Banking on the NHS

Jonathan Bartley
By Jonathan Bartley
11 Jun 2009

According to the NHS Confederation, the health service faces a £15 billion funding shortfall as a result of the recession and rising costs, sparking fears of reduced patient services.

Immediately there has been talk of cuts and rationing. But as my colleague Simon Barrow puts it, the crucial question is whether we are committed to the principle that no-one should die or be ill through lack of resources to pay for treatment when they could be helped?

If we are indeed committed, then that must be our priority. The question then becomes how, not if, we fund that commitment.

The predicated shortfall is somewhere in the region of £15 billion over five years after 2011. It will cost £102 million this year to fund the NHS and Labour actually does not have a bad record of increasing investment. In real terms, it has put in around an additional six per cent per annum during the last few more bountiful years ( seven per cent this year) following previous years of chronic underinvestment by the Tories.

The global recession raises the latest questions about how we fund a health system which is making increasing financial demands in the face of an ageing population and the increasing costs of new treatments. But as I heard the Treasury Minister Stephen Timms say the other day at a lecture in Westminster, the response to the banking crisis has also thrown old assumptions and rules about Government spending right out of the accountant's window.

The main parties and newspapers are making the same tired arguments that I studied as an undergraduate at the London School of Economics in the early 1990s. Some small savings could perhaps be made by trimming bureaucracy and cutting back management but as the King’s Fund has pointed out, this is unlikely to go very far in filling the growing hole in the public purse.

The Tories suggest that devolving power to patients and getting rid of targets will miraculously provide large sums and save tens of thousands of lives, based largely on some very dubious claims about cancer death rates. Their figures did not work even before Andrew Lansley's 'clarification' about their proposed 10 per cent spending cuts. As Cancer Research says, Britain’s place near the bottom of the European table for cancer survival was there under the Conservatives and we have yet to measure the impact of Labour’s cancer strategy launched in 2000.

The data they quote, as well as being too old to give a meaningful picture of the current situation, also fail to give clear indications about exactly why cancer death rates are so high - let alone how they can be addressed more efficiently and cost effectively.

So where might we go to fund what should be our main priority? There are the obvious targets of increased income tax for higher earners but also of increased indirect taxes on unhealthy goods - not just on tobacco but also on junk food and drinks. Recent estimates have put obesity and smoking as contributing to a £5 billion and £6 billion cost to the NHS respectively.

But these are not the only taxes which might be levied. Currently, UK drug companies make profits in the region of £10 billion per annum. These are excess profits and one has to question the morality of making such huge wealth out of other people’s misery.

Options for using some of this money might include a windfall tax. Or we might be bolder and consider whether tighter financial regulation, part nationalisation, or a move towards not-for-profit organisations might be an option.

The main argument against is that the profit motive is vital for research and the development of new drugs. But there is no reason why a reasonable operating profit could not still be pursued and even ploughed back into the NHS.

There might be additional benefits of such strategies. As profit maximisers, drug companies price their products according to what they believe the market can bear - albeit with a degree of existing government regulation, negotiation and pricing through the National Institute for Clincal Excellence (NICE). But the costs of drugs could still be dropped thus drastically cutting significant NHS expenditure.

The drugs could also then be more easily supplied at cheaper prices to the developing world and meet a need that has become all too apparent with regard to HIV medications in recent years.

There is a precedent for these kinds of approaches. It is to be found in the unlikely relationship between Government and commercial arms companies. Currently the Government underwrites the export of commercial arms. It does so for a number of reasons. The main one is that the private sector cannot always underwrite the costs of the arms deals because they are so vast. So government provides the necessary investment – something that clearly applies to the huge sums involved in investing in new drugs too.

The rationale for such Government intervention in the private sector is that producing arms and exporting them around the world means that unit costs - when it comes to buying its own weapons - is that much smaller. Another principle that clearly applies to drugs and the NHS too.

And while on the subject of defence spending, there is a longer term budget which might also be made available - the £76 billion currently proposed for the replacement of Trident. The initial cost was estimated to be in the region of £25 billion but this takes no account of the annual costs of maintenance which have now emerged in response to Parliamentary questions. The cost of replacing Trident is equivalent to an extra £5 billion every year for 15 years for the NHS.

And then of course, there is the medical profession itself. If we thought that the situation of expenses of 650 MPs was serious, then we should take a long hard look at the behaviour of 100,000 doctors too.

GPs currently have some of the best paid job in Britain after top-level company directors, even ahead of some city traders. The situation has arisen following Labour’s measures designed to give general practices additional funds to invest in improving and developing services to patients. The problem is that the funds have not always been going back into the NHS. Some of the money goes into GPs' pockets.

Average total earnings for GPs is around £230,000. Average GP pay is in the region of £110,000 a year and expenses on average account for 55 per cent of overall income, with GPs claiming 45 per cent profit. (Compared this with the average nurse earning £30,000 a year). A £20,000 average reduction in doctors salaries would save £2 billion a year. And if we are entering a period where we are all going to need to tighten out belts (including those in the medical profession), then moves in this direction might be no bad thing.

Bailing out the banks cost us more than the entire annual budget of the NHS. The public debt increased by £1.5 trillion. The £15 billion over five years that we need is small by comparison. The message is clear. There is money available. The question is which of the options we should choose and whether anyone will then show the political will to go and get it.

We also need to ask one simple, moral (and some of us would say, theological) question: If health for all, especially the must vulnerable, is not something we as a prosperous people want to invest in as a clear priority - as well as contributing to global health challenges, prevention and participation, from which we all benefit in the long run - then what is it that we think is more important? And what does this say about our understanding of what it is to be human and what it is to be neighbours?

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(c) Jonathan Bartley is co-director of Ekklesia.

Keywords: nhs | nhs funding
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