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A taxing question for the NHS

There is serious trouble ahead if the Conservatives enact their planned reforms of Britain’s health

Attempts to overhaul the National Health service have descended into an insurgency battle, with the people who make the NHS work, united with policy experts on one side, and the Health Secretary on the other.

The King's Fund released a devastating critique of the coalition's health reforms on Thursday, warning that there's a £1bn black hole in funding for care of vulnerable people. It's the latest in a line of warnings about the reform programme by this influential think tank. There is serious trouble ahead.

Here's the long-shot question. Could this lead to a form of local income tax or local insurance by the back door?

I ask this because there's a good chance that your local council will end up picking up the pieces when the NHS falls apart. And that is a "when", not an "if".

There's been a lot of smoke and noise about the government's health reforms, which are currently going through parliament. The focus has been on GPs taking over the commissioning work of primary care trusts (PCTs).

But this is only one part of the headache that has led to personal interventions by both David Cameron and his policy overlord, Oliver Letwin. Despite claims from No 10 that the problem is communication, neither has been that happy, which might explain the rumours in the Department of Health HQ at Richmond House that Phillip Hammond could be set to take over Health in a post-local election reshuffle in May.

If Hammond gets the gig, it will come with a toxic in-tray of failing hospitals, closing hospitals, collapsing care-home businesses, militant doctors and a budget crisis. But what is really eating at GPs and hospital managers is the fear of what kind of system Lansley is going to leave them.

The King's Fund has warned that there will be more emergency admissions as care for older people collapses. This is because councils are cutting back on social care spending. They are limiting provision to only those rated as having "critical need". At the same time they have frozen care-home fees.

The freeze led to Southern Cross, the country's biggest residential care firm, warning that it is facing deep financial problems.

There are others in a similar position and as interest rates go up, those with severe problems will go to the wall.

No warning lights

And the foundation trusts, set up by Alan Milburn, have warned, hospital closures are inevitable. Hidden within this a deeper problem, that the internal market created by Labour has destroyed relations inside hospitals as departments compete for patients. That's before the hospitals start competing with each other.

Worse still, with the move to "light-touch" regulation, the government has no idea where the system is failing. Nor does it have the capacity to handle its reforms, as there's no "dashboard" with warning lights.

Monitor, the body that inspects management of hospital trusts, has already warned that it cannot guarantee future oversight in its part of the system, for example.

What we'll be left with is a fragmented, cash-starved contraption that barely functions outside the A&E units. And it will be councils that will have to step in as the Health Bill also re-creates public health officers to oversee their communities.

We have already seen what happens when it goes down. Kent County Council stepped in when Maidstone and Tunbridge Wells NHS Trust collapsed in October 2007, after a damning report showed 90 deaths were linked to Clostridium difficile outbreaks in its hospitals at Maidstone, Pembury and Tunbridge Wells.

That was in the good times, when the council had managers with health expertise at the top. The situation hasn't got better there, either.

So as the cash runs out across the system and the poor performers break, the GP consortiums will push down decisions to close services to councils.

Which will create more rows like the one running between Enfield Council and its health partners, over the decision to close an A&E unit at Chase Farm Hospital. The matter has been referred to – you guessed it – Andrew Lansley.

One outcome is that, as the waves come crashing in, the coalition will look to inject emergency cash quickly into the NHS. Councils will by then have oversight and some of the budget, and so will demand more. One option would be to allow council-tax increases, which Labour would use to tear the Tories apart.

Someone in the Lib Dems will remember a dusty pledge to hypothecate and localise taxes with a form of local income tax. You just create a localised version of NI to pay for care, linked to the survival of your local hospital.

Imagine the press release: "Nick Clegg saves NHS with NI for 21st century". I'd put money on it – and pray that the coming winter is a mild one.

Chris Smith is a former lobby correspondent.

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