New Labour and the internal market in the NHS

The Labour party's 1997 general election manifesto New Labour: because Britain deserves better criticised the Conservative government's internal market reforms, suggesting that the result was an 'NHS strangled by costly red tape'. The manifesto committed to ending the Conservatives' internal market in health care:

'Under the Tories, the administrative costs of purchasing care have undermined provision and the market system has distorted clinical priorities. Labour will cut costs by removing the bureaucratic processes of the internal market.'

In May 1997, in his maiden speech to Parliament as the new Labour Secretary of State for Health, Frank Dobson confirmed this commitment to abolish the internal market:

'Those treasured principles of fairness, quality and equality have been breached under the outgoing government. The changes that they made have created a two-tier system which is unfair to patients and repugnant to doctors who have to impose the unfairness, and is costing a fortune in bureaucracy, invoices and red tape. We will get rid of it. We will get rid of the internal market.'

In the event, the party did not do so. However, the party did slowly phase out fundholding, substituting 'locality commissioning'. In 1999, primary care groups (PCGs) were established as fundholding ended, but continued the major influence that primary care had on commissioning.