For several years now, I have been arguing the case that the NHS, as currently configured, is financially unsustainable (see blogs below). This issue really became clear to me some ten years ago with the publication of the first Wanless report which effectively indicated that the only way that the NHS, as currently configured, could become financially sustainable in the longer term was through the achievement of a series of objectives which most informed people regarded as unachievable. Wanless was effectively a political document designed to support Gordon Brown’s views about leaving the NHS alone as opposed to Tony Blair’s view that this was unsustainable.
Fast forward eight years and we hit the era of the Great Recession and financial austerity. Although the NHS was “protected” from the pressures of austerity, it was left with a tiny amount of growth in resources each year. I will not enter the complex debate, as to how big or small that tiny amount actually is but let us just recall that it was light years away from the substantial levels of growth the NHS has achieved throughout its history and even further away from the growth it received in the Brown/Blair years.
As a consequence of financial austerity, the NHS was given a target of making £20 billion of efficiency savings over a four year period which would release resources that could be ploughed back into new services, particularly those related to the needs of an ageing population. Many of us argued, at the time, that this target was also unachievable and was a challenge which no health system in the world had ever achieved. Despite valiant efforts from NHS managers and staff, it is becoming quite clear now that these efficiency savings will not be delivered to the required level and that the NHS is running into serious financial trouble pretty fast. Indeed, in my opinion the financial problems facing the NHS have taken longer to materialise that I expected four years ago when austerity commenced. This must be due to the sterling efforts of NHS managers and staff in making some progress on the cost savings front
Not surprisingly, the clarion calls are now starting to come out of the various London think tanks etc that the NHS needs another round of “reform” as a consequence of these financial problems. As someone who can remember, and was personally involved, in the “reforms” of the NHS which took place in: 1974, 1982, 1984, 1991, 1997, 2013 etc perhaps I can be excused a little weariness and cynicism about reforms which involve such things as: structural changes, reform to the commissioning process, changes to the internal market etc etc. I think we are well past that point and the types of changes needed to the NHS at this point in time and far more radical that has been the case in the past.
I would suggest that some of the key founding principles of the NHS, in 1948, were:-
· Comprehensive – the NHS was charged with delivering a comprehensive range of health services provision at the local level which, to a large extent, it still does.
· Free – NHS services were to be provided free at the point of consumption. Although charges have subsequently been introduced, over the years, for some purpose, the services provided are still largely free
· National – the NHS was to be a national service. At the time of its inception, Aneurin Bevan emphasised the importance of having a national system with uniformity of standards and not a series of local systems with variations in standards. In practice, and in spite of being subject to endless centralised control, the NHS has become a system with significant variations in standards across the country. Although attempts have been made to decentralise the NHS, these always seem to fail. Indeed as Chris Ham noted recently, (Public Finance Blog, 11 June 2014) the government’s recent NHS reforms which were meant to devolve power away from Whitehall have not done this and the NHS still remains one of the most centralised health systems in the world
· Tax funded – the NHS is financed almost entirely from the proceeds of taxes levied by central government with relatively small amounts from other sources. It must be emphasised that the NHS is financed from the general pool of taxes collected by Government so that individuals see no link between the taxes they pay and the amount spent on the NHS. In the past, polls have suggest that people do not want to pay more in general taxation (the tax burden is constantly raising) but are more open to a tax levied specifically to fund the NHS.
What I am about to say will probably cause apoplexy in some quarters but it has to be said. The originating principles of the NHS were wonderful principles at the time (nearly 70 years ago) but the world has changed radically and these principles now need amending if the NHS is to survive. The NHS as currently configured is broken and needs to be fixed. I say this as someone brought up in a strong Labour Party family and born not ten miles from where Aneurin Bevan lived.
There are five things I would emphasise regarding the sorts of changes needed:
· Funding – the NHS needs more money and always will. It is not going to generate the level of savings needed and we just as well stop pretending that it will. People don’t want to pay more in general taxes and so we must look elsewhere. There are two obvious candidates which space only allows me to mention here. Firstly charges need to become a much greater source of income for the NHS. I know this breaches the “free at the point of consumption” principle but it is something that many developed countries operate without the sky falling in. Moreover, any charges levied must be able to raise a substantial amount of money. We don’t want something like (English) prescription charges where you exempt a huge proportion of the population such that the volume of funds raised is limited. Secondly we have to, at least consider the merits of introducing some form of health insurance or earmarked taxation model for funding health services where people pay according to what they earn and they know the money raised goes towards the NHS. At the point when health insurance is mentioned, many people default to the view that “we don’t want to end up like the Americans”. In my experience, most Americans don’t want to end up like the Americans but they don’t know the way out of the mess. The reality is that there are several countries who operate health insurance models (private and/or public) which work well and deliver better health services than in the UK. We must at least consider them. Whether we want the health insurance model to also incorporate some sort of premium penalty for those undertaking risky health behaviours is also a point of debate. It must be remembered that a basic principle of “insurance” is that premiums should reflect risk.
· Prevention – it is well known that a huge proportion of NHS expenditure is spent on treating medical conditions which can be prevented by changes to individual’s behaviour and lifestyles (e.g. smoking, obesity, alcohol consumption etc). Changing such behaviours in millions of people appears a herculean task of public policy. In my inaugural professorial lecture in 2009, I speculated that one aspect of public policy under austerity was that government would probably need to become more authoritarian in its attitude towards certain of its citizens. To some extent this has already happened in areas of public policy such as “troubled families” and social welfare benefits. In relation to health such an approach might involve a greater element of sanctions for pursuing unhealthy behaviours rather than incentives to adopt healthy lifestyles. One example such as this (referred to above) would be higher premiums under a social health insurance model.
· Diversity – the NHS has often been described as the last great public sector monopoly in the UK. Through policies of contestability, there have been changes in the involvement of private providers in NHS services the proportion is still pretty small. In many other countries we find a much greater diversity of provision in involving: government, religious orders, not for profit organisations and for-profit organisations. Maybe further diversity of provision needs to be encouraged.
· Decentralisation – I have already noted the extreme centralisation of the NHS as a health system and the failure to achieve de-centralisation. To be honest, I have no idea how this could be achieved other than significant constitutional change in the UK (Malcolm Prowle, Public Finance Blog, 12 June 2014)
· Political consensus – Nigel Lawson once observed that the NHS is the national religion of the UK with an unchallengeable theology. My observations of the last forty years are that when any political party is in government it tries to achieve some reforms and changes in the NHS. However, when in opposition, political parties of all colours fall back on policies which, by and large, comprise the following: spend more public money on the NHS, employ more doctors and nurses, reduce the number of NHS managers and administrators, not close any hospitals (however decrepit, unsafe and ineffective they may be) and not change anything. Unsurprisingly these sorts of policies are almost universally supported by health professional representatives and trade unions. Coupled with strong publicity from the media this makes it incredibly difficult to achieve the level of change actually needed in the NHS. Moreover, this sort of mentality often blocks reforms which are needed to improve health care. Unless we can achieve some sort of political consensus on health (as we have in some policy areas), we face an endless cycle of political parties in opposition promising things which go down well with the electorate (even though the electorate is wrong) and when in government trying to reform the NHS but being opposed by other political parties, the media and the health professions. A recipe for stagnation.
Although we live in an era of austerity I suspect that the worse NHS finances get and the closer we move towards the election then the more likely it is that the Chancellor will find some additional funding from somewhere to tide the NHS past election day. However, post-election the NHS will return to the existing unsustainable position facing the same choices.