A leaked dossier shows the Scottish NHS is in deep financial trouble. A tax rise will soon be needed to bail it out
With the referendum over, Scotland's political leaders have a range of public services to run, even if the electorate have denied them a country. About a third of their budget goes on health, and most of that on the NHS. According to a confidential government document, leaked in the final few days before the poll, the NHS in Scotland is on the brink of a financial crisis. The referendum is now history, but this problem remains.
The content of the leaked document – what newspaper journalists like to call the dossier - makes for grim reading. In the context of below-trend increases in cash funding and various sources of higher costs, it calls for savings of £210 million in 2015/16 and another £224 million in 2016/17. These are on top of the substantial savings that have been required in recent years. The leaked document suggests these savings can only be achieved through greater rationing of services, significant rationalisation of the estate, and a re-allocation of resources from acute services to primary care and prevention.
The £500 million programme of privately financed hospitals (and yes, the SNP doesn’t talk about this very often) is also in doubt, these plans being 'neither affordable nor desirable given the need to re-balance investment across other asset classes.' The unnamed authors call for a major expansion of the powers of regional health boards so they can implement the scale of service reconfiguration required – much of which will be unpopular.
So what is the source of the problem? Some blame can be pointed at the ultimate source of funding for the NHS in Scotland – the chancellor, George Osborne. He sets the fiscal framework which ultimately determines the lump sum Scotland has received. But from thereon in, it has been decision what to do with the cash. Under successive governments, Scotland has made different choices to the rest of the UK, and in general those choices have not helped the financial position of the NHS.
Between 2002/03 and 2009/10 – the years of high spending before the financial crisis - real-terms health spending per person grew by 29% in Scotland compared with 43% across the UK. This was despite overall public service spending per person growing by roughly the same amount in Scotland and the UK. And, as the Institute for Fiscal Studies showed in the heat of the referendum debate a few days ago, this trend has continued through more recent years, and is due to continue into next year at least. Between 2009/10 and 2015/16, Scotland’s budget has fallen by 8.4% (far less than the 13% for 'English' government departments) and yet, over this period, health spending will have fallen by 1.2% in real terms in Scotland while in England it will have increased by 4.4% - a significant gap.
So what can be done to head off the alleged crisis? One thing, clearly, is to give Health Boards the authority and political support to take hard decisions. Part of the job is being straight with people about the reality of the situation, and that sometimes the needed changes (perhaps service closures in some places) will hurt. One would hope that, with the referendum out of view, such bold action might be possible. More sustainable change, however, requires even greater political courage.
The Scottish Government can, with the powers it will soon acquire under the Scotland Act, increase taxes. If it were to increase income tax by 1% it would raise up to £450 million a year, enough to boost health spending by around 4%. This is more than enough to address the forthcoming financial crisis in the NHS. It will not be an easy thing to do politically. But, after all, with power comes responsibility.
Mark Hellowell is a lecturer in health policy at the University of Edinburgh
