GDP and the prognosis for National Health

By Daryn McCombe / @Daryn_mccombe

24 hours to save the NHS was Labour battle cry in 1997. Record investment gushed into the NHS from 2000 to 2008. This is what we promised the public and this is what we delivered. Yet as Joyce Robins, of Patient Concern, said in May 2007: “I feel sorry for Blair, the money has been wasted.”

Labour raised expectations too high and underestimated the level of damage to the NHS by the previous Tory governments. Labour needs to redefine the debate on health funding. We need to reinvigorate the case for increased funding year on year to pay for increased service alongside increased wages.

Five months after Joyce Robins made her comments the Wanless report concluded that the investment had been wasted amongst other things on record increases in staff pay. The King’s Fund concluded that once pay pay increases, covering for deficits and rising drug costs are taken into account, the 7% budget increases actually equate to about 2% for services. Last year Gordon Brown told NHS staff that they must keep their pay increases down to help with inflation but no doubt in the back of his mind were these figures.

According to the OECD growth rates in the cost of healthcare outstripped the growth rate in GDP in every industrialised country except France. This is particularly evident in the USA where the cost of seeing a doctor increased by a rate 1.5% higher than GDP per annum leading to an increase in costs in absolute terms of 1200% over a 47 year period . But why?

Simply put in the NHS you cannot reduce the amount of labour required to heal somebody and you wouldn’t want to – the recent scandal at the Staffordshire Hospital is evidence enough. If you want to treat more patients, you need more staff. Contrast this with a car factory where greater automation means you can produce more using less staff. The car is made for less and sold for the same price as before. The difference is pure profit used, at least partially, to fund an increase in wages for the factory staff. If we allowed wages to lag behind in the NHS then eventually the gap in pay would become a significant recruitment problem and the service would be left without the world class staff it deserves. The public service ethos will attract and retain doctors and nurses to an extent but if we are to have a world class NHS, we should not be relying on this to keep the service running. It’s not fair to NHS staff or patients!

Funding increases will continue to be needed to fund wage increases if we are to provide a world class service. We should not be apologetic about this. Labour needs to begin to make the case for this in a positive and proactive way. We cannot do the NHS on the cheap – and we can’t expect our nurses in particular to pay for the universal service by being underpaid for the work they do. The country can expect the NHS to become more efficient and to do more as technology and new drugs begin to reduce the labour involved in healthcare. Long term growth in the economy means we can afford more of everything and the government will need to redistribute resources from sectors where goods are getting cheaper to the NHS through the tax system or by increasing private finance. As a country we will need to pay an increasing proportion of GDP on the provision of the NHS or risk the long term damage that was inflicted on it during the Thatcher and Major years. Labour needs to make the case for fully funding the NHS to be free at the point of use through progressive taxation and private finance.