Time For An NHS Mark II

“The most radical health reforms will be made necessary in the next Parliament by events, dear reader, events.”

Guest Speaker Health UK Politics Welfare State
William Beveridge: His 1942 report formed the basis for the welfare state

The word “crisis” is overused and never more so than in a long run-up to a general election. But if the next government expects it can run and finance the NHS on the existing model, then the NHS, as we know it, will cease to exist by 2020. I believe the sheer weight of circumstances will panic the government into radical reform.

There are, generally speaking, two ways by which social reform comes about in this country. The first is from the force of an inspirational leader. The second is, to use Harold Macmillan’s phrase, by “events, dear boy, events”. The most radical health reforms are going to be made necessary in the next Parliament by events, dear reader, events. Health and welfare were once reformed by an inspirational leader. Sir William Beveridge published his blueprint for a new social order at the great turning-point in the Second World War, coinciding with Montgomery’s desert victory at El Alamein. Public interest switched from how the country might survive to the world after the war, as Beveridge presented his reconstructions for post-war health and welfare.

Beveridge built on the basis Lloyd George and Neville Chamberlain had laid down over the previous 30 years and he did so for fiscal reasons that are as valid today as they were then. Lloyd George judged that the tax base was too small and inflexible to be expanded to finance his health and unemployment reforms. Paying by way of National Insurance built on the country’s growing sense of fairness: you pay in before you draw out.

Beveridge naturally followed. His great health and welfare reforms were to be paid for from a much enlarged National Insurance scheme. So to advocate a National Insurance basis for reforming the NHS is far from revolutionary. It is, rather, to adopt the finance model that has always served this country well: the contributory principle.

A National Insurance approach to financing health has a number of clear advantages, and none more so than the prospect of the public being unlikely to elect a government committed to a non-hypothecated increase in taxes. Contributors never viewed National Insurance contributions as a tax, despite the fact that politicians have continued to call them thus. More important has been that contributors saw these services as theirs, paid for by their own contributions.Here is the beginning of a link between benefit levels, the level of healthcare, and costs. It is here that events, dear reader, will push reform in the next Parliament back along the National Insurance path.

Sixty per cent of cuts still need to be enacted. Yet even these cuts will not be sufficient. Balancing the books will require a further £12 billion cut in the welfare bill. The idea that tax increases of any size are going to be made for health, let alone welfare, is moonshine. But the NHS is already in deficit and that deficit will grow each year over the next Parliament to make a cumulative shortfall of £90 billion. That is not a misprint. In 2020 alone the annual NHS deficit will have reached a staggering £30 billion. The political response shouldn’t simply be one of succumbing to blackmail for yet more and more money, without it being clearly linked to productivity gains. After reviewing the huge injection of new monies into health from 2001, the National Audit Office observed that while “there has been significant real growth in the resources going to the NHS, most of it [was allocated to] funding higher staff pay and increases in headcount. The evidence shows that productivity in the same period has gone down, particularly in hospitals.”

This is why I propose to raise through National Insurance half of the monies required to plug that £90 billion deficit and that these new monies should be used not only to reshape the service, away from hospitals to GPs, but also to drive through productivity increases while keeping the health service free at the point of use. But I don’t think this new injection of cash will by itself result in the changes necessary to gain a new deal for patients. It hasn’t in the past.

Acting on the principle that every crisis can be used for radical reform, I have proposed that the next government establish a National Insurance mutual. The mutual would have all the functions that NHS England and Monitor—the sector regulator—currently have. But the mutual would be owned by us, the contributors. Its governance could follow the John Lewis model whereby the members elect a strategy board which then appoints an executive board to carry out the policies it decides upon.

Crucially, the strategy board would receive all the additional funding from the National Insurance increase. When Gordon Brown put a penny on National Insurance to “save” the health service, he secreted away almost half the sum to other pet projects. The mutual will set future contribution levels in negotiation with the contributors and the government. This leads on to the mutual’s other function. It needs to inform, educate and seek approval from us, the contributory owners, on the range that a future free health service should take and to gain our support to drive through productivity increases with our money.
It is here that the national mutual would break further ground in the health debate in this country. At the moment the clinicians largely decide on the pattern of NHS treatments. Further down the line, the politicians have to pick up the bill, however reluctantly. The new health mutual would dispel the idea that voters have of a bottomless pit of money from which resources can forever be drawn.

National Insurance has also struck a deep chord with the nation’s gut feelings about fairness: you have to have paid in before you can establish an entitlement. To reinforce this crucial feeling, I proposed that contributors and their families would have an entitlement card. These entitlement cards would also prevent NHS tourism. We would need to present our cards when visiting our GPs or going to hospital. Pie in the sky? I think not. It’s how events will play, dear reader, and it’s these events that will deliver an NHS Mark II.