David Laws: Why the Liberal Democrats cannot echo Old Labour

If we are to seize this opportunity it will not be by repeating the wish-lists of luddite trade union leaders

What will be the "judge and jury" of this Government? The recent focus on Iraq and the Government's upcoming decision on the euro has obscured the fact that, ultimately, the success of the Blair-Brown government will be judged by its ability to improve significantly the state of Britain's health, education and transport services.

But just as public-service reform defines the challenge for the Government, so, too, does it define the challenge for the opposition parties. The Conservative Party, under Iain Duncan Smith, has realised that it must join the debate over public services. The weakness of the Conservative position is that they have yet to develop any coherent alternative vision for either funding or reform.

A few months ago I spoke to a senior member of the Shadow Cabinet who explained to me his view that, regardless of how much extra the Government spent on health, this would make no difference at all to the performance of the NHS.

This highlights the risk to the Tories – that it is quite likely that the billions of pounds of extra spending will deliver some improvement in public services, and that the Tories will therefore be unable either to offer any credible alternatives or to point to a complete failure of delivery.

What of Labour?

In the early years of the 1997 government, occasionally private conversations were held behind the scenes between my Yeovil predecessor, Paddy Ashdown, and the Chancellor and Prime Minister.

In these Mr Blair or Mr Brown would point to small extra allocations for the NHS or schools and claim these would soon make a big difference. At the time, I couldn't believe that these two giants of modern politics really took their own spin seriously, but now I begin to wonder. It certainly took the Chancellor long enough to announce the magnitude of investment in health, education and transport that will be needed.

Now that the money is becoming available through the comprehensive spending review, is the argument about resources over? I doubt it. There will still be specific areas where funding does not match demands, and there is the issue over how to secure long-term funding for these services.

Moreover, a huge amount of government spending is still being wasted because of the centralised, "command and control" manner in which Labour seems intent on "reforming" the public services. Ironically, a Labour government which began by talking of reform and delivering little extra cash has ended up needing to use huge amounts of extra cash to overcome the failure and timidity of its reform programme.

The potential for the Liberal Democrats is clearly immense. We have an opportunity to show that, with our traditions, we alone can embrace an agenda of real investment and workable reform.

If we are to seize this opportunity it will not be by outflanking Labour in the bid for the producers' interest vote. It will not be by echoing the wish-lists of the Luddite union leaderships. It will not be by finding excuses for abolishing the systems of inspection and performance assessment on the basis that they penalise the disadvantaged, when it is precisely the disadvantaged in our society who need them most.

For well over 100 years, since the development and implementation of "social liberalism" in the early 1900s, we have been a party deeply committed to challenging the inequalities of opportunity in our society. But we are also a party which instinctively distrusts the state. We do not believe that the man in Whitehall knows best.

Nor do we believe that the central or local politician knows better than the patient, the parent or the passenger. Our job is not merely to transfer the "Nanny knows best" attitude of Whitehall to the "Nanny knows best" attitude of much of local government. We do not believe that it matters who provides a public service – what is important is the quality of the provision and the extent of access to everyone in society.

We need a health service and an education system in which funding is delivered on a longer-term and more stable basis than in the past. That is why we are discussing at our conference this year a hypothecated NHS contribution – which some of us would like to see become a front-runner for a social insurance system of health provision. This would give real choice of provider and, over time, could help further break the grip of state monopoly delivery.

This week we debate a new policy paper on public services with a welcome emphasis on decentralisation. Some of us will want to see this as a starting point, a good one, for further decentralisation of decision-making.

Such a development of Liberal Democrat principles would allow the party to capitalise on the increasing disillusion with Labour's delivery and the recognition that a viable alternative is not emerging from the rubble of the Conservative Party.

More importantly, we can begin trying to reshape our public services for an era when people will expect to be treated, as taxpayers, as informed purchasers of high-quality services, and not as passive and grateful recipients of second-rate state monopolies.

The writer is the Liberal Democrat MP for Yeovil