NHS Funding

Two interesting bits of information have come out over the last couple of days. The first is from an interview by James Forsyth with Andrew Lansley in the Spectator:

'I ask him whether, despite the ramifications of the autumn statement, the NHS budget will still be immune from cuts. His reply is unequivocal: "We have been very clear that the NHS is going to have real terms increases year on year. I mean clearly what we've said in terms of the coalition agreement is an agreement for a parliament. From our point of view, I would say yes is the answer to that because exactly the same principles apply. We have a profile of rising demographics and demand and cost pressures and technology in the NHS, so it is inconceivable that we can sustain the quality of services that we are looking for without the basis of real terms increases."

Does this mean that spending on the NHS will have to rise in real terms every year from now until kingdom come? "I believe so."'

Lansley is saying that a Tory government will not cut the NHS budget (as we know, their definition of real terms increase is actually real terms flat funding, but at least that is better than real terms cuts). This raises the question of whether Lansley is making up policy? Forsyth goes on:

'One senior figure at No. 10 tells me that "Dave, George and Steve", the holy trinity of Cameron, Osborne and Hilton, "all believe that the pressures on the Health Service are such that you are always going to have to increase spending on it"'.

So it seems that "real terms increases" after the election is a Tory policy. It is questionable whether it will be enough to de-toxify the Tory brand on the NHS after Lansley's mismanagement, but that is another article.

The problem is that at the Autumn Spending Review George Osborne admitted to his mismanagement of the economy and, shamefaced, accepted that his plan to wipe out the structural deficit will be delayed by two years. So rather than getting a balanced budget by the next election, the balance will be achieved two years later. If the economy is in such a Tory-imposed mess, how can Lansley promise "real term increases"?

The clue lies in an article by Nick Timmins of the FT. The title of the article tells you almost all you need to know: Debate looms about how to fund the NHS. In this Timmins says:

"Last month’s autumn statement has made that more or less inevitable. Faced with rising demand, the health service was already facing its toughest financial challenge – four years of what is, in effect, a real terms freeze. But the extra £15bn a year of spending cuts beyond 2015 announced by the chancellor means that – unless the economy improves – the service will be in a financial crisis or on the brink of one."

This is not the rosy situation that Lansley et al like to convey. Timmins is a reliable and expert social commentator: he knows his stuff. The NHS will suffer from a financial crisis at the next election and the Tory government will not be able to fund it sufficiently to fix the problem. Timmins describes what he thinks will happen:

"So when yet more money is excised from public services after the next election, it is inconceivable that the NHS will be given even the relative degree of protection it has received this time round. The result is likely to be a performance and financial crisis. Every time that has happened – in the 1980s, 1990s and early 2000s – the result has been a debate about how to fund the service, with all the old chestnuts dragged out. Whether, for example, to introduce charges, provide tax relief for private medical cover or switch to social insurance. Up to now, such arguments have always been lost. This time round, the outcome may be different, not least because other forces are at work."

While I do not think that Osborne deliberately engineered a failing economy so as to create an excuse for this debate, I do think that it was the intention of his policy of real terms flat funding. At the next election the Tories will go to the country telling the electorate that the only way for the NHS to have the larger increases necessary to avert the financial crisis is if the electorate accepts a new funding mechanism.

[As an aside, if there is an NHS financial crisis before the next election then surely the public will take this to finally decide that the NHS is not safe in Tory hands? If so then we have to direct our attention to Labour and get a pledge from them to maintain the current funding mechanism.]

When have we heard this before? We haven't had such an option specifically at an election (there's always a first time). However, after the Blair government introduced tuition fees (without an electoral mandate) we were told that we had to accept the new funding mechanism because it was the only way to provide the extra funding that higher education needed. Same argument, different public service.

We know that the introduction of tuition fees was a disaster, contributing to the heavy debts our children will have to bear. Let's hope that the next time that a political party either seeking a mandate, or in power without the mandate, will find all-out opposition to the funding changes that Timmins suggests could be offered.