The NHS crisis that none of the parties will discuss: how to pay for it

With a £30bn funding gap, all parties need to decide whether they would raise taxes, cut spending elsewhere, or impose patient charges. But don't expect them to tell us.

If there's one NHS issue that none of the parties are prepared to confront, it's that of funding. The common view is that the health service has been shielded from austerity by having its budget ring-fenced, but in reality the reverse is the case. Owing to the above-average rate of inflation in the service, the NHS requires real-terms rises just to stand still. As a recent Social Market Foundation paper noted, "A ‘flat real’ settlement for the NHS is mot what it sounds like since it is defined with reference to an irrelevant price index. To keep up with rising input costs, growing demand, and the public’s expectations for an adequate healthcare system, growth in spending on health has historically outstripped GDP growth." 

By historic standards, the NHS is undergoing austerity. Since 1950, health spending has grown at an average annual rate of 4%, but over the current Spending Review it will rise by an average of just 0.5%. As a result, in the words of the SMF, there has been "an effective cut of £16bn from the health budget in terms of what patients expect the NHS to deliver". Should the NHS receive flat real settlements for the three years from 2015-16 (as seems probable), this cut will increase to £34bn or 23%.

If they wish to avoid a significant fall in the quality and quantity of services, this government and future ones are left with three choices: to raise taxes, to cut spending elsewhere, or to impose patient charges. The third of these is proposed by the think-tank Reform today, which calls for a £10 charge for GP consultations, £10 fines for missed appointments, the introduction of a means-tested system for end of life care and an increase in prescription charges from £7.85 to £10 (with exemptions for those on low-incomes). It estimates that these measures would raise around £3bn a year, with research director Thomas Cawston commenting: "Few will want to debate higher NHS charges but the funding outlook for the service makes it unavoidable. Prescription charges are the easiest route to new revenue, with exemptions for people on low incomes built in." If this seems heretical, it's worth remembering that our "free" health service hasn't been truly free since Labour chancellor Hugh Gaitskell introduced prescription charges for glasses and dentures in his 1951 Budget (although they have now been abolished in Scotland, Wales and Northern Ireland).

But perhaps unsurprisingly, the Department of Health has responded by dismissing the idea out of hand. A spokesman said: "We have been absolutely clear that the NHS should be free at the point of use, with access based on need. That is why we have increased health spending in real terms alongside £20bn of efficiency savings to make sure the NHS continues to provide excellent care."

Labour, meanwhile, spying an opportunity to cause political mischief, has commented: "Patients will be alarmed that friends of Number 10 want to see charges for GP appointments and hospital care.

"Labour froze prescription charges before the election, but they have increased year on year under David Cameron. They are now creeping towards £10, as these plans want, and are adding to the cost of living crisis.

"The Government must come clean on any plans to charge for NHS care. They have already lost people’s trust over the crisis in A&E and thousands of axed nursing jobs – this will only add to it."

But this merely defers the question of how we will ultimately pay for a health service of the standard the public both expect and deserve. Will any party grasp this nettle before 2015? Don't count on it. 

Jeremy Hunt delivers a speech during his visit with David Cameron to the Evelina London Children's Hospital on July 5, 2013 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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Forget planning for no deal. The government isn't really planning for Brexit at all

The British government is simply not in a position to handle life after the EU.

No deal is better than a bad deal? That phrase has essentially vanished from Theresa May’s lips since the loss of her parliamentary majority in June, but it lives on in the minds of her boosters in the commentariat and the most committed parts of the Brexit press. In fact, they have a new meme: criticising the civil service and ministers who backed a Remain vote for “not preparing” for a no deal Brexit.

Leaving without a deal would mean, among other things, dropping out of the Open Skies agreement which allows British aeroplanes to fly to the United States and European Union. It would lead very quickly to food shortages and also mean that radioactive isotopes, used among other things for cancer treatment, wouldn’t be able to cross into the UK anymore. “Planning for no deal” actually means “making a deal”.  (Where the Brexit elite may have a point is that the consequences of no deal are sufficiently disruptive on both sides that the British government shouldn’t  worry too much about the two-year time frame set out in Article 50, as both sides have too big an incentive to always agree to extra time. I don’t think this is likely for political reasons but there is a good economic case for it.)

For the most part, you can’t really plan for no deal. There are however some things the government could prepare for. They could, for instance, start hiring additional staff for customs checks and investing in a bigger IT system to be able to handle the increased volume of work that would need to take place at the British border. It would need to begin issuing compulsory purchases to build new customs posts at ports, particularly along the 300-mile stretch of the Irish border – where Northern Ireland, outside the European Union, would immediately have a hard border with the Republic of Ireland, which would remain inside the bloc. But as Newsnight’s Christopher Cook details, the government is doing none of these things.

Now, in a way, you might say that this is a good decision on the government’s part. Frankly, these measures would only be about as useful as doing your seatbelt up before driving off the Grand Canyon. Buying up land and properties along the Irish border has the potential to cause political headaches that neither the British nor Irish governments need. However, as Cook notes, much of the government’s negotiating strategy seems to be based around convincing the EU27 that the United Kingdom might actually walk away without a deal, so not making even these inadequate plans makes a mockery of their own strategy. 

But the frothing about preparing for “no deal” ignores a far bigger problem: the government isn’t really preparing for any deal, and certainly not the one envisaged in May’s Lancaster House speech, where she set out the terms of Britain’s Brexit negotiations, or in her letter to the EU27 triggering Article 50. Just to reiterate: the government’s proposal is that the United Kingdom will leave both the single market and the customs union. Its regulations will no longer be set or enforced by the European Court of Justice or related bodies.

That means that, when Britain leaves the EU, it will need, at a minimum: to beef up the number of staff, the quality of its computer systems and the amount of physical space given over to customs checks and other assorted border work. It will need to hire its own food and standards inspectors to travel the globe checking the quality of products exported to the United Kingdom. It will need to increase the size of its own regulatory bodies.

The Foreign Office is doing some good and important work on preparing Britain’s re-entry into the World Trade Organisation as a nation with its own set of tariffs. But across the government, the level of preparation is simply not where it should be.

And all that’s assuming that May gets exactly what she wants. It’s not that the government isn’t preparing for no deal, or isn’t preparing for a bad deal. It can’t even be said to be preparing for what it believes is a great deal. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.