By 2015, new NHS charges will be knocking at the door | Nicholas Timmins: With a flagging economy and rising demand for the NHS, any future government will have to look at new ways of funding it.
Malcolm Grant, chairman of the NHS Commissioning Board – now renamed NHS England – has just dropped a small bombshell into the debate about the future of the NHS.
He has said that a future government will have to consider new charges for the NHS unless the economy picks up – while, apparently, indicating that he personally would not favour such a move.
"It's not my responsibility to introduce new charging systems but it's something which a future government will wish to reflect [on], unless the economy has picked up sufficiently, because we can anticipate demand for NHS services rising by about 4 to 5% per annum," he told the Financial Times.
His essential proposition – that a future government will have to consider new charges – is an almost self-evident truth.
The NHS is entering its third year of no-real-terms spending growth and is certainly facing another two years of that. More likely, given the coalition's failure to reduce the deficit, it will face another two or three years beyond that which will be no better and quite possibly worse. No health system anywhere in the world has ever delivered that.
So it is a pretty fair bet that by 2015 – when the current freeze on NHS pay runs out – services will be visibly deteriorating. So the choice will be a) change the way the NHS is financed, such as a switch to some form of social insurance of the type that is used in many other parts of Europe; b) raise more money from taxation, which will be difficult in this economic climate; or c) think about other ways of lifting the burden on the NHS, or raising new finance for it.
A switch to social insurance makes no sense. Typically it loads costs on to employers making jobs more expensive. And that is something that no one would want to do. Ringfenced taxes equally have a poor track record. The Treasury, quite rightly, hates the idea. Aside from their inflexibility – they either raise too much money or not enough – these taxes reflect the economic cycle. They bring money in in the good times. But when times are bad – when you want to maintain spending on health – they bring in too little.
There will undoubtedly be a huge demand from the private medical insurance industry for tax relief on their premiums as a way of "lifting the burden on the NHS". But if Margaret Thatcher taught us anything, it was that the state should not subsidise private industry unless it absolutely has to. And given the constrained nature of the UK private medical sector, the effect of tax relief would most likely be not a saving to the NHS but a considerable cost to the Treasury in income foregone to fund the tax relief, and an increase in the fees that doctors and private hospitals could charge. Not a happy outcome.
Which essentially leaves new charges. So Prof Grant is right. A future government – indeed the next one – will indeed have to consider them.
The problem is that for charges to raise a significant amount of money, say upwards of £10bn a year, to add to the NHS's £100bn expenditure, no one has discovered a way of doing that – by charging for a GP visit or a hospital stay, for example – which does not disadvantage the less well-off to the point where they may not seek necessary care.
New charges do not have to happen. The answer could be that the alternatives to raising taxation are so unpleasant that the next government may bite the bullet and do that.
Nigel Lawson, the Tory chancellor when the Conservatives last seriously contemplated alternative ways of raising NHS finance back in the 1980s, concluded that a big change might be the equivalent of "jumping out of the frying pan and into the fire", and out of "not such a bad frying pan after all". If that view does not hold this time round, new charges might be the least bad of the many unpalatable options. The Guardian
Malcolm Grant, chairman of the NHS Commissioning Board – now renamed NHS England – has just dropped a small bombshell into the debate about the future of the NHS.
He has said that a future government will have to consider new charges for the NHS unless the economy picks up – while, apparently, indicating that he personally would not favour such a move.
"It's not my responsibility to introduce new charging systems but it's something which a future government will wish to reflect [on], unless the economy has picked up sufficiently, because we can anticipate demand for NHS services rising by about 4 to 5% per annum," he told the Financial Times.
His essential proposition – that a future government will have to consider new charges – is an almost self-evident truth.
The NHS is entering its third year of no-real-terms spending growth and is certainly facing another two years of that. More likely, given the coalition's failure to reduce the deficit, it will face another two or three years beyond that which will be no better and quite possibly worse. No health system anywhere in the world has ever delivered that.
So it is a pretty fair bet that by 2015 – when the current freeze on NHS pay runs out – services will be visibly deteriorating. So the choice will be a) change the way the NHS is financed, such as a switch to some form of social insurance of the type that is used in many other parts of Europe; b) raise more money from taxation, which will be difficult in this economic climate; or c) think about other ways of lifting the burden on the NHS, or raising new finance for it.
A switch to social insurance makes no sense. Typically it loads costs on to employers making jobs more expensive. And that is something that no one would want to do. Ringfenced taxes equally have a poor track record. The Treasury, quite rightly, hates the idea. Aside from their inflexibility – they either raise too much money or not enough – these taxes reflect the economic cycle. They bring money in in the good times. But when times are bad – when you want to maintain spending on health – they bring in too little.
There will undoubtedly be a huge demand from the private medical insurance industry for tax relief on their premiums as a way of "lifting the burden on the NHS". But if Margaret Thatcher taught us anything, it was that the state should not subsidise private industry unless it absolutely has to. And given the constrained nature of the UK private medical sector, the effect of tax relief would most likely be not a saving to the NHS but a considerable cost to the Treasury in income foregone to fund the tax relief, and an increase in the fees that doctors and private hospitals could charge. Not a happy outcome.
Which essentially leaves new charges. So Prof Grant is right. A future government – indeed the next one – will indeed have to consider them.
The problem is that for charges to raise a significant amount of money, say upwards of £10bn a year, to add to the NHS's £100bn expenditure, no one has discovered a way of doing that – by charging for a GP visit or a hospital stay, for example – which does not disadvantage the less well-off to the point where they may not seek necessary care.
New charges do not have to happen. The answer could be that the alternatives to raising taxation are so unpleasant that the next government may bite the bullet and do that.
Nigel Lawson, the Tory chancellor when the Conservatives last seriously contemplated alternative ways of raising NHS finance back in the 1980s, concluded that a big change might be the equivalent of "jumping out of the frying pan and into the fire", and out of "not such a bad frying pan after all". If that view does not hold this time round, new charges might be the least bad of the many unpalatable options. The Guardian
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