Comparative Healthcare Economics/NHS Finance

Jo Churchill Excerpts

Tuesday 7th June 2016 Commons Chamber

[Dr Murrison]

I think the hon. Gentleman and I are on the same side of the Brexit debate, and I certainly would welcome the extra money that would be spent on the NHS in the event that we leave the European Union, so fingers crossed for 23 June.

The Health Consumer Powerhouse report highlights poor accessibility and an “autocratic top-down management culture” here, in contrast to top-performing Holland’s removal of what Health Consumer Powerhouse calls “healthcare amateurs”—that is to say, politicians and bureaucrats—from decision making. Unhappily, that sounds rather familiar. Earlier this year, Dame Julie Moore slated fellow senior NHS managers for “gross incompetence” and poor leadership.

The question is, what, apart from its management, accounts for the UK’s lacklustre ranking? Despite the UK’s innovative cancer drugs fund, Health Consumer Powerhouse found, for example, relatively poor availability of the latest oncology interventions and therapeutics, including radiotherapy. Sadly, that rings true, and we remember the high-profile case of Ashya King, the five-year-old with medulloblastoma, who was taken by his parents in 2014 from Southampton general hospital to Spain and then the Czech Republic for proton beam therapy, which was not available here.

The much-vaunted Commonwealth Fund report that some use to claim that the NHS is super-efficient and effective actually contains just one element that deals directly with health outcomes—a composite of deaths amenable to medical care, of infant mortality and of life expectancy at 60, it puts the UK 10th out of 11, the US being bottom. Tenth out of 11 sophisticated healthcare economies is not where I want the UK to be, and not where the Minister wants the UK to be either. The British public would expect us to be doing rather better against a raft of healthcare outcomes where the UK is firmly in the wake of our immediate northern-European neighbours France, Germany, Holland, Belgium and Denmark.

Can we explain why UK healthcare outcomes are not as good as those of peer group nations through differences in the level of healthcare funding? We can expect an opinion from the House of Lords, which last week set up a Select Committee under Lord Patel to examine the sustainability of the NHS—that is, the “what next?” question. I would be very surprised if it did not conclude that the answer is to bring spend up to the level enjoyed in countries such as France, Germany and Holland. After all, closing the gap with the EU15 in health spending as a proportion of GDP was a goal explicitly set in 2000. However, Conservative Members tend to be somewhat wary of making spend a proxy for outcome. It is not enough just to write big cheques and consider the job done. Can we do better with what we have? There are apologists for our low spending on health who cite the supposed efficiency of the NHS, but simply asserting that the NHS is more efficient than health services in other countries does not make it true.

I do not know what is in the Minister’s speaking notes, but there is a very good chance that he will use the New York-based Commonwealth Fund analysis on comparative healthcare to support a contention that the NHS is very efficient and thus ameliorates the relatively low UK spend on healthcare. The report’s methodology rewards close examination. I am sure he will have read it thoroughly, but if not, I commend it to him. In my opinion, its methodology renders the sorts of deductions that have been made unsafe. The only reliable element of the analysis that is used to claim that the NHS is relatively efficient is the percentage of national expenditure spent on administration and insurance, meaning that the UK comes in at fifth out of 11. Given that the nature of our system means that insurance and transactional costs are very low, that is hardly something to crow about. Other markers of efficiency rely on patient and practitioner surveys and include items such as time spent filling out financial transaction forms. UK-relevant metrics, such as rehospitalisation rates, were found to be comparatively poor. I conclude that it would be unsafe to make claims about the relative efficiency of the NHS based on contestable reports like that of New York’s Commonwealth Fund.

Let us suppose for one moment that the NHS is fairly efficient—not very efficient, because Carter and others suggest that that would be unwise, but fairly efficient. Indeed, I have no reason to suppose that it is institutionally profligate. If it is fairly efficient, we will not be able to squeeze many more efficiencies from it beyond the Stevens assumptions, but we will still be left with relatively poor outcomes and still needing to know “what next?” Simon Stevens still believes that we can squeeze £22 billion in efficiencies from the NHS. Much of this, presumably, is predicated on productivity gains that are contingent on holding down salaries and wages—a challenge if incomes in the economy rise. This is what I think he means by “strong performance”—strong indeed, because the implied productivity gains of 2.4% are well in excess of anything that has been achieved by the NHS historically and well beyond expectations for the wider economy. It also depends on sustained spending on social services and public and preventive health. Both, in the event, have been impacted by cuts to local government funding—cuts that I supported and accept were entirely necessary to repair the public finances, but cuts nevertheless.

So “what next?” will inevitably mean a step change in input—in money—if not by the end of the five year forward view period, then without doubt during the next decade and beyond. Here again, it is instructive to look across the channel, where we find some good news for Ministers. The Office for National Statistics has just tweaked its approach to health accounting to comply more closely with that of the OECD, and obligingly, this increases the UK’s spend on public and private healthcare combined from 8.7% of GDP to 9.9%. Most of this is due to re-badging a slice of publicly funded social care as healthcare spend. Of course, none of this accountancy changes by one penny the amount spent on care, but it impacts on the international spending league table. It means that we overtake southern European countries such as Spain, Portugal, Italy and Greece. However, we still lag well behind Germany, France and the Netherlands—my chosen basket of similar European countries.

So what next? Data from the Kings Fund and the Institute for Fiscal Studies suggest that income tax must rise by at least 3p in the pound simply to offset the fall in NHS spending as a proportion of GDP predicted over the rest of the decade. But all that will do is arrest the UK’s relative downward trajectory towards being the sick man of Europe. To bring spend up to the EU15 average would now involve an 8p increase. That eye-watering sum may be toned down a little bit by the new Office for National Statistics method for calculating healthcare spend, but probably not greatly if the comparison we actually want to make is with our closest European neighbours France, Germany and the Netherlands.

So, if we accept that big fistfuls of money are needed, the question becomes, “How are we to get it?” The Labour party does not know. It has yet to say how much it thinks the NHS budget should be, despite every encouragement from me and others to do so. All we know is that the party opposed the Stevens uplift at the general election. Maybe the unaccustomed reticence about pledging money from the party of fiscal incontinence is an indication of the sheer scale of the spending challenge that even Labour has perceived in a rare lucid moment.

Although I have every confidence in my right hon. Friend the Chancellor, a precipitous growth in the economy seems unlikely, and further borrowing should not be an option. In fact, half the £350 million per week that we send to the EU—a figure, net of rebate and subsidy, that I personally rely on—would, by my reckoning, halve the difference. I fervently hope that it will be in play after 23 June, but it would still leave a gap. How will that gap be closed? It is said that if we want a social healthcare system, we must choose between Bismarck and Beveridge. For my part, I cannot see how the transaction costs implicit in insurance-based models or large-scale schemes of co-payment would improve productivity or efficiency in our NHS—this despite the fact that the UK healthcare economy is distinguished from others by the small scale of its private provision.

For me, the Bismarck versus Beveridge debate is pretty much settled. However, I would expect a commission to examine all possible funding streams, drawing on experience from other countries. I would expect it to look closer to home at incentives that can be given to encourage subscription to mutuals, such as the Benenden Healthcare Society, formed in 1905 by and for Post Office workers, whose headquarters in York I visited recently.

But affirming that the great bulk of healthcare in the UK should continue to be funded through general taxation does not just mean more of the same. A variable hypothecated tax would be an easier sell to the public than a general tax hike. Treasury officials, or course, hate hypothecation, but the Treasury has been softening its approach in recent years and we are now, of course, wedded to the far less economically literate practice of hypothecated spend as a proportion of GDP for selected areas of public expenditure. Despite the Treasury’s reluctance, if we are talking about several pence in the pound to bring UK health spending up to the average of neighbouring similar countries, we have to find a politically acceptable and publicly palatable way of doing so. Either way, gathering a consensus on this most sensitive and complex of public policy areas, using a vehicle on a spectrum from royal commission to non-departmental public body, surely makes sense. As a model, may I suggest the influential Pensions Commission, chaired by Adair Turner, during the last Labour Government?

If the NHS is the closest we have to a national religion, its critical friends are often seen as heretics. We saw that even at the height of the Mid Staffs scandal. How, then, are we to uphold this rallying point for national morality, decency and righteousness with the more prosaic imperatives to save and lengthen life, make sick people better, prevent ill health and match health outcomes in comparable countries? I hope that the Minister will agree that the proposal for a commission and associated national conversation—made by me and others in this House, in the other place and elsewhere—has merit. I warmly congratulate Ministers on successfully arguing the NHS’s corner at a time of austerity. However, I urge the Government to give serious thought to establishing a commission that will examine how we can properly and sustainably fund healthcare and close the widening gap that exists between us and our European neighbours.

[Jo Churchill (Bury St Edmunds) (Con)]

I do not think that a commission is the right way to go, but does my hon. Friend agree that we sit on a new horizon, with molecular diagnostics, personalised medicine and so on, and that it is really important that we take a broader look at what our healthcare needs will be in future and how we can embrace more self-responsibility and new techniques for ensuring good patient outcomes? I said in this place in 2010 that we were lagging behind; sadly, we still are.

[Dr Murrison]

My hon. Friend is absolutely right: we are lagging behind. I hope that in the course of my remarks I have made it very clear that we are lagging behind countries with which we can reasonably be compared, particularly Germany, France and the Netherlands. The challenge is to bring our spend up to that level and to anticipate new developments and technologies. We should welcome that, because it will extend our lives and it will make us healthier for longer, but we do have to decide where the money will come from. Since the sums, I fear, will be so great, I believe that a commission would be a reasonable way to approach this matter and to have the conversation with the public about how the money will be raised.

The sands are fast running through the five year forward view hourglass. I believe it is time for Ministers to consider, “what next?”