NHS and Social Care: Winter Service Delivery

Lord Macpherson of Earl's Court Excerpts

Thursday 25th January 2018 Lords Chamber

[Lord Macpherson of Earl’s Court (CB)]

My Lords, we may or may not be experiencing one of those periodic crises that beset the NHS and the social care sector every 10 years or so, and by the time we know for certain it will be too late to do anything about it. Indeed, even if the Government announced another £1 billion of spending today, the lead times are such that it would not have any impact until well into the next financial year. However, if there is not a crisis this year, it will happen next year or the year after that.

The coalition Government were right to try to secure efficiency improvements out of the NHS and social care sectors, but the squeeze has gone on for too long. Although the Chancellor announced more money in his recent Budget, it was more a temporary sticking plaster than a permanent solution to NHS finance problems. The NHS will come under further pressure in the years ahead as the demographic pressures long predicted by the independent OBR and others begin to materialise. Those spending pressures are compounded by the so-called triple lock, which means that pensions and health spending are accounting for an ever-increasing proportion of public spending. It is no longer realistic to cut spending on prisons, the police and defence; they too are under heavy pressure. So something has to give.

The NHS is the last great socialist institution, free at the point of use and based on the principle of command and control. Its founders were wrong when they predicted that better healthcare would reduce demand. The fact is that demand is infinite. We now know that demand increases as society becomes more prosperous so healthcare, under the NHS model, will always be rationed. Governments are inevitably reluctant to admit this but it is a fact, and it may be no bad thing. The NHS is certainly a lot cheaper than the US private system, which is beset by waste caused by supplier-induced demand.

Such is the British people’s attachment to the NHS that I do not think it is realistic to change its founding principles. Of course the NHS could be better managed. For example, we need to find better ways of managing demand. Far too much money is wasted on patients who fail to turn up for appointments. We also need to solve the age-old disconnect between the NHS and social care. I welcome recent government efforts to address this, although there is still more to do, but better management and reform is not going to be enough. If we are to avoid future winter crises, we need to address the funding side of the equation.

Despite the Treasury’s excellent presentation in this year’s Budget, the Chancellor’s proposals effectively financed extra spending on the NHS through higher borrowing. That is not the right approach. The current pressures are structural and on revenue spending. Good stewardship should ensure that structural spending is financed out of higher taxes. It would run against the orthodoxy that I imbibed over 30 years at Her Majesty’s Treasury but I propose a hypothecated tax that would be set at the beginning of each Parliament, informed by independent projections by the Office for Budgetary Responsibility. A new NHS and social care tax would be introduced to fund these additional pressures. It would be based on national insurance contributions, which, incidentally, already include a little-known NHS allocation. Unlike national insurance contributions, the tax would be paid by those above retirement age as well as those below it, and it should be charged on savings, rental and pensions income as well. The fact is that young people are already bearing too much of the burden of funding the elderly. It is time that the old folk put something back. We need greater solidarity across the generations.

This new NHS tax would be separately itemised on people’s pay slips and could be spent only on the NHS and social care. In my view, taxpayers would be more prepared to pay higher taxes if they knew where the additional money that they raised was being spent. A 2% tax, paid by young and old alike on incomes above the lower earnings limit of national insurance, would raise well in excess of £10 billion a year. I hope the Government will give it serious consideration.