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Comparative Healthcare Economics/NHS Finance

Volume 611: debated on Tuesday 7 June 2016

Motion made, and Question proposed, That this House do now adjourn.—(Charlie Elphicke.)

I need to start by confessing an interest as a doctor. We are now 18 months into the five year forward view, and the big question really is: what next? “What next?” really means bringing English healthcare outcomes up to the standard enjoyed in peer group European nations, and I am afraid that means much more money. I hope that, in the next few minutes, I can suggest how we might go about achieving that.

The average age of Members of Parliament is 51. That means that most Members of this House have tipped, or are tipping, into the demographic twilight zone in which the incidence of common and chronic diseases begins to accelerate—it is sad but true. That focuses the mind on what a successful healthcare economy looks like and what it delivers for patients.

When those 51-year-olds enter the danger zone in a few years’ time, what will success look like? Success will mean accommodating the great advances in medicine that we believe we are on the cusp of achieving, and that we hope will add years to life and life to years, and I know that my hon. Friend the Minister is particularly exercised about those matters. Success will mean dealing with the healthcare needs of an ageing demographic, an expanding population, and more chronic diseases of lifestyle, which will amount to a 3% per annum uplift in demand, according to NHS England and the Nuffield Trust. Success will mean satisfying the legitimate demands of a less deferential, consumerist, better educated society that will not be content with second best. Success will mean closing the gap between healthcare outcomes here and in northern European countries with which we can reasonably be compared, and therein lies the “What next?”

In July 2010, the Government White Paper “Equity and excellence” exposed relatively poor health outcomes in the UK, compared with other countries. Our healthcare system was delivering poorer results in terms of mortality and morbidity. The most recent OECD statistics, published last year, have confirmed Britain’s relatively poor performance across pretty well the complete spectrum of common diseases—common cancers, ischaemic heart disease, cerebrovascular disease and the rest. Crucially, the number of unnecessary deaths—mortality amenable to healthcare—is substantially higher in the UK than in neighbouring countries.

However, healthcare is not just about reducing deaths. What about other measures of quality? Measures such as post-operative sepsis, pulmonary embolism, deep vein thrombosis, obstetric trauma and diabetic complications are worryingly unimpressive in the UK, compared with countries we would consider to be in our peer group. Although the teenage pregnancy rate has improved in recent years, the UK bumps along the bottom of the EU league table with recent accession states. The list goes on.

The Swedish-based and well-respected, if drug firm-funded, Health Consumer Powerhouse has been reporting on the performance of Europe’s healthcare economies since 2005. The UK’s position in its Euro Health Consumer Index has always been mediocre, but in January the UK was ranked 14th out of 35—just above Slovenia, Croatia and Estonia, and below European countries that most Britons would regard as peers.

I congratulate the hon. Gentleman on bringing this matter forward. This may seem a bit like politicking, but it none the less needs to be said. There is no doubt that the Transatlantic Trade and Investment Partnership has the potential to threaten the very nature of our NHS. What is even clearer is that we are sending millions of pounds every week to the EU that could be invested in our NHS, where that money is much needed. Does the hon. Gentleman agree that there is great potential to properly resource and liberate our great NHS, were we to vote to leave the EU?

I think the hon. Gentleman and I are on the same side of the Brexit debate, and I certainly would welcome the extra money that would be spent on the NHS in the event that we leave the European Union, so fingers crossed for 23 June.

The Health Consumer Powerhouse report highlights poor accessibility and an “autocratic top-down management culture” here, in contrast to top-performing Holland’s removal of what Health Consumer Powerhouse calls “healthcare amateurs”—that is to say, politicians and bureaucrats—from decision making. Unhappily, that sounds rather familiar. Earlier this year, Dame Julie Moore slated fellow senior NHS managers for “gross incompetence” and poor leadership.

The question is, what, apart from its management, accounts for the UK’s lacklustre ranking? Despite the UK’s innovative cancer drugs fund, Health Consumer Powerhouse found, for example, relatively poor availability of the latest oncology interventions and therapeutics, including radiotherapy. Sadly, that rings true, and we remember the high-profile case of Ashya King, the five-year-old with medulloblastoma, who was taken by his parents in 2014 from Southampton general hospital to Spain and then the Czech Republic for proton beam therapy, which was not available here.

The much-vaunted Commonwealth Fund report that some use to claim that the NHS is super-efficient and effective actually contains just one element that deals directly with health outcomes—a composite of deaths amenable to medical care, of infant mortality and of life expectancy at 60, it puts the UK 10th out of 11, the US being bottom. Tenth out of 11 sophisticated healthcare economies is not where I want the UK to be, and not where the Minister wants the UK to be either. The British public would expect us to be doing rather better against a raft of healthcare outcomes where the UK is firmly in the wake of our immediate northern-European neighbours France, Germany, Holland, Belgium and Denmark.

Can we explain why UK healthcare outcomes are not as good as those of peer group nations through differences in the level of healthcare funding? We can expect an opinion from the House of Lords, which last week set up a Select Committee under Lord Patel to examine the sustainability of the NHS—that is, the “what next?” question. I would be very surprised if it did not conclude that the answer is to bring spend up to the level enjoyed in countries such as France, Germany and Holland. After all, closing the gap with the EU15 in health spending as a proportion of GDP was a goal explicitly set in 2000. However, Conservative Members tend to be somewhat wary of making spend a proxy for outcome. It is not enough just to write big cheques and consider the job done. Can we do better with what we have? There are apologists for our low spending on health who cite the supposed efficiency of the NHS, but simply asserting that the NHS is more efficient than health services in other countries does not make it true.

I do not know what is in the Minister’s speaking notes, but there is a very good chance that he will use the New York-based Commonwealth Fund analysis on comparative healthcare to support a contention that the NHS is very efficient and thus ameliorates the relatively low UK spend on healthcare. The report’s methodology rewards close examination. I am sure he will have read it thoroughly, but if not, I commend it to him. In my opinion, its methodology renders the sorts of deductions that have been made unsafe. The only reliable element of the analysis that is used to claim that the NHS is relatively efficient is the percentage of national expenditure spent on administration and insurance, meaning that the UK comes in at fifth out of 11. Given that the nature of our system means that insurance and transactional costs are very low, that is hardly something to crow about. Other markers of efficiency rely on patient and practitioner surveys and include items such as time spent filling out financial transaction forms. UK-relevant metrics, such as rehospitalisation rates, were found to be comparatively poor. I conclude that it would be unsafe to make claims about the relative efficiency of the NHS based on contestable reports like that of New York’s Commonwealth Fund.

Let us suppose for one moment that the NHS is fairly efficient—not very efficient, because Carter and others suggest that that would be unwise, but fairly efficient. Indeed, I have no reason to suppose that it is institutionally profligate. If it is fairly efficient, we will not be able to squeeze many more efficiencies from it beyond the Stevens assumptions, but we will still be left with relatively poor outcomes and still needing to know “what next?” Simon Stevens still believes that we can squeeze £22 billion in efficiencies from the NHS. Much of this, presumably, is predicated on productivity gains that are contingent on holding down salaries and wages—a challenge if incomes in the economy rise. This is what I think he means by “strong performance”—strong indeed, because the implied productivity gains of 2.4% are well in excess of anything that has been achieved by the NHS historically and well beyond expectations for the wider economy. It also depends on sustained spending on social services and public and preventive health. Both, in the event, have been impacted by cuts to local government funding—cuts that I supported and accept were entirely necessary to repair the public finances, but cuts nevertheless.

So “what next?” will inevitably mean a step change in input—in money—if not by the end of the five year forward view period, then without doubt during the next decade and beyond. Here again, it is instructive to look across the channel, where we find some good news for Ministers. The Office for National Statistics has just tweaked its approach to health accounting to comply more closely with that of the OECD, and obligingly, this increases the UK’s spend on public and private healthcare combined from 8.7% of GDP to 9.9%. Most of this is due to re-badging a slice of publicly funded social care as healthcare spend. Of course, none of this accountancy changes by one penny the amount spent on care, but it impacts on the international spending league table. It means that we overtake southern European countries such as Spain, Portugal, Italy and Greece. However, we still lag well behind Germany, France and the Netherlands—my chosen basket of similar European countries.

So what next? Data from the Kings Fund and the Institute for Fiscal Studies suggest that income tax must rise by at least 3p in the pound simply to offset the fall in NHS spending as a proportion of GDP predicted over the rest of the decade. But all that will do is arrest the UK’s relative downward trajectory towards being the sick man of Europe. To bring spend up to the EU15 average would now involve an 8p increase. That eye-watering sum may be toned down a little bit by the new Office for National Statistics method for calculating healthcare spend, but probably not greatly if the comparison we actually want to make is with our closest European neighbours France, Germany and the Netherlands.

So, if we accept that big fistfuls of money are needed, the question becomes, “How are we to get it?” The Labour party does not know. It has yet to say how much it thinks the NHS budget should be, despite every encouragement from me and others to do so. All we know is that the party opposed the Stevens uplift at the general election. Maybe the unaccustomed reticence about pledging money from the party of fiscal incontinence is an indication of the sheer scale of the spending challenge that even Labour has perceived in a rare lucid moment.

Although I have every confidence in my right hon. Friend the Chancellor, a precipitous growth in the economy seems unlikely, and further borrowing should not be an option. In fact, half the £350 million per week that we send to the EU—a figure, net of rebate and subsidy, that I personally rely on—would, by my reckoning, halve the difference. I fervently hope that it will be in play after 23 June, but it would still leave a gap. How will that gap be closed? It is said that if we want a social healthcare system, we must choose between Bismarck and Beveridge. For my part, I cannot see how the transaction costs implicit in insurance-based models or large-scale schemes of co-payment would improve productivity or efficiency in our NHS—this despite the fact that the UK healthcare economy is distinguished from others by the small scale of its private provision.

For me, the Bismarck versus Beveridge debate is pretty much settled. However, I would expect a commission to examine all possible funding streams, drawing on experience from other countries. I would expect it to look closer to home at incentives that can be given to encourage subscription to mutuals, such as the Benenden Healthcare Society, formed in 1905 by and for Post Office workers, whose headquarters in York I visited recently.

But affirming that the great bulk of healthcare in the UK should continue to be funded through general taxation does not just mean more of the same. A variable hypothecated tax would be an easier sell to the public than a general tax hike. Treasury officials, or course, hate hypothecation, but the Treasury has been softening its approach in recent years and we are now, of course, wedded to the far less economically literate practice of hypothecated spend as a proportion of GDP for selected areas of public expenditure. Despite the Treasury’s reluctance, if we are talking about several pence in the pound to bring UK health spending up to the average of neighbouring similar countries, we have to find a politically acceptable and publicly palatable way of doing so. Either way, gathering a consensus on this most sensitive and complex of public policy areas, using a vehicle on a spectrum from royal commission to non-departmental public body, surely makes sense. As a model, may I suggest the influential Pensions Commission, chaired by Adair Turner, during the last Labour Government?

If the NHS is the closest we have to a national religion, its critical friends are often seen as heretics. We saw that even at the height of the Mid Staffs scandal. How, then, are we to uphold this rallying point for national morality, decency and righteousness with the more prosaic imperatives to save and lengthen life, make sick people better, prevent ill health and match health outcomes in comparable countries? I hope that the Minister will agree that the proposal for a commission and associated national conversation—made by me and others in this House, in the other place and elsewhere—has merit. I warmly congratulate Ministers on successfully arguing the NHS’s corner at a time of austerity. However, I urge the Government to give serious thought to establishing a commission that will examine how we can properly and sustainably fund healthcare and close the widening gap that exists between us and our European neighbours.

I do not think that a commission is the right way to go, but does my hon. Friend agree that we sit on a new horizon, with molecular diagnostics, personalised medicine and so on, and that it is really important that we take a broader look at what our healthcare needs will be in future and how we can embrace more self-responsibility and new techniques for ensuring good patient outcomes? I said in this place in 2010 that we were lagging behind; sadly, we still are.

My hon. Friend is absolutely right: we are lagging behind. I hope that in the course of my remarks I have made it very clear that we are lagging behind countries with which we can reasonably be compared, particularly Germany, France and the Netherlands. The challenge is to bring our spend up to that level and to anticipate new developments and technologies. We should welcome that, because it will extend our lives and it will make us healthier for longer, but we do have to decide where the money will come from. Since the sums, I fear, will be so great, I believe that a commission would be a reasonable way to approach this matter and to have the conversation with the public about how the money will be raised.

The sands are fast running through the five year forward view hourglass. I believe it is time for Ministers to consider, “what next?”

I thank my hon. Friend the Member for South West Wiltshire (Dr Murrison)—my honourable and clinical friend—for bringing this debate to the House. I am only sorry that there are not many more people here this evening, because this subject goes to the heart of the prosperity, sustainability, health, wealth and resilience of our economy and society in the 21st century. I am very grateful that he has raised it.

This subject raises, and my hon. Friend has raised, a number of important issues. I start by pointing out that our ability to fund the NHS is profoundly based on our ability to run a strong economy. Without getting distracted into discussing the merits of the case for Brexit, I would just say that it is very difficult to find any serious commentator who thinks that leaving the European single market would be good for our economic growth prospects. It would therefore have a direct impact on our ability to fund the NHS.

My hon. Friend made a number of important points. He rightly flagged up the importance of outcomes not inputs, and said that we should be driven not by inputs, but by outputs. He spoke of a better use of existing budgets, as well as the need for new money. He mentioned the importance of new care pathways that are changing the way we diagnose and treat disease, and indeed prevent disease in the first place. He also spoke of the importance of technology and productivity in allowing us to get more health for every pound that we spend. The mission that I am delighted to say sits at the heart of the new portfolio that I hold as the first Minister for Life Sciences is to accelerate the uptake of innovation in our healthcare system to help us deliver more health for every pound, and to generate more pounds from our life sciences and health technology sector to help pay for our growing health costs as a society.

My hon. Friend touched on the fact that we have always had a mixed healthcare economy in this country—a mixture of public funding, charitable funding and some private funding. That mixed economy is mirrored across Europe, with different countries having different balances. He raised the equally important issue of health and care integration, and how as an ageing society we can tackle that challenge.

In the short time available, I want to say something about international health comparisons, which my hon. Friend raised, health outcomes and what the Government are doing. He mentioned the 2010 Government White Paper, “Equity and excellence: Liberating the NHS”, in which it was acknowledged that more needed to be done to improve health outcomes in comparison to other countries. It stated:

“Compared to other countries…the NHS has achieved relatively poor outcomes in some areas. For example, rates of mortality amenable to healthcare, rates of mortality from some respiratory diseases and some cancers, and some measures of stroke have been amongst the worst in the developed world.”

I do not shy away from that. We are in the process, with NHS England, of gripping those issues.

It is true that the NHS has, at times, scored relatively poorly on being responsive to particular patient groups. We have had problems with MRSA that were worse than the European average. There is some international evidence that shows that we have much further to go on managing care more thoroughly. For example, the NHS has had high rates of acute complications of diabetes and avoidable asthma admissions.

I do not for a minute come here tonight to pretend that everything is perfect. But the truth is that it is difficult to compare like for like, as all healthcare systems are different and there are many ways to compare them. For example, the OECD’s latest report on amenable mortality rates shows that the UK has average rates of amenable mortality in the OECD, and is not among the worst in the developed world, as has been suggested at times. The NHS has been ranked first overall in the Commonwealth Fund report. I accept my hon. Friend’s point about the report only measuring certain factors, but on quality, access and efficiency the NHS was ranked the No. 1 system in the world—I do not deny that scope for improvement was flagged in outcomes and healthy lives.

On the latest OECD data, for 2013, it is true that total health spending in the UK, inclusive of public and private spend, at 8.5% of GDP is lower than the EU15 average of 9.5% of GDP, but it is around the same as the OECD average of 8.9%, and the UK delivers above average health outcomes for an average level of expenditure within the OECD. The majority of UK health funding is through general taxation. Reviews of the evidence have shown that using general taxation as the main mechanism for healthcare funding is still fairest and most efficient. That raises the long-term point that my hon. Friend is flagging, which is that we need to think about how we want to fund the levels of healthcare that our ageing society is likely to need.

The OECD has said that no broad type of healthcare system performs systematically better than another in improving a population’s health status in a cost-effective manner. In his 2002 review, Derek Wanless concluded, interestingly:

“Private funding mechanisms tend to be inequitable, regressive (those with greater health needs pay the most), have weak incentives for cost control, high administration costs and can deter appropriate use.”

For that reason and many others this Government are absolutely committed to funding the NHS through the existing mechanism to the highest level we can afford as a society.

On health outcomes, I want to flag in particular the point my hon. Friend made about cancer. Cancer survival rates are at a record high and continue to improve, as shown by the latest figures from the Office for National Statistics in February this year. We know that we have to continue to do better. Every other country is improving, and technology is changing; that is why the independent cancer taskforce report, “Achieving World-Class Cancer Outcomes. A Strategy for England 2015-2020”—published to wide acclaim in July 2015—has pulled together a consensus from the whole cancer community. That strategy sets out a number of important measures that we are committed to and are seeing through: a radical upgrade in prevention and public health; a national ambition to achieve much earlier diagnosis; establishing patient experience on a par with clinical effectiveness and safety; and transforming the way we support people living with and beyond cancer, as there are now 850,000 people living with cancer.

New drugs on the horizon offer the prospect of actually curing cancer in some patients. That is an extraordinary breakthrough, and we are making the necessary investments to embrace genomic personalised cancer services in the NHS and ensure that commissioning, provision and accountability processes are brought up to date and are more fit for purpose. At the heart of all that is the need to adapt to the new drugs coming through, which is why I have launched the accelerated access review to look at the way in which we assess, adopt and reimburse new medicines, and unleash the power of our NHS to provide data and genomic insights to drive the increasingly personalised and precision medicines that the cancer community is producing.

I do not want to pretend that the issues my hon. Friend has raised are not real. They are real, for a number of reasons, not least our rising population. By 2030, England’s population is forecast to reach 60.2 million, a rise of more than 6 million from 2015. Over the same period, the number of people aged 85 and over is expected to grow by more than 74%, an increase of 1 million from 1.3 million to 2.3 million. That puts huge pressure on our system of both health and care, and speaks to the importance of integration. That is why we have supported NHS England’s own five year forward view—its own action plan; I am sure that, like me, he welcomes the fact that as a result of our reforms NHS England’s clinical and professional leaders are now able to set out their requests for how they want to manage the system, and we fund them and hold them to account in doing that. It has put in place a number of important mechanisms to change the models of care and to update how the system treats those key chronic diseases. If those services continue to be provided under the old model of 1947—silo care—they will put unsustainable pressure on our system.

NHS England is putting in place a range of measures, including the new care model vanguard sites—there are 50 of them around the country—and the Carter report on procurement. We are improving clinical commissioning group performance through the Right Care programme. We are putting in substantial extra money, including £2.1 billion in the sustainability and transformation fund, £4 billion for technology and the digitisation of the NHS, and billions for new drugs.

Crucially, we need to upgrade how the system diagnoses and treats so that we can liberate people from the 20th-century model of heavy dependence on the state system to provide healthcare at its convenience, where people queue to receive healthcare. We want to move to a system in which people can live with and manage diseases better from home and be productive citizens in the economy and society. A huge amount of work is happening on new care pathways.

Integration was at the heart of my hon. Friend’s speech. We need to develop a health and care system in which we recognise that, particularly for the elderly, health and care need to be seamless. In our system today, they are not. That is why we have set up the better care fund, and given local authorities the freedom to raise extra money through the local care precept, which will in itself put £3.5 billion extra into supporting care, including £500 million for disabilities facilities, which will prevent 8,500 people from needing to go into care homes.

We are putting the money in to try to support local health and care integration, but we want to go further and faster, which we must do as a society and economy. We do not want to impose top-down solutions; we want to create situations in which local health economies can adopt the right mechanisms and the right processes for them.

In this Parliament, we have responded to NHS England’s leadership’s requests. It set out clearly before the election its five year forward view and forecast that, by 2020, we would be looking at £30 billion of extra health costs, of which it said £22 billion would be avoidable with technology, transformation, better care models, digitisation, smarter and remote diagnostics, and more people being empowered and enabled so that they would not have to present at GP surgeries and hospitals so often. We have backed that plan. It asked for £8 billion a year, but by 2020 we will give it £10 billion. We have front-loaded that with £3.8 billion in 2016-17, the £3.5 billion for social care and the £4 billion for technology. Nobody can say that the Government have not put their money where the NHS’s mouth is. The NHS said that that is what it needed, and we have provided it.

In giving succour to the idea of a royal commission, I would not want to undermine that very important settlement, but I recognise that the points my hon. Friend has raised go to the heart of the big health and care debate we need to have as a society. The Government do not believe that a royal commission is the right solution, but I support the debate and want more of us to have it locally.

In the end, all hon. Members know that it is in their local health economies that the leaders who can crack this problem for us exist. We need to incentivise them. That is why the devolution plans and the integration of devolved budgets, and the measures we are considering to incentivise local health economies—we want not to reward them through tariffs for the treatment of disease, but to reward them for the prevention of disease—are so exciting. Ultimately, they provide the basis for optimism in the long term. We need to get more out of the money we spend as well as raise more money as a society. I am grateful to my hon. Friend for raising this important issue.

Question put and agreed to.

House adjourned.