The government's application of 'third way' thinking to the public sector is becoming clearer. At least it is in education , where the private sector is being encouraged, if not actively courted, to apply to provide a range of educational services, run schools and even whole education authorities.

Whether there is a precedent here for what might happen in health, where privatisation so far has been confined to the monstrous private finance initiative, is less clear. But it does not take a great leap in imagination to conceive of the new primary care trusts as being possible candidates for privatisation, or for the new PFI-funded hospitals to be privately managed at some stage.

On the other hand, it may be that the teaching profession is a softer touch than the medical profession. Or that the NHS is regarded as a 'no go' area when it comes to overt private sector management of healthcare, with Dobson truer to his Old Labour roots than Blunkett in education.

Yet, within the health sector, there remains a significant school of thought which holds to the view that as long as the principle of public funding is upheld, in order to preserve equity and allow for effective cost containment, and as long as appropriate regulation is in place, then it should not matter who actually provides the service. Surely it is only a matter of time before it, too, succumbs to the onward march of this interpretation of the 'third way'.

The principal issue is this: does it matter whether healthcare continues to be provided publicly or privately if public goals are set and performance managed against these? Surely the government has a point when it claims its concern is with ends rather than means and that as long as the ends are achieved to the appropriate standard then the means should not matter.

Well, perhaps. But if more efficient services are bought at the price of greater labour flexibility and wage cuts, then the logic of 'whole systems' thinking might lead one to suppose it does indeed matter who provides services. Moreover, this argument makes the somewhat heroic assumptions that goals can be defined precisely and performance suitably monitored. There is depressingly little evidence in support of either assumption.

These issues are no stranger to this column but, in the dying embers of the 20th century, they need to be revisited, especially in the midst of the annual ritual 'shroud-waving' with, once again, cries of an NHS in 'crisis' ringing out across the country.

What is so depressing about the current state of the public sector is how little confidence New Labour appears to have in it. For all its rhetoric about restoring a public sector ethos, virtually every initiative has had precisely the opposite effect or has been perceived as contributing to the malaise and pervasive low morale throughout public services.

Nurses and others are not just concerned about pay but also about how they are valued. The more the government talks about and sets targets, performance, indicators, effectiveness measures and all the other paraphernalia associated with the particular creed of managerialism derived from business practice, the more the effect on the public sector is actually the opposite of that intended. Such devices betray a failure to understand the distinctiveness of public management and a lack of trust in people to do a good job. Instead, they induce a mind-numbing box-ticking outlook that has little to do with management and everything to do with creating a culture of obedient administration of which the former Soviet Union would have been proud.

Under the insistent refrain of 'modernisation', the government is actually reducing public and staff confidence in public services rather than restoring or strengthening it.

And the reason is simple. Instead of looking at the problems and challenges posed by public services in their own terms and according to their own particular circumstances and contexts, the government insists on importing a particular type of managerialism which is at odds with many of the values, and much of the content, of public provision. Little wonder, therefore, that the more ministers talk about poor management in the public sector, the less confidence there is in the NHS and elsewhere.

The goals ministers have set themselves, like a healthier population, are entirely laudable. But the means they have chosen to achieve and monitor results are, like performance-related pay, outmoded, inappropriate and disregard the complexity and pluralism that are central features of public service.

If a private sector agenda can be imposed on parts of the education service, why should health remain exempt? And what does such a move imply about the government's lack of confidence not only in public management but also in the democratic process? At least local education authorities are accountable to their populations.

If the 'third way' is really about the marketisation of the public sector by stealth, then the government should come clean and say so. Otherwise, the gradual erosion of public confidence in publicly provided services will continue. But that may be precisely the outcome the government desires.

Then, in its second term (assuming it survives to see it), the NHS might begin to go the way of local government in general and education in particular. Or will the effects of devolution and regionalism begin to kick in at this point and save the day for public services? There is always a paradox in any public policy. Why would any private sector undertaking wish to operate under the stifling, risk averse administrative culture of the type emerging within the NHS? Or perhaps it is only the private sector that will be able to break out of such a straitjacket. Who said politics was a dull sport?