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31 January 2017updated 02 Aug 2021 12:41pm

The NHS doesn’t just need better management. It needs more income from taxes

The government must strike the right balance between NHS funding and reform.

By Harry Quilter-Pinner

In June 2000, a 74-year-old lady from Wakefield named Marvis Skeet died of throat cancer. Like so many others at the time, her death was entirely needless.

The NHS had the technical ability to reverse her condition, but simply did not have the capacity to get on with it, cancelling her operation no less than four times.

On the back of this, the then Labour government – which had claimed on the eve of their 1997 victory that voters had “24 hours to save the NHS” – faced a barrage of criticism in the press who saw Skeet’s story as symbolic of the wider NHS crisis.

In the now famous Breakfast with Frost interview a few days later, Tony Blair surprised even his own Chancellor, Gordon Brown, by announcing his intention to increase health funding to match the EU average.

In the years that followed, health spending increased by 7 per cent per annum, up from a historical average of 4 per cent.

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Whilst some have claimed that much of this funding was wasted, there is little doubt that it helped cure the NHS of one of its most scandalous failings: chronically long waiting times.

In 1997, nearly 300,000 people had waited six months or more for an operation; by the time Labour left office, this was down to just 199. Waiting times in A&E fell too, with 98.5 per cent of people seen within four hours of turning up, from less than 70 per cent a few years earlier.

Looking back, it seems impossible that such long waiting times were ever tolerated at all. And yet, anyone monitoring the data coming out of the NHS at the moment would be forgiven for thinking that they had slipped back in time.

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In the final months of 2016, around one in five patients waited longer than four hours in A&E, the worst performance since records began in 2004. Indeed, across the board, targets are being missed: ambulance response times, waiting times for operations, transfers between the NHS and social care and access to GP appointments.

In light of this, 2017 seems set to be the year when the NHS reverts to form, with over a decade’s worth of work; ensuring people get timely access to life changing treatment, undone. So, where did it all go so horribly wrong?

Reform or funding?

So far, the government has argued that a lack of reform lies at the heart of the NHS’s problems. In a meeting last year with Simon Stevens (chief executive of the NHS), Theresa May reportedly said that the NHS should learn from the cuts to the Home Office, whereby the police embraced reform and maintained a steady fall in crime. The Prime Minister’s implication being: “Why can’t the NHS do the same?”

May’s reluctance to give the NHS more money stems, in part, from the deal done between Stevens and her predecessor, David Cameron.

Given the increasing demands for healthcare, in 2014, Stevens came forward with new figures suggesting that between 2015 and 2020 the NHS would face a £30bn funding gap.

He argued that if Cameron and then chancellor George Osborne put in £8bn in extra money, he would deliver £22bn of efficiency savings, set out in what became known as the Five Year Forward View.

Stevens’ reform plans included a more closely joined up health and social care package for the elderly, moving care out of hospitals and into the community; as well as much more upstream prevention of ill health.

These plans are now being put in place through a range of initiatives including the new (and much maligned) Sustainability and Transformation Plans (STPs), jointly authored by local government and local NHS leaders.

However, whilst there is little doubt that the NHS needs reform, it seems unlikely that reforms alone will deliver the scale of efficiencies promised by Stevens.

To experts in the sector, this doesn’t come as a surprise. Many argued at the time that Stevens’ plans were over ambitious, precisely because, at its core, healthcare is an entirely different service to the police.

Unlike crime, which has been falling over the last decade, the health service faces a growing and ageing population, which suffers from an ever rising tide of complex chronic conditions, as well as rising medicine and treatment costs as exciting new scientific breakthroughs come on-stream.

Furthermore, whilst there is much evidence that reforms such as the integration of health and care can deliver better health outcomes (and would therefore be needed regardless of the funding settlement), there is little evidence that they deliver significant efficiencies.

Meanwhile, it is also becoming increasingly clear that any chance STPs and the Five Year Forward View had of delivering on either outcomes or efficiencies is now being undermined, as the money earmarked for supporting it is diverted towards plugging hospital deficits – which totalled £2.45bn last year – instead.

This all implies that Stevens, whilst right to put NHS reform at the heart of his plan, sold the NHS short in asking for just £8bn to back it up, something that May will have to confront, one way or the other, over the coming months.

As deficits continue to grow and waiting times spiral in 2017, she will face a choice between further entrenchment of the government’s existing funding crisis or stumping up the extra cash needed to maintain a world-class health service.

Shaking the money tree

Given that the NHS remains, in the words of former Conservative politician Nigel Warner, “the closest thing the English have to a religion”, it seems inevitable that May will ultimately choose the latter – as she should. The challenge will then become, how can she fund such an increase in spending?

The most obvious solution for May would be to garner additional revenue through tax rises. This is what Brown did back in 2002, raising National Insurance (NI) contributions for employees and employers by 1 per cent, which May’s government should emulate drawing on the popularity of the NHS to ring-fence these funds for the healthcare system.

IPPR estimates that such a move could raise an additional £4bn a year, thereby providing an extra £12bn over the remainder of the parliament, much of which should be reinvested into the government’s NHS reform agenda, increasing the chances it will deliver (the much more realistic) £6bn worth of efficiency savings left to find.

However, in the longer term, it seems unlikely that tax rises alone can keep pace with the upward pressures on demand for healthcare. By 2030 the number of over-85s will have doubled.

Meanwhile, those of working age, whose incomes form the tax base for these services, will have increased by just 2 per cent. These demographic pressures could see spending on health grow from around 7 per cent of GDP at present to 16 per cent or more by 2060.

This alongside other age related costs to the public sector (pensions, social care) will ensure that, even with tax rises, an ever increasing share of government spending will be spent on elderly people.

At some point the working age population are going realise that they are paying more and more tax for services that they themselves will not receive when they get older.

This implies that our political leaders must also start negotiating a new social contract between the generations to fund these health and social care services.

This might include a higher retirement age and an end to the triple lock on pensions, with revenues targeted on those people – both young and old- who need it most.

Together these changes would constitute a bold new funding settlement for the NHS and social care that would both help the service manage the ongoing “winter crisis”, whilst also properly funding the reform agenda to ensure we have sustainable services capable of delivering the best new treatments to its patients on time and free at the point of use in the long-term.

Harry Quilter-Pinner is a research fellow specialising in public service reform at the UK’s leading progressive think tank, the Institute for Public Policy Research (IPPR).