Rt Hon Lord Lilley

    Westminster Ethical Policy Forum, 20 Great Peter Street London SW1P 2BU
    Earlier this year I gave a lecture on Conservatism and the Welfare State.

    It achieved a unique distinction.

    It managed simultaneously to secure near universal endorsement from those who read it and to provoke a row ? albeit a synthetic row largely confined to the media and those who rely on media reports rather than the actual text.

    Today you have asked me to return to similar issues.

    So, don your flak jackets.

    Compassion or Greed?

    You have asked me to speak on Compassionate Conservatism.

    Our critics would say that it is an oxymoron like military intelligence or New Labour principles.

    Conservatives are frequently accused of being a party that panders to the greed and selfishness of the haves and ignores the needs of the have-nots.

    I want to ask:

    – ?Is that true??

    – And if, as I shall argue, it is false: how does Compassionate Conservatism differ from the left-wing social conscience?

    – Finally I want to give an example of how compassionate Conservatives should be reforming our welfare state to benefit everyone.

    Do Conservatives care about the underdog?

    First, is the caricature of Conservatism as a ?creed based on greed? true?

    Gordon Brown asserted this in typical form when he said: ?British qualities have been ground under by a crude free market ideology based on the narrow pursuit of self-interest?. the dogma that worships greed??

    My answer is that this is false.

    The Conservatism I have always believed in is concerned with the underdog and the ordinary family.

    My Tory heroes have always been people like:

    – Samuel Johnson who?s household was a veritable welfare state of frail and unfortunate people in support of whom he spent the bulk of his income. At the Department of Social Security, I took as my mantra his doctrine that ?A decent provision for the poor is the true test of civilisation?.

    – Dean Swift, who gave away a third of his income to the poor and who scrimped and saved from the rest to found a hospital for the insane.

    – Disraeli whose vivid descriptions of the ?two nations? of his time was a compelling appeal to the rich ?nation? to accept their obligation to ease the lot of the poor.

    – Lord Salisbury who epitomised a sense of duty, honour and integrity.

    Moreover, there is a long tradition, of which we can be proud, of Conservative social reform specifically aimed at helping the least well off.

    It was summed up by one leading Conservative in the following words:

    ?Practically every measure of social amelioration passed through Parliament in the 19th century was passed by Conservatives, often against bitter and entrenched Liberal opposition. While [they] concentrated solely on the propagation of unlimited economic competition ? the so-called policy of laissez-faire ? whatever the human cost to workers and their dependents, it was the Tories who, throughout the century, sought to mitigate the consequences of the Industrial Revolution.?

    Doubtless some will argue that to emphasise that historic record is somehow to seek to repudiate the Thatcherite revolution of the 1980s.

    Well, those are the words of Lady Thatcher herself.

    And she was right.

    Conservatives have always sought to improve the lot of the least well off, the deprived and exploited.

    The first laws to limit exploitation of child labour were passed by Conservative governments under Addington and Lord Liverpool.

    Conservatives first gave workers the right to form Trade Unions ? described by Sidney and Beatrice Webb as ?the most impressive event in the early history of the trade union movement?.

    Peel repealed the truck acts ?being convinced that no system was so calculated to destroy the independence of the workman?.

    Lord Shaftesbury ? the greatest Tory reformer of them all ? introduced a mass of legislation including an Act to improve the lodgings of the very poor ? described by Dickens as ?the best measure ever passed in Parliament?.

    Disraeli said one of the central objectives of Conservatism was ?to elevate the condition of the people? and introduced a stream of legislation to fulfil his promise of ?pure air, pure water, the inspection of unhealthy habitations, the prevention of adulteration of food?.

    His Home Secretary put employees on the same legal footing as employers.

    And his measure to legalise activities by unions where they would be lawful for individuals elicited a vote of thanks from the Trades Union Congress as ?the greatest boon ever given the sons of toil?.

    We do not need to believe that all this legislation was as effective in improving the lot of the poor as contemporary Conservatives hoped.

    With the benefit of hindsight and improved economic analysis, we may have doubts about some of it.

    I certainly believe that some of the union legislation undermined the living standards of the poor.

    But my point is that elevating the condition of the people has always been a central objective of Conservative policy.

    Sometimes that objective seems to require legislation, state action and public expenditure.

    But too much regulation, too powerful a state, not enough freedom and enterprise can damage the interests of the poor.

    So, more typically, Conservatives believe our objective of extending prosperity to the less well off is fostered by encouraging ?the independence of the working man? as Peel said; by promoting wider individual thrift and insurance as Disraeli did by strengthening the Friendly Societies; or by giving millions of tenants the opportunity to become home owners as Lady Thatcher did.

    As Margaret Thatcher went on to say after the remarks I quoted earlier:

    ?a dominant state is an insensitive state: the cry of the weak and the needy is the last to be heard by all-powerful ministers?I believe that only an economy based on free enterprise can generate the wealth to provide for our needs and?particularly the needs of the more unfortunate and deprived among us?.

    The economic reforms that Margaret Thatcher introduced were essential to rescue the British economy from a collapse that would have hit the poorest hardest.

    Those reforms generated sufficient growth (at a time when the rest of the developed world was slowing down) to pay for substantial increases in welfare provision.

    They brought about a massive increase in average incomes ? up by more than a third.

    There was also a widening of income differentials.

    But attempts to show that the least well off failed to participate in this growth are obtained only by perversely ignoring the massive increase in spending on the welfare state that was disproportionately focussed on those in greatest need and the casualties of rapid change.

    There was a specific focus within that provision ? towards people who through disability could not participate fully or at all in the market economy.

    We have a proud record of giving them priority.

    Expenditure on benefits for sick and disabled people was increased no less than threefold in real terms.

    How the Caricature was Created

    Given this record, how did the caricature of Conservatives as the party of greed become so entrenched in recent years?

    Because our policies during the Eighties were recognised as being successful overall, our opponents made little headway in attacking them.

    So, they increasingly attacked our motives and our values.

    They depicted us as greedy and selfish.

    And they condemned our policies as fostering greed and selfishness.

    We did little to repudiate this caricature which became almost unchallenged in the media.

    That had little effect while people feared Labour more than they disliked this ugly picture of Conservatives.

    However, once Labour allayed fears about itself, that accumulated dislike of us mattered a great deal.

    As we found on the 1st May 1997.

    Our mistake was to fail to repudiate this caricature of Conservatism.

    Now we must do so and reaffirm our commitment to the Conservative tradition of concern for the underdog and the ordinary family.

    William Hague has rightly begun this process with a series of fine speeches on Conservatism:? and the Family; and Christian Values; and the Community.

    Caring Conservatism versus the Liberal Social Conscience

    If we do reaffirm Conservative concern for those in need will that make us indistinguishable from the Left?

    Is there any difference between caring Conservatism and the Leftwing social conscience?

    I believe there is.

    Our whole approach is different.

    It has a different moral basis and looks to different means to achieve our ends.

    To put it in a nutshell ? the weakness of the Left is that they tend to be more concerned to feel good rather than to achieve good results.

    What makes them feel good is identifying with the power of the state, spending other people?s money, nationalising the nation?s charitable endeavour and imposing virtuous behaviour on others, but with little concern for the results.

    Tony Blair can declare that ?the Giving Age has begun? as if generosity could be decreed by an Act of Parliament.

    On close examination, his giving is financed by plundering people?s pension funds – the Robert Maxwell school of generosity.

    The weakness of the Right is that we are more concerned to do good than to seem good.

    We accept that the state can be the best way to provide some public services. But we know state action is often ineffective and damaging.

    Moreover, there is no virtue in doing what the state compels.

    Only voluntary action by individuals can be virtuous.

    So we want to unleash voluntary effort, strengthen the family, encourage responsibility and reward results.

    American-style compassionate Conservatism

    The label ?Compassionate Conservatism? has recently risen to prominence in the USA.

    George Bush Jnr uses it to describe his approach as governor of Texas.

    It is clear that at least in an American context Compassionate Conservatism is not the same as left-wing liberalism.

    George Bush Jnr neither looks nor sounds like a liberal. He wears eelskin boots embossed with the words Governor, advocates school vouchers and low taxes, sets time limits on welfare entitlement and encourages voluntary organisations to help get the poor off welfare.

    Yet he has won the support of large sections of the minority and poorest groups in society.

    And after a term in office he won re-election with a landslide 60 per cent of the vote.

    He constantly emphasises that choice, opportunity and freedom are even more important for the least well off than they are for the rich.

    But his compassionate Conservatism is not just a matter of the rhetoric.

    These policies do seem to have benefited the poor, African Americans and Hispanic Americans.

    What works in America may not be right electorally, socially or economically for UK.

    We will have to work out what Compassionate Conservatism means in a British context.

    The Next Wave of Social Reform

    Throughout its history, the Conservative Party has pioneered social reform.

    It has been in the vanguard of improving the lot of the underdog and giving the ordinary man and woman a greater stake in their country.

    The left invariably claim retrospectively the credit for all social reform.

    They even try to airbrush out of history their own opposition to reforms that have subsequently proved too popular for them to reverse.

    The right to buy a council house is the latest example of this.

    Now it is the Conservative Party?s role to lead the next wave of social reform just as we have done in the past.

    The reforms needed today will not involve an endless expansion in public expenditure and the role of the state.

    Far from it.

    Many of the problems of modern society arise from the failures of state monopoly. We have to humanise the welfare state.

    We must tackle the restrictions it puts on most people‘s lives and choices.

    We must stop the state undermining families, voluntary organisations and natural communities.

    Only Conservatives can come up with creative solutions to these problems.

    The left is too wedded to state monopoly even to acknowledge the problems it creates.

    There is a big agenda of social problems crying out for compassionate conservative solutions.

    In all humanity we must find better ways to help children who are in the care of the state.

    The state has been in a dismal failure when it has taken on the role of parents. Young people brought up in children‘s homes or shuffled between one foster parent and the next are disproportionately likely to become unemployed, homeless, on drugs, in jail, involved in prostitution, or unmarried parents.

    These most vulnerable of children, deprived of the parental love that most of us enjoyed, deserve something better than most of them receive at present.

    We must face up to the manifest failure of our prison system.

    Samuel Johnson described prisons as “universities of crime”.

    Two centuries later little has changed.

    Most prisoners learn nothing except from their fellow inmates.

    They leave better equipped for a life of crime to which all too many return.

    We need far more emphasis on hard work, training and acquiring skills in prison.

    We must respond to the growing problem of financing residential and nursing care for the elderly.

    Above all we need to tackle the lack of choice in public services.

    We know that most people increasingly want choice.

    It should not be the privilege of the rich.

    We also know that choice is what drives constant improvement in quality and efficiency in private services.

    Suppliers of goods or services who do not match the quality or cost of their competitors lose customers and therefore revenues.

    So they have to do better.

    Conservative reforms have already shown that choice can bring similar benefits in public services funded by the taxpayer.

    For example, what made parental choice in education really effective was “making the money follow the pupil”.

    Before this, when parents chose to send their child to a particular school it did not receive any extra resources.

    As a result the most popular schools ended up with the largest classes and the most overworked teachers.

    Conversely, the less popular schools who lost pupils did not suffer a corresponding reduction in resources.

    So they had smaller class sizes and less pressure on their teachers.

    Neither good schools nor poor schools had much incentive to do better.

    Publishing exam results and school prospectuses enabled parents to make more informed choices.

    But it was “formula funding” coupled with “local management of schools” which made money follow the pupil and so gave parental choice real clout.

    As a result, popular schools that attracted more pupils were rewarded with extra resources.

    Less popular schools that lost pupils also lost resources.

    They were forced to pull up their socks and improve their standards.

    The effect was often dramatic.

    Governing bodies that had previously tolerated inadequate heads now replaced them.

    Schools that had treated parental concern about exam results with disdain suddenly became interested in academic success.

    The net result has been improvement in all schools, particularly those that were initially less good.

    Making the money follow the pupil has also allowed schools to specialise (e.g. in technology, languages or music) where there was parental and pupil demand for that type of school.

    Patient Power

    Now is the time to find ways to give NHS patients similar power by helping them and their GPs make informed choices that will determine where the money goes.

    When Mrs Thatcher said she had chosen to have an operation done privately because she wanted to be able to choose “where, when and by whom” it was done she was reviled by the left.

    Why should she enjoy a choice that was available only to the better off?

    They demanded that such choice be stamped out.

    What few people realise is that now Labour are in power they have set about doing just that.

    They have not merely restricted access to private medicine; they are also removing the last vestiges of patient choice within the NHS.

    As the Health Service Journal said, Labour‘s reforms introduced this April mean that “patients have less choice than ever in the NHS‘s history”.

    Labour has effectively abolished the right of GPs to refer their patients for treatment in a different area.

    The only out-of-area treatments now grudgingly countenanced by the government are for emergencies where a patient is inconsiderate enough to fall ill away from home.

    So you can no longer choose to travel to a more distant hospital with shorter waiting times.

    As the Director of the College of Health wrote “it doesn‘t make sense to impose limits on referring patients from overstretched hospitals to those with spare capacity”.

    Yet that is what the government have done.

    You can no longer ask your GP to refer you to a hospital with a superior record in performing the operation you need.

    To quote the director of the College of Health again: “worryingly the Government‘s consultation document suggested that [allowing referrals to other areas] enabled GPs and patients to ‘play the market‘, as though the exercise of informed choice – for example wanting to be referred to a centre of expertise … – were wholly undesirable”.

    You can no longer, even if you wish, be referred, to a more efficient NHS hospital able to perform the operation at less cost to the taxpayer.

    As a result there is no incentive for the NHS to develop centres specialising in carrying out specific common operations efficiently and to the highest standard.

    Conservatives should be moving in exactly the opposite direction.

    We should be broadening choice not restricting it.

    We should be extending the right to choose from the few to the many.

    We should do this, not primarily by extending private medical insurance, but by giving every NHS patient – as far as possible – the right to choose “where, when and by whom” they are treated within the NHS.

    We have to recognise that even under the previous arrangements patient choice was quite limited.

    GPs were permitted to refer patients to a hospital of their choice even if they had made no contract to send patients there.

    But these so-called extra contractual referrals (ECRs) accounted for only two per cent (?1/2billion) of hospital expenditure, albeit an increase from the 1.3 per cent in 1991 when the reforms began.

    Moreover, the majority of these extra contractual referrals were for emergency or tertiary services.

    It is estimated that less than 40% were for elective treatments.

    And most elective ECRs were for small sums of money.

    The majority cost less than ?500 with very few costing over ?5000.

    The cost of administering the system was about ?22m ? 4% of the total ? and referrals could be the subject of time consuming debate about which budget should pay for them.

    It is disappointing that so few patients have been able to exercise choice over where they are treated in the past.

    But what is astonishing is that this government should find even that tiny degree of individual choice too much for its collectivist stomach.

    Yet they have abolished extract contractual referrals entirely.

    And the new system of Primary Care Groups, apart from being a wholly unnecessary upheaval introduced for ideological reasons, will further restrict the scope for patient choice. The PCGs will have to negotiate contracts (renamed service level agreements) on the basis of the forecast needs of all the patients in their area three years ahead.

    Instead of the money following the patient, the patient will have to follow the money.

    Instead of strengthening patient choice the system imposes bureaucratic choice.

    Far from further restricting patient choice, we ought to be extending it.

    Even the government pays lip service to the need to ?encourage more informed patient decision making especially at a time of heightened awareness of unacceptable variations in mortality?.

    But we should pay more than lip service to choice.

    We should find out what has impeded patients from exercising it in the past and then set about giving them real choice in future.

    Clearly a rigid and comprehensive system of contracts or service level agreements prevents the exercise of choice by patients in consultation with their GPs.

    The patients have to follow the money.

    Conversely, as long as there is no system for the money to follow the patient, hospitals will be reluctant to treat patients from another area not covered by a contract.

    Patients have also had little scope to exercise informed choice so long as they do not have access to information about waiting times, specialisms, mortality rates or success rates of different hospitals.

    We need to develop a system such that patients can find this sort of information at their GP?s surgery or even over the Internet.

    Some of the information they need is already available.

    The National Waiting List Helpline gathers and holds information about the length of wait for a first outpatient appointment for virtually every consultant surgeon in the country.

    Sadly the Department of Health grant for this Helpline was ended and it now has to keep going with a grant from a charitable family trust and support from Nuffield Hospitals.

    Moreover, the hospitals apparently give this information to the Helpline somewhat reluctantly on the understanding that it will be made available to GPs in confidence and is not for wider publication.

    As a result few patients and not all GPs are aware that it is available at all!

    There is no publicly available source of information on the extent of specialisation of different hospitals.

    However, the government does have a database of Hospital Episode Statistics recording how many operations each hospital in England carries out in each category.

    The Trusts are not compelled to report on the frequency of individual procedures performed.

    However, some do provide this type of information so presumably it could be collected comprehensively.

    The National Institute for Clinical Excellence provides information that patients can use about a particular procedure or treatment so that better informed patients will ask better questions of their health practitioners.

    The usefulness of data on mortality rates and outcomes in different hospitals is a moot point.

    The raw figures can be misleading.

    A hospital that treats particularly severe cases will have a worse death rate than one dealing with much milder cases of the same illness.

    Nonetheless, this data is at long last being made public so patients need more qualitative information to help interpret it.

    Certainly if parents had had access to the mortality figures of infant heart surgery at the Bristol unit many would have moved to a more distant hospital.

    That would have provoked action far sooner than actually to place.

    Fewer parents would have faced the tragedy of losing their child.

    Information is essential to make choice work.

    But money makes the world go round.

    Patient choice will only have the power to force real improvement in the NHS if the money follows the patient.

    It is crucial to devise a method of bringing this about that is as simple and non- bureaucratic as possible.

    This Government‘s new system requires primary care groups to pay hospitals which treat their patients an amount set at the national average cost for each type of operation, not the actual cost incurred by that particular hospital.

    The actual costs incurred by a hospital can vary widely.

    For example, the average cost for an elective ophthalmological procedure – cataract removal with a lens implant – in 1998 was ?699.

    Yet costs in different NHS hospitals range from ?337 to ?1,659.

    Similarly, the cost of a primary hip replacement averaged ?3,678 but individual hospitals costs ranged from ?1,834 to ?6,494.

    It is probably best to stick with this system of charging standard fees per operation when patients choose a hospital not covered by a service agreement.

    It has a number of advantages in addition to simplicity.

    Hospitals with high costs will have an incentive to bring their costs down to the average (though they will still be able to ration by waiting list as at present). PCGs should no longer be reluctant to fund such referrals since they will cost the same wherever they are performed.

    More important, hospitals with a lower than average cost for a particular operation will be able to expand and specialise in that treatment.

    At present the NHS only finances specialist centres to treat rare illnesses or perform highly specialised operations.

    Yet there is a strong case for centres that specialise in common operations.

    There is great scope for increasing efficiency in this way just as specialisation drives down costs and improves quality in every other area of life.

    Other countries have specialist centres for common operations like cataracts.

    Such centres can operate seven days a week and 24 hours a day to make maximum use of theatre capacity.

    Moreover patients can book in at a time to suit their convenience.

    Surgeons specialising in a specific area become extremely skilled and familiar with complications that arise only infrequently.

    So quality is enhanced as well as costs reduced.

    I believe that such centres would develop naturally as a result of these proposals. But they would only do so if patients positively chose to be treated at specialist centres even though they were further away than their local hospital.

    By contrast, if the NHS set up such centres under its normal bureaucratic planning procedures there would be enormous controversy and allegations that patients were being dragooned into using them to cut costs.


    That is simply one idea on how to extend to the majority of the people who depend upon the public services the dignity of choice currently enjoyed only by the minority who can afford private provision.

    I believe it would complement the excellent Patients? Guarantee spelt out in our Common Sense Revolution.

    That offers patients a guaranteed that they will receive treatment within a maximum time set on the basis of clinical criteria.

    This proposal will enable patients who are willing to travel to be treated even earlier and to relieve pressure on the most overburdened hospitals.

    Our new Common Sense Revolution has regained the intellectual initiative for conservatism.

    And it is in tune with our tradition of caring for all our people.

    I believe we can build on it to restore our reputation as a party that cares for those in need and extends to all the opportunities which were once the privilege of the few.

    As a result the phrase Compassionate Conservatism will no longer sound like an oxymoron.

    It will be recognised as describing what we really stand for.