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- The Reformer Blog
10 May 2013
Blog following Reform’s recent report, Seismic shifts in the welfare state.
Reactions to the Queen’s Speech have been as much about what was left out as what was left in. Yesterday, David Cameron told Ministers he had left out issues such as the price of alcohol and cigarette packaging so as to not distract from working towards economic recovery. Today divisions have emerged over the lack of an EU referendum. But there was one more crucial omission: reforming the funding of the NHS.
The Queen’s Speech was full of good intentions. The Government is right to try and tackle the cost of pensions; but in reality the triple lock will come to cost the Chancellor an extra £10 billion a year. The Care Bill is also an important step to get people paying for more of the cost of their social care. But with the social care budget standing at a sixth of the size of the NHS budget, the lack of a debate around how the NHS should be funded is thrown into sharp relief.
As Reform’s recent report, Seismic shifts in the welfare state, argues the NHS has become an increasingly important part of what families get out of the welfare state, particularly the elderly. Figures from the Office for National Statistics show that the net transfer to the average retired family has almost doubled in the last two decades, from £5,420 in 1990 to £10,009 in 2010. A key factor behind this increase has been the rise in benefits in kind (services such as education and health), the most significant of which is the NHS. For pensioner households, spending on the NHS now accounts for around 95 per cent of the benefits in kind that they receive.
This means that new ways of funding the health service will be essential. All countries are struggling with the challenge of designing an affordable health system that is capable of meeting the costs of rising and ever more complex demand. For the UK this firstly means finding new ways to bring private money into the system. Mixed provision can bring both affordability and greater consensus around what the government can afford to provide. Yet whilst OECD countries spend an average of 2.7 per cent of GDP on healthcare privately, the UK spends only 1.6 per cent. Alternative funding arrangements such as user charges will have to be part of the broader discussion if the challenge of rising demand on services is to be met.
The ring-fence around the NHS budget has been a barrier to meaningful debate about how to reform healthcare. Applying the same fiscal scrutiny to the NHS as to the police or local government could drive innovations in the NHS that are being seen in other public services. Yet even the so-called “National Union of Ministers” has side stepped the issue, calling for money to be moved between budgets by redefining responsibilities for certain activities rather than removing the ring-fence altogether. This is no substitute for a coherent approach to public spending across the board.
Ultimately, there is a recognition that spending on the NHS and on the elderly more broadly will have to go down. All parties however are reluctant to admit this as they run scared from the elderly voting bloc; in the 2010 election around 1 in 4 voters was aged over 65. By 2050 this will be around 1 in 3. But the evidence suggests that waiting is a gamble that won’t pay off. When it comes to spending on the elderly, whether that is in the form of pensions or the NHS, there is a growing gap between what the public expects and what the state can afford. With debt at a 40 year high, this gap will have to close. The Queen’s Speech was a missed opportunity to begin this historic change to the welfare state. The Spending Round must do better.
Cathy Corrie, Senior Researcher, Reform