Why cutting the NHS would be bad policy and bad politics

There is no prospect of David Cameron taking up Liam Fox's suggestion of cutting spending on the health service.

Liam Fox's call for the ring-fence around NHS spending to be removed is one that is likely to attract much sympathy from Conservative activists. There is a common view that the health service, one of just two departments (the other being International Department) to have had its budget protected in real-terms, has been unfairly shielded from austerity, with even some on the left (among them Vince Cable) calling for cuts. 

In reality, the reverse is the case. Owing to the above-average rate of health inflation (most notably the cost of new drugs and medical equipment), 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. Fox argues that "we’ve tested to destruction the idea that simply throwing lots more money at the health service will make it better", but this ignores the significant improvements that health researchers found to have taken place under Labour (with patient satisfaction rising to a record high as a result). 

If that is reason enough for the Tories to avoid cutting NHS spending, it would also be terrible politics. As a ComRes/ITV News poll found last year, health is the most popular spending area among voters. Just 5% of voters believe the NHS budget should be reduced and 71% believe it should be increased. There is no prospect of Cameron and Osborne handing Labour a pre-election gift by pledging to cut spending.

Incidentally, it's worth correcting the myth, encouraged by Cameron, that Labour would have cut the NHS had it won the last election. In fact, in 2010, then-health secretary Andy Burnham pledged to protect spending, the difference being that the Tories promised to increase it. Burnham helpfully clarified this in an interview with the NS in 2010. 

Why shouldn't NHS spending be ring-fenced?

The ring-fence is what we proposed at the election and, in many ways, it is what I'm still arguing for, which is protection in real terms. Before the election, Labour calculated that if you gave the NHS protection in real terms -- so frozen in inflation -- it would allow you, on the other hand, to give schools inflation in real terms and give police inflation in real terms. Those are the three key services. The health service does not exist in isolation. By taking a more balanced approach to public spending, you can protect the three key services.

So your argument is that ring-fencing it in isolation makes it nonsense?

They're not ring-fencing it. They're increasing it. They're doing two things: they're accelerating the reduction in public spending, which I wouldn't have done, and they are also going to increase the NHS within that. So they went through the whole election campaign boasting that they were going to spend more than me and they're still doing it. Cameron's been saying it every week in the Commons: "Oh, the shadow health secretary wants to spend less on health than us."

As for what Labour's stance will be in 2015, Miliband all but confirmed in an interview with the BBC last year that he would not cut the NHS. He told Nick Robinson: "We're not going to be cutting the health service, I'm very clear about that. We will always be protecting the health service and will always make it a priority."

It's worth remembering that when Ed Balls announced his "zero-based" spending review (one that examines every item of spending), he signalled that health would be a candidate for a "pre-election spending commitment". Expect the Tories to adopt much the same approach. 

Former defence secretary Liam Fox speaks at the Conservative conference in 2011. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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Unite stewards urge members to back Owen Smith

In a letter to Unite members, the officials have called for a vote for the longshot candidate.

29 Unite officials have broken ranks and thrown their weight behind Owen Smith’s longshot bid for the Labour leadership in an open letter to their members.

The officials serve as stewards, conveners and negotiators in Britain’s aerospace and shipbuilding industries, and are believed in part to be driven by Jeremy Corbyn’s longstanding opposition to the nuclear deterrent and defence spending more generally.

In the letter to Unite members, who are believed to have been signed up in large numbers to vote in the Labour leadership race, the stewards highlight Smith’s support for extra funding in the NHS and his vision for an industrial strategy.

Corbyn was endorsed by Unite, Labour's largest affliated union and the largest trades union in the country, following votes by Unite's ruling executive committee and policy conference. 

Although few expect the intervention to have a decisive role in the Labour leadership, regarded as a formality for Corbyn, the opposition of Unite workers in these industries may prove significant in Len McCluskey’s bid to be re-elected as general secretary of Unite.

 

The full letter is below:

Britain needs a Labour Government to defend jobs, industry and skills and to promote strong trade unions. As convenors and shop stewards in the manufacturing, defence, aerospace and energy sectors we believe that Owen Smith is the best candidate to lead the Labour Party in opposition and in government.

Owen has made clear his support for the industries we work in. He has spelt out his vision for an industrial strategy which supports great British businesses: investing in infrastructure, research and development, skills and training. He has set out ways to back British industry with new procurement rules to protect jobs and contracts from being outsourced to the lowest bidder. He has demanded a seat at the table during the Brexit negotiations to defend trade union and workers’ rights. Defending manufacturing jobs threatened by Brexit must be at the forefront of the negotiations. He has called for the final deal to be put to the British people via a second referendum or at a general election.

But Owen has also talked about the issues which affect our families and our communities. Investing £60 billion extra over 5 years in the NHS funded through new taxes on the wealthiest. Building 300,000 new homes a year over 5 years, half of which should be social housing. Investing in Sure Start schemes by scrapping the charitable status of private schools. That’s why we are backing Owen.

The Labour Party is at a crossroads. We cannot ignore reality – we need to be radical but we also need to be credible – capable of winning the support of the British people. We need an effective Opposition and we need a Labour Government to put policies into practice that will defend our members’ and their families’ interests. That’s why we are backing Owen.

Steve Hibbert, Convenor Rolls Royce, Derby
Howard Turner, Senior Steward, Walter Frank & Sons Limited
Danny Coleman, Branch Secretary, GE Aviation, Wales
Karl Daly, Deputy Convenor, Rolls Royce, Derby
Nigel Stott, Convenor, BASSA, British Airways
John Brough, Works Convenor, Rolls Royce, Barnoldswick
John Bennett, Site Convenor, Babcock Marine, Devonport, Plymouth
Kevin Langford, Mechanical Convenor, Babcock, Devonport, Plymouth
John McAllister, Convenor, Vector Aerospace Helicopter Services
Garry Andrews, Works Convenor, Rolls Royce, Sunderland
Steve Froggatt, Deputy Convenor, Rolls Royce, Derby
Jim McGivern, Convenor, Rolls Royce, Derby
Alan Bird, Chairman & Senior Rep, Rolls Royce, Derby
Raymond Duguid, Convenor, Babcock, Rosyth
Steve Duke, Senior Staff Rep, Rolls Royce, Barnoldswick
Paul Welsh, Works Convenor, Brush Electrical Machines, Loughborough
Bob Holmes, Manual Convenor, BAE Systems, Warton, Lancs
Simon Hemmings, Staff Convenor, Rolls Royce, Derby
Mick Forbes, Works Convenor, GKN, Birmingham
Ian Bestwick, Chief Negotiator, Rolls Royce Submarines, Derby
Mark Barron, Senior Staff Rep, Pallion, Sunderland
Ian Hodgkison, Chief Negotiator, PCO, Rolls Royce
Joe O’Gorman, Convenor, BAE Systems, Maritime Services, Portsmouth
Azza Samms, Manual Workers Convenor, BAE Systems Submarines, Barrow
Dave Thompson, Staff Convenor, BAE Systems Submarines, Barrow
Tim Griffiths, Convenor, BAE Systems Submarines, Barrow
Paul Blake, Convenor, Princess Yachts, Plymouth
Steve Jones, Convenor, Rolls Royce, Bristol
Colin Gosling, Senior Rep, Siemens Traffic Solutions, Poole

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.