics for the degree of Doctor of Philosophy, London, September 2012 Declaration I certify that the thesis I have presented for examination for the PhD degree of the London School of Economics and Political Science is solely my own work other than where I have clearly indicated that it is the work of others (in which case the extent of any work carried out jointly by me and any other person is clearly identified in it). The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without my prior written consent. I warrant that this authorisation does not, to the best of my belief, infringe the rights of any third party. I declare that my thesis consists of 75,000 words. 2 Abstract This thesis investigates the factors involved in the processes of health policy change. It questions the validity of path dependency theory in the context of changes observed within the United Kingdom health system under the Conservatives between 1979 and 1997. The development of the National Health Service (NHS) ‘internal market’ reforms is considered together with five specific cases of change affecting public-private boundaries. The research combines literature research, including biographical and archival sources, with a selection of interviews with important actors from the health policy arena of the time. The cases are mapped using an adapted version of the three policy streams developed by Kingdon for the analysis of agenda-setting processes, as a structured basis for comparison. The research finds little evidence of the self-reinforcing processes that are required to generate path dependency, or that a change of path can take place only at a critical juncture. It shows that small changes can produce substantive and enduring changes of path. It also identifies that the factors involved appear to go beyond Kingdon’s three streams, and attaches importance to the potential for disloyalty to the status quo. Cultural or technical change, as well as policy change, can generate disloyalty amongst those who deliver services. The presence of the potential for disloyalty is, therefore, an important factor in the achievement of a change of path. Taken together the changes between 1979 and 1997 show a notable consistency of purpose in pursuit of a dual agenda of consumerism and public spending control. Whilst analysis of individual cases of change can suggest an absence of strategy, each case plays a part within a remarkable consistent Conservative programme of change the roots of which predate the National Health Service. 3 Contents ACKNOWLEDGEMENTS 6 1. INTRODUCTION 7 2. CONCEPTUAL FRAMEWORK 13 3. RESEARCH METHODOLOGY 39 4. THE CONSERVATIVES AND THE NHS 1944-74 55 5. THE NEW RIGHT 1974-1987 68 6. AN INTERNAL MARKET 87 7. AN INTRODUCTION TO THE CASE STUDIES 110 8. GENERAL OPHTHALMIC SERVICES 113 9. LONG-TERM CARE OF THE ELDERLY 127 10. PAYING FOR MEDICINES 146 11. TAX RELIEF ON PRIVATE MEDICAL INSURANCE (PMI) 159 12. ADULT DENTISTRY 174 13. ANALYSIS 190 14. CONCLUSIONS 216 REFERENCES 219 ANNEXE 1: CHRONOLOGY OF RELEVANT EVENTS 1979-97 233 ANNEXE 2 : HEALTH MINISTERS & SPECIAL ADVISERS 1979-97 236 ANNEXE 3 : TREASURY MINISTERS AND SPECIAL ADVISERS 1979-97 238 ANNEXE 4 – 1980 MEMO TO PRIME MINISTER ON CHARGES 239 ANNEXE 5 - PM 1979 NOTE TO TREASURY ON “PERKS” 241 ANNEXE 6 – EDWINA CURRIE DIARY AUGUST- NOVEMBER 1987 242 4 LIST OF TABLES TABLE 1 MODES OF CHANGE ......................................................................................................................... 27 TABLE 2 SOURCES OF CHANGE ....................................................................................................................... 28 TABLE 4 NHS & INDEPENDENT BEDS 1983-96 .............................................................................................. 133 TABLE 5 DENTAL REGISTRATIONS 1990-92.................................................................................................... 177 TABLE 6 FACTORS IN THE CASE STUDIES ........................................................................................................ 207 5 Acknowledgements This research would not have been possible without the support and encouragement of a large number of people over a long period of time. I am particularly grateful to my supervisor at the LSE, Professor Anne West, who has faced the significant challenge of keeping me on course to complete the work without sacrificing its quality. Professor Howard Glennerster has also been a wonderful source of inspiration and ideas, as well as encouragement, and I am very grateful indeed for his support and timely comments and advice. Neither Anne nor Howard share any blame for errors, which are all my own. Also at the LSE, Professor Elias Mossialos and my other colleagues at LSE Health have been welcoming throughout the time that I have been working on this thesis, and despite my occupation of much-coveted desk space amongst them. It has been a tremendous privilege to work alongside such a talented group of people. The interviews were of fundamental importance to this project and it could not have been completed without the time that my interviewees gave to me out of their very busy lives. My fascination with the policy process was fed by the wonderful opportunities that I was given to participate in these processes in Westminster, and I will always be indebted to David Owen, Virginia Bottomley, Stephen Dorrell and Gerry Malone for allowing me to see policymaking from the inside. The most significant contribution has, however, come from my wife, Vanessa, without whose support I would not have even embarked upon this project and who pressed me to see it through to the finish. 6 1. Introduction Background to the research This study grew from the author's personal involvement in the policy process. Shortly before the 1987 General Election, whilst still a student of economics, I became involved in policymaking for the then Social Democratic Party (SDP), whilst it was in a formal alliance with the Liberal Party. When the SDP split following the election I remained with the independent SDP, under the leadership of Dr David Owen MP, and following my graduation in 1990 went to work for Owen in the House of Commons. As Owen was both a former Labour Foreign Secretary, Minister of Health, and a doctor, his interests, and therefore my work, covered the range of policy. Major changes were underway. Internationally the Berlin Wall had fallen, the Soviet economy and society were changing, the first Gulf War was fought, and the European Community was working towards completion of the Single Market and taking the first steps towards monetary union through an Exchange Rate Mechanism (ERM). At home, Conservative divisions over the United Kingdom's relationship to the European Union and the unpopularity of the Community Charge, known as a "Poll Tax", led to John Major replacing Margaret Thatcher as Prime Minister, and then winning the 1992 General Election against most expectations. Following the fall of Thatcher there appeared to be a centre-right political convergence on market-based social policies. Anticipating the inevitable demise of the SDP, I assisted Lord Kilmarnock in forming the Social Market Foundation (SMF) think tank in 1990, with financial backing from David Sainsbury1. The SMF was created to continue the development of a distinctive social market approach to policy, which was gaining attention across the political spectrum. In February 1991, for example, I highlighted to Owen speeches by both the Conservative Party 1 A Trustee of the SDP, Deputy Chairman of Sainsburys PLC. Funding came through the Gatsby Foundation charity. David Sainsbury became a Labour Peer in 1997. 7 Chairman2 and the Chancellor of the Exchequer3 describing themselves as adherents to a social market approach4. The focus was shifting towards concern with the goals of social policy, and away from state ownership of the means of delivery. In the SDP we would find ourselves in policy and political discussions with the Conservatives: Owen with the Prime Minister and Conservative Chairman5(Owen 1991:790, 802), and myself with the head of the Conservative Research Department6. The case that there was a convergence underway upon a new paradigm for public policy seemed strong. The internal market reforms of the NHS, which the SDP had been promoting before the 1987 General Election, were an example of a new approach. After the 1992 General Election I joined the Civil Aviation Authority (CAA) to assist in the development of new consumer-based policies within the process of market liberalisation, advising both the CAA and the European Commission.. Different modes of policy change seen in Europe and America demonstrated that the process of change can take several forms which are nonetheless transformative. In America the Airline Deregulation Act of 1978 was a dramatic and complete reversal of preceding policy. It was implemented quickly despite the opposition of the air transport sector, and overseen by Alfred Kahn, who had shortly beforehand been appointed by President Carter to head the Civil Aeronautics Board(Susan 2011). In Europe an incremental process was followed, with piecemeal changes in bilateral agreements between