A recent Telegraph article reported that the NHS is paying “extortionate” prices for basic computer equipment and services.

It showed that the NHS buys computer equipment at an average 28% more than wholesale prices. This is a shocking misuse of tax payers’ money and shows that the state is often unable to purchase even the smallest of items without insulting hard-working people.

Its aversion to buying commodities in a free market is stark:

  • 4GB USB flash memory stick: NHS price £10.50 versus wholesale price £5.28, Amazon price £5.99
  • Basic three-metre internet cable: NHS price £1.73 versus wholesale price 72p
  • Laser printer part: NHS price £6 versus wholesale price £1.40.

The solution appears simple – basic commonsense and an Amazon account – so why do departments of state fail this way so often?

Whether we like it or not, there are two ways to direct human affairs: either profit & loss or rule following, either entrepreneurship or bureaucracy. Entrepreneurs drive down costs. Bureaucrats, however talented and well-intentioned, are evidently institutionally indifferent to them.

That’s why I’m so glad to support the Government’s drive for Open Public Services.


  1. Matthew Newton

    I think your enthusiasm for Coalition reforms to healthcare and other public services really isn’t justified. Isn’t the reality that there will not be real choice or real competition as a result of these NHS reforms and the result will be similar to the privatised railways, i.e. very disappointing? As David Cameron himself pointed out in a speech on infrastructure, “Compared to the French, Dutch and Swiss railways our fares are 30% higher, our running costs are 40% higher and our public subsidy is double theirs. Now, you have to admit it is something of a miracle to achieve higher fares, bigger subsides and poorer performance all at the same time” http://www.number10.gov.uk/news/pm-speech-on-infrastructure/
    But it doesn’t take rocket science to see that the crucial difference between the UK and these countries is that their railways are nationalised. The same disappointing results will occur in the health service. As Max Pemberton put it in his article in The Telegraph (http://www.telegraph.co.uk/news/features/9193015/Healthy-competition-in-the-NHS-is-a-sick-joke.html) ” For example, what providers other than Virgin [Care] might be an option for Surrey residents? After all, it’s about choice, isn’t it? The answer, again, is none. The good folk of Surrey haven’t been allowed to exercise a choice between providers – it’s Virgin Care or nothing. This isn’t a market in the true capitalist sense. This is a perverse, warped and corrupt reading of market principles. If we are going to open up healthcare in this country to the market, at least let’s do it properly, rather than handing out these whopping amounts of public cash to corporations that are also handed a captive consumer base. There’s no choice here.” The same thing is true in utilities such as water – taxpayers’ money goes in, companies (often offshore) take profits out without improving standards for the users.

  2. Lucian Holland

    I’d agree with the previous commenter’s scepticism about the sham free markets in many privatised utilities. About the only case where we’ve actually seen any benefit at all from privatisation is in the telecomms sector, and in practice little of the expensive infrastructure that typifies public utilities has experienced any competition even here – the success has all been at the service delivery/reselling end.

    I’d also go further, however, and question the assertion that we face a choice between “either profit & loss or rule following”. That’s a false dichotomy. I’d be the first to accept that we need to move away from centralised, bureaucratic and rule-based systems; but it’s only by political sleight of hand that one can see that necessitating the introduction of a profit motive as a prime structuring principle. Why can we not have decentralised, localised systems run by non-profit organisations with rich and diverse goals that reflect the interests of local communities?

    What’s criminal about the excessive expenditure in the NHS is not that it’s financially inefficient; it’s that it doesn’t further any other goal that its stakeholders care about. I *want* the health service to be a money sink, not a profit centre. But I want that money to sink into things that matter to patients rather than just lining the pockets of suppliers who know that government procurement is slow and stupid. Isn’t saying that the only way of achieving this is through a market that reduces everything to a single pricing scale a classic case of over-simplifying the richness of human decision-making in precisely the way that the Austrian school claims to abhor?

    • Indeed: an entire book could be written on crony capitalism, human choice and action and a better direction for our society. I plan one.