Health spending shouldn't be ring-fenced

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In a column in the Yorkshire Post on Saturday, I argued that we could not afford to ring-fence health spending while trying to make big cuts to public expenditure. After all, the NHS is our second biggest expense after social security, eating up more than £100bn of taxpayers' money every year. Moreover, real terms health spending more than doubled between 1999 and 2009, while productivity fell - a clear sign that the health service is not providing value for money. Bearing this in mind, it should be clear that any attempt to dramatically reduce expenditure without looking at the health service is doomed to fail.

Indeed, our most recent report - The Party is Over: A Blueprint for Fiscal Stability - called for a £10bn reduction in health spending over the next five years, as part of a £91bn package of cuts that are needed to eliminate the budget by 2015. But how could these savings be achieved? In the Yorkshire Post, I suggested that payroll and bureaucracy was the place to start, and pointed to potential savings from a mixture of pay cuts and pay freezes, almost halving the number of managers in the NHS (i.e. returning us to 1999 levels), and getting rid of the Strategic Health Authorities. But I also made it clear that this would not be enough:

But this kind of tinkering only takes you so far. Because one of the other lessons we need to learn from Canada and Sweden is that making spending cuts sustainable in the long run means completely re-thinking the role of government, what it does, and how it does it.

When it comes to health, the key question we need to ask is this: can we still afford to provide everyone with comprehensive healthcare, free at the point of use? Or should we focus scarce resources on those most in need, using government as a safety net and guarantor of minimum standards, rather than a provider of universal services?

Our answer will become increasingly important in the years ahead, as baby boomers age and technological advances drive a spiralling burden on taxpayers. And yet, in a way, the question is misleading. The NHS has not been truly comprehensive and free at the point of use since 1951, when charges were introduced for prescriptions, dental care, and spectacles.

For now, we should take that precedent and run with it, gradually introducing user charges throughout the NHS. Britain is virtually unique in the world for not charging people to visit their GP, for instance, and even a modest fee of £10 would save the NHS around £1.5bn a year.

Direct payment would have a powerful effect on the way people see the NHS. Realizing that healthcare is never really ‘free’ would make them use services more judiciously; knowing they would bear some of the cost of their lifestyle choices might also encourage people to take greater responsibility for their own health.

Eventually, most medical services could be paid for directly by patients, with various exemptions and spending caps in place to ensure that the disadvantaged do not suffer unfairly. The NHS would become a ‘people’s insurance policy’, covering Britons against unpredictable, big-ticket health expenses, and ensuring no one went without, but no longer providing comprehensive services itself.

Of course, there’s no question that these are radical suggestions. But the government has promised us a ‘once-in-a-generation’ re-think of government. Will it be brave enough to think the unthinkable?