Healthcare Austerity 2.0

The effects of austerity and budget cuts for NHS England, health policy and the health sector.

Dear Chief Secretary, I’m afraid there is no money. Kind regards –and good luck!” So read the note left by outgoing Labour treasury minister Liam Byrne to his coalition successor following the 2010 General Election.

The coalition government has held this note up as a signal of the last government’s profligacy in office, a justification for coalition cuts and a symbol of the Labour Party’s callous disregard for the consequences of the economic contraction it presided over.

Embarrassingly for the coalition, current Treasury Chief Secretary Danny Alexander may well leave the same note for his own successor following next year’s election. This has profound repercussions for health policy and the health sector in the period 2015-20. Despite its budget being ring-fenced from the cuts, NHS England has predicted that it will face a funding gap of £30bn by 2020.

Whoever wins the next election will have to either deliver further cuts or find new taxes and charges to fill this black hole. This harsh reality is compelling both major parties to think the unthinkable on health policy. Labour’s Shadow Health Secretary Andy Burnham has ambitious plans for the NHS. He plans to integrate health and social care into a single, unified ‘whole life’ service. The policy is designed to address the challenges posed by the fact that, by 2030, the number of people aged over 80 in the UK will double to six million.

However, it raises far more questions than it answers on the issue of funding. That is why, according to a number of reports, the Labour high command is currently debating whether or not to make an election pledge that they will raise income tax specifically to fund a revolution in care for the elderly. Many in the party fear that such an open commitment could cost them the next election in the same way that accusations of an impending ‘tax bombshell’ cost the party power in 1992.

Certainly Conservative election strategist Lynton Crosby would have a field day attacking such a policy but it is worth remembering that in the 1990s a pledge to add 1% to income tax to fund education by the Lib Dems added to the party’s popularity rather detracted from it. The Conservatives are also wrestling with their own solutions for squaring a rising healthcare bill with the need to reduce spending overall. Conservative MPs continue to question how long the ring-fencing of both the NHS and the aid budget can last when other departments – including those closer to Tory hearts, such as defence – are being cut to the bone. It is in conservative-leaning think tanks, however, where the real revolution is being plotted.

Respublica, the think tank founded by ‘Red Toryism’ advocate Philip Blond, recently published a pamphlet urging the mutualisation of healthcare, with friendly societies and other mutual playing a valuable role in integrating services. Reform, a centre-right think tank that counts a number of ministers and former ministers amongst its alumni, has gone further, publishing a report (co-authored by former Labour health minister Lord Warner) that proposes a range of patient charges and higher ‘sin’ taxes on tobacco, alcohol and sugary foods. Reform calculates that a £10 charge for missed GP appointments could net the NHS £55m whilst a £10 ‘hotel charge ’for overnight stays in hospital could bring in between £93m and £196m and reform of the prescription charges regime could generate up to £1.9bn.

The Conservatives have long debated the introduction of charges within the NHS but have always shied away from doing so, fearing the public backlash that it would incur from the public. Even with a recovering economy, it is clear that both major parties not only face some hard choices after 2015 but must each resolve their own internal schisms that pit cherished ideology against much-desired popularity. Whoever wins, expect sacred cows to be challenged.

This article was first featured in the May print edition of Healthcare Business News

James Ford is a Senior Adviser at PLMR. Previously he was an aide to Mayor of London Boris Johnson, advising him on transport, digital and environment policy between 2010 and 2012.

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