Mandelson should refer NHS monopolies to the Office of Fair Trading

How radical will the new Lord Mandelson be in seeking to reinvigorate the ‘New Labour’ brand?

With the regulatory levers in his fresh hands he has a key opportunity to free the public from NHS monopoly and to improve services dramatically. This would indeed be great achievement.

The NHS has been kept outside effective markets since 1945 – with calamitous consequences. Here is Lord Mandelson’s first major regulatory problem. He should solve it by referring NHS monopolies to the Office of Fair Trading. The IEA has now written to him, formally asking him to do so, as it launches my new book on health policy, Who Decides Who Decides? 

The role of Primary Care Trust and District General Hospital local monopolies seriously constrains patient choice, which the government has been seeking to enhance. It also unnecessarily limits fair competition.

Primary Care Trusts have patients allocated to them instead of individuals making empowered choices, while large District General Hospitals are protected from competition by the guaranteed income they receive from the government for Accident and Emergency services. They are also sheltered by being the only places where doctor training is authorised and by the lack of any contestability for their management.

At present public services cannot be referred to the Office of Fair Trading (OFT) or the Competition Commission. However, the OFT, which has looked at restrictive practices in the private sector, should have its remit extended to the public sector where the worst restrictive trade practices exist.

Lord Mandelson and ‘New Labour’ are surely no friends of the inexorable trend in the NHS towards ‘giantism’and local monopoly, nor of remoteness and unaccountability both in purchasing and in provision. Yet in 2006–07 the number of primary care trusts was reduced from 309 to 152. Current NHS hospital numbers are expected to shrink further, perhaps to 50. These will be very large institutions with turnovers above £300 million.

Mergers in the NHS should be prevented if they are against the public interest and if they disable competition. The remit of the OFT should therefore be extended to enable it to investigate these serious constraints on fair competition and patient choice.