The NHS is looking at a funding black hole of over £50bn. It's time to face facts on what must be done to protect services
A report published yesterday by the Nuffield Trust paints a very dark picture for NHS finances in the years ahead.
The report states that if NHS funding were held flat, in real terms, after the end of the current spending review period then the NHS in England could experience a funding gap (the gap between what it needs and what it will get) of between £44bn and £54bn. This is a proverbial 'black hole' in NHS finances. The implications here are that unless the NHS can achieve sustained and unprecedented increases in productivity, then either funding for the NHS will need to increase or there will inevitably be reductions in the level and/or quality of services.
This is seriously scary stuff and we need to ask what are the options available. Well, as always they are limited and there are no easy answers. But here are some options:
- Reductions in services – one option for government is to accept that there will be reductions in the level and/or quality of services available. It is clear that in many public services (eg adult social care, police) there are significant reductions in the levels and/or quality of services being provided so why should health be the exception. In reality this is clearly not a politically viable option. A former Chancellor of the Exchequer described the NHS as the national religion and David Cameron has spent years trying to convince voters that the NHS is safe in Tory hands. While the government may try to implement certain cuts in services by the back door they are certainly not going to put forward cuts in NHS services as their official policy. That would be electoral suicide. It is bad enough that they already will have to go into the next election offering the electorate yet more austerity.
- Radical change to the NHS– some eighteen months ago in an earlier PF blog (PF 19 July 2011). I stated that I thought the £20bn efficiency target for the NHS was 'wishful thinking' and was not based on any substance or evidence of what is achievable. I see nothing to change my mind on this view. To achieve the level of productivity and efficiency gains needed by the NHS would require a much more ambitious programme of reform than has ever been attempted previously. I have argued that (based on many years observation) whenever a political party (any political party) is in government they tend to try to promote some reforms and changes in the NHS, but when they are in opposition they fall back on policies which, by and large, comprise promises to: spend more public money on the NHS, employ more doctors and nurses, reduce the number of NHS managers/administrators and not change anything. Not surprisingly, these sorts of policies are almost universally supported by health professional representatives, trade unions and other vested interests in the NHS. This resistance coupled with strong publicity from the media, make it impossible to achieve the level of change actually needed in the NHS. The only solution is to have some political consensus on NHS reform and that isn’t going to happen. The NHS is too good an opportunity to beat up the other political parties.
- Re-allocate funding – polls suggest that the vast majority of the public want to see the NHS financially protected. This could involve re-allocation of funding from other government programmes or an increase in tax revenues. The problem with reallocating resources from other programmes is the basic question of from where should it be drawn. Programmes such as local government, law and order and defence are already under the cosh from the level of funding cuts they have already had to make. If more cuts were imposed on them one has to wonder how they can continue to exist at all. No doubt many would suggest things like reducing the UK contribution to the European Union but that is also very unlikely to happen.
- Increase general taxation – the generally accepted view among politicians is that people do not want to pay more in tax. The tax burden is the UK is already quite high and has increased in recent years. Trust in politicians is low and there is a belief among voters that a large proportion of public expenditure is wasted. While governments may try to increase levels of taxation by devious means they are unlikely to, for example, raise the basic rate of income tax. Also, the parlous state of the economy means that they need to carefully consider the macro-eceonomic impacts of raising levels of taxation
- Earmarked taxation – finally I would like to come to an old chestnut and a favourite of mine. Introduce some form of specific tax where the proceeds are earmarked (or hypothecated) for the running of the NHS. Polls in the past have suggested that the general public would be happy to pay more taxation if they knew the proceeds were going to pay for health services and not be squandered by government on all sorts of things they disapprove of. No doubt politicians and Treasury civil servants will raise all sorts of objections and problems with such an approach to taxation (none of them valid in my view). The basic worry is that a health tax might be the thin edge of the wedge and in future voters might want a bigger say in how taxes are raised and how the money is to be used.
Whether the approach suggested is to be called an earmarked tax or a health insurance scheme, it involves people contributing more of their own money directly to run the NHS. I suggest that the time has come for a real debate on how we should finance health services in the longer term. I just do not believe that the current model of services funded from taxation and free at the point of consumption is viable in the world we live in today. It is time to face up to the facts.
