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2 February 2018

The Health of the National Health Service (2)

Tag(s): Politics & Economics
I recently wrote to The Sunday Telegraph and had my letter published. I was responding to a letter published the previous week which in turn was a reaction to a provocative leader in the newspaper at the beginning of the year. The National Health Service (NHS) is perennially in the news, particularly in winter, especially if there is a new and virulent strain of influenza putting more pressure on an already over-burdened system.

The Sunday Telegraph published the following extract from my letter:

“SIR- M P Wadsworth (Letters, January 14) needed inner soles from the local podiatry clinic. He was apparently told he could have as many as he wanted free of charge.
I also recently needed inner soles from my local podiatry clinic. I was given one free pair, which has to last me a year. I was advised that any further pairs would cost me £102.
There are many things wrong with the NHS but we should not judge it by our individual experiences. The NHS may be national but it actually consists of over 700 separate organisations. The current mood in the country seems to be that anything less than perfection is a crisis.”

They did not find room for the following:

“The sensible decision has been made to defer 50,000 non-urgent operations affecting fewer than one in a thousand of the population so that an unusually severe strain of flu nearing epidemic proportions can be prioritised.
I agree with Mr. Wadsworth that those of us who can pay more as individuals should do so. But those of us who can pay more already pay much more in tax and national insurance. Don't forget that the marginal rate of Income Tax and NI is nearly 70% at £100,000 pa, a salary earned by many hard working doctors and head teachers.”

Tony Blair was quoted recently as saying “The NHS is frankly in a terrible situation.” Jeremy Hunt, Secretary of State for Health & Social Care, responded “Blair’s memory is as selective in office as out of office: does he not remember his own regular NHS winter crises?” And indeed, in January 2000 Conservative Leader William Hague pointed out in the Commons that operations were being cancelled to cope with winter ‘flu and accused Blair of “becoming another Labour Prime Minister saying ‘Crisis? What crisis?’ “

I blogged on this subject in the run up to the 2015 General Election.[i] In that blog I pointed out the many myths and legends that have built up around the NHS, not least the myth that the Labour party created the NHS when all they effectively did was nationalise the existing services. Right from the beginning the greater part of the NHS, the GPs, were private operators and then Health Minister Aneurin Bevan would boast that he “stuffed their mouths with gold”. I pointed out that Labour today accuse the Conservative government of creeping privatisation when it was under the Labour governments of Blair and Brown that the largest increase in privatisation took place with the extensive use of Private Finance Initiatives in building hospitals. One major reason why resources are limited today is the massive debts placed on the NHS Trusts for these schemes.

But the main reason why resources are limited is that the demands on the NHS grow inexorably and a system that offers any service free at the point of use cannot limit demand. Demand rises as the population ages and grows through unrestricted immigration compounded by medical tourism. The NHS used to cost 3% of GDP back in the 1960s and today exceeds 8%. On current trends it will grow to 20% and so other public services will all suffer as the British continue to treat it as a sacred cow. In my previous blog I forecast that there would be no honest debate about it in that General Election. It has got worse as now there is only dishonest debate on all sides. Furthermore the media exacerbate the problem by highlighting individual cases. These may be exceptional but the implication is they are the norm. This is absurd because when the public is polled on the quality of the NHS it gives very high marks, largely because their own individual experience has been good.

One idea that is chucked around by MPs on both sides of the House is to raise a special hypothecated tax dedicated to expenditure on the NHS. The Treasury don’t like hypothecation and they are right to oppose it. In 2002 Gordon Brown as Chancellor raised National Insurance in order, he said, to increase NHS spending. As a political tactic, that was effective. But he could just as easily have linked the increase in NI to his expansion of the tax credit programme announced at the same time. There was no actual link between the NI rise and the increase in NHS spending.

In any case, NHS spending soon rose by vastly more than the additional revenue raised. What we spend today on the NHS is clearly independent of the 2002 rise in national insurance contributions.  In fact it is simply illogical to seek to link one measure of taxation to NHS spending. In 2007-8 national insurance contributions raised £100 billion while we spent £102 billion on the NHS. Three years later, after the financial crisis, national insurance contributions raised just £96 billion while NHS spending had risen to £121 billion.  As Paul Johnson, director of the Institute for Fiscal Studies points out:

“In a world of hard hypothecation, NHS spending would have been cut or national insurance contributions raised during a recession. Either policy would have been crackers.”[ii]

So what is to be done? Well, this was partly answered by another correspondent to The Sunday Telegraph on the same day as my letter was published, and one better qualified to comment than me, a medical practitioner:

SIR- I have worked in the NHS for more than 30 years and am very proud of the service that it provides.
The problems that you allude to in your leader (January 14), and the recent strains on the NHS, are nothing new. In fact, this time last year, the British Red Cross said the NHS was facing a “humanitarian crisis”.
However, there is one worrying trend: the politicising of the NHS. This is increasing year on year, with opposition parties using it to score cheap political points.
It is lazy for politicians to claim that the solution is increased funding. Apart from the fact that billions are added to the budget each year, what is to be done if even more money is provided? Any increase in staff members or wards would leave a surplus in the summer months.
The answer is that the NHS has to fundamentally change the way it is run. And work is already being done to improve efficiency – by increasing the application of technology, for example, and through the use of different healthcare models, such as more care in the home. This is the future of a modern health service.

Dr David Lomax,

 Hayes, Middlesex”

I am sure that Dr Lomax is right that the NHS needs reform rather than ever-increasing budgets and I certainly agree with him that a big part of the problem is that it has become too politicised. But given its present status as the National Health Service it will always be political. I think what is also needed is a genuinely independent Royal Commission with wide terms of reference to develop a new consensus on how we balance what the country needs with what it can afford. And one only has to look at all the other systems in the world with superior results in terms of health outcomes to see that the result will be more privatisation not less. 

P.S. The scandal over the demise of Carillion about which I blogged two weeks ago has distorted the debate about privatisation. Firstly, one of the good things about capitalism is that when businesses fail, they go out of business and the resources are deployed elsewhere. This just does not happen in the public sector so failure continues. There are terrible schools and hospitals but they are never closed.
But the other issue about Carillion is that only now do we hear politicians and journalists pointing out that for years the Board of Carillion paid excessive bonuses and dividends out of meagre profits and with limited cash. Only now is the regulator investigating the role of the auditor in this. I was asked to write about Carillion and with a few hours of research could easily see all these problems were evident years ago. Surely the role of the regulator is to prevent such misbehaviour not investigate it when it’s too late. It reminds me of the Northern Rock debacle. It had been obvious for years that Northern Rock was chasing revenue growth by borrowing short in the money markets to lend long in the mortgage markets, even offering 100% mortgages. Such a policy was clearly doomed. A good friend of mine was approached to join its Board. She asked questions about this mad policy and was so disgusted with the paucity of the replies from top management that she sensibly took it no further. But the regulators were nowhere to be seen.
[ii] 15th November, 2014 The Health of the National Health Service
[ii] “Earmarking a tax to pay for the NHS alone is not a healthy option” Paul Johnson. The Times 22nd January, 2018

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