Queen’s Speech

Lord Taverne Excerpts

Thursday 19th May 2016 Lords Chamber

[Lord Taverne (LD)]

My Lords, I want to follow the excellent speech made by my noble friend Lady Walmsley and discuss the question of the future of health and social care. Our National Health Service is heading for a crash and it may come sooner than even the pessimists fear. You cannot run a viable health service if the Government are committed to reducing their share of national income while health costs increase much faster than GDP, but that is what is happening. Health costs are rising inexorably because the population is ageing, new lifesaving drugs are expensive, the needs of mental health and many other urgent demands have been neglected and so require more funding. More and more hospitals are piling up huge deficits. Yet according to the Office for Budget Responsibility, the share of GDP allotted to the NHS will decline from 6.1% in 2014-15 to 5.4% in 2020-21, the lowest of any comparable country in the European Union. At the same time social care, which also desperately needs more money, as the Barker commission showed, faces draconian cuts. Social care and health cannot be separated. How else can the problem of, for instance, bed-blocking ever be solved?

The Government claim that efficiency savings will keep the NHS afloat, but even a miraculous leap in efficiency greater than anything experienced to date cannot close the huge gap between health and social care needs and what the Government are prepared to spend. What is required is a new cross-party commission on the future of health and social care, as advocated by Norman Lamb and others. But the NHS as we have known it will cease to exist long before any commission has had time to report, which is likely to take years.

To survive, the NHS needs a substantial injection of extra funds in the next few years. Unfortunately, the Conservative manifesto has committed the Government to not increasing income tax, corporation tax, VAT or national insurance contributions, so where can the money for health and social care be found? There is only one source left: a new, reformed national insurance system, earmarked specifically and exclusively for health and social care. Of course, the Treasury strongly dislikes hypothecated taxes. Indeed, they reduce government flexibility and the ability to allocate tax receipts according to spending priorities and best value for money. There are other, technical objections, but they are not insuperable.

There is one overwhelming argument for a system of especial health and social care contributions. According to opinion polls, people seem far more willing to pay additional money to fund the NHS, which is still regarded as a national treasure, than taxes in general. Indeed, in 2002, when Gordon Brown, with some hesitation, increased NICs by a penny to finance extra spending on the NHS, he was surprised to find that it was very popular. Of course, in the event, less than half the proceeds went to their declared purpose. Most were swallowed up in the general tax pool.

In fact, NICs no longer make sense. They were originally designed to finance the NHS and pensions—most people believe that they still do—but most of the proceeds go into the general pool of tax receipts. Only some 20% goes to the NHS; 80% of the NHS is financed from general taxation. Likewise, the basic state pension is now almost entirely unrelated to contributions, and is also financed from general taxation. The public are unaware of what they are paying for when they pay NICs, contrary to every principle of a good tax system.

Who should set the health and social care budget and be responsible for its oversight and administration in such a reform? The answer should be a new independent health and social care mutual, as advocated by Frank Field and others, the trustees of which would include not only representatives of the Government and the relevant professions, but members elected by the public. After hearing his speech, I suggest that the noble Lord, Lord Bichard, would be a very good member. It would be part of a new deal between the public, politicians and the NHS.