NHS – thinking liberal

Only higher taxes can save the NHS. That will require serious political reform

Dr Chris Morris on the picket line. Picture: BMA

For once it is not the usual journalistic hyperbole to suggest that Britain’s National Health Service is failing. Waiting lists mount as the service is racked by strikes. With little sign of an end to these severe workforce issues, it is hard to see how the service is going to recover from the stresses placed on it by the covid pandemic. Indeed, things just seem to be getting worse. But Britain’s politicians are not being honest with the public about what is required to bring the service back to an even keel.

Just how bad are things? Workers and their union representatives have an interest in painting a bleak picture to support their pay claims; journalists suffer their normal bias towards the sensational and the bad; so it is hard to get a clear objective picture. Parts of the service appear to be operating reasonably well. Recently my household, in East Sussex, has had cause to use local primary care services, and cancer treatment. Neither service has been up to where we wanted it to be: it very hard to get a face-to-face appointment with a general practitioner, and the 8am scramble to get an appointment of any sort is both farcical and painful; there are delays of weeks in the cancer service. But neither service has fallen below the acceptable – and when you get the it, the service is excellent. We are not signing up for private services yet – though we have done this for dentistry and optometry. But there are places – such as apparently to the east in Kent – where things are more desperate. Reported waiting times for ambulances and at Accident & Emergency in hospitals are starting to alarm. The unions paint a picture of a workforce crisis – with high vacancy rates, and staff leaving the service either through burnout, or to better opportunities outside the NHS, including in Australia. Statistics back these claims up, and nobody is seriously challenging this narrative, not even the government. For that reason I largely accept it – though I suspect that in some parts the country NHS staff may be paid generously by local standards – though this is unlikely to apply to doctors, who are much more mobile.

It is the strikes that are the greatest cause for concern. High inflation comes on top of many years in which real levels of pay have been squeezed. Nurses, ambulance operatives and other more junior staff may be arm-wrestled into accepting pay that does not meet their longer term concerns. But the doctors are only getting started in their campaign, and are taking a very aggressive line indeed. There are no settlement talks. Throughout these disputes both sides seem to be talking at cross-purposes. The unions are trying to address a workforce crisis that has been building up over years; the government talks about a year of temporary hardship in order to combat inflation and meet government financial targets. This mismatch goes to the heart of the issue.

The main problem is that the NHS has an effective monopoly on employment for the key medical skills – what economists call a monopsony. This allows them to frequently get away with paying below what should be a market rate for the job. The Treasury ruthlessly exploits this market power in its annual attempt to make its budgeting work. Longer term issues are always tomorrow’s problem. The NHS as an institution is very popular with trade unions, but the dirty secret is that a privatised system would almost certainly pay its workers more, at least in most parts of the country. The government suggests that higher rates of pay can be contemplated if workers become more efficient. It’s generally not hard to find inefficiencies – but much harder to address them in such a complex environment, There is no evidence that I am aware of to suggest that the NHS is inefficient by international standards – the opposite in fact, although greater “efficiency” may be a function of low pay. Besides, efficiency gains are overwhelmed by rising demand and medical inflation. Meanwhile high staff turnover only makes the financial squeeze tighter.

But what about affordability? Here again it is very easy to get caught in a cross-purposes argument. The NHS budget is a major headache for the government, as it is almost entirely funded from taxation. But health care is a major priority for people, and given the ability to choose, people would spend a lot of money on it. More money, almost certainly that the country now pays for its health services. And since it does not require much in the way of imports, there is no good reason that the country can’t spend a lot more on the NHS, and less on nonsense and luxuries. That doesn’t help the government, as its budget does not cover nonsenses and luxuries, which are for private choice. It can only square the circle by raising taxes. To spend more without raising taxes would be inflationary, the last thing the economy needs right now. The Chancellor of the Exchequer, Jeremy Hunt, is quite right about that, though he somehow fails to explain that it wouldn’t be inflationary if he raised taxes.

What is needed is a long-term workforce strategy for the NHS, covering both pay and recruitment, showing how the country intends to sustain the workforce required. I have heard that the government is working on such a strategy, but somehow it keeps being delayed. That would not be surprising, as surely there is hole in the heart of it. The government is adamant that it wants to cut rather than raise taxes. Labour is no better. It is terrified of being painted as the party of high taxes, especially as inflation has put many people under financial pressure. It comes up with a few tax-raising gimmicks (taxing non-domiciled residents more; taxing private schools; and so on). These aren’t enough to do the necessary heavy-lifting. Besides, in order for extra spending on staff not to be inflationary it is necessary for any tax rises to reduce consumption. The sorts of tax gimmick Labour are proposing are more likely to affect the savings rates of the wealthy, and not have much impact on domestic consumption; it would help public debt, which is just a statistic, but do little for inflation. Other opposition parties (the Lib Dems, the Greens, the SNP, etc.) are no more convincing.

What happens if the NHS is not given more funding? People will spend more on private health care. This would create a doom loop, as the private sector competes with the NHS for staff, making its workforce problems and waiting lists worse. This is what has happened to dentistry. And a growing a private sector creates a whole variety of inequities and inefficiencies, with the system as it now is.

There are perhaps three ways that the circle might be squared, and the pressure on taxes reduced: economic growth, reducing demand, and private/public integration. Economic growth is, of course, every politician’s favourite answer. Readers of this blog will know that I am growth sceptic – the demographics and deeper economic dynamics are against it. Still, Britain has some particular issues that might allow the country to be more economically efficient: more affordable housing; trade integration with the European Union; looser immigration rules. For various reasons these are all politically unacceptable. Liz Truss has shown how politically unpopular a growth agenda can be – though her biggest ideas about achieving this (tax cuts, for example) were laughable. Meanwhile deteriorating health is acting as a brake on growth – though it is hard to tell how much the NHS workforce problems are part of this.

Could we reduce stress on the NHS by moving to healthier lifestyles? Reducing consumption of processed foods; healthier relationships with drugs and alcohol; better approaches to mental health? Good luck with that.

My third suggestion is more integration between the NHS and private care. That would mean things like hospitals accepting “co-payments” – supplementary payments for higher standards of care or non-essential treatments. But that would undermine the egalitarian ethos of the NHS, which is again considered politically toxic.

So every way of tackling the NHS crisis hits a political roadblock. It is at this point that I could suggest that this is not the fault of our politicians, but the public itself. It refuses to confront the tough choices required. But that isn’t fair on the public. Many suspect that tax rises are on the way – and there is widespread sympathy for NHS staff. But our political system forces politicians to concentrate on narrow groups of marginal voters, who dictate the political weather. All parties have concluded from this that it is suicidal to have an honest debate on tax and the NHS. No party can, say, try to make a case for higher taxes, which convinces, say, 25% of the electorate to create a substantial block in parliament, which would in turn force other parties to deal with it to form a government.

Instead our politicians throw insults at each other in the hope of influencing a minority of voters in a minority of parliamentary seats. And there is no momentum for serious reform.

NHS failure is hurting the economy. Only higher taxes will break the cycle.

Last Friday I read a rather shocking article in the FT by John Burn-Murdoch pointing out that, uniquely amongst major economies, the number of inactive people of working age in Britain is still rising even as covid subsides. In the EU the number of inactive people has already returned to below the pre-pandemic trend line; in the US the number of inactive people is still above this trend line, but it is falling. About 300,000 people are missing from the UK workforce. The author draws a connection with NHS waiting lists, where a similar number of people have been waiting for more than a year for an NHS operation to deal with a chronic condition. You don’t have to accept the exact causal link between between these figures to understand that a poorly functioning health system affects the size of the economy. The scale of pain implied by the backlogs in NHS care, and the difficulty people have in accessing it, including primary care and mental health services, should make this enough of political priority. But even those who say the economy trumps all else should be taking notice.

Two important insights about the current British economy seem to elude many commentators. The first is that the dominant factor affecting the size of the economy, and hence economic growth, is the number of people that are in work. As I discussed in my recent post on Dietrich Wallrath’s book Fully Grown, this factor trumps all others, and in particularlar changes in productivity. It follows that anybody who cares about growth should focus on this factor above all else. It is why childcare policies are so important, to say nothing of immigration and retirement. It follows that the persistent shrinkage in the UK workforce through the covid pandemic must be an important contributor to the country’s lack of economic performance. The second insight is that Britain is facing a supply side crunch, which is why unemployment is low at the same time as inflation is becoming widespread through the economy, and not just focused on things like energy costs. And following Brexit, international trade (and migration) is much less of a safety valve for imbalances between supply and demand. This means that anything reducing the size of the workforce really matters. And that makes the state of the nation’s health doubly important.

It is evident that Britain is experiencing a health crisis. The NHS is failing to deal with the pressures it is under, and as for policies to stop people getting ill in the first place, that gets scarcely any attention at all. The surge in demand, combined with pressure on supply, arising from the pandemic has broken a system that was already under stress. The direct effect of the pandemic – in terms people getting ill – does not seem to differ all that much from many other countries. The issue is that other country’s health systems seem to be more resilient.

Why should this be the case? The main reason is surely that the country does not spend as much on health care as other developed countries. In an ONS study on comparative health spending based on 2017 data, only Italy spent less per head among the G7 countries. This study also pointed out that the proportion of the spend that was publicly financed (about 80%) was amongst the highest – though in the Nordic countries and Japan it was higher. The two countries in the OECD with the highest overall health spend per capita, Switzerland (about 40% higher than the UK) and the US (about double) had amongst the lowest public contributions. This points to the central paradox of the NHS: the arrangement of care being free at the point of use, combined with an effective monopoly of state provision, causes the country to spend less on health rather than more – because it makes private contribution harder. Why would you pay for treatment that you can get free? You aren’t allowed to top up NHS care with your own money to get better treatment or priority. But if people are driven to use private care because the NHS is inadequate, private care infrastructure starts to undermine the public one – and the universal consent that is the basis of the NHS starts to break down. This has already happened to dentistry and optometry. A recent BBC study has shown that more and more people are going private out of frustration with NHS waiting times, in many cases causing significant financial hardship. So this is a growing threat.

Britain probably took a wrong turning with the design of its health system in the 1940s. Other countries have found a better balance between public and private finance, and deliver better health outcomes overall – though the US shows that you should not equate health spend with health outcomes. But that is a useless insight. It is inconceivable that the country moves to one of the public insurance-based systems (Netherlands and Australia are often spoken of as exemplars) that seem work better. There is only one way to solve the problem and that is to expand the public budget to take up a higher share of the national income. This was the solution hit upon by Tony Blair when he was prime minister in the early 2000s – which it must be said was one of his most successful insights, even though it went against political orthodoxy – he had to outmanoeuvre his chancellor Gordon Brown bring it about. The problem, of course, is how to fund it (or, if you are a follower of Modern Monetary Theory – how to prevent the policy being inflationary). When Mr Blair pushed the policy through, the country was going through a largely illusory period of economic growth, and no hard choices were required as tax revenues were buoyant. But a big problem arose when the bubble popped in the Great Financial Crisis, and much of the government’s tax revenues vanished. Since then governments have sought to protect the size of the NHS budget, but without letting it reflecting increased demand arising from the higher proportion of older people. Meanwhile other public services that affect demand for the NHS, like social care and public health, were squeezed. Meanwhile the country’s growth prospects were dented by those same demographics, to say nothing of the ending of cheap Chinese imports and Brexit, and various other headwinds. The inescapable conclusion is that core taxes (Income Tax, National Insurance, and VAT) must go up to provide health services with the resources they need to meet public demand.

Only shadows of this awkward political choice seem to be affecting the Conservative leadership debate. Rishi Sunak defends the recent rise in NI on the basis that it is needed to fund the NHS to help overcome its covid backlog, and then to improve social care. But this extra funding is inadequate. Liz Truss persists in suggesting that taxes should come down immediately, and stay down, as this will unleash growth and higher tax revenues overall. Though she doesn’t suggest cutting spending, it is not hard to see that this is where that path leads. Both place hope in productivity miracles in the health system to square the circle. Neither want to touch the idea of intrusive regulation to help the country avoid health hazards such as junk food. This position is not necessarily incoherent. Many conservatives think we should push health choices and their consequences out of the public realm and into that of individual responsibility. Such people would not be unhappy with the rise of a two-tier health system with the rise of private care increasingly dealing with the requirements of the better off. It is, of course, a policy that dare not speak its name.

And yet Labour, and the Lib Dems for that matter, are no better. They may accept the ethos of an effective and properly funded public health system, including preventative health interventions (though tastes for this vary) – but they will not say that this requires core taxes to go up. It is easy to blame devious politicians, right, left and centre for this failure to confront the hard choices about the national health. But the problem clearly goes deeper. Conservatives don’t talk about strangling the NHS in the name of individual agency, and Labour doesn’t talk about serious tax rises to boost health funding, because each of these policies would be politically suicidal. The political system crushes minority political views, which both of these are, in the all-or-nothing electoral system. The public has no apetite for political straight talking of this sort. It’s been hard enough to get people used to the idea that stopping climate change means changing our way of life. Health policy, or the awkward choices it entails, does not get anything like this attention. Initially leadership on this kind of issue is required from outside the main political parties. But I hear nothing.

And so we face the prospect of a vicious circle, with the health system and the economy bringing each other down.

The NHS makes Britain a high-tax nation. Tories need to get over it

The most significant political development here in Britain in the last week was the government’s announcement that it is going to raise National Insurance by 3% of income (1.5% each to be paid by employer and employee) to pay for additional short-term costs in the NHS and longer term costs of social care. Alongside it were announced a sketch for the future public funding of social care. This is a reversal for the Conservatives, who had promised not to raise rates of Income Tax, NI or VAT, which has caused consternation among many Tories. They see their dreams of Britain being a lower-tax country ebbing away.

With this new tax the proportion of national income taken as tax will be historically high – though I read differing stories of just how much. When I first started to work calculating PAYE and such in a small accountant’s office in 1976, the basic rate of income tax was 35%, and the top rate was 83%. On top of that “unearned income” was subject to a 15% surcharge, which could take the top rate up to 98%. Then there was National Insurance – admittedly at a much lower rate and capped so that it did not apply to higher levels of income. Corporation Tax was 52%. VAT was only 10% (or 8% on some goods I can’t quite remember), compared to 20% now – but I find it very hard to believe that the country is even close to raising as much tax relative to income as it was then. Maybe I’m missing something. It was a signal achievement of Margaret Thatcher’s government (1979 to 1990) that it cut these rates drastically without destroying the nation’s finances.

That achievement seems to have fostered an illusion amongst many Conservatives – that lower tax rates pay for themselves by creating economic growth – and the effect would be doubly beneficial if wasteful public spending could be cut too. They could point to successful countries with lower rates of tax: such as the USA and Japan – whereas many European countries were regarded as basket cases, suffering from excessive tax. Such people, often styled as “economic liberals”, dominated the Conservative/Lib Dem coalition of 2010 to 2015, and David Cameron’s majority Conservative government that briefly succeeded it. These governments drove forward a period of austerity, in which many areas of public spending were cut drastically, and spending on other areas, such as the NHS, failed to keep up with increased demand. Taxes did not fall so much, though. Personal tax allowances were raised – but tax collection was tightened up. This period should have awakened Tories to the fact that big tax cuts are off the political agenda in the UK. It required huge amounts of political capital just to stand still on the tax and spend equation.

At the heart of this reality is the National Health Service. Unlike most developed countries, the bulk of Britain’s health care is supplied for free through this nationalised utility. This must be funded by taxes (or if you are a follower of Modern Monetary Theory, taxes are required to ensure that the spending is not inflationary). Private health services exist alongside the NHS, but in most cases a wall is placed between the two. You cannot top up your NHS care with private money. Such are the egalitarian principles behind the NHS.

When the NHS was set up in 1949 it was widely thought that health services were like any other utility – such as the drains. Demand would be contained at a particular level when health needs were met – few people become intentionally ill after all. This has never happened. Health care has extended its reach as new conditions come within its scope, and new treatments become available.

All this is generally understood. But what economic liberals often fail to grasp is that if some perfect market mechanism could be found to supply medical services, backed by a perfect social insurance system, then the overall demand for medical care would be very high. In other words people would choose to spend on health services over and above other sorts of consumption. The consumer appeal of reducing pain and extending life has a strong competitive appeal. It is unknowable how much this hypothetical level of demand is – but to get some idea of how high it could be, look at the USA – where healthcare costs 18% of national income, notwithstanding high levels of unmet demand. In Britain the ratio is about 10%, with a lower income per head. So Britons get to spend 8% more of their income than Americans on other things. But other things they probably don’t want as much as better healthcare. They just have no good way of using their income to achieve this because of the way the NHS is structured, and because their political leaders have imposed such a draconian cap on costs. The NHS tops international league tables for value for money – but not for health outcomes. That is not the right way round. In one view the design of the NHS means that demand for health care is exaggerated, because it is free at the point of delivery. In practice the NHS acts as a constraint on demand, because it makes it hard for consumers to use their own money to get what they want.

Other health systems are better at drawing in private money to supplement taxpayer funding. This is done by not imposing a segregation between public and private systems – typically by using an insurance system underwritten by the state. Well-working examples include Australia and the Netherlands (America, on the other hand, is a horrible mess). Alas this not an option for the United Kingdom. The NHS and its egalitarian principles are a national religion that no politician dare touch. Since all health systems have serious drawbacks alongside their advantages, it surely makes sense to try and make the NHS system work better, rather than replace it with something new.

But making the NHS work properly means ramping up the level of funding so that it is closer to the level of “natural” demand, alongside taxes and fees that distribute costs fairly, reflecting that it is a form of insurance. To his credit Labour Prime Minister Tony Blair understood this when, in the early 2000s, he decided to just that, reversing many years of constrained spending. To balance this he and his Chancellor, Gordon Brown, raised National Insurance. At one level this makes sense. This tax is the closest we get to an insurance premium, paid while people are in work, and drawn down in retirement – alongside taxes on tobacco and alcohol, two big drivers of healthcare demand. However the Treasury hates the idea of hypothecated taxes, and there has been no attempt to fund the NHS actuarially. National Insurance is lost in general taxation. Alas Messrs Blair and Brown fatally misread the economy and cut income tax at the same time, all the way down to 20% for the basic rate. That was because of buoyant capital receipts from Britain’s booming capital markets. That income evaporated in the financial crisis of 2007 to 2009. Beyond a little tinkering with top rates, it has been considered toxic to raise income tax rates since Mr Blair promised not to do so before he was first elected in 1997. That is unfortunate because it is clear this tax that should be raised, rather than NI, as it would take money from better-off pensioners (people like me, in fact) who have not done so badly from the austerity years, but who can expect to be using NHS services more.

This problem will come back to haunt this government, or, more likely, its successor. The extra 3% on NI may be enough to keep the NHS going for now, but it surely cannot do the job on social care as well. The wider economy may give governments more time, through growth and with greater scope for budget deficits than the Treasury is assuming. In the long run though, the NHS means that the UK will be pushing its way up the league table of higher tax countries. Conservatives need to get used to that fact.

Tax or efficiency: making sense of the politics of the NHS

Radio 4’s Moral Maze on the NHS yesterday didn’t start well. The first witness raged at the institution’s inefficiency and how people were using its supposed moral integrity to justify it. Tens of thousands were dying as a result, he said. His interlocutors provided no real challenge. I switched off. This is symptomatic of the very poor quality of political debate about the NHS here in Britain. I don’t suppose debate in other countries about healthcare is any better.

There are two things that are not well understood about the NHS. People on the right fail to appreciate that the NHS’s inefficiency is a function of the complexity of healthcare, and not its “socialised” funding model. People on the left fail appreciate that the effective state monopoly of healthcare means that we get less of it than people really want.

It was the first point that the Moral Maze‘s witness was running foul of. The only evidence he quoted was that private hospitals in the UK spend much less on administration and management than NHS ones. But these private hospitals only offer a narrow range of services to a select few clients, and so are much simpler to run. International surveys consistently show that the NHS is less wasteful of funding than pretty much any other nations’ system. These systems have the complexity of operating insurance records and administering claims; they do not prevent expenditure on ineffective treatments or wasteful breakdowns of communication between different parts of the system.

I know something about how this happens. Apart from being an accountant, the core of my professional career has been as a general manager whose mission was been to manage systems as efficiently as possible. In that role I have been responsible for some pretty dramatic improvements in productivity. At one point I even looked for a career in the NHS, though nobody in the service was prepared to take the risk of taking on somebody without a track record in health services, or at any rate not without the kind of hard-nosed bullying persona that many in the NHS seem to think is what effective management is about. I have thought quite a bit about how you might make the service more efficient.

That there is monstrous waste is not in doubt. As a patient you spend a lot of your time waiting around, and then repeating yourself to the myriad different people you are handed on to. A lot of the NHS is in fact very efficient; the problem is fitting the various bits together so that the right treatment is delivered to the patient at the right time. And that’s before the question of how to ensure that less people need healthcare services in the first place.

This failure to get things to fit together is a familiar problem. Understanding this was at the very heart of what I tried to do as a manager. My technique was quite simple in principle: to make processes as simple as possible, and focus them on what the customer needs. A simple idea that was quite revolutionary in the 1990s, when it was usually labelled as “business process re-engineering” (or BPR). It went against a production line approach borrowed from manufacturing, where workers would specialise in a single task. The technique required fewer specialists and more generalists. Or, to put it another way, it required workers to specialise on the customer that they were serving, and not in a particular functional skill.This usually entailed not just the retraining of workers, but a redesign of information technology.

BPR is now largely played out in the world of commercial services, with automation and artificial intelligence taking over. But the BPR revolution never really got going in healthcare. No doubt this was partly down to the vested interests of those that worked there. But I have to realise that there is a much deeper reason. The complexity of health services requires the use of specialists to a much greater degree than in pretty much any other activity that I can think of (another notoriously inefficient sector, defence systems, is comparable). Healthcare is crying out for patient-centred treatments, and yet this is very hard to do efficiently because you need to involve so many specialists. The field is riddled with what economists call “information asymmetries” which undermine all attempts to put consumers in charge using market mechanisms.

Which is why nobody does it well. And why trying to restructure the NHS to make it more efficient is always likely to fail. The Coalition government’s attempt to do so by putting general practitioners in charge is generally regarded as a costly failure. The current trend in the NHS towards “integration” is a bit more promising, but pitfalls abound. Trying to bring market mechanisms into play helps solve some problems but creates others.

But if this line of criticism of the NHS – that it is inefficient because it lacks market mechanisms – is misplaced, it obscures a more valid critique. It is that the NHS restrains the level of health spending, meaning that people get less healthcare than they want. If you could wave away the information asymmetries with a magic wand, and find a way of allowing poorer people to meet their basic needs, how much healthcare would we buy in a market ststem? Lots. Healthcare promises longer life and less pain. It is an unmatched consumer proposition. Everybody wants more of it. Britain tends to spend less on healthcare as a proportion of its income than other high income countries. And much less than the most unrestrained healthcare market: the United States.

One example gives a good illustration. A number of very expensive tailored cancer treatments have been developed by pharmaceutical companies. These don’t prolong life by very much, or at any rate there is no convincing base of evidence base of this. So the NHS often bans them; the money will secure greater benefits if it is spent on other people. But if you are the cancer sufferer that could benefit, and you have the money, you might want to have it anyway. The NHS does not allow you to pay extra (co-payments in the jargon), because it is deemed morally wrong that a patient “in the next bed” with the same condition does not have the same treatment. In principle you could transfer to a non-NHS facility in the UK or elsewhere. But this is usually impractical, and brings with it additional costs. This is such a difficult problem that politicians try to camouflage it with special slush funds. But this is just an extreme example of a more general problem. Lots of us would happily pay a bit extra to get better treatment.

The obvious solution is to ramp up overall spending on the NHS to the sort of level that a perfect market system would lead to. But that means much higher taxes, and the evidence that people are willing to pay that much is weak, to say the least. Most people say they are happy to pay a bit more tax for a better NHS, but this willingness melts away when you start raising the amount. The problem is that there is no personal link between the taxes you pay and what you get. It always seems as if the money is benefiting somebody else.

This, of course, is precisely the dilemma that the current government is stuck in. It has announced plans to increase NHS funding but it is unclear about how it is to be paid for. The Labour Party are little better. They hope a lot more tax revenue will be available from rich companies and businesses; but they also want to end “austerity” in many other parts of public services, limiting the amount available for health.

What’s the solution? I think taxes should go up. I also think we need to find acceptable ways of allowing people to spend more of their own money on healthcare within the NHS system. And we shouldn’t just give up on the idea that healthcare should be delivered much more efficiently. As regular readers of this blog will know, I think that means more localised management and more integration with other public services, and a stronger focus on the needs of users. Alas I hear very little of such ideas in the cacophony that is the political debate on the NHS.

Election issues: the NHS. None of the parties are credible on funding. Labour would create more chaos.

After the economy the biggest issue in Britain’s General Election is the NHS. This comes top, or near to the top, of most voters’ lists of concerns. Labour want to make the most of these worries, while the Conservatives want to muddy the waters.

Two things seem to worry voters in particular. The first is pressure on Accident & Emergency services, which is knocking on to other parts of the system. This gives a general sense of the system failing. The second is the effect of NHS reorganisations of local services. This is often associated with outsourcing. Whether the public is as incensed about this “privatisation” as people on the left think is an interesting question – but they are suspicious of any threat to familiar local services.

That the NHS is under stress should be no surprise. As the proportion of older people in the population rises, so does the workload – but not the tax base from which it is funded. Furthermore many new treatments tend to be expensive; technological change does not improve productivity – but simply increases demand as new treatments are found.

There is political consensus around the free-at-the-point of use principle of the NHS. This has both flaws and strengths, but the NHS does quite well in international comparisons, though more for value for money than keeping people alive. Given this there are two important issues for the politicians to tackle. The first is organisational architecture, and the second is funding. They are related, of course, since the efficiency with which the service uses its funding depends on the architecture of the service. But it helps to keep the two separate for now.

First let’s consider this organisational architecture. The NHS has evolved since a chaotic mix of institutions was nationalised in the 1940s. Two ideas have always competed: a Soviet-style command and control model, with clear accountability to the politician at the top of the system; or a demand led organisation where users create demand and the service is forced to follow it. The Left tends to focus on the first, which is slow to react to change, and beset by tribal organisational silos. The Right prefers the latter, which suffers from a lack of reliable information about the true level of demand, and creates organisational instability.

What we have is a compromise between the two approaches. The service is divided between commissioners, who identify what services are needed and make choices as what to prioritise with the available money. And providers, such as hospitals, who actually deliver services based on the identified demand, a small proprtion of which is outsourced to the private sector. In addition there are other organisations charged with making it all work, including regulators of various sorts. This includes NICE, which rules on what treatments provide acceptable value for money. This basic architecture was established by the last Labour government, and remains largely unchallenged by the parties – though it is disliked by many health professionals.

But the details of Labour’s system were flawed. It was designed by management consultants in less stringent times. At its heart was an over-engineered monster called World Class Commissioning, with commissioning being spread out amongst a large number of Primary Care Trusts – which were bureaucratic, with little clinical input and token local accountability. The Coalition rightly attacked this structure, and set about redesigning it – with commissioning now being given to a combination of national specialist bodies and local commissioning groups, run by general practitioners. This succeeded both in bringing in more clinical input and improved local accountability. But it was a massive and distracting exercise (in spite of a Tory promise of “no top-down reorganisations”, enshrined in the coalition agreement). This was a serious mistake which has left much muddle in its wake. It was perfectly possible to achieve much the same ends on an evolutionary basis – piloting different approaches in different regions. The reorganisation has created a huge amount of bad blood, and not a little paranoia amongst health professionals. It has been accompanied by a steady process of outsourcing elements of the service, though no private or third sector organisation will take on the major hospitals that are at the system’s heart.

Alongside this reorganisation has been steadily increasing demand, which has run ahead of funding. The combination has resulted in huge organisational stress. The way in which the service started to cope with the extra demand, and the need for greater efficiency, was classic top-down and Labour-inspired. It was called the “Nicholson challenge” after the then Chief Executive of England’s NHS. Funds were ratcheted down gradually each year on all parts of the system, with a bullying “just-do-it” approach. This did not unlock enough of the creative thinking and deeper re-engineering that the service required. Much of the result was mindless cutting and hoping for the best. Under a new Chief Executive (with reduced job scope), Simon Stevens, a more intelligent approach is being adopted – but the wreckage remains.

Given this history, surely the best idea is to work on the current structure on an evolutionary basis. This is what the coalition parties propose to do. The main work-in-progress is something called “integration”. This means getting social care, run by local authorities, to run jointly with the NHS. Awkwardly, this cuts across many of the bureaucratic structures currently in place, especially when it comes to parcelling up the money. It is far from straightforward, and it makes sense to proceed by means of locally run pilot schemes. It runs alongside greater devolution of responsibilities, as exemplified by the recent deal regarding Greater Manchester. The wider the scope of a service, the more localised the organisation has to be in order to prevent unmanageable complexity and stasis.

The main challenge for Conservatives is their approach to outsourcing. There is nothing wrong with outsourcing elements of the NHS. It can bring in fresh ideas and fresh management. It can be used to bring in new ownership structures, like cooperatives and social enterprises, to replace the hierarchical empires that the current NHS fosters. But the way it has worked out is dysfunctional. The tendering process can be so complicated that only behemoth suppliers need apply. These behemoths can afford slick tenders put together by professional marketers and priced at whatever level it takes to win. Once they win they are free to break their promises and a general period of mindless hollowing out follows. Sometimes this is what is needed; usually not. Many Conservatives just don’t get this.

The challenge to Labour is a bigger one. They want to respond to the anger over the last reorganisation and reverse parts of it. Does this imply another chaotic reorganisation? Will it kill the good elements of reforms along with the bad? Do they think integration should be enforced top-down from the centre? Or will they follow the path of devolving political responsibilities? Does their idea of in-house NHS services being given preference mean less value for money and slower innovation? Will their idea of capping the profits of the outsources prove to be yet more bureaucracy that favours the heartless behemoths rather than the innovative social enterprises? Will Labour revert to the top-down, bullying style of management of old? And will they need SNP votes to get their reforms to the English system through? More uncertainty and chaos beckons.

The Lib Dems have a rather interesting take on NHS policy. They want to prioritise mental health services. As I have written elsewhere, I think this approach is inspired, and one of the better reasons for voting for the party. They stand for intelligent continuity.

And so we come to funding. Britons do not spend a particularly high level of money on health services (much less proportionately than the Americans), and there is no economic reason why the country shouldn’t spend a lot more than it does. There is no evidence that the overall level of demand is excessive because the service is free; people really want the services, and would pay a lot for it them if they had to. The problem is the opposite: funding is constrained by the need to pay for the service through taxes, where it competes with a whole lot of other things, like schools and policemen. And the government isn’t raising anything like enough tax to pay for it all.

Last year Mr Stevens produced a plan which showed that the service will need an extra £8bn per annum in five years’ time, even after a lot of efficiency savings. Will the political parties follow his plan? The problem is that its affordability depends on how well the economy and the tax base does – which is unknowable. The gaps between the parties come down to the different ways in which they are handling these forecasting uncertainties. The Conservatives are the most optimistic, Labour the least, and the Lib Dems somewhere in between. None of them are committing to sufficient tax rises if a growing economy does not deliver the extra tax revenue. Both Labour and the Lib Dems are offering some tax gimmicks to help close the gap, but none are offering the increases to Income Tax, VAT or National Insurance that will be required if the economists get their growth projections wrong (yet again). Labours plans are obscured by their issues of NHS organisation; they will not sign up to Mr Stevens’s plan for that reason.

If the NHS is starved of funds more people will go private, social solidarity will fade and a death spiral will be put in motion. Something very like this has happened to NHS dentistry. If we want to keep the NHS in its current format, with few charges, then this means extra tax, and not just the somebody-else-is-paying sort. It really is quite simple. It is very disappointing that our politicians (and Ukip, the Greens and the SNP are as bad as the others, or worse) will not face up to this. I find it impossible to choose between the parties based on their funding proposals.

Which leaves organisation as being the decisive issue. The coalition managed one step forward and one back. Labour’s attitude to organisation threatens another step or two backwards. The Conservatives are suspect on outsourcing and the most suspect on funding. The Lib Dems offer intelligent continuity, but, sadly, even in coalition they are unlikely to be given enough scope to put their way forward into practice.

The Coalition wrong-foots Labour on its (lack of) NHS policy

Labour’s plan for winning the General Election in May has a special place for the NHS. They are seeking to “weaponise” it, and promote themselves as the only party that can be trusted to run this great British institution. And yet their NHS policy has deep flaws. Now the Conservative/Liberal Democrat coalition government has come up with a plan to integrate health and social care budgets in Greater Manchester. To maintain the warlike metaphor, this looks like surgical strike on Labour. In fact the story arose from a leak in the negotiation process, and seems to be the brainchild of Simon Stevens, the politically neutral head of NHS England. But the policy poses serious questions for Labour.

The details of yesterday’s news are a little vague. The Coalition had already announced plans to devolve more powers to Greater Manchester, working through the local councils (mainly Labour, but with Conservative and Lib Dem ones too) and an elected Mayor. And integration is everybody’s favourite reform idea for the NHS. It refers to merging the health budget with that of social care (currently controlled by local authorities), so that the policies for the two can be coordinated properly. This is important because one of the main problems at NHS hospitals is that they cannot release patients to social care beds. Integration of this sort is already being piloted in such places as Torbay. This looks like a pilot on a grander scale.

As a reform idea, the Manchester proposal looks entirely sensible. Sarah Wollaston, a Conservative MP who is a doctor, and no government stooge, offered a knowledgeable and effective advocacy on Radio 4 yesterday lunchtime. Integration has been one of Labour’s big ideas. But Labour can’t bear to give the government any credit for policy on the NHS – as this undermines their weaponisation plan. So their spokesman, Andy Burham, rubbished the idea. He attacked it as undermining the “National” in the NHS, because it was a localised solution rather than being dropped from a great height from Westminster. He also suggested it would be another “top-down reform”, which the government had promised not to do.

And yet both these lines of attack expose weaknesses in Labour’s own NHS policy. In the first place, if they are serious about promoting NHS integration, how on earth are they planning to do it? The quid-pro-quo of an integration plan is surely more local devolution – otherwise you simply create a monstrous bureaucracy, and a feeding frenzy of large consultancy firms proposing over-engineered implementation plans (er, like the last Labour government’s reform of NHS commissioning). And secondly, are Labour or are they not planning a top-down reform all of their own? Their proposal to scrap the government’s Health and Social Care Act suggests just that. And if they intend to implement integration across the whole country at once… well, that just proves it, doesn’t it?

Which highlights the real problem for Labour. Their plan is to ride the tide of anger amongst NHS insiders over the government’s record on the NHS. They headline attempts to outsource some services as an NHS “sell-off” or privatisation. This is vastly exaggerated – no major hospitals are being outsourced (private businesses would be mad to take them on) and GP surgeries, er, have always been private businesses (a fact that confused the hell out of a save-the NHS campaigner that called on me a couple of months ago). But any plan to reform the NHS in any serious way involves taking on these insiders. The idea of integration to insiders is popular probably because it is seen as a way of hitting the ball into the long grass: the setting up of some toothless committees of professionals who purr about “collaboration not competition” and achieve very little except requests for yet more money. The more serious and specific Labour gets about reforms that promote efficiency, the more dissent they will get from their core supporters, and especially the trade unions. The hard fact is that Labourare proposing to dismantle the Coalition’s health reforms at the moment they are starting to show some promising results, like this devolution initiative.

Now the public probably don’t think much of the Coalition’s record on the NHS, but they surely accept that reforms will be needed to make the organisation more efficient. And if Labour appear not to be serious about that, then their line on the NHS is undermined, and their line on tax-and-spend, already weak, gets shot through. With enough pressure this weakness will become more and more apparent – and there will be a greater and greater risk of dissent in Labour ranks. They are offering just bluster. Far from trying to avoid the NHS as a campaigning issue, the coalition parties have the opportunity of a devastating counterattack, especially if Labour persists in opposing the Greater Manchester plan.

All of which shows how fatally bad is Ed Miliband’s leadership. He has valued party unity over making serious political choices. He has chosen sound and fury over policy substance. He hoped to craft clever policy positions that cover the cracks in his own party while providing credible ideas for saving the country. Alas serious policies mean taking on vested interests in your own ranks, not just the usual villains. The unity of silence in Labour ranks is not a token of assent – it is a token of denial. Labour’s most vocal supporters, and the providers of the bulk of their funding, do not think that Labour is serious about public sector reform and austerity. As Labour is pressured by the coalition parties the greater it is in danger of falling apart just when unity is most important. It is a political strategy put together by policy wonks and campaign tacticians – and not those with serious nous about taking on political responsibility.

The Coalition parties have their own weaknesses of course. These may yet save Labour. But a meltdown for Labour cannot be ruled out on this form.

We need to talk about the NHS but our political culture prevents it.

Many Britons complain that political correctness stops important issues being talked about. By that they usually mean immigration and cultural integration. Now we talk about these things all the time, and we are coming to understand why that culture of political correctness was a good idea. Pointless, nasty behaviour to immigrants and people from ethnic minorities is on the rise, while yet more rubble is strewn in the path of necessary economic development. But there are issues that are important but where there is a conspiracy of silence. Foremost amongst these is Britain’s National Health Service (NHS). This is not a good idea.

Well it isn’t that politicians don’t talk about the NHS. It has become a central theme of Labour’s election campaign, and the Green party, in their bid to harvest left-leaning voters, have jumped in too. But these campaigns challenge the very idea that the NHS should be reformed. Any suggestion that elements of the NHS should be run by private businesses, or that a local facility should be closed, is attacked virulently. The idea behind these campaigns is that the NHS is under attack, is being “sold off”, and needs to saved by a government that will let our heroic doctors, nurses and ambulancemen get on with their jobs unmolested by rapacious hedge fund managers and bankers. The government’s response to these challenges is distinctly muted – they try to deny that much is changing at all, and point out that they are recruiting more these wonderful doctors and nurses and keeping the money flowing.

But senior NHS professionals are worried. Today it is the turn of Professor Sir Bruce Keogh, NHS England’s medical director, to speak out. He warns that without major changes to the way care is carried out the service will collapse. That means that many existing facilities will have to be cut in order to make room for more cost-effective ways of treating illness which do not involve big hospitals. You don’t have accept Sir Bruce’s prescription to understand the nature of the threat.

The first problem is demographics. The proportion of elderly people in Britain is on the rise. This is increasing the number of patients, and presenting the service with more complex cases that it is difficult to deal with adequately. It is also undermining the tax base from which the NHS is funded and the pool of workers that the NHS needs to recruit. The next problem is a change to the economics. More advanced and effective treatments cost more money. Rates of pay, especially for skilled staff, are getting higher.

These problems are well understood, even if politicians and public alike would rather talk about their implications another day. There is a third problem too. And that is management. Dealing with health issues is a very complex matter, and it is becoming clearer that the way we try to go about it isn’t really helping. Our default method is to break the task down into a series of specialisms and give each a separate autonomous organisation. Primary care is split from acute hospitals which are separate from social care, with mental health handled by yet another set of organisations. But all these things interrelate, and good patient care depends on getting the coordination right. For example the current NHS crisis in hospitals is presented as overflow in Accident & Emergency, but it has its roots in the inability to move older patients into more appropriate social care settings when the acute phase of their illness is over.

I am very familiar with this type of management problem, albeit in much simpler contexts. It was the focus in the 1990s of a management revolution that went under the name of Business Process Reengineering. The key insight here is that one of the main obstacles is the shape of the organisation itself. Pouring more resources into it won’t help, or not help by much. If you fix a problem in one area, it simply pops up in another. That means that the shape and structure of health care has to change in order to cope with the extra pressures being thrown at it. That in turn means politically sensitive closures and, almost certainly moves that can be described as sell-offs. It is worth pointing out, though, that simply outsourcing an element of the service without restructuring the way care is delivered is just as fallacious as pouring extra funds into existing structures. This is a point that some on the right, and in government, have not grasped.

I think this is reasonably clear; there may even be consensus about it amongst those that try to look beyond the short-term politics. But the fog then starts to descend. The problem is highly complicated, and the costs to failure very high. The way forward is not obvious. Both this government and the preceding Labour one grappled with it. Both got some things right; both have made mistakes. But it is a debate amongst a small elite of policy wonks and senior professionals, when broader engagement, to prepare the political ground, is what is required.

Is the basic model of the NHS under threat? This is an open-ended commitment by the taxpayer to fund health care for all citizens. This has some obvious problems – there is no clear way to limit demand. Health care, it turns out, is not like the drains, where once you have fixed the basics, people forget they are there. That was what some people thought when the NHS was set up. People don’t like getting ill, so, said the optimists, that would limit demand. Alas longer life and reduced pain are consumer propositions to die for; potential demand seems endless.

This is the key to a further insight which few seem to have grasped. People often talk of high levels of health care spending being unaffordable. This is untrue. People prize healthcare above many other things, and are happy to give up these other things for less pain and a longer life. You only have to look at the enormous sums spent in the USA on health care to understand that. The problem is how, exactly, do you get the money from people’s pockets and into that of health service providers. The critical question for the future of the NHS is how much more can be raised through taxation.

Which is another area that we should all be thinking about. Could we raise a lot more through taxes if the process was more transparent and people had more confidence in it? Or should the NHS start charging for more things? Should we develop a model of “basic cover” vs “luxury cover”, and bill for the latter? And what could the latter include (anti-cancer drugs that might prolong life but aren’t deemed cost effective?). And that leads to another series of questions we would rather not ask, about the meaning of life and death.

And there’s a further problem. How much do we focus resources on where the demand is currently, or and how much to where we think the areas of greatest need are. The last government talked often of rectifying “health inequalities”, and started a process of shifting resources to poorer areas with worse health outcomes. That put facilities in areas with high current demand, but less actual poverty, under pressure. Most of the NHS’s big disasters, like the failure of Mid-Staffordshire Trust, occurred in areas that had high demand, especially from elderly residents, but which were not classed as being in poverty.

If we don’t fix the NHS, a parallel private health system will build up beside it and undermine it. Something like this has already happened with dentistry. We have little chance of a serious, mature political discussion this side of a General Election. But the sooner that the public demands their politicians address such issues the better. Rejecting the facile slogans of Labour and the Greens would be a good start.

Good and bad news about the Lib Dems NHS funding pledge

Today the Liberal Democrats announced and eye catching policy to improve NHS funding by £8bn a year by 2020 (in England). This matches the figure asked for by NHS England chief Simon Stevens – so it isn’t plucked from thin air.

How is this to be paid for? First £2bn extra is already planned and accepted by the other parties (Labour want to add another £0.5bn). A further £1bn comes from more taxes on the wealthy. The rest will be gradually added as the economy grows. The Lib Dems say that public expenditure should keep pace with national income.

There are good and bad things about this new policy. First the good thing. The £8bn funding figure is entirely credible, given the direction of demographics. Mr Stevens is no lefty. He knows that the NHS can be more efficient and has plans to make it so. But that only gets you so far. Any party that promises to keep the NHS within its current scope and free has to address this gap. This moves, or should move, the debate on the NHS out of the area of gimmicks and into serious choices.

Except that it doesn’t. They’ve made the whole thing look to easy. Tax some other people a bit more and the rest comes from growth. If it’s that easy the other parties can do it too. This is not different in substance to what Labour are offering. It is more of a challenge to the Tories who want to use the proceeds of growth to fund tax cuts.

And growth cannot be guaranteed. There are severe economic headwinds, from demographics, from changes to technology, from changes to world trade – to name but three. To say nothing of the legacy of piles of household and state debt.

To be distinctive, the Lib Dems needed to make it look harder. Which in practice means raising taxes – income tax, national insurance or VAT. Remember Paddy Ashdown’s promise of 1p income tax for education? This would have made the promise more credible, and got a real debate going. It would then be Labour who would be forced to mutter promises about future growth, which the public are likely to discount.

Instead this looks like another politician’s promise that is less than it seems. What a pity.

Is there a case for complementary medicine on the NHS?

Last weekend there was outrage from The Daily Mail that Prince Charles had being lobbying government ministers to give more space for complementary medicine on the NHS. This provoked a piece on the BBC Today programme (at 0833) on Saturday morning. In this UCL’s Professor David Colquhoun made short work of Tory MP David Tredinnick, who was attempting to defend homeopathy, the target of choice of those wanting to drive complementary medicine to the lunatic fringe. Indeed, very few advocates of complementary techniques do a decent job of defending them in public forums, quickly resorting to dodgy mumbo-jumbo and dubious scientific studies. And yet there is a case to be made.

I find it a bit awkward to make this case myself. I have not used such therapies, and nor am I likely to. I am simply in too deep with conventional scientific scepticism to give any credence to their supporting patter – “energy fields”, “life forces”, or homeopathy’s “like cures like”. And without that, I suspect the techniques lose a lot of their impact. However, people I like and respect do use selected complementary techniques, and they have value.

The best way to start a defence of complementary medicine is attack. Conventional, evidence-based medicine has its own weaknesses. The technique depends on breaking health issues down into bite-sized problems, and then testing therapies to treat them using statistical tests against a placebo. Once a therapy passes this test, it then gets rolled out to anybody suffering from the condition concerned. This approach benefits from scientific rigour, and has steadily improved the effectiveness of conventional medicine over the generations. More recently the focus of the technique has been more on finding what works than necessarily why. This makes it less vulnerable to dismissing therapies that do not work in theory (as happened in some spectacular early medical failures in the 19th century over the importance of hygiene and clean water). But it has certain blind spots designed into it.

The first problem concerns placebos. The reason why this is the null hypothesis against which therapies are tested is that placebos have a measurable beneficial effect in many cases. The main scientific sceptical explanation for any benefits of complementary therapies is that it is a placebo effect. A supporter might go further: complementary therapists understand how placebos work better than conventional therapists: it isn’t just a placebo, it’s a top class placebo. But you can’t test a placebo against a placebo. Back in the 1980s a practicing GP told me how one of his favoured techniques was to prescribe harmless sugar pills to his patients, and he claimed great benefits from doing so. Surely if that sort of thing is allowed on the NHS, why can’t other placebo therapies? And the answer isn’t to ban all placebos – though doubtless that is the approach taken by conventional medicine advocates; something tells me that my GP wouldn’t be allowed to prescribe his sugar pills nowadays.

The second problem is the fragmentary approach of conventional medicine. Fragmentation has been elevated to a positive religion in the NHS. You can’t experience the service without being handed to several different professionals of different shapes and sizes, each with their carefully rationalised boundaries. Each handoff creates risks, and stories of catastrophic breakdowns in hospital treatments abound – patients left for hours on trolleys, starving to death, or forced to drink water from plant pots – and even more cases where post hospital after care breaks down. One of the few common themes across complementary disciplines is that they are holistic. Indeed the very idea of holistic treatments (now very much part of modern management jargon) was originally derived from complementary medicine, or that is where I heard it first, anyway. You see a single therapist, who gathers as much information about you and your condition as she can, integrates it, and then moves on to treatment. The diagnosis is likely to be a large part of the cure in its own right. And yet scientific testing of complementary therapies is liable to start only after the diagnosis has ended. All this proves is that if you go out to a shop and buy homeopathic remedy, you are on to a hiding to nothing. That does not prove that the complete homeopathic therapeutic process is useless.

There is a third problem. Evidence has to be gathered by using large numbers of people. In this process there is very limited opportunity to distinguish between the different needs of individuals. As a result the evidence tends to show not that the therapy works for everybody, or even most people, but that on average it is better than the placebo. The result is that lots of people are prescribed treatments that are, for them as individuals, useless. How many people do you know who complain of medication that gives unpleasant side-effects but does not seem to be doing them any good? The scientific evidence says they could be right, but is rather helpless after that. Complementary therapies are much less likely to have side effects, though they don’t have the proven benefits either. I do wonder whether for some conditions the overall cost-benefit balance of complementary therapies against conventional ones is constructed fairly.

And finally we need to address the question that few advocates of scientific method will admit to. That scientific rigour has its costs. There are areas of potential knowledge into which it is incapable of reaching. The higher your standard of rigour, the less that is capable of being revealed. The method is too blunt an instrument to deal with many types of issue. It can’t handle too many variables at a time, especially if they are interdependent; and any ideas that mess with constancy of the laws of nature are ruled out a priori. It struggles to find ways of testing mind over matter propositions, which often play a part in complementary medicine’s thinking. How many people do you know who feel unwell, go to doctor, who commissions tests that just don’t find anything? You don’t have to take on mystical ideas to see that the bluntness of conventional diagnosis leaves huge areas of illness as a mystery. And when this happens conventional medicine is worse than useless. It creates stress and frustration, and doctors start to disbelieve the patient, making the problem worse, not better. Complementary techniques are much better at handling patients suffering from these sorts of problems.

So what are my conclusions? A little more humility on the part of the advocates of conventional medicine is warranted. They don’t know everything; they are not very good of handling conditions that are difficult to diagnose; they are too sanguine about the collateral damage arising from evidence based treatments on those they do not help; and they fail to see how the fragmentary way they handle problems is bad for patient health. With this humility they might understand that once they have eliminated the nice, well-defined illnesses in their comfort zone – cancer, heart disease, strokes, bacterial infections et al – being open to patients who want complementary treatments is often the best way forward. And I haven’t even mentioned the corrupting influence of big pharma.

The NHS crisis: while politicians look the other way, what should we do?

The NHS is deep in a long term crisis. Last Thursday NHS England published a “call to action” outlining the emerging crisis. This attracted a day or so of news coverage, focusing mainly on a £30 billion funding gap. But there was no political debate, and the story quickly died. It was replaced yesterday by a story on the NHS’s abuse of the “Liverpool Care Pathway” for end of life care, and today by an investigation on struggling hospitals. Both stories are backwash form the continuing struggle of NHS management and staff with financial pressures. But where are the politicians? Labour are waiting to pounce on stories of struggling accident & emergency services to promote a general air of government incompetence on the NHS; the government try to play things down, blaming any problems on long standing issues not tackled by the previous government. A debate about the long-term options for the service it is not. So what should they be talking about?

The dimensions of the crisis are quite clear. Britain’s NHS is almost entirely funded from tax. But after the economic crisis of 2007-09 the tax base has shrunk. Furthermore a number of trends, not least the increasing proportion of older people, point to a slowing down of the overall rate of growth in the economy and hence taxes. And yet some of those same trends will create growing demand on the NHS. The government has promised to protect the NHS budget in real terms, much to the chagrin of right wing critics, but this will not solve the problem of rising demand. The NHS England report settled on a headline gap figure of £30 billion by 2021 – after toying with £60 billion by 2025, the number used by Health Service Journal (HSJ) in its preview.

The strategy is to buy time through efficiency savings. As a large, monolithic organisation, with weak accountability, inefficiency is rife. NHS top management has been ratcheting up pressure on the component services by progressively squeezing the available funding, , in a process known as “the Nicholson challenge” after NHS England’s chief executive, Sir David Nicholson. The NHS England report claims that this is on track to deliver its target of £20 billion efficiency savings by 2015, but there is plenty of reason to doubt its efficacy, as the number of crises with a financial root seems to grow.

But the strategic point is that efficiency is not a long term answer to the pressures. The NHS paper calls for fresh thinking, but seems to rule out most radical ideas, like charging for, or heavily restricting services, although in doing so it is only holding to the current political near-consensus (the far right does not go along with this, but everybody else does). Let’s take a step back and look at this.

The first point to make is that increased demand for health services in the economy will be met by increased supply. Occasionally you hear people suggesting that the economy can’t bear an increase. But there is no fundamental economic reason why the proportion of the economy taken up by health care cannot increase substantially. It does not depend overly on imports, and there are plenty of things the public can give up to make way (own fewer or cheaper cars or clothes, go out less, and so on and on). Healthcare offers the prospect of a longer life and less pain; it is a consumer proposition, as I have pointed out in an earlier blog, to die for. If there is demand, there will be supply. The only question is how that supply will be met.

There are broadly four ways the NHS will meet this crisis:

Taxes will be progressively increased so that taxpayer funded services maintain their current profile overall. This is clearly what is favoured by most NHS insiders, and left wing policy types who like the paternalist structure of the current NHS.
It will stratify into a class-based service, where only poorer people will use it, while richer people go private. This will happen because the NHS service will be considered dangerous, shoddy, and accessible only after an intolerable wait. This is largely what has happened to NHS dentistry, and it is what will happen if the NHS is allowed to muddle on with its current level of funding (or if funding is cut).
The NHS will concentrate on excellence in a smaller core of services, while letting people go private for others. However healthcare has few neat boundaries, and it is difficult to see how this would work in practice.
The NHS will start charging for more services, and accepting co-payments for cosmetic and other add-ons. This may be done with increased collaboration with the private sector, rather like NHS optometric services. This is the direction of travel favoured by the right, apart from those who secretly favour option 2.

These solutions are not mutually exclusive, and indeed option 3 is probably only viable in conjunction with 4.

The first strategic question is how far new taxpayer funding will be forthcoming. Many seem to assume that it will be. John Appleby, economist at the health think tank the King’s Fund, assumes this will be so: the economy will be growing again by 2025, and public demand for increases to real spending will return. I’m not so sure: the headwinds on the economy are severe, and I don’t see any return to the growth rates we have previously seen for more than a two or three years in a row. Meanwhile demand from other areas of public expenditure has been suppressed and could bounce back. And I think public attitudes to higher taxes have changed, after the general squeeze that has been put on living standards. Some left-wingers assume there is large pot of money available from taxing rich individuals and businesses. This is open to doubt, however, and it has proved a volatile source of tax revenue both Britain in the past, and to other economies, like California’s, whose public funding depends heavily on taxes on the rich.

Besides, I do not think that taxpayer funding is particularly efficient. It means that resources tend to be allocated top down according to political objectives, and not where it is really needed. And difficult problems tend to be left unsolved rather than confronted. My guess is that we will end up with option 4, after having given options 2 and 3 a try. It will continue to be a very bruising time for the NHS.

For those that want to avoid this, I think the most promising way forward is to bring health services into a complete rethink of public services to make them more integrated with each other, and centred on people rather than symptoms. And in case you think that sounds like motherhood and apple pie, its practical consequence means dismantling current power structures, and pushing towards democratically accountable local control. That will not be popular amongst NHS professionals, and we know how much noise they can make. Some on the left are starting to think this way, and while I don’t trust the left, with their penchant for paternalism, this may be the basis for a useful political coalition. One interesting aspect of this is that the other services (personal care, housing) with which the NHS would be integrated are not “free at the point of use”, considered so sacred in the NHS, which may allow the whole question of charging and co-payments to be fudged in a constructive way. Here’s hoping that something can be achieved along these lines.