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.

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The tale of Battersea power station shows how affordable housing is lost

Initially, the developers promised 636 affordable homes. Now, they have reduced the number to 386. 

It’s the most predictable trick in the big book of property development. A developer signs an agreement with a local council promising to provide a barely acceptable level of barely affordable housing, then slashes these commitments at the first, second and third signs of trouble. It’s happened all over the country, from Hastings to Cumbria. But it happens most often in London, and most recently of all at Battersea power station, the Thames landmark and long-time London ruin which I wrote about in my 2016 book, Up In Smoke: The Failed Dreams of Battersea Power Station. For decades, the power station was one of London’s most popular buildings but now it represents some of the most depressing aspects of the capital’s attempts at regeneration. Almost in shame, the building itself has started to disappear from view behind a curtain of ugly gold-and-glass apartments aimed squarely at the international rich. The Battersea power station development is costing around £9bn. There will be around 4,200 flats, an office for Apple and a new Tube station. But only 386 of the new flats will be considered affordable

What makes the Battersea power station development worse is the developer’s argument for why there are so few affordable homes, which runs something like this. The bottom is falling out of the luxury homes market because too many are being built, which means developers can no longer afford to build the sort of homes that people actually want. It’s yet another sign of the failure of the housing market to provide what is most needed. But it also highlights the delusion of politicians who still seem to believe that property developers are going to provide the answers to one of the most pressing problems in politics.

A Malaysian consortium acquired the power station in 2012 and initially promised to build 517 affordable units, which then rose to 636. This was pretty meagre, but with four developers having already failed to develop the site, it was enough to satisfy Wandsworth council. By the time I wrote Up In Smoke, this had been reduced back to 565 units – around 15 per cent of the total number of new flats. Now the developers want to build only 386 affordable homes – around 9 per cent of the final residential offering, which includes expensive flats bought by the likes of Sting and Bear Grylls. 

The developers say this is because of escalating costs and the technical challenges of restoring the power station – but it’s also the case that the entire Nine Elms area between Battersea and Vauxhall is experiencing a glut of similar property, which is driving down prices. They want to focus instead on paying for the new Northern Line extension that joins the power station to Kennington. The slashing of affordable housing can be done without need for a new planning application or public consultation by using a “deed of variation”. It also means Mayor Sadiq Khan can’t do much more than write to Wandsworth urging the council to reject the new scheme. There’s little chance of that. Conservative Wandsworth has been committed to a developer-led solution to the power station for three decades and in that time has perfected the art of rolling over, despite several excruciating, and occasionally hilarious, disappointments.

The Battersea power station situation also highlights the sophistry developers will use to excuse any decision. When I interviewed Rob Tincknell, the developer’s chief executive, in 2014, he boasted it was the developer’s commitment to paying for the Northern Line extension (NLE) that was allowing the already limited amount of affordable housing to be built in the first place. Without the NLE, he insisted, they would never be able to build this number of affordable units. “The important point to note is that the NLE project allows the development density in the district of Nine Elms to nearly double,” he said. “Therefore, without the NLE the density at Battersea would be about half and even if there was a higher level of affordable, say 30 per cent, it would be a percentage of a lower figure and therefore the city wouldn’t get any more affordable than they do now.”

Now the argument is reversed. Because the developer has to pay for the transport infrastructure, they can’t afford to build as much affordable housing. Smart hey?

It’s not entirely hopeless. Wandsworth may yet reject the plan, while the developers say they hope to restore the missing 250 units at the end of the build.

But I wouldn’t hold your breath.

This is a version of a blog post which originally appeared here.

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