The Blog

Britain's National Sickness

Politicians in Britain continue to pledge ever greater tax funding, despite the evidence that systems funded by tax perform less well than those based on personal contribution.

Britain's health service has moved centre stage in the campaign for May's general election, as the parties compete for votes. The Conservatives pledge more funding - an additional £8bn and another £22bn in efficiency savings - along with weekend GP cover; Labour promises to cut back outsourcing and payments to private providers; and the UK Independence Party would pour another £3bn into the NHS coffers and curb burgeoning healthcare 'tourism'.

Britain's voters would be gullible to believe that, even if honoured, such commitments would lead to the enviable standards of healthcare other rich western economies enjoy.

First, there a great deal of catching up to do if the NHS is to match clear-up rates for prevalent illnesses like cancer or even to provide consistently decent care for those lying sick in Britain's hospital wards - too frequently the victim, as in the case of the Mid Staffordshire Trust, of sadistic and harmful neglect. And second, there will be far greater demand for healthcare in the years to come as demographically the population ages. In Britain, as in its two most similar continental neighbours, France and Germany, the ratio of retired to working people is rising.

To meet such demand western health services will have to adapt, say some of Germany's leading economists, in a new study for Politeia. Ludger Schucknecht and colleagues at the German Finance Ministry, compare different systems of healthcare - those financed by tax, by contribution and by a mixture of both. The NHS takes its place under the microscope alongside other systems. Switzerland and the Netherlands come out top for performance. France and Germany, two countries most similar to Britain in size, economy and population profile, score much higher than Britain. They and the Netherlands have contribution-financed healthcare. (Switzerland's is mixed).

Britain, by contrast, lags mid-field for effectiveness of healthcare expenditure. 'Our' NHS is funded by tax, and though tax systems can be that bit cheaper, the data show that they tend to be less effective in meeting need than those based on contribution.

Nonetheless, politicians in Britain continue to pledge ever greater tax funding, despite the evidence that systems funded by tax perform less well than those based on personal contribution. Nor have any doubts been expressed about whether public funds can or will be found in sufficient quantity to pay for the increasing demand. Politicians boast that the promised funds will come from tax, and the implication is that they will be sufficient. They are missing the bigger picture. Britain's beleaguered taxpayers are already propping up a deficit of 90 per cent - almost as great as socialist France's - and a national debt now running at £1.4 trillion. The health service is part of the problem, a monopoly 'command' structure run by officials for officials who outnumber the doctors and qualified nurses, as the last of the big state 'rent groups', the vestige of the crude post-war collective ideology and central planning. Tony Blair sought to move away from that model, but the political battles have since entrenched it.

Nonetheless, the fact remains that to meet the increased demand which ageing brings, healthcare systems must open the way for greater competition amongst providers; the way to co-payments and top-up by users. Governments must clamp down on tax-funding to encourage such private payments and insurance.

Instead, our leaders promise higher levels of tax finance, lower levels of outsourcing - and some of the leftist ladies even go as far as demanding zero competition. Though Nigel Farage from the UK Independence Party might in future be more open, even he will not budge for this parliament.

These German economists by contrast offer a vision for the future of how a country such as Britain can realise the ambition of a health system which people want: it must be consistent with the realities of today's globally competitive economy in which economic growth is a priority for such social goods to be afforded to the standard expected.

For some countries, such changes may involve a matter of degree, increasing the number of providers, or the scope for competition, or users' co-payments or top-up insurance. For Britain, the going will be more bumpy. The first step must be for politicians to come to realise that healthcare, like any social good, must be paid for; and if people are to have the healthcare they need into a ripe old age, then competition and co-payments are a better, more honest and more winning bet than ever greater public spending. That, in the end, would make us all poorer.

Paying for the Future: Working Systems for Pensions and Healthcare by Ludger Schukneht, Matthias Dauns ad Werner Ebert is published by Politeia.