Category Archives: NHS Funding

The following article was first published in the Camden New Journal on 06 December, 2018

A private company being promoted
by government to recruit patients to its doctor service spells ruin for the whole-person integrated care we need from the NHS, argue
Susanna Mitchell and Roy Trevelion

The sneaking privatisation of our National Health Service now aggressively threatens our GPs. In Camden and across London, we all need to be aware of the long-term harms this development will cause GPs and primary care NHS services.

Last year, a global multinational corporation called Babylon Healthcare – owned by a former Goldman Sachs investment banker and Circle Health CEO – established a “digital- first” business called “GP at Hand”.

Disastrously for the NHS, Babylon Healthcare Services Ltd can be traced back to a holding company in Jersey, the offshore tax haven.

GP at Hand is contactable through a mobile app which uses standard calculations as a symptom checker. Unfortunately NHS England have not provided our existing practices with this software.

Instead any patient registering with this commercial enterprise will be deregistered from their normal GPs. And, although the GPs employed by the company can also be accessed by video or phone, this process delivers no continuity of care or whole-patient assessment.

Continuity of care is a cornerstone of general practices. However, Matt Hancock, the health secretary says, “If we need to change the rules to work with the new technology then change the rules we must.”

In addition GP at Hand’s own promotion material actively discourages older people from registering. Explicitly these are those who are frail or living with dementia, or in need of end-of-life care. Pregnant women and those it describes as having complex social physical and psychological needs are also discouraged from signing up.

In other words it is “cherry-picking” young and healthy patients who will be more profitable to its shareholders. Its use of standard practice via information technology, and the easy access it offers, is particularly attractive to the young.

Of the 31,519 new patients who have signed up with GP at Hand over the past 12 months, 87 per cent are aged between 20 and 39 years, while patients over 65 now make up just 1 per cent of the population registered with the service.

All this poses serious problems both for patients and general practices. In the first place, our present primary care system consists of GP practices committed to whole-person and integrated care for everyone in their local communities. Healthcare services are organised around geographic areas to enable better co-ordination with hospitals and social services.

In contrast to this, GP at Hand fractures this fair and impartial community-based model, registering patients who live or work anywhere within 35 to 40 minutes of one of the clinics. In addition, should any of their patients require more complex care, they will no longer have their own GP to turn to.

Secondly, by picking the most profitable patients, GP at Hand drains money away from ordinary GP surgeries. Normal GPs are funded according to the number of people on their patient list and this funding is combined into a single budget to provide the services they offer. This means that funding from the roughly 80 per cent of patients who remain reasonably well helps to pay for the 20 per cent who are elderly, who are chronically sick, or have multiple illnesses.

But if the “capitation fee” of the young and healthy is scooped up by a for-profit company like GP at Hand, it will critically undermine the funding available to surgeries. This will leave practices to deal with the sick, the frail and the old on a much reduced budget.

Shockingly this commercial entity is funded by NHS England. It can be commissioned through our clinical commissioning groups (CCGs).

It’s expanding fast, and already has over 35,000 patients. Currently the corporation operates out of five clinical locations in London including one in King’s Cross. Plans for rolling it out nationwide are under discussion. It is also advertised widely, with the health secretary Matt Hancock recently announcing that he has registered with the company.

Future developments in information technology and artificial intelligence that can be useful to our public health systems should be funded directly towards our existing GP surgeries.

It should not be used as a vehicle for profit-making by private corporations at the expense of our NHS.
We need to make the dangers of adopting this business model clear to the widest possible public. We must encourage those who care about our publicly-funded NHS to boycott Babylon’s GP at Hand.

We need to bring public pressure to bear and end this attack on a valued and trusted institution that serves us all.

The NHS has always been for the benefit of everybody. It must be kept that way.

• Susanna Mitchell and Roy Trevelion are members of the Holborn & St Pancras Labour Party and of the Socialist Health Association.

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Chipping Barnet CLP notes that access to contraception is a fundamental human right underpinning equality, impacting on the health, structure and prosperity of both society and families. The 2012 Health and Social Care Act disadvantaged women, separating much of the funding for contraceptive care from the NHS by moving the responsibility for commissioning into Local Authorities, with NHS providers competing for contracts. As a result, the commissioning of contraception is now separate from the commissioning of other aspects of women’s health, including abortion. From both a woman’s and a clinical perspective, this is illogical. Compounding this, the impact of austerity on Local Authorities has led to a reduction in services, reduced access and to a postcode lottery for contraception in England.

Chipping Barnet CLP believes that contraceptive services need to be fully funded and accessible in all areas of the UK, with co-operation replacing competition. It welcomes the commitment of the Shadow Health Department to abolish competitive tendering for these essential services, and to work with clinicians to establish centres of excellence alongside regular accessible clinics to which women have free and easy access to confidential care.

Chipping Barnet CLP calls on the Labour Party to resolve to deliver fully funded contraceptive services in all areas of the UK, setting up a working group whilst still in opposition, composed of experienced clinicians and commissioners, to write a blueprint for delivery which will be implemented within the first year of the Labour Government.

Published by Jean Hardiman Smith with the permission of Sarah Pillai ( Chipping Barnet CLP )

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Surveys of members of the British Association of Sexual Health and HIV (BASHH) and the British HIV Association (BHIVA) provide new evidence of pressure on over stretched sexual health services and a sector at ‘breaking point’

 

Access to sexual health and HIV services has been dramatically reduced as a result of changes to the funding and organisation of sexual health services since 2013, according to the medical professionals providing care. Over half (54%) of respondents to a survey of members of the British Association of Sexual Health and HIV (BASHH) reported decreases in the overall level of service access to patients over the past year, with a further 16 per cent saying that access had significantly decreased. In a parallel survey of members of the British HIV Association (BHIVA), three quarters (76%) of respondents said that care delivered to patients in their HIV service had worsened.

With Public Health England (PHE) data showing a 13 per cent increase in attendance of sexual health services between 2013 and 2017 (PHE, June 2018,) it is not surprising that nearly 80 per cent of BASHH respondents (79%) said that they had seen an increased demand for services in the past 12 months. Budgetary pressure means that this demand cannot always be met: more patients are now either turned away or redirected to other parts of the health system.  Six in ten (63%) per cent of BASHH respondents said that they had to turn away patients each week, with 19 per cent saying that they were having to turn away more than 50 patients on a weekly basis. While most were offered the next available appointment, 13 per cent said that patients were referred to another sexual health provider and four per cent that they were redirected to primary care. Clinicians responding to the survey report that many of the patients who are being turned away have symptoms of potential infection.

 

Reduction in prevention, cytology and mental health services

Both surveys revealed significant reductions in services such as the delivery of HIV prevention activities, outreach to vulnerable populations, cervical cytology and psychosexual health services. Three quarters of BHIVA members (75%) said that there had been an impact on access to HIV prevention advice and condoms, with 63 per cent saying access had been reduced; 44 per cent of BASHH members said that HIV prevention services had decreased. Almost half (47%) of BASHH members reported reductions in the provision of cervical cytology functions, reflected by BHIVA members, who also said that cervical screening had been halved (reduced access reported by 49.5%).  This is of particular concern in the context of a fall in national cervical screening coverage and the higher risk of HPV related cancer in women with HIV.

More than 40 per cent (42%) of BASHH respondents reported reduced provision of psychosexual health care, mirrored by a similar number (41%) of BHIVA members, who said that access to psychology input for HIV related mental health problems had been reduced. This is despite the higher risk of mental health issues the HIV population faces. Nearly half of BASHH members (47%) also said that care for vulnerable populations had reduced.

 

STI screening and HIV testing

More than 40 per cent (41%) of BHIVA members said that access to sexual health screening had been reduced, despite HIV positive people being at greater overall risk of sexually transmitted infections.  BASHH members gave a mixed response, with 29 per cent of respondents reporting reductions in STI testing in the past year and 27 per cent increased testing.  The BASHH response regarding HIV testing was similarly mixed, with 21 per cent saying there was a decrease and 26 per cent an increase.

The BHIVA survey showed that it is becoming more difficult for people to test for HIV, with 35 per cent of respondents reporting that there is now reduced access to testing in their own location.  Although 58 per cent of services offered outreach testing, with a quarter of respondents (26%) saying that it was offered locally in another service, more than half (52%) said access to testing in outreach settings was also reduced.  Almost half (47%) of BASHH respondents reported increases in access to online testing in the last 12 months, but it is not yet available in all locations. Although some respondents were optimistic about its role in helping to manage the growing demand for services, others expressed concerns about poor implementation, and suggested it was taking the focus away from face-to-face services.

Funding cuts have also drastically reduced the output of third sector organisations, such as charities and community groups, who have traditionally helped to plug gaps in services with HIV testing, advice and peer support. Nearly 40 per cent of BHIVA respondents said that peer support was no longer offered by their service, with 28 per cent of those that still do saying access to it had been reduced. 70 per cent said that overall the remaining third sector support had worsened, with services stripped back to basics or simply closed down completely.

 

PrEP availability and reproductive health

The roll-out of the PrEP programme through the IMPACT trial has led to increased availability.   Over 70 per cent (71%) of BHIVA respondents said that PrEP is now either available from their service or offered locally by another service (17%) and over 70 per cent (74%) of BASHH respondents reported increased delivery. However, provision remains mixed with 28 per cent of BHIVA respondents saying access is improving, 25 per cent saying it had been reduced, and 11 per cent saying PrEP was not currently on offer locally.

At the same time almost a third (32%) of BASHH respondents reported decreased provision of reproductive health and contraception and a similar percentage (34%) of BHIVA respondents also reported reduced access to these services.

 

Impact of separation of HIV and GUM on staff and services

Changes since 2013 have in many areas led to previously fully integrated clinics that were able to provide a range of services from a single location now being divided between differently funded suppliers.  Patients, particularly people living with HIV, may not be willing or able to travel elsewhere and staff may not be able to access records from other services.

Funding cuts have led to staff not being replaced with a knock-on effect to those remaining and to the level of service they can offer. For example, the loss of Health Advisers and nursing staff can limit support for patients.  More than a quarter (27%) of BHIVA respondents reported that access to partner notification has been affected, yet this is a key method of increasing testing of people at a higher risk of HIV transmission.  Although the majority of services (64%) still maintain counselling for the newly diagnosed, close to 30 per cent said that access is reduced.

Staff morale has been affected, with more than 80 per cent (81%) of BASHH survey respondents saying that staff morale had decreased in the last year, with almost half (49%) reporting it had greatly decreased.  Respondents to both surveys cited the damaging impact sustained budget cuts were having on staff, as well as the pressures and stresses experienced by retendering, restructuring and the loss of experienced colleagues. Some describe the situation as being “at breaking point” and nearly all are worried about the future:  more than 90 per cent (92%) of BASHH respondents said that they were worried, or extremely worried, about the future delivery of sexual health care in England.

 

Commented BASHH President, Dr Olwen Williams: “Providing high-quality free and open-access care for all those that need it has been the bedrock of sexual health in this country for over a century. Whilst we are doing our utmost to maintain standards in the face of record demand and dramatic increases in infections, such as syphilis and gonorrhoea in recent years, these surveys clearly show that continued cuts to funding are taking their toll. Current levels of sexual health funding are quite simply not sustainable and the pressures they are generating are having a seriously detrimental impact on the morale and wellbeing of staff. Without increased support to match the huge growth in demand, the consequences will likely be disastrous for individuals and our public health as a whole.”

Added BHIVA Chair, Professor Chloe Orkin:“Despite the stated ambition of policy makers to reduce health inequalities this will not be possible without robustly funded, sustainable services. Our survey results provide clear evidence that we need to upgrade, not reduce, services if we are to support and protect vulnerable populations. We have made huge strides in the control of HIV, so it is particularly worrying to see that important aspects of HIV care, such as access to prevention services, testing and mental health support, have been reduced. Public Health England (PHE) figures show a 17 per cent fall in new diagnoses, which it attributes to large increases in HIV testing (PHE, September 2018.) It therefore makes no sense to make it more difficult for people to test, as shown by the reduced access to testing in clinics and outreach locations our members report.”

ENDS

Editor’s notes:

  1. Survey responses: The BASHH and BHIVA surveys were both conducted in August and September 2018. BASHH received 291 responses in total, of which 264 respondents were based in England. This press release summarises the responses provided by those members based in England.  BHIVA received 98 responses to the survey, 97 of which were from respondents based in England, which are summarised in this press release.
  2. The British Association for Sexual Health and HIV (BASHH)is the lead professional representative body for those managing sexually transmitted infections (STIs) and HIV in the UK. It has a prime role in education and training, in determining, monitoring and maintaining standards of governance in sexual health and HIV care. BASHH also works to further the advancement of public health in relation to STIs, HIV and other sexual health problems and acts as a champion in promoting good sexual health and providing education to the public.
  3. The British HIV Association (BHIVA)is the leading UK association representing professionals in HIV care. Since 1995, it has been committed to providing excellent care for people living with and affected by HIV. BHIVA is a national advisory body on all aspects of HIV care and provides a national platform for HIV care issues. Its representatives contribute to international, national and local committees dealing with HIV care. It promotes undergraduate, postgraduate and continuing medical education within HIV care.

For further information, please contact either: Simon Whalley, BASHH on 07506 723 324 or simon.whalley@mandfhealth.com or Jo Josh, BHIVA, on 07787 530 922 or jo@commsbiz.com.

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Following the Judicial Review in London in July, NHS England quietly launched its promised public consultation on the Integrated Care Provider (ICP) Contracts on 4 August. The consultation closes on 26 October.  If the appeal granted at the other Judicial Review called for by 999 Call for the NHS in Leeds is successful, this ICP contract may yet be unlawful, but it is nonetheless essential that we respond to the feedback.

The ICP consultation document is a daunting read for most of the public. However, Health Campaigns Together (HCT) has provided expert answers to all 12 points in the public feedback document. 

HCT’s aim in providing these answers is to prevent flawed plans being adopted. They are seeking to prevent long-term contracts being signed that will undermine our NHS. This is in order to preserve any hopes of achieving a genuine integration of health and social care as public services, publicly provided free at point of use – and publicly accountable.

 

A reminder on what’s happened so far: There have been two judicial reviews on the Accountable Care Organisations and these Integrated Care Provider (ACO/ICP) contracts. And the courts found in favour of the NHS. But one of the campaign groups, 999 Call for the NHS, has now been granted permission to appeal. 

This is some very good news. But it also means NHS England is consulting on an ACO/ICP contract that may be unlawful. 

NHS England knew full well that an appeal was a possibility. Although fully aware of this, on Friday 3rd August – the day Parliament and the Courts went on holiday – NHS England started a public consultation on the ACO/ICP contract. The consultation says that the Judicial Reviews had ruled in their favour. This consultation runs until 26 Oct.

 

We all know that this ICP consultation needs to be combatted and stopped. But in the meantime, here’s all the information you need to fill in the consultation feedback.

As stated, the judge in the London NHS Judicial Review said that the ACOs (now ICPs) should not be enacted until a lawfully conducted consultation was held, and any eventual ICP contract would have to be lawfully entered into.

Since then, NHS England have moved swiftly and stealthily into gear, and you will find their monstrous ICP ‘consultation’ document at this link.

And here is Health Campaigns Together on the subject at this link.

As you see, the consultation document includes 12 points for feedback and Health Campaigns together has provided suggested responses to these points – very good responses too, I think. You’ll find them at this link.

When you’re ready here is the direct link for public feedback to the document, just copy and paste from the Health Campaigns Together link above.

As stated, there is a move afoot to get the consultation suspended until after the appeal granted to the 999 for the NHS has been concluded, but it’s very important to counter what will definitely be lots of responses from the allies of NHS England. Otherwise they will be able to hail the result as a democratic mandate.

Health Campaigns Together say that it is OK to copy and paste HCT’s responses into the feedback boxes on the questionnaire, although if possible, it would be good if respondents could add a few tweaks of their own.

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National Health Service (Co-Funding and Co-Payment) Bill

2017-19

Type of Bill:

         Private Members’ Bill (Presentation Bill)

Sponsor:

         Mr Christopher Chope

Progress of a Bill

House of Commons

First reading, Second reading, Committee stage, Report stage, Third reading

House of Lords

First reading, Second reading, Committee stage, Report stage, Third reading

Consideration of the Amendments

Royal Assent

This Bill is expected to have its second reading debate on Friday 26 October 2018.

This Bill was presented to Parliament on Tuesday 5 September 2017. This is known as the first reading and there was no debate on the Bill at this stage.

Details of the Bill

National Health Service (Co-Funding and Co-Payment) Bill (HC Bill 37)

A

BILL

TO

Make provision for co-funding and for the extension of co-payment for NHS services in England; and for connected purposes.

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

1.    Amendment of section 1 of the National Health Service Act 2006

  (1)      The National Health Service Act 2006 is amended as follows.

  (2)     In section 1 (Secretary of State’s duty to promote comprehensive health  service), in subsection (4)—

           (a)   the words “the making and recovery of charges is expressly provided for by or under any enactment, whenever passed” become paragraph
                  (a), and

                 (b)   after paragraph (a), insert or

                 (b)   the charges form part of an agreement in England for co-funding or co-payment.

2.  Other amendments of the National Health Service          Act 2006

  (1)       The National Health Service Act 2006 is amended as follows.

  (2)      After section 12E (Secretary of State’s duty as respects variation in provision of  health services), insert—

                                       ““Co-Funding and Co-Payment

  12F                Co-Funding and Co-Payment: England

  (1)            For the purposes of this Act, co-funding of NHS care shall be permissible in England when NHS-commissioned care is proposed to be partly funded—

                     (a)         by a patient, or

                     (b)      on behalf of a patient

  (2)           Co-payments permitted by virtue of this Act shall, in England, include payments made through co-funding as provided for in subsection (1)

 3             Extent, commencement and short title

  (1)          This Act extends to England and Wales.

  (2)          This Act shall come into force at the end of the period of two months after the day on which it receives Royal Assent.

  (3)          This Act may be cited as the National Health Service (Co-Funding and Co-Payment) 2018.

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 Court of Appeal grants NHS campaign group permission to appeal against NHS England’s new Integrated Care Provider contract

Some very good news – which also means NHS England is consulting on an ACO contract that may be unlawful.

They knew full well that was a possibility, despite their protestations in the consultation document that both Judicial Reviews had ruled in their favour.

(They have rebranded the ACO contract the Integrated Care Provider contract and their consultation runs until 26 Oct.)

We shall be putting out more info shortly about this.

 

The Court of Appeal has issued an order granting campaign group 999 Call for the NHS permission to appeal the ruling against their Judicial Review of the proposed payment mechanism in NHS England’s Accountable Care Organisation contract.

The Accountable Care Organisation Contract (now rebranded by NHS England as the Integrated Care Provider contract) proposes that healthcare providers are not paid per treatment, but by a ‘Whole Population Annual Payment’, which is a set amount for the provision of named services during a defined period. This, 999 Call for the NHS argues, unlawfully shifts the risk of there being an underestimate of patient numbers from the commissioner to the provider, and endangers service standards.

In April, the High Court ruled against the campaign group’s legal challenge to NHS England’s Accountable Care Organisation contract – but the group and their solicitors at Leigh Day and barristers at Landmark Chambers found the ruling so flawed that they immediately applied for permission to appeal.

Although fully aware of this, on Friday 3rd August – the day Parliament and the Courts went on holiday – NHS England started a public consultation on the Accountable Care Organisation contract – now renamed the Integrated Provider Organisation contract.

The consultation document asserts that the payment mechanism in the ACO/ICP contract is lawful, because:

“The High Court has now decided the two judicial reviews in NHS England’s favour.”

Steve Carne, speaking for 999 Call for the NHS, said

“It beggars belief that NHS England is consulting on a contract that may not even be lawful.

And a lot of public funds is being spent on developing the ACO model – including on the public consultation.

We are very pleased that 3 judges from the Court of Appeal will have time to consider the issues properly.

We shall shortly issue our stage 5 Crowd Justice appeal for £18k to cover the costs of the Appeal.

We are so grateful to all the campaigners and members of the public who have made it possible for us to challenge the lawfulness of NHS England’s attempt to shoehorn the NHS into an imitation of the USA’s Medicare/Medicaid system.

We will not see our NHS reduced to limited state-funded health care for people who can’t afford private health insurance.”

Jo Land, one of the original Darlo Mums when 999 Call for the NHS led the People’s March for the NHS from Jarrow to London, added,

“All along we have been warning about the shrinkage of the NHS into a service that betrays the core principle of #NHS4All – a health service that provides the full range of appropriate health care to everyone with a clinical need for it, free at the point of use.

Since we first started work two years ago on bringing this judicial review, there have been more and more examples of restrictions and denials of NHS care, and the consequent growth of a two tier system – private for those who can afford it, and an increasingly limited NHS for the rest of us.”

Jenny Shepherd said

“NHS England’s rebranded Accountable Care Organisation contract consultation is a specious attempt to meet the requirement to consult on a significant change to NHS and social care services.

We don’t support the marketisation of the NHS that created the purchaser/provider split and requires contracts for the purchase and provision of services.

Integration of NHS and social care services, in order to provide a more straightforward process for patients with multiple ailments, is not aided by a system that essentially continues NHS fragmentation.

This new proposed contract is a complex lead provider contract that creates confusion over the respective roles of commissioner and provider. It requires multiple subcontracts that are likely to need constant wasteful renegotiation and change over the duration of the lead provider contract. This is just another form of fragmentation, waste and dysfunctionality.

The way to integrate the NHS and social care is through legislation to abolish the purchaser/provider split and contracting; put social care on the same footing as the NHS as a fully publicly funded and provided service that is free at the point of use; and remove the market and non-NHS bodies from the NHS.

Such legislation already exists in the shape of the NHS Reinstatement Bill.”

The campaign team say they are determined in renewing the fight to stop and reverse Accountable Care. Whether rebranded as Integrated Care or not, they see evidence that it is the same attempt to shoehorn the NHS into a limited role in a two tier healthcare system that feeds the interests of profiteering private companies.

Steven Carne emphasised,

“It is vital that we defend the core NHS principle of providing the full range of appropriate treatments to everyone with a clinical need for them.”

999 Call for the NHS hope the 2 day appeal in London will happen before the end of the year. The Appeal will consider all seven grounds laid out in the campaign group’s application – with capped costs.

Details on the first instance judgment can be found here, and the judgment itself here.
David Lock QC and Leon Glenister represent 999 Call for the NHS, instructed by Rowan Smith and Anna Dews at Leigh Day.

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Tuesday morning was the launch of the Resolution Foundation report, Healthy finances? Options for funding an NHS spending increase – a response to the rumoured government “birthday present” for the NHS as it turns 70 on 5 July 2018.

The audience included party advisers (I spotted a Whatsapp group chat for a party’s comms team), people from various think-tanks, academics (including an Emeritus Professor from Imperial who had a lot to say), and a representative from at least one (non-militant, at least in the room) campaigning group.

The line up:

  • Sarah Wollaston MP, Chair of the Health Select Committee and medic who worked as a GP up until 2010. (Given her generally sensible views, I keep having to remind myself that she’s a Tory).
  • Jon Ashworth MP, Shadow Secretary of State for Health, who has a long history as a Labour professional, including as Special Adviser in the Treasury for Gordon Brown.
  • Ben Page, Chief Executive of Ipsos MORI and fellow of the Academy of Social Sciences.
  • Matt Whittaker, Deputy Director at the Resolution Foundation, who previously worked for the House of Commons Library where he provided stats and economics advice.

The event was chaired by Torsten Bell, Director of the Resolution Foundation, former adviser to Ed Miliband (and, incidentally, architect of the Ed Stone).

Interlude: What is the Resolution Foundation?

The launch was set at Resolution HQ in a bright, wide room, with cosy luxurious seats which wouldn’t be out of place in an up-market indie cinema, so I was curious who they are and how it’s all funded.

Resolution Foundation’s website describes it as “a non-partisan and award-winning think-tank that works to improve the living standards of those in Britain on low to middle incomes.” In their most recent annual report, they defined “low to middle” as those in income deciles 2 to 5, whom they say are overlooked in policy debates. Their focus is on working households.

They receive most of their funding via donations from Resolution Trust, founded by Clive Cowdery with a £50m donation, “believed to be one of the largest endowments for public policy research made in the UK”.

Cowdery made his wealth from “sponsoring insurance vehicles” (an FT article says more) and is also founder of financial services investment firm called (again) Resolution.

Resolution Trust backs Prospect Magazine and, intriguingly, WorkerTech, which seems to be about encouraging alternatives to trade unions for the precarious world of Uberified work. (Here are slides from its launch.)

What did they say on health funding?

All agreed that the NHS needs more funding, so the question is how much more funding and where the money is coming from. The issue was framed as a tug-of-war between Treasury and Jeremy Hunt (with Hunt wanting more money, in case not clear – it’s not always obvious), constrained by a complex parliament and a wish to keep voters happy.

Matt Whitaker took us through some headlines from the Resolution report, emphasising that it was a prediction of what the government was likely to announce rather than what it should do. (Though it sounded very much like advice.)

Borrowing was seen as likely necessary, so long as the total was below 2% of the projected GDP in 2020-21 (to meet a Tory fiscal target). But borrowing alone would not suffice, so some sort of tax raise is almost certainly on the cards – the problem is how to keep keep Tory voters and donors on side, whilst getting it through parliament.

One possibility is increasing National Insurance contributions (or NICs, pronounced “nicks”), which Gordon Brown did when he was chancellor. This is a progressive tax for workers; however, increased NICs was seen by the report authors as “unfair from a generational perspective” since older people who rely more on healthcare don’t pay national insurance (this generational perspective might need some analysis). A solution proposed was to extend NICs to include those above state pension age who are still working.

Increasing income tax could be another way to get the money. LibDems and SNP might support this, and Scotland recently introduced a change to its tax bands meaning some pay more and others pay less tax. Labour, the authors argue, would likely oppose increases for anyone earning under £80k and some Tory MPs might oppose too.

Another approach suggested was to adjust thresholds for (i) when income tax is payable and (ii) the higher rate of payment. Threshold changes were Tory manifesto promises, but the authors suggest a fiddle (p. 24):

“An alternative approach would be to lift the Income Tax thresholds to those pledged in the manifesto in 2020-21, but to freeze both them and the NICs thresholds in the final two years of the parliament. This would of course cost money in 2020-21, but by 2022-23 it would raise £3.7 billion relative to the default of uprating in line with inflation every year.”

Another promising source of funding would come from reversing George Osborne’s 2016 pledge to cut corporation tax by 2020. This tax uncut could provide £5.2 billion in 2020-21 and £5.7 billion by 2022-23. Other political parties would likely support the move and the authors argue (p. 27):

“The Chancellor might also feel emboldened to act given the way in which the estimated costings of the move from 19 per cent to 17 per cent have shifted since George Osborne first announced it.”

Remarkably little was said about Brexit. Will it torpedo all the projections and render the suggestions (sorry, predictions?) unimplementable? The exception was Sarah Wollaston, who noted that she never believed the infamous £350m bus claim; she expressed reasonable worries about the effects Brexit would have.

What might more money mean for mental health?

Although the focus was very much top-level – where’s the money? – speakers did say a little about how it should be spent. For instance, Jon Ashworth quoted numbers on additional doctors and nurses required (it’s thousands), citing a report from IFS – also cited by Sarah Wollaston.

Reassuringly, mental healthcare was mentioned a few times as being important and in need of improvement (though note the history of “warm words”). Ben Page cited public support for increased spending, with mental health being second on the list in an April Ipsos MORI survey of priorities, after Accident and Emergency. Jon Ashworth mentioned improving support for addictions, in particular.

Sarah Wollaston cited the Health and Social Care Committee’s report into integrated care, published yesterday, which discusses detailed contractual changes needed to improve how, e.g., mental healthcare integrates with other services, including discussion of accountable care organisations (ACOs). (Perusing this report just now highlights how difficult it is to have public debates on these issues – it’s technical stuff.)

The coming weeks as we approach July 5th would be a good time to campaign for key specifics on how much money mental healthcare should receive and what it should be spent on. If the NHS received £20 billion more in 2022-23, how much should go to mental health and where?

First published on Andy Fugard’s blog

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Deborah Harrington’s interesting posting on “The Myths and Legends of Hypothecated National Insurance” (March 29 2018) in particularly relevant in the light of media speculation about hypothecated taxes or National Insurance contributions to pay for health or social care.

In Wales there is a further variation on this general theme with Professor Gerry Holtham (Dept. of Regional Economics at Cardiff Metropolitan University ) proposing the establishment a social care levy for Wales. (See link below)

The levy, based on weekly payments between £1.75 and £7, would differ from a tax in that the receipts would not go into a general government budget but rather into a separate social care fund with its own independent trustees. “A portion of ..(the fund) receipts would go to local authorities to expand social care provision straight away. The greater part of the receipts would be held back for future needs and meanwhile invested to grow over time and enable even greater social provision to be made in the future as the population ages.”

And following the National Assembly for Wales having secured its own tax raising powers at the beginning of October 2017 the Welsh Government Finance Secretary, Mark Drakeford, signaled that a levy to support social care was one of the new tax ideas he was considering.

Solving Social Care. And more besides

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There are pressing reasons for understanding a bit about how our tax system works and very specifically what National Insurance is. NI is used as successive governments’ tax increase of choice because of a widespread and mistaken belief that it is a direct payment to the NHS. The Liberal Democrats had it in their 2017 manifesto, Gordon Brown put 1p on NI to ‘pay for’ the NHS, Frank Field (Labour) gave evidence on NI to the Lords Committee on the long-term sustainability of the NHS and his website says he is working on this issue with Oliver Letwin(Conservative) and he wants to restore a ‘something for something’ society.

Frank Field’s website says:  ‘Polling last year found that while 42 per cent of the public would support an increase in tax to pay for a larger National Health Service budget, this figure climbs 11 points, to 53 per cent, once the public are asked about an increase in NI contributions.’

One of the most recent additions to this proposition was in an ‘exclusive’ from the Daily Telegraph (18 March 2018 paywalled):  “It is understood there is now broad agreement within the Cabinet that extra money must be provided for the health service. Some ministers have privately suggested an across-the-board rise in National Insurance to provide new ring-fenced funding for the NHS. However, The Telegraph understands that officials are drawing up plans for a more targeted tax rise on older workers as part of a new 10-year funding plan for the NHS championed by Jeremy Hunt, the Health Secretary. One idea under discussion is to make the 1.2 million pensioners who keep working past 65 to pay NI contributions. The move would raise £2 billion per year which could be spent on the health service. Scrapping universal free prescriptions for the over-60s is also under discussion.”

The Telegraph article incorporates many of the issues frequently raised when talking about how to pay for the NHS. These arguments have muddied the waters about how public funding is allocated giving rise to political decisions being made on the spurious grounds of ‘affordability’, ‘sustainability’ and ‘no money’. And it has led to campaigns and petitions calling for 1p in the £ tax or the hypothecation of NI to ‘pay for the NHS’.

Here we make the argument that this is not only misleading but it will undermine rather than support the NHS.

A political consensus – can we afford the NHS if the public won’t pay more?

Earlier this year, thousands of NHS campaigners marched and rallied across the country in protest at the de-funding, cuts and privatisation of the NHS. Anyone who isn’t an NHS campaigner could have been forgiven for missing it, it was given so little press attention.

In contrast, two days later the BBC gave headline space on its flagship news programme, Radio 4’s Today, and on BBC One’s Breakfast, to the Liberal Democrats’ perennial call for NI to be increased for the NHS. They are also calling for NI to be converted into National Health and Social Care Insurance – which they refer to as a hypothecated tax.

Simon Stevens has argued for different funding sources too:

“Would intergenerational fairness support a further increase in the share of public spending on retirees, at the expense of children and working-age people? Should it be easier for families to flexibly fund social care by drawing down resources tied up in housing, pension pots and other benefits?”

A little bit of history (but not too much)

Funding was a key issue in all the prototype versions of the health service that finally became the NHS. The debate about how to pay for the NHS was based around three elements, all of which are reflected to greater or lesser degrees in other healthcare systems around the world today.
These were (and are):

  1. The Exchequer should pay a proportion via government run national insurance.
  2. Local authorities should pay a proportion from the rates (council tax).
  3. People should make a contribution from their own pockets -usually as some form of insurance.

Combinations of these are used across the world in a system known as the Bismarck Model.

NI already existed for working people in the UK before the creation of the Welfare State. It gave an entitlement to unemployment benefit, seeing a doctor and some pension benefits. But Prime Minister Clement Attlee supported Aneurin Bevan’s desire to break the connection with insurance to bring in something quite different for the NHS – and unique in a Western democracy. The NHS was to be paid for in full by the Exchequer. It has caused complaint and consternation ever since about its affordability – ‘growing and ageing populations’ have always been seen as a threat to its survival. Yet it has been consistently one of the lowest cost universal healthcare systems in existence. And that has been largely as a result of this direct funding method.

In 1952 Bevan wrote ‘In Place of Fear’ a remarkably modern set of essays showing that the questions about funding, who gets access, what should be provided are perennial and instantly recognisable across the years. He writes one of the best explanations of why NI was not chosen as the method of payment:

“When I was engaged in formulating the main principles of the British Health Service, I had to give careful study to various proposals for financing it (…) what was to be its financial relationship with national insurance; should the health service be on an insurance basis? I decided against this. It had always seemed to me that a personal contributory basis was peculiarly inappropriate to a national health service. There is, for example, the question of the qualifying period. That is to say, so many contributions for this benefit, and so many more for additional benefits, until enough contributions are eventually paid to qualify the contributor for the full range of benefits.”

So, to answer Bevan’s question, what is the NHS’ “financial relationship with National Insurance” in 2018?

Given the number of people who respond on social media to questions about funding the NHS by saying, ‘I pay for it already with my National Insurance’ – it looks as though the question is answered in popular consciousness, if not in reality.

It might surprise people to learn that the National Insurance Fund (NIF) today is used to calculate employment related and pension benefits, as it did before 1948. It doesn’t include paying to see a doctor! This Fund supposedly contains £30 billion of spare money. You may have seen the petition to parliament asking for the release of the money to save the NHS. John Prescott, former Deputy Prime Minister, was the person who discovered this ‘secret’ in 2015. But, like many things which have an eternal life on social media, it isn’t quite true.

Bevan talks about ‘the qualifying period’ for NI. NI still has qualifying periods for the various benefits it covers.

According to the government website the list below is what NI is for. Each of the benefits listed have different numbers of contribution years needed to be able to claim them. For example, it takes a minimum of 10 years contributions to earn entitlement to any state pension at all and 35 years to earn full entitlement. State pensions aren’t like private pensions. There is no personal money pot built up. Instead your contribution to society through your earnings is a social contract. There is an expectation that, having contributed through your working life, the government of the day will honour the contract when you retire.

Benefit  Class 1: employees  Class 2: self-employed  Class 3: voluntary contributions 
Basic State Pension  Yes  Yes  Yes 
Additional State Pension  Yes  No  No 
New State Pension  Yes  Yes  Yes 
Contribution-based Jobseeker’s Allowance  Yes  No  No 
Contribution-based Employment and Support Allowance  Yes  Yes  No 
Maternity Allowance  Yes  Yes  No 
Bereavement Payment  Yes  Yes  Yes 
Bereavement Allowance  Yes  Yes  Yes 
Widowed Parent’s Allowance  Yes  Yes  Yes 
Bereavement Support Payment  Yes  Yes  No 

The NHS is conspicuous by its absence from the list above.

In the late 1970s over 65% of all unemployment benefits were based on contributions from previous employment with 35% being means tested. Today it’s almost the mirror image and contributory benefits are now just over 42% of the total.

Why do people say that National Insurance pays for the NHS?

Most people will remember Gordon Brown, when he was Chancellor of the Exchequer, saying he would put 1p on NI to ‘pay for the NHS’. There is that claim from John Prescott that he had ‘found’ £30bn in the NIF ‘for the NHS’. And the Liberal Democrats – along with Labour’s MP Frank Field – insist that NI should be changed to fund the NHS and Social Care as a hypothecated tax.

Is it any wonder that people believe that’s how the NHS is paid for, with so many politicians saying it is, or should be?

There is, in fact, a difference between the NIF and the National Insurance Contributions (NICs) collected. And the difference illustrates the confusion that exists about the tax system. At this point it is worth pointing out that, despite any statements to the contrary, NI is just a tax.

The Government Actuary’s Department has estimated that NICs will raise just over £125 billion in 2017/18, of which £101.8 billion will go into the NIF and £23.7 billion will go to the NHS.

What is accounted for in the NIF, as explained above, is the estimated amount of contributions needed to pay for the contributory benefits including pensions. Any excess over that amount is supposed to ‘go’ to the NHS, but it isn’t equivalent to the amount of funding the NHS needs. It is simply accounted for in the Consolidated Fund at the Bank of England which is a record of all the Government’s spending and receipts.

This brings us to the central issue of why politicians insist on making the link between the NIF and the NHS. At its most basic it is because politicians believe that if the public think that the tax is being spent directly on something they want and have a direct interest in (working benefits, pensions, health) they are less likely to complain when that particular tax is increased. And why do they believe it? Because countless polls tell them so. They also like going to the polls saying that they will not increase income tax – that’s a huge vote loser. But a manifesto commitment on ‘income tax’ can be neatly circumvented by increasing the other income tax – NI.

Is National Insurance a hypothecated tax?

A true hypothecated tax is one in which the tax is ring-fenced for a named service and pays for all that service. This system effectively enforces a spending cap on the service being paid for as it limits spending to an equivalent of the tax levied. That’s very difficult to do when necessary spending is required before the taxes are received. It’s also difficult to define the ‘whole’ of a service.

The NIF appears to be hypothecated. Its rules say that the Fund must always contain enough contributions to meet all its obligations as listed above. To this end it must have a reserve in hand (John Prescott’s £30bn ‘secret’). But the Treasury also makes grants available to the NIF to make sure it keeps to its rules when it doesn’t have enough contributions coming in. A further adjustment is made between the balances in the England & Wales account and the Northern Ireland account to make sure they both represent the right amounts for their relative constituencies. Yet more adjustments are made because the Department of Work and Pensions and the Department of Business, Skills & Innovation both make payments out of their own budgets for the benefits accounted for under the NI scheme so transfers are made between them to equalise the accounts.

There is also an excess of receipts required to fulfil the contributory principle over the course of the accounting year and that doesn’t go into the Fund at all. It is not a genuine hypothecated tax. It is a bookkeeping exercise.

If NI is just a tax and it isn’t hypothecated, what’s the point of it?

Historically people had a direct link between their NI contributions and the benefits that accrued to them as a result. Pensions retain that historic link, with a defined minimum and maximum number of ‘contribution years’ required. In and out of work benefits for those covered by the NI scheme also have minimum contribution periods. It is the contributory principle that makes NI difficult to abolish. Income tax is simply recorded as an annual amount, no matter what the source of the earned or unearned income. NI, on the other hand, is recorded as the number of consecutive weekly contributions. It is the appropriate number of full years in a given period that defines eligibility for the benefits.

People who take breaks from paid employment for any reason and therefore have a break in their contributions may receive a letter asking if they wish to make a voluntary payment to cover the missing contribution period. That couldn’t happen with income tax. Getting rid of NI therefore leaves a problem of how to calculate eligibility for contributions-based benefits.

NI hides the true levels of income tax

The headline rates for income tax are currently set at 20%, 40% and 45%. This looks as if we have a very fair system where the lowest earners only pay half what higher earners pay. However, if NI is added to income tax the picture looks very different.
NI (tax!) starts below the personal allowance level.

Income bracket  Income tax rate   NI rate  Total tax 
£8164 – £11,500  0%  12%  12% 
£11,500-33,500  20%  12%  32% 
£33,500-£150,00  40%  2%  42% 
£150,000 +  45%  0%  45% 

People often call NI a regressive tax because it doesn’t increase with higher earnings but what is far worse is that it masks the real differentials between the rates of taxation. The lowest rate is quoted at 20% and the higher rate at 40% which leads people to reasonably believe that lower earners are not carrying the burden of tax but as the real figures are 32% and 42% respectively then it is a far less fair system.

So, when campaign groups call for a penny on income tax to fund the NHS or that there should be further increases in NI they may not be aware of how serious the impact is on lower paid workers.  In 2016-17 a fraction over 31p in every £ of tax collected was income tax. NI accounted for just under 22p. The rest is accounted for by other taxes.

Inter-generational Fairness – a concept designed to persuade people that you don’t get what you don’t pay for

Over recent years there has been a change in the general understanding of what the economy actually means. Politicians talk as if the economy consists of the private sector and its wealth creation with government wholly dependent on the taxes raised from that wealth creation. Government expenditure is framed as money lost or wasted or a drain on the economy. The tax ceiling is used as a whip to limit government who must be vigilant against overspending or allowing ‘debt’ to get out of hand. It also tends to focus on income tax and NI to the exclusion of other taxes.

This is the narrative that explains why services need to be reduced or more paid for them by the public. It creates an obligation on those who cost most to be asked to contribute more for the sake of ‘fairness’ and ‘not burdening the state’. It makes means testing into a harsh system of proving you really need state help before you can get it. It reflects Frank Field’s ‘something for something’ idea that you don’t get what you don’t pay for. It is the political and moral opposite of the NHS.

Far from ensuring intergenerational fairness, this system forces the burden of payment for the NHS on to people in paid employment who are paying NI as this tax is not paid on unearned income nor by various other income groups.

The idea of expanding NI to retirees and of extending its range, making it more progressive, also ignores the contributory element. The regressive nature of NI is directly attributable to its contributory nature. Once you have paid ‘enough’ to meet the contributions threshold there is no justification for levying any more, as there is no more additional benefit to be ‘earned’.

This is the landscape that gives rise to the NHS Five Year Forward View with its voucher scheme for maternity and personal budgets for disability and now for the Liberal Democrats arguing for a National Health and Social Care Insurance for older people. Asking pensioners to pay NI when they already made their contributions to earn the status of pensioners is clearly nonsense and anything but fair, but you can change that argument if you change the purpose of the tax.

An insurance-based health and social care system

The Liberal Democrats report says:

“we .. believe that an NHS funded by national taxation continues to be the best option for delivering our healthcare system, and so we decided early in our discussions that we would not explore options for an insurance-based health system as a means of raising additional revenue.
…. thanks to great strides made in tackling pensioner poverty, after housing costs pensioner households are far less likely to be in poverty than households of working age, particularly those with children.
For this reason, we suggest policy makers consider ending the exemption from paying NICs for people who continue working past the state pension age. NICs could either be equalised with the rates paid by the rest of the workforce, or introduced at a lower rate.
(…) this is the age group who are the biggest users of health and care services and, as described in the section on income tax above, on many measures this group of workers are proportionately better off than younger generations.”

Like many of the issues we have examined in this blog these statements appear to superficially make sense regardless of whether or not you agree with them. But health and social care now form part of a single government department and the NHS and local authorities are being brought together within integrated systems with combined budgets.

Despite saying they would not explore options for an insurance-based health system, the Liberal Democrats’ focus on paying some form of insurance for health and social care actually means converting NI to a stateinsurance scheme. They are calling for Theresa May to back their scheme. This would transform our Bevanite state-funded NHS into a Bismarckian system. Currently healthcare is free at the point of need and social care is means-tested, which brings an element of uncertainty to what exactly is to be covered by this insurance.

If this were simply an argument about tax there are, of course, many other forms of tax. It takes experts to calculate the changes in government receipts and the effect on households when tax thresholds are raised or lowered. That is what would be being considered if this was about changing our tax structures or raising taxes in general.

But this is not an argument about tax. This is an argument over the role of the government.

While it may appeal to many to call for increased taxes to ‘fund’ the NHS what we really need is to understand how public funding works. The root of the problem does not lie in our tax system. It lies in public policy decisions.

If you are asked to sign a petition or support calls for a hypothecated NHS & Social Care NI or for 1p in the £: just say ‘no’.

For further reading:
Post crash economics and ‘Professor’ George Osborne
Jeremy Hunt calls for increase in tax to pay for Trident

First published on the Public Matters blog

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‘Where to find the money to pay for the NHS’ is a recurrent theme of successive governments. As if changes to our public services are simply a matter of practicality under adverse financial conditions rather than political choice.  

Jeremy Hunt appears to have added his voice to the calls for tax increases, which apparently is now ‘general consensus’ in parliament and being ‘backed’ by the public.

This blog looks at how those arguments are presented from different sources. Politicians and think tanks – yes, and campaigners too – limit the debate about funding to who will have to  pay the tax burden and which tax needs to be increased.  For some the answer is simply to tax corporations and stop tax evasion to raise the necessary funds. 

We think that the principles of funding and the relationship between funding and taxes must be better understood. If not then arguments will continue to reinforce the mistaken idea that the Government is trapped in a spiral of debt from which it can only escape by balancing its books. That balance, it insists, can only be maintained if government borrowing stops and public spending stays within its means – that is to say, its tax receipts. 

Should we stick to arguments that aren’t true, just because they are easy to understand? 

Questions about the economy have been conflated with questions around how the Government looks after its accounts and records its cashflows. Those questions need to be disentangled. Focusing on tax, deficits and debt masks political decisions to reduce and defund public services.  

It’s a terrible truth of politics that people are more swayed by appeals to the heart than by facts or evidence. It is also true that many people don’t want to know much about economics or are happy to accept simplified explanations about tax-and-spend or household budgets. You don’t need a degree in economics to understand how wrong those explanations are – but it’s very important to know how wrong they are.  

Implicit in the arguments about affordability is that those who use services most should pay most or that the government should focus on which section of the population that has the most assets and how those assets can be turned into a source of income. Whichever way the subject is approached, at its core is the message that if we, the public, will not tighten our belts, be less selfish and dig deeper into our own pockets then we are stuck as the government is too financially constrained to do more.  

This leads to debates about the best way to tax to raise the money – 1p in the £? Increase National Insurance? A Robin Hood Tax? Grow the economy? 

Public purpose first and foremost 

Calling for specific additional taxes is part of a simplified explanation of how the economy works. Running the economy is a complex interplay of different elements. The household budget analogy of the last 40 years is wrong but serves a political agenda to shrink the state. Trying to ‘put it right’ with 1p on income tax or an increase in NI supports that narrative, it doesn’t challenge it.  

Here are some simple facts that do challenge that narrative:

  1. Arguments about who gets taxed and at what levels are separate from discussions of policy and public purpose. 
  2. ‘Choosing’ which taxes the public will or won’t support isn’t a useful part of that discussion. 
  3. You can’t ‘cost’ a manifesto with tax unless your starting point is that the deficit and debt are the most pressing issues the government has to face rather than the level of services it needs to provide. 
  4. When a manifesto is ‘costed’ in this way the reality is that the government spends the money first anyway. Balancing it against tax receipts is a bookkeeping exercise. 
  5. Hypothecation doesn’t protect spending. It puts a self-imposed tax constraint on government’s ability to fund services. 
  6. Public sector employees are private citizens whose salaries are spent into the private sector which generates more tax (income tax, NI, VAT, etc). Their employment boosts both public sector service delivery and the private sector. 
  7. Public sector expenditure on buildings, plants, equipment, drugs and consumables fill the private sector’s order books and increases tax receipts. 

Resources not money are the true policy constraints governments face:  

  1. What kind of services does the government want to provide? Equality of access and standards for all or variable standards and access according to ability to pay? 
  2. Are the resources available for the services the government wants to provide?  
  3. Will providing the resources for one service reduce the availability of resources for another? How will those competing claims be settled? For example, building both houses and hospitals – are there enough bricks, wood, steel, plumbers, etc? 
  4. What will the impact be on the wider economy of using those resources? 
  5. Restricting the money available to put the resources to good productive use is a tool to achieve unpopular political ends by giving a false reason for its necessity. 

Is it true that we need a strong economy to provide our public services? 

Conservative Manifesto 2017: Without a strong economy, we cannot guarantee our security, our personal prosperity, our public services or contented and sustainable communities. 

Theresa May says, as David Cameron did before her, that we need a strong economy to pay for the NHS. There are many who share that belief from across the political spectrum. This includes both sides of the Brexit argument who either fear that the economy will shrink so much we won’t be able to afford the NHS or believe that reducing our obligations to the European Union will release the money to pay for it.  

But what constitutes a ‘strong economy’? And at what point does the strong economy become strong enough to fund our services properly? According to that same manifesto we have the fifth largest economy in the world, we are the biggest recipient of foreign investment in Europe and the fastest growing economy in the G7. According to the International Monetary Fund our National Debt is at least 10% lower than the average amongst advanced economies. There are 16 advanced economies which spend much more per head on their citizens for healthcare than the UK, yet 11 of them have larger National Debts. So why isn’t the UK strong enough to fund its health service if they are?  

The manifesto also says that the Conservatives are committed to low taxation and reducing taxes for families and corporations even more. Theresa May said in Parliament that the government has no money of its own and needs taxes to pay its bills but that she is committed to ensuring our services receive the funding they need by having a strong economy. But how can that happen if they rely on taxes and she would like to lower taxes?  

The answer clearly lies somewhere else. 

Is the answer simply to tax the rich? 

Jeremy Corbyn, twitter account 22 March 2018: ‘Over the last 8 years the Tories have cut councils’ budgets in half. In that same time the Tories have slashed corporation tax, cut the bank levy, abolished the top tax rate on high earners and cut capital gains tax for the very richest. Austerity is a political choice.’ 

It appears that the Leader of the Opposition agrees with the Prime Minister about where the problem lies in the government’s ability to spend but disagrees with her about tax regimes. Theresa May wants to cut corporation taxes and council business rates. Jeremy Corbyn thinks that this is where the problem lies and that our local councils and public services could have been funded if the government had not chosen to cut taxes instead.  

Between the Government and the Opposition the battle for public services is fought on the grounds of who is most ‘responsible with the economy’. This includes assurances for the necessary taxes to fund spending ambitions and who will best provide the conditions for the private sector to flourish. These arguments pervade the public consciousness so completely that rather than supporting calls for properly funded services many people ask: ‘has it been costed?’ And costing means being able to list which taxes will be raised in addition to those already being collected to fund any additional expense.  

It also means committing to ‘balancing the budget’ and reducing borrowing – which means reducing the sale of government bonds. 

This argument is being taken further with ‘additional’ funds for public services being allowed only if there are trade-offs elsewhere. Foundation Trusts get capital funding if they are prepared to sell-off land and staff get pay rises if they will give up their increments or holiday. 

Jeremy Hunt offloaded the responsibility for making these trade-offs onto the public, saying it is what they expect: “If you ask the public…they are very clear they would like to see more money going to the NHS and they would be prepared to see some of their own taxes going into the NHS but they are very clear they want to know that money is actually going into the health and social care system and they want to know the NHS is going to reform and tackle some of the inefficiencies.” 

We are not arguing against the raising and collection of appropriate taxes. Our argument is that tax forms part of a well-regulated economy. It is not a constraint on government spending. If the real-world resources are there, the money can be spent. The idea that the de-funding of our public services is the fault of tax evasion and can’t be put right until the money is collected does not bear examination. 

The Office of Budget Responsibility 

Health Service Journal  says: ‘Many will applaud the OBR’s de-politicisation of public finance forecasts, because it helps keep the government on track to meet its fundamental commitment to eradicating the deficit.’ “Clearly ministers are not bound completely by the OBR forecasts, but they do provide a solid defence when besieged by demands on the public purse.” “This reduces (the) power of the NHS, which because of its political importance has been a constant and effective battering ram against the Treasury doors throughout its 70year history. Will individual tragedies such as Mavis Skeet have the same power over government spending, when the chancellor can use the OBR’s cold and compelling logic as a political buffer?” 

There has been a very successful message repeated over the last few years that insists Labour’s public spending during its time in government created‘the deficit’ and has left the country in the grip of an unsustainable debt as a result. The Office of Budget Responsibility (OBR) was set up to make sure the government kept on track to eliminate the deficit. It is supposed to be an independent authority overseeing government spending. It is, of course, a government body ensuring that the government has an ‘external authority’ on whose shoulders it can place the responsibility for there being ‘no money’. 

De-politicisation is in name only. The Treasury is the ultimate arbiter of spending decisions. We do not need, nor should we want, those decisions to be moved elsewhere. Indeed, they cannot be. The Treasury owns the Bank of England and the Bank creates funds on the Treasury’s authority. That is the ultimate public spending decision-maker. 

The OBR is part of a movement that wishes economics to be seen as having hard and fast rules which apply regardless of which party is in government. This is despite the fact that its predictions are usually wrong. The reality is that economics is a political activity and reflects the government’s ideology. A government which believes in free trade and a small state will have a different set of public policy objectives from a statist one, or one which believes in devolving power from the centre.  

The idea of an independent judge of a country’s economic competence is also reflected in the use of two US accountancy firms, Moody’s and Standard & Poor’s, to give ‘credit ratings’ in a similar fashion to companies like Experian and Equifax who credit rate individuals. Economists across the spectrum agree that the idea of bankruptcy for a country that issues its own currency, like the £ sterling, is meaningless. The currency might temporarily lose some of its spending power relative to others but a government can never be unable to re-pay its debts in its own currency because it creates it when it needs it.  

Although modern economics involves complex analysis and modelling, it is still about the political governance of the country’s trade and productivity, distribution of wealth and income levels and how they relate to the law.  

Since 2010 all parties have signed up to the principle that there is an absolute obligation on the shoulders of government to balance its budget or create a surplus. The debate centres on how – or if – they will manage it, not whether they should. 

This is matched by an equal insistence that the private sector is responsible for the economic success of the country. In this scenario the government is wholly dependent on taxing the private sector in order to gain its income. Its spending on public services is therefore a drain which must be carefully balanced against the overriding need not to damage the private sector in the process. 

This is a damaging image which undermines the role of government and democracy. Government is responsible and must be held accountable for balancing the needs of all the different sectors of society. These are interdependent. The objective of public spending should be to provide a well-educated and healthy population. There is a serious problem when the budget itself becomes the objective. Restricting the money available to put public resources to good productive use is a tool to achieve unpopular political ends by giving a false reason for its necessity. And claiming that all spending must be equal to the tax take and that deficits are inherently bad is part of that false reasoning.  

What does fund government if it is not limited by tax? 

Conservative Manifesto 2017: “The greatest impact a government can have on future generations is the amount it chooses to borrow to pay for current spending. Borrowing always means spending money you don’t have; but government borrowing differs because the repayment falls to others – those who come later, including people not yet born. Conservatives believe in balancing the books and paying down debts – because it is wrong to pass to future generations a bill you cannot or will not pay yourself.”

At the beginning of the financial year each Department is given its budget by the Government. At this point of the year no tax receipts have been collected. But the departments and arm’s length government agencies have expenses that must be met right away. The Government is not able to calculate with any certainty what its total tax take is going to be by the year end. But that doesn’t stop it spending. 

In simple terms, the Government tells the Bank of England to credit its departmental accounts to pay for whatever it has decided needs to be paid for. It ensures that inflation is controlled and other policy objectives are met by a combination of taxation and issuing Treasury bonds. It has complete control over each of these actions – the creation of the reserves, the level of taxation (and who gets taxed) and whether or not to issue bonds. This does not mean that tax has no purpose or is not important nor does it mean that the Government can just spend at will on whatever takes its fancy.  

This is the point when Magic Money Trees are invoked or accusations of creating Zimbabwe/Weimar/Venezuela levels of inflation are thrown around. But stating the fact that the Government creates central bank reserves to meet its obligations is not outlandish. Nor is the idea that it will further create reserves to meet its own fiscal objectives. In the modern world no printing or minting of notes or coin is necessary. Keystrokes on a computer are all that is required. (Radio 4’s File on 4 went to the Bank of England and were shown exactly how it is done – link no longer available). 

The NHS is the only thing we are ever asked to ‘pay extra’ for. If taxes and spending really were linked in that order then surely every time the Government wanted to launch an additional project – HS2, Trident or even the bankers’ bailout – we would be called upon immediately to pay more tax. Especially in the case of the bank bailout. The bank bailout amounted to £435 billion. Compare that with the £4 billion a year extra for the NHS. 

But that’s not what happens. The Bank of England has been buying up the Treasury’s bonds from the market in an attempt to stimulate growth. In the case of the bank bailout these purchases were very large scale. A private company has also been set up, wholly owned by the Bank of England, to purchase private sector assets on its behalf. These are financed in the same way as the purchase of Treasury bonds, by the creation of central bank reserves under the instruction of the Treasury. Both the Treasury and the Bank of England form part of the Government. How these purchases were financed and what the intention was behind them gives a clear picture of why the Government is not reliant on taxes or NI to spend on public purpose. The picture below is an extract from the annual report of the Bank of England Asset Purchase Facility Fund Limited.  

Bank of England report

The last sentence says: “These actions were intended to boost the supply of money and credit in order to raise the rate of growth of nominal spending to a level consistent with meeting the inflation target in the medium term.”  

Politicians say we need a strong economy to pay for the NHS. They then go on to say that only a strong economy produces the level of taxes that the government needs in order to pay for its public services. They say that if there is not enough tax, they are forced to borrow and that borrowing puts future generations in debt for the spending of today. But the final sentence of the extract above gives the lie to that explanation.  

The economy cannot grow unless it has sufficient money in it and there will not be sufficient money unless the government creates the central bank reserves necessary for that to happen.    

But what about the warning that spending today causes the payment to fall on others in the future – even those not yet born? Since 1948 the NHS has been there for all who need it. In that time the National Debt has dropped from two-and-a-half times our national income to less than 90%. It has fluctuated in between despite huge investment in public infrastructure and equally huge revenue spending. The generations in between have not found themselves being taxed at higher and higher rates to ‘pay for it’. Tax rates have changed, indirect taxes like VAT have increased, but income tax and National Insurance have fallen. And the Debt – in the form of assets for things like keeping our pensions safe – is simply renewed. Each time a limited bond expires a new one is issued to take its place. This might be the height of irresponsibility for an individual whose life span is measured in decades, but not for countries which measure theirs in centuries. 

Funding the NHS  

The greatest obstacle to overcome when talking about funding the NHS (or any public service) is how to counter the debt and deficit myth which has taken such hold on public discourse. Deficits are connected to the activity that is taking place in other parts of the economy. If tax is increased to ‘pay’ for more services that action is reducing the spending power of the whole population. At a time when levels of personal debt are precariously high and increasing numbers of people are in precarious employment, removing people’s spending power simply increases poverty. The reality of an austerity agenda is that it both decreases the availability of public services while simultaneously reducing people’s ability to pay for their day-to-day needs.    

The proper responsibility of Government is to match its spending with the real needs of the population and the resources available to provide for those needs. At any point this may involve running a deficit. Most of the last 300 hundred years has involved running a deficit. It isn’t new, it isn’t dangerous and it is not ruining the lives of people in the present or in the future. What is dangerous and what is ruining lives right now is a determination to balance the books or to run a surplus based on the false notion that taxes are the only legitimate funds it has to spend.   

Our real danger is that with the closure and sell-off of NHS land and buildings, the loss of staff (from early retirement, demoralisation, emigration and failure to train) and the loss of planning skills through privatisation and fragmentation we may no longer have the resources needed even if the funds were forthcoming. And those are the things the Treasury cannot create with a few keystrokes on a computer. 

For more on this subject see our blog: Post Crash Economics and Professor George Osborne  

This first appeared on the Public Matters blog

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MAY AND HUNT announced that this winter the NHS was the best prepared ever – a claim worthy of Trump. As the New Year began, stories of horrendous delays – waits for and in ambulances, patients sitting, standing or lying on trolleys in A&E corridors, long waits for hospital beds and treatment – shocked the nation. Dozens of avoidable deaths resulted. Mental health crises have hit the news and 50,000 elective operations in January were cancelled, adding to the immeasurable misery. NHS staff have done their best – they are holding the NHS together by their exhausted commitment.

Why is government allowing this to happen? There are two linked mainstays of their ideology: firstly, a belief that market competition and privatisation will improve NHS efficiency; secondly, the belief that funding for public services should be cut back and replaced by private finance. Austerity is the method and justification for years of deliberate neglect.

The fallacy of this ideology is demonstrated by the collapse of Carillion: £900m in debt, a £587m hole in pension funds and 20,000 staff and projects costing £1.7bn in contracts at risk. Two new PFI hospitals, Royal Liverpool and Midlands Metropolitan, face an uncertain future. And now Capita is in serious financial trouble.

Notwithstanding the positive investment in the NHS 1999-2009, we must not forget the PFI years of the Blair government and the privatisation it promoted. But current Labour policy has rejected those mistakes. Labour’s re-commitment to the NHS, captured in composite 8 from 2017’s Labour conference, resonates with voters. Government claims to be spending more every year are a deception. Rising health need is predictable – more people, greater complexity of need and of treatments, which society both demands and welcomes. Since 1948, on average the NHS has required 4% more funding every year on top of inflation to keep pace with expanding health needs.

Government-imposed austerity has on average underfunded the NHS by 3% every year since 2010, reaching 30% by 2020. That is why, eight years in, there are more referrals than the NHS can manage, longer waits, more pressure on staff, more complaints, more human error. The NHS is the most cost-effective, democratic and accessible health service of a major economy worldwide.

Government ideology is breaking it. Sustainability and Transformation Partnerships (STPs) are being used as a Trojan horse for £26bn of cuts. Visionary claims without evidence that “excellent community-based care” will “reduce the need for district general hospitals by 30%”; plans to centralise hospital services in fewer ‘specialist’ hospitals – to an unnecessary and dangerous extent which will increase health inequality by reducing access: this vision not only lacks an evidence base but is delusional when set alongside the massive cuts that undermine those very community services.

Accountable care organisations (ACOs) are now being trialled under the radar in accountable care systems (ACS). But ACOs are undoubtedly the delivery vehicle for an NHS fragmented into 44-50 management organisations, put out to tender and ripe for further privatisation of management, financing and procurement of NHS services. Strict cost control limits will add impetus to diverting patients who can afford it into paying for treatment in the private sector. Hunt faces a judicial review on this.

Most hospital clinical care is still in public NHS hands. But many are unaware of the inroads privatisation has made, in PFI builds, catering, cleaning, portering, pathology, radiology and significant swathes of community healthcare. Virgin Care holds £2bn worth of 400 contracts and last financial year won £1bn of new contracts. Only 34% of tendered clinical contracts last year went to the NHS. The government has given £11bn of our current annual clinical budget to private companies.

And it has chosen where not to spend – with dramatic impact.

Evidenced by this winter’s chaos, far too many beds, 15,000 in total, have been lost since 2010 – 8,000 in acute care, and in mental health (25% lost) and learning disability, 7,000 combined. Comparable European economies spend far more than the UK, which has fewer beds per 1,000 (2.3 in England, 4 in Scotland, 8 in Germany), fewer doctors per 1,000 than the OECD average (2.8 compared to 3.3) and fewer nurses per 1,000 (8.2 : 8.9). Germany has close to twice as many doctors. We have 40,000 nurse vacancies -100,000 across all NHS staff – which explains why £3bn is spent on agency staff and why permanent staff are exhausted.

Some 120,000 excess deaths have occurred since austerity cut into essential health and social care services. Avon’s coroner concluded that the death of a 15-year old girl in September was the consequence of neglect due to the lack of resources of local community mental health services to support her.

A healthy well-educated childhood population makes for a healthy country. Research shows that state investment in healthcare gives a fourfold payback to the economy. The wellbeing of our children and adults is paramount: people are dying as a result of waits for critical mental and physical healthcare, bearing in mind that three-quarters of enduring mental health problems first present before age 18.

Keep Our NHS Public campaigns to defend our NHS, challenging government, using all means available. We reached out to other organisations and set up Health Campaigns Together (HCT) in 2015, building with the People’s Assembly for the 2017 demonstration and the NHS Roadshow during the June election. Our Emergency Day of Action on 3rd February held the government to account this winter with 60,000 marching in London and 50 events across the UK.

Our demands are: more beds, more staff, fund our NHS; no cuts, no closures, end privatisation; health and personal social care must be free at the point of use and, as in Scotland, not means-tested.

Campaigners have reversed plans for bed closures; hospital mergers have been slowed or prevented; STPs have been challenged; judicial reviews have forced concessions on ACO scrutiny. But Labour in local government must adopt national policy and oppose the undemocratic ACOs and cuts to health and social care, and come out fighting for our NHS before it’s too late.

» Please consider affiliation. www.keepournhspublic.com www.healthcampaignstogether.com » Tony O’Sullivan is co-chair of Keep Our NHS Public and member of Health Campaigns Together.

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2018 marks the seventieth anniversary of the founding of the NHS, but also the fiftieth anniversary of the 1968 Green Paper that marked the beginning of a series of attempts to reorganise the NHS that lasts up to today. What were these other reorganizations about, and did they work?

A most basic organisational challenge the NHS continues to face is the split between NHS, GP and community health services (including social care). This was the result of a political compromise in the founding of the NHS. The big idea in 1968 was bringing NHS organisational boundaries in line with those of local government. However, it did not succeed, failing again to due to political constraints. The split between the three areas of the NHS continues to cause us so many problems is testament to the force that past decisions about organisational forms can continue to hold over us, decades later.

Any discussion about the NHS inevitably takes us to the question of funding. In the 1950s there was a government inquiry examining why the NHS was costing so much more than anticipated. What it showed is that the NHS is, comparative to other health care systems, remarkably inexpensive. We still haven’t really learned that lesson. Apart from above-trend increases in funding in the 2000s, the NHS has continued to lag behind its neighbours in funding healthcare, year after year. This seems to get somewhat lost when politicians make lazy claims about how ‘unaffordable’ the NHS is.

Since the 1980s, the two big reorganizational ideas have been about management, and about markets. In the 1980s general managers were put in hospitals to try and make the NHS more ‘business-like’, and that didn’t seem to make much difference other than to increase management pay. This led to an ‘internal market’ for care, in which public providers competed with one another for care contracts to try and bring the discipline of competition into the NHS. Apart from some innovative changes the way GP practices worked, the internal market seemed to do little other than introduce new functions such as care purchasing which did little to improve services.

When they came to power in 1997, Labour promised to abolish the internal market on the grounds that it was wasteful and bureaucratic. Labour also embraced the Conservative ‘Private Finance Initiative’ (PFI), which allowed it embrace a radical building plan for new hospitals, but without breaching their own budgetary rules. However, PFI deals were often negotiated locally, and where poor bargains were struck, this left the hospitals involved with substantial funding deficits running over decades.

In January 2000, the Prime Minister committed to increasing NHS funding to the European average, taking his cabinet (and Chancellor) by surprise, but, for a short period in the NHS’s history, giving it sufficient resources to avoid winter crises and reduce waiting lists. Then devolution happened, and the paths of the home countries started going down different routes. In England, performance management and markets reigned. In Scotland, a more collaborative route was taken. At the end of the decade, evaluations suggested that there was actually little difference in reported health outcomes between the two, again asking questions about whether reorganisations actually improve things at all.

Labour’s performance management changes included hospitals and GP surgeries. The hospital system was widely gamed, and seemed to lead to managers ‘hitting the target but missing the point’ at best, and at worst was probably a causal factor in the horrific events at Mid-Staffordshire with staff becoming so driven to hit targets that they forgot about patients. The early years of the GP performance system appeared to show promise, with GPs being consulted upon and engaging strongly with the system, but policymakers then extending it and introducing more bureaucracy until it became deeply unpopular. It has already been abolished in Scotland.

Labour’s new market for care created greater scope for private providers to enter in England, and paved the way for an extended version of it appearing from the coalition government after 2010, leading to huge controversy and expense. What is remarkable is how little there was to show of this reorganization by the end of 2017 – much of the attempt at driving further competition in the NHS has been slowly abandoned in the face of budget pressures and high profile cases of private provision failure. Reductions in budgets, have, however, led the return of winter crises and budget overspends.

The NHS is all about its staff, but relationships between the government and clinicians have gone through cycles of antagonism and co-operation. In the 1970s industrial action and threats to the provision of services dominated, with governments fearful of challenging doctors. In the 1980s staff protests continued, but with the government taking a harder line, until they ignored the doctors completely in introducing the internal market in the 1990s. The doctors got their revenge though, teaching the government the lesson that it is one thing to make policy, and entirely another to implement it. Labour’s funding increases in the 2000s appear to have led to a period of co-operation, before the 2010 coalition government’s reorganisation leading to a groundswell of opposition. Since then relationships between Secretary of State Hunt and the doctors, in renegotiating employment contracts or in demanding a ‘7-day NHS’ at a time of reduced budget settlements, have seldom been friendly. The basic lesson of industrial relations in the NHS, again not learned by politicians, is that it unwise to introduce new policies unless you have the co-operation of those that you will need to implement them.

By 2018 we’ve had 50 years of NHS reorganization. Mostly, it hasn’t really made things better. Indeed it is hard to see what lots of it was actually for. We still haven’t managed to find a way of overcoming the tensions of the tripartite split. We know we need more collaboration between local government and the NHS, especially as the demands on social care services increase and the lack of funding for it has real consequences for services currently paid for by the NHS. However, for many of us the boundary between health and social care is an artificial one that does not serve our needs.

What does seem to have made a difference is increasing the funding for the NHS in real terms in the 2000s, with a range of measured improvements coming along soon after, but which are in danger of disappearing in the more austere environment of the 2010s. If there is a big lesson from the history of the last fifty years it is that health reorganizations often do as much bad as good, but increasing the funding of the NHS has a much better chance of improving healthcare for us all.

A version of this article was first published on the Social Policy Association website

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