The Parliamentary Under-Secretary of State, Department of Health (Lord Prior of Brampton) (Con)
My Lords, I thank the noble Lord, Lord Patel, for introducing this fascinating debate, which has covered a very wide range of subjects. I hope noble Lords will forgive me if I do not address all their questions; I may not even be able to refer to all of them by name. That is not because I did not note what they were saying but because there is just not enough time to go into what they said in detail. I do have a speech here but I am putting that to one side because I do not think it does justice to the issues that were raised today. I have some notes here instead. I will come back at the end of my speech, if that is acceptable, to discuss whether or not there should be an inquiry and, if so, what kind of inquiry or investigation it should be.
I have a reputation at the Department of Health for being a bit of an Eeyore character because we often hear about great changes that are going to happen in the NHS but they never quite materialise. Perhaps we should stand back from the NHS for a minute. Every healthcare system in the developed world is facing almost exactly the same issues of sustainability that have been posed in the debate today. Most extreme is probably the United States of America, where healthcare accounts for over 16% of GNP. I worked in America for some time in the 1970s and I saw the cost of healthcare, which was largely loaded on to employers, literally destroy large parts of the steel and car industries. We may wish to explore alternative charging systems or different funding systems, but just moving the cost away from the state—from taxation—to insurance has not actually solved very many problems.
Ironically, perhaps, in the light of today’s debate, the NHS is probably one of the most affordable healthcare systems in the developed world. It consumes between 7% and 9% of GNP. In Germany and France, healthcare takes between 10% and 12%. We are about average across the OECD countries but among our peers we have a relatively cheap and successful healthcare system. I was talking to people from the Mayo Clinic recently and they rate the British system as the highest-value healthcare system in the world. So we should not get too depressed about the NHS. Noble Lords have referred to the Commonwealth Fund report, Mirror, Mirror on the Wall. In every category bar one the British system is first, and that is comparing it with all the other best healthcare systems in the world.
As my noble friend Lord Mawhinney pointed out, in 1947-48 we were spending 3.5% of GNP on healthcare—£400 million in the first year—and employing a few hundred thousand people. Clearly, since then the resources going into healthcare have expanded exponentially, and will continue to grow. The demographics, the cost of new drugs and procedures, and rising consumer expectations will drive that increase. We have heard a lot today about the importance of early prevention. That is an area we ought to explore further. As the noble Lord, Lord Crisp, mentioned, that kind of assessment should go well beyond traditional health topics.
These pressures are common to all developed systems. It matters not how you fund the system, the pressures will still be there. My noble friend Lord Fowler was not impressed by the mention of Derek Wanless. I will quote just one small part of his report. He concluded that:
“Private funding mechanisms tend to be inequitable, regressive … have weak incentives for cost control, high administration costs and can deter appropriate use”.
If the noble Lord does not like Wanless, I will quote him the recent OECD report, which is only months old. It says that,
“no broad type of healthcare system performs systematically better than another in improving the population’s health status in a cost-effective manner”.
There is at least no evidence to suggest that a tax-funded system is less effective or efficient than any other system. Indeed, tax funding allows the collective pooling of financial risk across the whole population for collective benefit. It is this pooling of risk that makes the NHS probably one of the lowest-cost systems in the world. I see that the noble Lord, Lord Lawson, has just arrived. That reminds me of his quote:
“The National Health Service is the closest thing the English have to a religion”.
Actually, you do not need just belief to think that the NHS is an efficient system—there is plenty of evidence as well.
The real question is: which healthcare systems are best equipped to beat this rising level of demand over the long term? In most industries, the forces of change that have driven productivity improvement—because in the long run everything depends on productivity improvement—have been driven by globalisation, by competition, as the noble Lord, Lord Warner, mentioned, and by consumer choice. But those drivers are weak in healthcare. The previous Labour Government tried to bring in more competition and a lot more private sector involvement. They would probably have to admit that they were disappointed by the impact. Actually, the market does not work as well for healthcare as perhaps they would have wished.
The market does not work so well in healthcare—in any country—because there is information asymmetry in the market: the patient will always be less well-informed than the professionals in the system. It is difficult to measure the quality of care. Even in a very transparent system, as we are moving to in this country, it is difficult for patients to determine which professional in which hospital is delivering the best care. It is very difficult to assess relative quality across providers when systems are so complicated. The market structure is difficult. Inherently, there will be natural monopolies, which limit choice and competition. You cannot have two or three A&E departments operating in close proximity. There are very significant barriers to both market entry and exit. Finally, of course, there is the nature of the good itself. It is very hard to rectify things—you cannot just “send it back” when you have experienced death or serious harm in a hospital. The market will always be limited in healthcare.
How are we going to get these improvements? How are we going to drive the kind of productivity improvement we need in the health service in the absence of a market? This is the crucial question as to whether or not our system is sustainable. If we are not able to get the productivity improvements set out in the NHS Five Year Forward View, the sustainability of our system is very much in question. The answer that we are supporting in the five-year forward view is multifaceted. We want to see new models of care.
The noble Lord, Lord Turnberg, gave an interesting example of how in his own speciality of gastroenterology the tariff structure can lead to completely the opposite result to the one that was intended when the tariff was introduced. The only answer to the question that he posed is a much more integrated structure, where capitated payments are made and there are integrated models of care. The days of the stand-alone acute hospital are gone—if they were ever there. No man is an island; no acute hospital is an island. There may be a few hospitals—perhaps in London or Cambridge—which have tertiary and teaching income and can plough their own furrow, but I would argue that the vast majority of acute hospitals must integrate much more with their local healthcare and social care systems.
A number of noble Lords pointed out the deficits that are currently mounting up in acute trusts. It is interesting that it was a Labour Government who introduced foundation trusts. Perversely, although it was not the intention at the time, foundation trusts make it more difficult to integrate. Rightly, in many ways they are obsessed with their own profit and loss accounts and balance sheets and are unable to look more broadly across the system. We will see new models of care.
The noble Lord, Lord Reid, a former Health Secretary, made reference to purchasing. In his review, the noble Lord, Lord Carter, looked at purchasing, workforce, patient flow through hospitals, medicines management and estates. The review has looked at the whole spectrum of where cost savings could be achieved, and has come up with a figure of approximately £5 billion. That figure is small in relation to £22 billion, but the noble Lord went on to say in that interim report that he believes there are many more savings to be had from getting better patient flow through the system. He has drawn attention in various meetings to the fact that some 20% of patients who are medically fit to be discharged are still in hospital beds. That goes back to the issue of better integration. If we can crack patient flows through the system, I am sure that the productivity benefits will be substantial.
I am not as pessimistic as other noble Lords who think we cannot make those savings. The noble Lord, Lord Desai, talked about the demand side, which we have to address as well. Through a combination of supply-side and demand-side measures, we have a good chance of achieving the kind of savings set out in the Five Year Forward View. There is considerable consensus around that document. Although the Labour Party did not commit itself during the lead-up to the election to the extra funding required, there was certainly concern on the Liberal Democrat Benches and on our side—and I suspect on the Labour side as well. It would be a great pity if we were to ask for another review now, when we have considerable consensus around the Five Year Forward View.
The noble Lord, Lord Patel, raised the fundamental issue of the balance between the state taking responsibility for healthcare and individuals taking responsibility. We have often been long on rights and short on individual responsibilities. Other noble Lords have mentioned alcohol, smoking, diet, exercise and personal responsibility. That issue would benefit from more debate. There is a social contract between the state and the citizen—a contract which often seems to be very one-sided.
There is a strong moral argument for the NHS. In the latest opinion poll on the question whether people wish to have a tax-funded system, free at the point of use, providing comprehensive care to all citizens, about 90% of people were in favour of what we have. To some extent you can phrase the question to get the answer you want; however, it is remarkable that a state-run monopoly, after some 70 years, still has the degree of public support that the NHS has. To some extent, we tinker with the NHS at our peril. It is one of the only institutions we have that provides the same care—or service—to rich and poor, the lucky and the unlucky, to people born with a good genetic inheritance and those who are not. It is part of the glue that holds our society together, and I would not wish to be responsible for weakening those links. So, we have to be very careful in the messages that we give out as politicians.
However, I have listened to the debate and the strength of feeling about whether we should take a longer-term view that goes way beyond this Parliament. The sustainability of the health service is an issue that extends out 20 years, probably, but it is one that every developed country faces. I would like to meet the noble Lord, Lord Patel, and maybe two or three others, to discuss this in more detail to see whether we can frame some kind of independent inquiry—I do not think that it needs to be a royal commission. We are not short of people who could look at this issue for us; there are health foundations, such as the Nuffield Trust and the King’s Fund. The issue is: what will the long-term demand for healthcare be in this country in 10 or 20 years’ time? Will we have the economic growth to fund it?
At heart, our ability to have a world-class health system will depend on our ability to create the wealth in this country to fund it. I am personally convinced, having looked at many other funding systems around the world, that a tax-funded system is the right one. However, if demand for healthcare outstrips growth in the economy for a prolonged period, of course that premise has to be questioned.
In conclusion, perhaps I might address issues such as whether there should be an independent inquiry with the noble Lord, Lord Patel, after today’s debate. I thank all noble Lords who have contributed to the debate for raising some very important issues.