One can only assume that despite the popular appeal of many of these policies the chance of a Labour election victory remains very slim – in short, the electorate are likely to dismiss the manifesto as unaffordable fantasy politics. Labour’s solutions are largely based on the idea that privatised profits would instead be better reinvested by the government to ensure customers receive good service for a fair price. There may indeed be more than a grain of truth in this belief, but there is also a relatively broad acceptance that pouring public money into problems often leads not to improvement but to waste on a huge scale. As Chris Dillow once put it in this magazine: “Government is every salesman's dream - an idiot with lots of money.”
One example of this takes me back to the very beginnings of my career as an equity analyst, and became a hot topic this week: the IT infrastructure of the NHS. The vulnerability of its systems to the cyber attack that shut down many health services over the weekend has been blamed on the presence of antiquated systems, specifically the continued use of Windows XP, a system that Microsoft first released in 2001 and stopped supporting in 2014. Some suggested this reflected the lack of funding available to the NHS, and that when making hard spending choices on a limited budget, IT maintenance was down the pecking order.
Again, there is maybe a grain of truth here. But the reality is that massive sums of money had been thrown at the NHS’s IT in recent decades with little to show for it. At the turn of the millennium, the Labour government embarked on a root-and-branch modernisation of patient management systems, to create a single patient view across the care spectrum. In 2013 the project was scrapped over £12bn had been spent, with very patchy take-up of the services. Despite such huge expenditure the two listed suppliers to this product that I analysed, iSoft and Torex, themselves ran into financial difficulties.
In short what sounded like a good idea proved hopelessly overambitious. I will not claim that I saw this disaster coming; indeed, I failed to see how iSoft and Torex – which eventually merged – could do anything but prosper. But I learnt a valuable lesson: that big political ideas can bring big problems for all involved, and that companies tackling more bite-sized business, like NHS supplier EMIS is successfully doing now, are more likely to reward investors.
