National Health Service

Lord Desai Excerpts

Thursday 8th January 2015 Lords Chamber

[Lord Desai (Lab)]

My Lords, it is a great pleasure to follow the noble Lord, because he has taken the discussion in the direction that I wanted to take it. I start by saying that the NHS is a miracle; it has a great staff. It works by consensus, but, as Lord Bauer, who was here some years ago, used to say, the more we are similar, the more we exaggerate our differences. The differences that we have over the NHS are actually very small, but it pays us politically to exaggerate how large they are. For as long as I have lived here and taken part in debates on the NHS, it has always been in crisis. I do not remember a single debate in which everybody said, “Isn’t it great? Things are fine. Everybody is happy. Nurses’ and GPs’ morale is no longer shattered”. It never works like that. We can live with this miracle only by being dissatisfied with it constantly.

There will always be the cliff-hanger idea that there is not enough money. There is absolutely no way of having enough money in a zero-price service which will not generate excess demand. That is not even elementary economics. If you do not know it, you should not be allowed even to enter a course of economics.

But we have still managed. We have managed to finance the NHS by and large from a single source of funds—although there are peripheral aspects. One problem will be—and this is not a matter of who wins the next election—that there will no longer be the kind of money there was. As I have said in other contexts, we are about to enter a low-growth period for the next 10 or 15 years, and the good times are over. They are not going to come back—this is nothing to do with me, nothing to do with the Labour Party and nothing to do with the Conservative Party—so we will have to think of smart ways of meeting the needs that we will have. Not only is the NHS a zero-price service but the types of demand that it faces are proliferating. People are not only living longer but they want a better quality of life, a better shape and things like that—and then we have to address new problems, for example in mental health.

Let me concentrate on one big lacuna that I see in the system. The system does not ask consumers to do enough. We provide them with a zero-price service, but, in return, the consumer does nothing. The consumer is not asked to look after his or her health, to cultivate good habits of not drinking too much or not smoking too much, or whatever it is. The consumer expects, upon presenting himself or herself, to be treated. In any zero-price industry and with any zero-price commodity, if you are not going to allocate resources by price, there has to be something else to ration, and the rationing that we use is time. Waiting time is one rationing device that we use. As we have seen from recent coverage of the A&E crisis, people feel that if they are asked to wait for hours, it is the end of the world. They should have gone to their GP, as the noble Baroness, Lady Barker, said, but going to their GP is too much of a hassle, so they suddenly present themselves at the cheap option, A&E. But if you have to wait, you should accept the price because you did not invest the time in going to your GP. You think this is cheaper? It is not. You have to pay in extra time.

One thing I have advocated off and on is that patients ought to be made aware of how much things cost. They should not be charged but they should be made aware of the shadow price of the things they get, especially the things they waste. If they do not turn up for an appointment, they should be told what it costs. For a long time, I have advocated that we should give each person a shadow budget per head of NHS spend—perhaps £1,500 or 1,500 points. Every time you go to a GP or anywhere, you have a little Oyster card and it deducts so many points from that amount. You do not have to pay but you will be made aware at the end of the year by getting an account of how you spent your 1,500 points.

People ought to be made aware that these things have different prices. If we can make them at all aware of this, it might change their behaviour. We will need not only more productivity but better behaviour from consumers. We will all have to economise. We cannot let the consumer out of the need to economise to get a better health service. I do not have time to say much more than that, but I hope that if we can change behaviour with shadow pricing in the National Health Service, we will have taken a great step forward.

Funding of Care and Support

Lord Desai Excerpts

Thursday 24th November 2011 Lords Chamber

[Lord Desai]

My Lords, first, I must say that Andrew Dilnot has written a good report, but I am going to be more critical of the proposal than most noble Lords have been so far. That is not because I do not recognise that there is a great and growing need, and that a civilised society should of course take care of people in need. But we have to face the fact that we are at a juncture where we have severe problems in our public finances. It is not just the coalition Government who have done this thing. We have undersaved for practically a generation. We—not just the UK but the developed economies as a whole—now face a serious crisis in that, unless we tackle undersaving, we will not be able to survive further into the 21st century. Our dependency ratio will rise. Noble Lords have already pointed out how many more people will be aged over 65 and how many people will live to 100. That is all very good, but the working population in proportion to the people to be taken care off will be small, and if we continue to have this ludicrous policy on immigration, it will not get any better internally.

My noble friend Lady Bakewell said, as often people say, “I have paid taxes all my life, why can't I be taken care of?”. The bad news is that your taxes are not adequate to take care of you when you need help. I am sorry about that. That is the reality. We find the same crisis in pensions. The pension that you have accumulated over a working life is no longer adequate to pay for the long after-work life that you will have. Once upon a time, when Beveridge put in his proposals, the working man lived three years beyond retirement. It was easy and the pension funds were flush with money. Now, you probably work for say 35 years and live for another 25 to 30 years. It is difficult to devise a system of pensions unless you have saved a lot of money to begin with, which will make it feasible for you to have a comfortable life later on. Somebody has to be the hard man and I will choose to be the hard man here.

At the very least, the cap should be indexed. I will come on to what my noble friend Lord Lipsey said, but we should make it quite clear that the cap of £35,000 cannot be kept constant. It will have to be indexed either to prices or earnings; whichever the Government find more money-saving.

Secondly, my noble friend Lord Lipsey said some very good things about this. There is a market failure in the social care insurance business. Of course, as many noble Lords have already said, it is because people confuse social care with health and they think that health is taken care of. Therefore they think, “Why am I not looked after for this?”.

We have to incentivise the buying of social care insurance at a very young age by people. The way to incentivise it, although I have not worked it out, would be that the amount of cap you get later would be related to how much preparation you have made earlier. If you have actually taken care of some of your needs, then we will help you along. That is not to say that we will not help other people, but ultimately this proposal, as many noble Lords have said, is benefiting the better off. To the better off we will say, “Prepare early on. You may be only 25 now, but if you recognise that you will face problems when you are 70, there will be schemes and there could be some government help for you”.

One of the other problems that we will have is that while we have not saved very much, we have been beguiled into thinking that buying a house is buying an appreciating asset. If you buy a car, you do not think that the car will appreciate as an asset. Why do we all think that a house should appreciate because of inflation? Asset price inflation will not go on. A house will not be the kind of wealth that will support you. It ought not to. We ought not to be living with the continuous asset price inflation that we have seen. Equity release will not be a way out in the future.

Given all these problems, I hope that the Government will accept some version of Andrew Dilnot’s report because we cannot again kick the problem into the long grass and come back to it in several years. That is not possible. We have to start with Dilnot and examine whether £35,000 is the right amount and whether we should index it, or whether £100,000 is the right amount and should we reduce it, especially given that the rich not only have more assets than the poor but they live longer. Both ways, there is this kind of regressive redistribution.

Therefore, we have to be very careful and examine the long-run economics, and the projections in Dilnot are not enough. The long-run economics in the general macroeconomic context are what we can afford and who will pay what in a carefully humane way. But let us not get carried away and let us not land ourselves with yet another bankruptcy-making proposal.