24 May 2018

The last thing the NHS needs is more funding


The IFS has released a report today calling for an increase in taxes to fund the NHS. This would amount to a four per cent increase in health spending and cost £2,000 per household.

This is the same old story. Hardly a day goes by without stories of how cash-strapped the service is and how it is on the brink of collapse. According to pretty much everyone in the newspapers, on the TV, and on social media the solution is simple – more money. The IFS is just the latest voice in a cacophony of pleas for more spending.

The NHS is certainly in a sickly state, but more money is not the solution. International league tables frequently rank the NHS near the bottom in terms of healthcare quality. Moreover, the UK ranks 19th out of 23 for mortality amenable to healthcare and 20th out of 24 developed countries for cancer survival. The failings of the NHS are perhaps best summed up by The Guardian‘s reporting of the Commonwealth Fund study: “The only serious black mark against the NHS was its poor record on keeping people alive”.

However, calls for increased funding – and a tax hike to pay for it – are wrong.

A specific ‘NHS tax’ is a particularly bad idea. If it doesn’t raise enough revenue then it will have to be topped up by other taxes.What’s more, there is already a hypothecated tax for health and welfare – national insurance contributions. NI was originally introduced to pay for things such as free healthcare, but it did not raise enough, so money had to be found from elsewhere.

Calling for higher taxes also fails to take into account our already high level of taxation. Not only does this have a negative impact on the economy, but it also places additional pressure on household budgets. The cost of living crisis is the number one concern for voters – especially the young. Hiking taxes would not only make life even harder for a lot of people, it would also come at a huge political cost.

And the evidence is clear that throwing more money at the NHS is not an adequate solution. Scotland spends more money per capita on healthcare than England, but has longer waiting times for appointments and slower response times for ambulances.

A report by the National Audit Office found that as funding has increased, productivity has gone down. As the head of the NAO Amyas Morse observed in 2010: “Over the last ten years, there has been significant real growth in the resources going into the NHS, most of it funding higher staff pay and increases in headcount. The evidence shows that productivity in the same period has gone down, particularly in hospitals.”

The NHS has low productivity, it is inefficient, and is slow to embrace technological change. It still uses antiquated operating systems and holds the dubious title of the world’s largest purchaser of fax machines.

A report by DeepMind Health concluded that “the digital revolution has largely bypassed the NHS”. The report also stated: “many records are insecure paper-based systems which are unwieldy and difficult to use”. The review uncovered evidence of doctors, frustrated with the system, using SnapChat to send patient scans to one another.

The UK has a booming life science industry with many companies producing innovative products which could improve patient outcomes in a cost-effective way. However, these innovators face real barriers to entry into the NHS. For example, there is a lack of consensus about what “good looks like” with respect to evidence, meaning innovators struggle to scale from one NHS trust to another. Some trusts impose their own standards and so the companies have to demonstrate the value of their product all over again. Then there are the poor procurement practices. Many parts of the NHS, including many trusts, rely on large IT vendors, some of whom operate out-of-date business models and closed systems.

And although the NHS has made some positive steps on spending, such as clamping down on prescriptions for items that are readily available at the supermarket, it still needs to go much further.

Last year the health service wasted £160m on pills which patients didn’t need, £300m on unnecessary admin. another £300m on treating infections after hip and knee operations and £18 million on crutches and wheelchairs which patients failed to return. There are also discrepancies between the different trusts in terms of paying for items such as artificial hips, with the trust purchasing the largest number getting the worst deal.

There are real issues with productivity, inefficiency, and wasteful spending. Increasing funding would not only be ineffective, but there is also evidence to suggest that it would exacerbate the worst practices.

Instead of allocating the scarce resources to the most effective hospitals, extra money is generally used to prop up failing trusts and hospitals. As Dame Julie Moore, the Chief Executive of the Queen Elizabeth Hospital in Birmingham has said “The NHS at its best is amongst the best in the world. However, it is patchy…Putting more money in has sometimes actually led to some of the problems, in that you’ve artificially propped up some of the hospitals that really are not sustainable.”

Free, universal healthcare is a good thing. It is a sign of a civilised society that it looks after the sick without forcing them to pay. As such, a US-style system would be completely unacceptable. Instead, we should look to other European systems such as Sweden where they have free universal healthcare, but with a significantly higher proportion of private provision than in the UK.  The same is true and Germany, where care is free and universal, but delivered through an insurance system.

Indeed, the vast majority of developed economies provide their citizens with free and universal healthcare, just like the UK. However, they differ in that they have more private sector involvement and the state does not have a monopoly. Private sector involvement increases innovation and competition, which keeps cost low and improves patient outcomes.

If we want to keep providing free healthcare for all and avoid the “decade of misery” portended by the IFS, then the NHS needs to change. It needs to tackle its issues with productivity and inefficiency. It needs to drop the barriers to entry for companies providing exciting and innovative healthcare solutions. It needs to stop wasteful spending and increase private sector involvement – whatever the howls of outrage this would provoke from Labour.

Until these serious issues are addressed then simply pumping in more money will be about as effective as homeopathy. What is more, to pay for it through a tax hike would be economically damaging and would place even more pressure on household budgets.

The NHS is sick. Tax hikes and more money are the wrong medicine.

Ben Ramanauskas is Policy Analyst at the Taxpayers' Alliance.