Private enterprise works, but not the way New Labour does it

Peter Mandelson's comeback campaign took another step last week with his Third Way conference. No one asked me to go, I don't know why. I started in politics as a Third Way activist. I'm not ashamed of that. I was young. I fell in with a strange crowd.

Roger Douglas, a New Zealand Labour finance minister, invented the Third Way around 1990. It wasn't Bill Clinton's "triangulation" (feel the pain of your core supporters while ramming your head up the dress of right-wing voters).

Neither was it Tony Blair's mish-mash of private management in the public sector, nor his public private partnerships, in which the government gives vast sums to private contractors and gets rock-all in return.

No, Roger Douglas's idea was based on a crucial insight. After a century of government activism, he saw that things had got worse, not better. Pitiful state pensions. Unprecedented queues for operations. Falling standards in schools. A new underclass. Greater poverty, by modern measurements, than had existed in the 19th century.

And why? It was not simply a coincidence, he reasoned, that the three large areas of health, education and pensions were state monopolies. They were run by politicians. All along, the carers were the abusers! It was an insight politicians hadn't dared confront before. The more politicians insisted on "giving something back" to the community, the more they demanded to "make a difference", the worse things got. So the Third Way is based on a law of public life which may be formulated as this: Everything A Politician Touches Turns to Sewage.

Why, particularly, should it be so? The reasons include the following: They change their mind. They want to be popular all the time. They've too little experience of the way the world works. They tell people what to do and assume it'll be done. They over-promise. They underfund. They're in the grip of higher powers. They have a few years in one ministry and then move on to another. The accounting periods are very spread out (five years, in this country). And they are prey to a variety of minor but disabling vices (smearing, spinning, ducking for cover, advanced buck-passing).

Suddenly it becomes clear why the 40 per cent of gross domestic product that politicians spend every year is so badly spent.

Here is the principle that underlies Roger Douglas's Third Way. Private organisations, companies and trusts provide all the health, education, pensions and indeed welfare for the population. They never get money from the government. Schools' revenue would only come from applicant parents.

Pension funds would compete with each other for savers. Health insurance companies would compete for premiums. The poor are given vouchers to cash at schools, pension funds and health companies.

In Tony Blair's Britain there is talk of this "money following the pupil/parent/patient", but no reality behind the talk. New Labour, esssentially, put private companies on a public service mission. They pay companies to act in the public interest.

Alas, that just isn't how the thing works.

Asylum problem? What asylum problem?

Some casual euro-anxiety. Asylum seekers. The crackdown, and so forth. The 100,000 that are here waiting for their applications to be processed.

Exactly how much of a problem are they? Isn't it the case that enlargement of the European Union is going to give Albanians, for instance, residence rights in Britain? All those Eastern European countries where they get paid in potatoes – isn't it the case that our benefits are more than their wages? And isn't all this enlargement happening the year after next?

Euro-pensions. Don't get me started. In just over 25 years, a quarter of the populations of France, Germany, Italy, Spain and Britain will be over 65. Of those countries, Britain's pensions are the best funded. Should they be panicking or should we?

Surgical absurdities with the quasi-Third Way

The Department of Health is currently piling on the pressure for foreign surgical teams to come and clear the backlog of waiting lists (these are up again, incidentally). The Government wants to use foreign surgical teams to get the lists down. Private foreign surgical teams paid for with public funds.

It's Third Way-ish. It's Third Way-like. It's not Third Way. If it was Third Way, it would work. Because it's quasi-Third Way, it'll work just poorly enough to be discredited.

The Third Way of doing 100,000 cataract operations for Britons starts by giving each sufferer a voucher for £1,000 (between one-third and two-thirds of the going rate for the operation) to be surrendered at a cataract surgery. It's like a cheque. A promise to pay. The cataract sufferer finds such surgery here, or in Europe, or in Somalia (where the operation costs £30, parts and labour).

How will they find these surgeries? The surgeries will find them. Surgical agents will start scouring the country for cataract sufferers, offering them transport, accommodation, insurance, aftercare, chocolates and a new sofa just as long as they get their cataracts done with Eyes'R'Us.

Some will find the commercial marketing offensive. Others (people blind with cataracts perhaps) will bear with the offence against taste.

This isn't the approach of the department. Bob Ricketts (head of Capacity and Choice for the NHS) has written to the big guns, the directors of health and social care, asking them to bid for money in order to perform operations.

He says: "Ministers have signalled that they wish to see a substantial number of schemes capable of making a real and ongoing impact on waiting times developed in 2002/3, with as many of these schemes as can be safely delivered coming onstream by the end of July this year."

July of this year? If they so much as reply to Mr Ricketts' letter by July of this year, they'll be flouting protocols relating to the secretarial governance of the NHS. There are five criteria for accepting foreigners' bids. The fifth is support of clinicians "if possible". That doesn't sound very hopeful.

Why do managers need inducements to adopt this new working practice? Well, it runs down their price list and it spoils their relationship with consultants, surgeons and other clinicians (who resent being paid less – no one knows why).

So, in return for letting these foreigners in, our doctors are being offered "more freedom" in negotiating their new contracts. That means one of two things: 1. More money (difficult to offer, owing to existing salary scales), and 2. More private-sector work.

Yes, if consultants let foreign teams in, the Government offers NHS consultants more opportunities in the private sector. This cuts the NHS workforce and will increase demand for foreign teams to do NHS work.

Is this a perverse interpretation? Yes. It's so perverse, it must be true.

Why Gordon no longer talks about Tory boom and bust

Gordon Brown's liabilities are increasing. Zero growth for six months has been offset only by high street spending (he can thank me for that) and the house-price boom.

Recently, we've heard very much less about "Tory boom and bust". That's a bad sign. The house-price boom has been high, wide and handsome; can the bust be far behind?

It seems Mr Brown may have to borrow £15bn in a year or so (nearly twice the Institute of Fiscal Studies' estimate). Of course, borrowing is frowned on in the Chancellor's golden rules. It is permissible only for purposes of investment. Now we may see why two or three years ago he relabelled all government spending as "investment".

Yesterday, The Sunday Times revealed that "Tony Blair has ordered a cash injection of £1.1bn for sport in school". And that "all but £20m is lottery money".

Oi! Wasn't the lottery supposed to be independent of government? And wasn't lottery money not supposed to be spent on services normally supplied by the state? It's rightly said that the lottery is in fact a tax, albeit a voluntary one.

It's paid only by those who are bad at maths.

¿ Tony Blair praises the English football team for having the courage to stick at it and finish the job. Iain Duncan Thing praises their tremendous discipline. The Liberal Democrats will no doubt praise the team's co-operative spirit, belief in fairness, freedom and justice and sense of community.