The Conservative Party is riding high in the polls despite widespread gloom over the prospects for public services. The Party’s electoral vulnerability on the health service creates an interest on the part of the NHS and its political opponents to declare a “crisis” at every opportunity and during every election. Even during periods of sustained austerity, as now and as in the 1970s, the NHS operates on the well-founded belief that bust will be followed by boom. It is hardly surprising that the intrinsic urge to innovate is weak. The promise of “reform” is taken as a threat, not an opportunity. The political debate reverts time and again to funding. The inevitable result is a disastrous financial rollercoaster. It is time to bring an end to this nonsense and recognise the reality of health spending.

The Guillebaud Report of 1956 nailed the myth that demand on health services would decline as population health improved. In 1985 Nick Bosanquet produced a substantive study on health funding showing that an increase of 2% a year was needed just to keep pace with technical advance and demographic change. Nothing has changed. Life expectancy continues to improve and technology continues to expand the range of what is possible to improve quality of life.  Meanwhile health spending has defied this logic.

Health spending

Source: HM Treasury, ONS see here

The consequences of this erratic path are plain.

Firstly, the boom-bust cycle stokes NHS inflation, making many of the declared crises very real. Booms inflate costs as the service tries to catch up on the recent past. This is most evident in the workforce, which is the majority cost of a health system. There is an inevitable and urgent attempt to boost pay after periods of freezes and to boost staff numbers after recruitment clamps. The tragedy of Mid-Staffordshire bears human testimony to this awful cycle. The inflated workforce costs, that are essential to repair damage done, are carried for many years to come – not just in the active workforce but also in pension costs.

Secondly, the rollercoaster makes real innovation almost impossible. No organisation can invest the time and energy in reform if it expects its resources to randomly boom or bust. It will simply survive in anticipation of the next bail-out. This bias against change is made worse by the stark divide between health and social care. Their funding cycles are unsynchronised, leading to institutionalised distrust and protectionism.

Debates about funding systems and structural reform are simply a diversion from recognition of the fundamental truth of health and social care spending. As a pragmatist rather than an ideologue, Theresa May should be capable of confronting the core problem facing our care system.

Since the creation of the NHS the average annual real-terms increase in spending has been 3.7%, but with erratic and dramatic variation around this average. As in the 1970s, the current average is closer to 1%. One simple but effective policy change would be to amend the NHS Constitution to create a firm commitment to a target range for health and social care annual spending growth. This should be based around Bosanquet’s 2% doctrine. Just as the Bank of England is set a clear 2% target for inflation, so the Treasury itself should face significant hurdles if its plans break firm upper and lower limits for NHS inflation around the target.

Of course, such special treatment for the NHS can generate, quite illogically, spending cuts for social care. The Government must continue with its existing commitment to reform social care funding. A cap on the individual costs of social care for the unfortunate few in this lottery, would enable a clear commitment to stable state funding for the future and create a foundation for private innovation in financing and care delivery.

Every General Election is about the NHS. It is simply an area in which there is a clear divide of party perceptions. In 2017 the election takes place at a time when NHS providers are reporting unprecedented deficits, and the social care system is in a real crisis. The Conservative manifesto will need to address these head on. Replacing the “triple lock” with a constitutional pledge to health and social care would demonstrate a real commitment to fairness over political games.

This first appeared on the  British Politics and Policy blog

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  1. rotzeichen says:

    My first point is once again we are being lead to believe that money is the problem in the NHS, either no matter how much we spend we can never satisfy the demand for more service.

    That is fundamentally a myth.

    There is no limit to how much we can spend on any public service in this country; we have exactly the same fiat money system as they do in Japan, Australia, Canada, and the USA and this is what Alan Greenspan has to say about our monetary system:

    Alan Greenspan speaking at Leuven University Belgium:

    ” National Bank of Belgium
    Let me begin with the fundamental observation, that a nation’s sovereign credit rating lies at the base of its current fiscal, monetary, and, indirectly, regulatory policy. When there is confidence in the integrity of government, monetary authorities–the central bank and the finance ministry–can issue unlimited claims denominated in their own currencies and can guarantee or stand ready to guarantee the obligations of private issuers as they see fit. This power has profound implications for both good and ill for our economies”.

    So in other words the sole constraints on our finances is not a shortage of money but our ability to effectively manage the economy.

    The question we must ask ourselves is, if we can spend money without question fighting other peoples wars, why can’t we spend the same on public services that really benefit the people of this country.

    The reason is political will, and politicians who represent a corporate elite against the interests of common people.

    The sole means of regulating our economy is interest rate policy and taxation, that has always been the case and still is.

    We have all the money we need to fund our NHS properly, what we don’t have yet is a government with the will to do it, underfunding has been used to enable the privatisation of all our public services, the chaos generated in the NHS by this deliberate policy is obvious to any casual observer.

    So lets make sure that we tell people what is really happening in Britain and do whatever we can to ensure we get a Labour government elected, that is dedicated to reverse this chaos created by the Tories.

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