Scarcely a day goes by without a new story about the shortcomings of the NHS. Today it was a senior consultant psychiatrist from Southampton speaking on the "Today" programme on BBC radio. He said that his nearest inpatient bed for a seriously mentally ill patient was in Bromley and that he had patients farmed out as far away as East Anglia. He stated very firmly that the policy of "Care in the Community" has gone too far.

Meanwhile, here in Nottingham elective surgery has been cancelled. The new market system has created a "deficit" in the two NHS hospitals which would carry it out. Therefore every extra case they operate on will "lose" them more money. Of course, not operating will not really save money. The "deficit" is mainly an artefact of the budgetting system. Nobody will be sacked or laid off. Nor will the buildings and operating theatres be demolished or sold off. Nor will those who can pay be denied their elective surgery. In this affluent part of the Midlands many people go privately anyway and these numbers look likely to increase.

Unless a new Labour government takes very firm action very early in its lifetime, and unless it provides more resources very quickly, the NHS as we have known it will disappear. It will remain - supposedly safe in our hands - as a safety net for emergency treatment and basic care for the poor. Any services over and above this level will rapidly become the responsibility of the individual. Private insurance companies will take over the payments for those who they agree to take on. I believe that this was the true intent of the NHS reforms right from the start.

This may sound alarmist. But a combination of insufficient resources, lack of accountability and a culture of macho management is dangerous for the NHS. There is nothing to stop decisions being made not to purchase care for whole areas of activity at present taken for granted. The NHS has withdrawn from long-term care for the elderly. The denial of care to other groups is under active discussion. I have heard it suggested that patients with long-term health problems such as multiple schlerosis or paraplegia should only be allowed (free) NHS care if they require the services of an NHS consultant at least once per month. The talk is all about restricting services to a set of "core functions" with the ultimate objective of making the core as small as possible.

The reforms illustrate very well the two central doctrines of the Thatcher project. They combine the use of market principles and American management science jargon with a much tighter degree of central control than previously existed. They also present New Labour with a political problem. Almost everyone working in the NHS thinks that the reforms have had a negative impact. Yet New Labour would rightly be sensitive to any possible charge that it was too close to the interests of the producers of any service. Also it is against the image of the New Labour project to appear to be looking back to a golden age that probably never existed.

The intellectual dishonesty behind the NHS reforms was laid bare in a brilliant analysis by John Gray in an article in the Guardian in January 1995. He pointed out that despite the widespread use of market jargon "the new (NHS) institutions are not those of a dynamic market economy, but of a corporate state." He articulated very accurately how NHS decision makers "dispose of vast resources and exercise immense power over individual lives without being subject to the disciplines of democracy or real markets."

Some of my best friends are NHS decision-makers. Many of them are deeply sceptical about the value of the reforms, though they cannot say so in public. They have welcomed several of Labour's recent announcements. The proposals to allow NHS Trusts to cooperate, and to revisit the waste of time involved in the drawing up of annual constructs seem to be very popular. It will therefore be possible to work with the grain. The more ideologically driven and macho managers might be unhappy, but this would give much general satisfaction.

It will be important to encourage honest discussion about what is really happening. The various publications of the NHS executive are known in the trade as "Pravda", "Izvestia" and so on. Some of the statistics issued by such publications are farcical. The gagging clauses which are now a standard feature of a typical NHS employment contract undoubtedly create a climate of resentment.

Another early decision should be to allow groups who wish to collaborate to do so. I have recently been involved as a facilitator with an exercise in Nottingham to improve the service given by a particular specialty of doctors and nurses. They wish to work together to provide a better service. Yet this will not be allowed to happen because the three different NHS Trusts who employ them expect them to compete with each other, even though they do not want to. I have no doubt that an overwhelming majority of voters in Nottingham would prefer it if they were allowed to cooperate in the way they wish. There would be little political danger to New Labour - and much to gain - from acting firmly in this way. The British people seem to have no problem with the proposition that markets are a good idea in some situations but not in others. Opinion polls taken over many years show huge majorities rejecting the market mechanism in health care. Some mechanisms of greater accountability to the local population will need to be introduced. This gives New Labour an easy way to demonstrate at no financial cost a crucial, popular, difference between themselves and the Conservatives - "we will strengthen the market mechanism where it is appropriate but will not impose it where it is not - unlike the Conservatives." It would appear as the pragmatic Sensible Party, they as the ideologically driven Silly Party.

Freed from the consequent paper chase and the need to juggle with meaningless or misleading statistics, managers would be able to concentrate on things that really matter. We will still need them. The NHS will also need more resources, despite the fact that significant savings would accrue from the scrapping of the market mechanisms. Mary Riddell (NS January 31) is quite right about this. Staff working in the NHS should be made to feel valued again.

It is not an option for a new minister to tinker at the margins of the reforms or to "wait and see." The system is now programmed for the ultimate destination of privatization and will end up there unless very active steps are taken to prevent it. Fortunately firm action would have the support of the British people and the overwhelming majority of those working in the service.

Richard Madeley is Professor of Public Health at the University of Nottingham, and a member of the NEXUS "Failure of the New Right" working group..