Published: 24/01/2002, Volume II2, No. 5789 Page 21

First some unambiguously good news. My wife's cousin, a medical researcher, rang.

'How's the trade?' I asked. 'Fine', he replied cheerfully. 'We are getting lots of government research money'.

As Tony Blair might put it, the glass is 'half full, not half empty'.You could draw the same comfort from Channel 4's sensitive The Trust series, which I am urging ministers to watch.

That said, it struck me as a nightmare week for British healthcare. Alan Milburn says that none of us should have been surprised by his plans to give three-star hospitals foundation status and to take school-style 'special measures' against failing ones:

'Where there are persistent problems - which are more often than not organisational and cultural - the management could be franchised.

Within this new definition of the NHS, the franchise could go not just to another public sector health organisation, but to a not-for-profit body such as a university or a charity or to some other external management team.'

As the speech noted, that model is normal in Europe, though not in Britain since 1948. The Times headline was, 'Firms to run hospitals in Milburn masterplan.' The minister insists it is all there in the NHS plan - 'earned autonomy' and its flip side, earned disgrace.

I have yet to discover how autonomy over merit pay will work. If managers can raise pay, can they also cut it? But it is all presented as part of the process of devolving power and creating a patient-centred service. So is the publication of surgeons' mortality rates, the product of the Kennedy report.

But we were surprised, were not we? Labour MPs, loyal Frank Dobson among them, were angry too, just as Dr Liam Fox (who seems to be getting more encouragement from IDS than he did from Wee Willie) was delighted. Policy is now running 'in our direction', he crowed.

It is a fair jibe. But it is more complicated than that. Mr Milburn keeps saying 'It is not privatisation' - and It is not. But the river of reform is flowing ever-faster. When IDS taunted Mr Blair with Mr Milburn's pledge a few months back that the NHS would remain a 'monopoly provider', the PM had no choice but to ignore the challenge. It will, I am assured, remain a near-monoply funder, though logic is now gently pointing to greater diversity of financial sources too.

The next day, there was a sharp reminder (Dobbo could hardly have dreamed up a crueller example) that private healthcare also leaves much to be desired: the jury's conclusion that Portland Hospital contributed to the death of Laura Touche is also a reminder that ministers are not always right when they say that money determines everything. This family is seriously rich and powerful.

Not that the point was taken up very enthusiastically by what Mr Milburn calls a 'vulnerable media' - tabloids and broadsheets alike - which has been in full, baying pursuit of our 'third world NHS' (Afghanistan? Congo? ).

The outcry is encouraged by the treatment of East Kent's 'Lille Nine' at La LouviÞre private hospital.Cheaper than the Portland, too.

Is all this a cause for national shame? If you must feel that way, yes, I suppose. But I should stress that while we are exporting patients, the French are exporting their skilled unemployed who flock to Kent and London to find work. The link?

Their higher taxes buy excellent French healthcare, but damage French employment.

You would expect free-market Conservatives to understand this simple point. But they do not.

Professor Tim Congdon, brilliant but daft, was again advocating health vouchers this week. Others waved a US report that says Kaiser Permanente provides better healthcare for 6 million Californians, more cheaply than the NHS. Yes, but what about the 21 million Californians it doesn't provide healthcare for?

As you may have gathered, I found it a depressing week, more so than Mr Milburn. He calmly assures his critics that what will be unforgivable when Labour MPs next face the voters in 200506 will not be too much NHS reform - but too little.