The Blog

The State Of Government Finances And The Future Of Health And Social Care


Political debate in the UK now seems largely dominated by BREXIT and the travails of health and adult social care such that the overall position of government finances is hardly mentioned. Unfortunately, this fiscal situation looks rather grave and questions need to be asked about the governments overall strategy with regard to public spending and public finances.

The original projection for government borrowing in 2016/17 was £68.2bn but stronger tax receipts in recent months are expected to reduce this to £65bn for the year. While the public budget deficit and associated borrowing have reduced from the high point in 2009/10, this current deficit of £65bn is still a very large amount of money and, on current plans, the deficit is not planned to be eliminated until 2020/21 at the earliest. Furthermore, whatever one's opinion on the merits of otherwise of BREXIT, it does seem likely that the actual withdrawal of the UK from the European Union will create (at least in the short term) some financial and economic turbulence which will put back the date for eliminating the fiscal deficit still further.

Surely, it is not a strategy to just keep borrowing tens of billions of pounds each year for a period, at least, well into the middle of the next decade while just hoping that something will turn up. If that something is thought to be greater economic growth then a failure to generate such growth will mean the burden of this excessive government borrowing will fall on our children and grandchildren.

The major problems at the current time appears to be that of health services and adult social care although there are other concerns around defence, policing, schools etc. I suggest that, on the assumption that we do not want a substantial decline in clinical outcomes or huge increases in waiting times, then, there are really just three policy options that can realistically be considered. All of them are difficult to do, politically contentious and all of them will probably need some form of up-front funding to lubricate the wheels of change. They are

• Reduce demand for health and social care services

• Reconfigure health and social care delivery

• Reconsider the financing of health and social care

Reduce demand for health and social care services

Clearly, an obvious way to reduce the pressure on health and social care services is to reduce the demand for such services. This encompasses the field of health promotion, self-care etc and there are many different models and approaches that can be used in both health and social care. There are, however, a number of problems. The first is an inability to get individuals to change their lifestyles in order to improve their health (e.g. stop smoking, reduce alcohol consumption, reduce weight). Various approaches have been tried but with mixed degrees of success. Perhaps the key issue to consider here is the balance to be struck between providing incentives to individuals to change their lifestyles and the imposition of sanctions on people who do not make such changes. The second reason concerns funding mechanisms in that those preventative services often require up-front funding to kick-start them with the expectation of downstream savings which might not materialise. Lack of such investment-type funding mechanisms may inhibit preventative service development.

Reconfigure health and social care delivery arrangements

In 2016, I wrote a report entitled Sustainable Healthcare Systems: An International Study ( ). This report looked at the health systems of a number of countries and a common finding from many countries was that their existing health system was not "fit for purpose" and needed radical re-configuration. This finding also applies to the UK and this fact was reinforced yesterday by the comments of the Care Quality Commission's chief inspector of hospitals, Sir Mike Richards, who was quoted as saying that the NHS is standing on a "burning platform" because its current model is not fit to serve the public.

Now, it seems that there is a strong consensus that the NHS, as currently configured, is not fit for purpose. There is also, probably, a fair consensus about what needs to be done to make it fit for purpose. This will involve such things as greater integration with health and social care, improved use of IT, more out of hospital care etc. Hence, we might well ask what is the problem other than a lot of work to undertake the necessary changes? A finding from the Sustainable Healthcare Systems Report was that achieving such a service re-configuration was very difficult because of resistance from politicians, health professionals and the public and because there was a need for significant up-front investment to make the necessary changes. This would undoubtedly be the case in the UK as well.

Reconsider the financing of health and social care

The NHS is often described as being "free at the point of consumption". In practice this means that aside from a wide range of fairly limited charges, the services provided to patients are done so without charge and are paid for by the Government using taxpayers contributions. However, in the light of the large-scale government borrowing that has taken place over the last few years, it must be recognised that, in reality, at least a proportion of NHS expenditure is being financed through borrowing.

Adult social care is somewhat different in that funding comes from three main sources - central government funds, local government council tax revenues and a wide range of substantial charges which may be means-tested.

If we take as given that increases in funding as a consequence of economic growth are likely to be limited and that the electorate has no wish to pay higher basic rates of income tax, council tax or VAT then the options are limited. An extended range of charges seems likely to have little scope in either the NHS or adult social care while recent comments in the media suggest that the Treasury is looking to raise more revenue by a variety of stealth taxes. Whether that will be sufficient to deal with the funding problems remains to be seen.

My suggestion, which I have advocated for over fifteen years, would be some form of hypothecated or earmarked tax whereby, the taxpayer knows that the proceeds of the tax will go to pay for a particular public service. Thus, it would be possible to have an NHS tax whereby the proceeds of the tax go to fund the NHS and the taxpayer is aware of this. Such taxes work well in other countries and poll evidence in the UK suggests it would be more acceptable to the electorate than an increase in general taxation. Such a development would be hated by Treasury and many politicians since it reduces their power to transfers public funding from one area to another. Also, it may also be seen as the thin end of the wedge since if we have an NHS tax today why not a schools tax or a police tax tomorrow.

One final point is that if the reconfiguration of health services and adult social care involved some sort of merger then presumably funding options could be considered in relation to a unified service.


Recent experience has led me to think that all of the options discussed above fall into the "too difficult" box. They either are too expensive at the outset, too politically contentious or will be strongly resisted by service professionals and the public. Personally I don't think it is possible for changes as big as this to be implemented, successfully, on a national basis by a top-down arrangement managed from offices somewhere in London. For those who doubt this I would refer them to the fiasco of the National programme for IT in the NHS (Npfit) which resulted in a write-off of £1.5bn.

Given the spirit of the times and the increasing emphasis on regional/local solutions I would have thought that the obvious thing to do is to get away from a national solution and focus on regionally based solutions in England. I would argue that, in Wales, the closeness of the Welsh Government to NHS organisations and local authorities in Wales has resulted in better progress in integrating health and social care than in many parts of England.

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