By Richard S. Grayson This article was originally published in Reinventing the State: Social Liberalism for the 21st Century. We are grateful to Richard for allowing us to reproduce this article. Visit the Methuen website to purchase the latest edition of this book for the discount price of £10.
The democratic deficit in the NHSOf all issues in public policy, health care is the one in which the public is consistently most committed to a major role for the state. The basic principle of the National Health Service – a tax-funded state-run system free to all citizens at the point of use – is a hugely popular one. Even the most pro-market politicians are reluctant to challenge it. Of course, the principle of tax funding was undermined as early as 1951 when the Labour government introduced prescription charges for false teeth and spectacles, and charges were then expanded further under the Conservatives in 1952. However, charges make up a tiny percentage of the NHS budget today, and the core of the tax-funded system remains unchallenged in party programmes. Is that a problem? Some believe that funding through taxation has meant that the level of financing the NHS has been too low compared to other European countries. Michael Portillo made that case in 1998, saying that the necessary money could not be found through taxation: ‘The gap between what we spend on health care today and what we ‘ought’ to spend is large, and no party is going to make it up from taxation.’ ((Michael Portillo, ‘The Bevan Legacy’, Kathleen A Raven Lecture given at the Royal College of Surgeons on 10 June 1998; available at: http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=1113449.)) However, the record of the Labour government since 1997 has suggested that this analysis is wrong. They have put billions more into the NHS; one of Labour’s proudest claims is that ‘Investment into the NHS has doubled since 1997 and is set to treble by 2008 to over £90 billion.’ ((http://www.betterwithlabour.co.uk/nhs/Made_by_Labour#top10.)) The funding of health care in the UK now compares favourably with other European health systems, whether publicly or privately funded. This suggests that it is possible to fund the NHS through general taxation at levels which compare with other countries, and that Liberal Democrats should not be seduced by arguments that more funding means private funding. Moreover, Liberal Democrats should recognise that tax-funding is the surest way to ensure socially just funding. Such funding is socially just on two grounds. First, it is redistributive, in that the wealthiest in society pay the highest share of the costs. Second, and most important, access to health care is not limited (at least in principle) by an individual’s ability to pay charges, whether on a one-off basis or through an insurance premium. For these reasons, this chapter does not propose any alteration to the basic funding regime of the NHS. In contrast, decision-making within the NHS needs radical change. Despite the increased levels of funding under the Blair government, if only from 1999, there is no sense in which the public believes that all is well with the NHS. In particular, despite the extra money, the cumulative deficit of NHS trusts has risen past £1 billion. Consequently, some hospitals are faced with losing services or even closing altogether. The case has been particularly marked in the author’s own constituency, Hemel Hempstead. In July 2006, Liberal Democrat research found that sixteen hospital trusts, running twenty-seven hospitals in England providing acute services, were under strong pressure due to their deficits. The research identified the West Hertfordshire NHS Trust, which runs St Albans City Hospital, Hemel Hempstead General Hospital and Watford General Hospital, as being under the most pressure. Others at high risk included West Middlesex University Hospital NHS Trust, and Surrey and Sussex Health Care NHS Trust. The list suggests that deficits appear to be greatest in the south-east of England. ((Liberal Democrat press release, ‘Lib Dems highlight English hospital trusts most under pressure’, 25 July 2006; available at: http://www.libdems.org.uk/news/story.html?id=10674&navPage=news.html.)) The deficit means that trusts are obliged by the rules to make cuts, albeit after going through public ‘consultation’ exercises. Despite the huge public support for keeping all hospital services, trusts find they cannot do that because they do not have the money. But because they have little real meaningful independence from central government, and no power to raise extra public funds locally, they are unable to have a meaningful debate with local people about how local aspirations can be met. The end result is that after nearly a decade of increases in NHS funding, all that some local people see is the closure of wards. They understandably fear for the future of entire hospitals. The situation in West Hertfordshire is admittedly an extreme example of the problems faced by today’s NHS. But it flows from a political failure at the heart of the NHS throughout England: the inadequacy of the current decision-making structure for any kind of rational debate about the cost and shape of health-care provision in local communities. The NHS is enormous. As Patricia Hewitt pointed out in June 2007, ‘If the NHS was a country, it would be the 33rd biggest economy in the world, larger than new European Union transition economies like Romania and Bulgaria … The NHS is four times the size of the Cuban economy and more centralised.’ ((Patricia Hewitt, ‘The NHS: The Next Ten Years, Speech at London School of Economics, 14 June 2007; available at http://www.lse.ac.uk/collections/LSEPublicLecturesAndEvents/pdf/20070614_Hewitt.pdf.)) Within this massive bureaucracy the ability of local people to influence decisions is extremely limited. In the current system, ministers are able to claim that any local closures have followed public consultation and that decisions have been made locally. Yet the unelected bureaucrats who make such decisions pay scant attention to local wishes for two reasons. First, they do not have to: they are unelected and their jobs do not depend on any form of public satisfaction. Second, they are not able to act on most local demands because they work within tightly defined budgets and central rules, which do not allow them any flexibility in the amount of money they spend on local services. It is argued in this chapter that it is this absence of a democratic authority which can take decisions based on meaningful local debate that is the greatest barrier to satisfying public demands on the NHS. Without such a body, it will always be possible for everyone to blame somebody else without taking responsibility. Ministers can blame local bureaucrats, when those ministers have given the bureaucrats very little independence. Health care bureaucrats can point to rigid central controls, but can also blame the public for making supposedly unrealistic demands, when the bureaucrats have little incentive to engage with the public. The public can blame ‘them’ – usually the government or bureaucrats – despite the fact that the system allows the public to make demand after demand for high levels of local services without ever having to face their real cost. Meanwhile, without local power, demands for higher quality are difficult to balance with fairness, as only the better off can access the ‘more’ or ‘quicker’ health care which is so often what people mean by quality. In place of this current system, the NHS in England needs radical reform. We need a radically different system which puts elected local people in charge instead of the plethora of unelected bureaucrats currently in power, and the remote national ministers who set targets. Crucially, these elected local people need to have the power to raise funds for the NHS so that any demand made by the public for higher quality can have a real price attached. Only in that way can there be a rational public debate about local health-care provision in which those making the demands also pick up the tax bill. The danger of not reforming the NHS is that its noble concept will lose public support. In 1970, the economist Albert O. Hirschman wrote a classic study of what happens to organisations faced with difficulties: Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States. ((Albert O. Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States (Harvard University Press, 1970).)) This study has relevance for the NHS today. Hirschman argued that in any organisation which is failing to deliver a satisfactory service, its users have two choices: exit and voice. In the NHS today, exit is an option for the wealthy, but it is not a real choice for the many. Meanwhile, the ability to have a voice is extremely limited. Democratic reform can provide that voice.
Counties and cities, not regionsAlthough the NHS is notionally UK-wide, and is certainly funded as such, the system in England post-devolution to Northern Ireland, Scotland and Wales is unique to England. So although an English parliament would stop MPs from the devolved parts of the UK voting on England-only matters, it would do nothing to decentralise decisionmaking in the NHS, as the Parliament in Westminster already makes decisions on English health matters. But the problem with the NHS in England is not that Jo Swinson, Alun Michael or Ian Paisley can vote on English-only matters, but that the NHS in England is too vast. The challenge is therefore not simply to remove Scottish, Welsh and Northern Irish MPs from decision-making in England, but to devolve power below the English level that already exists. As part of a model for a federal UK, the Liberal Democrats have long argued for regional devolution. The regional dimension was a particularly important aspect of the 2002 Liberal Democrat public services policy paper, Quality, Innovation, Choice. This was the report of what was colloquially known as the ‘Huhne Commission’, named after the working group’s chair. The paper proposed that where elected regional authorities existed in England, current unelected Regional Health and Social Care Directorates and Strategic Health Authorities should be scrapped. Instead, regional assemblies would take responsibility for the strategic development of health and social care services. Crucially, these regional bodies would be able to vary taxation (specifically, a proposed earmarked NHS contribution) to supplement funding received from central government. Meanwhile, Primary Care Trusts would be scrapped, with their powers given to whatever tier of government in the area had responsibility for social services. In such a system, regions would have agreed collectively on setting minimum health care standards across England. The role of central government would be limited to public health, regulation, medical research, and medical, nursing and other professional training, while a new Finance Commission for the Nations and Regions would allocate central funds to each region based on need. ((Liberal Democrats, Quality, Innovation, Choice (Liberal Democrats, London, 2002), pp. 50–51.)) There was no alternative proposed for regions without an assembly because implicit in the policy was the belief that in time, regional assemblies would cover all of England, and those which did not initially want such a body would be encouraged to adopt one through the promise of more control over the NHS in their area. I was closely involved in developing these policies as the party’s Director of Policy at the time, and I still believe that given the assumptions of the time, they were the right policies for us to develop. However, it now turns out that one of our key assumptions was wrong. The context in which we operated was a shared belief, held in both the Labour Party and the Liberal Democrats. We believed that regionalism in England offered the only way in which England could have the same measure of democratic devolution as that enjoyed in other parts of the UK through elected bodies in Belfast, Edinburgh and Cardiff. It was assumed that there would be a rolling process of devolution across England, with the North East being the first to adopt a regional assembly. However, those assumptions were faced with a reality check when the North East decisively rejected such a body in 2004. It had always been known that some ‘regions’ (notably the South West, which has always had strong county identities) were resistant. But from the south of England, the ‘Geordie nation’ looked like exactly the kind of region that could blaze a trail for regional devolution. With even the North East rejecting a regional assembly, that chapter in progressive plans for devolution is now closed. The Labour Party rapidly shelved further plans, and even the Liberal Democrats downplayed the proposal in the 2005 election. Three lessons came out of the North East case which need to be learned by anyone who wants to see decentralisation in England. First, people are inherently sceptical about additional layers of government or bureaucracy. There is always a fear that such a body could be a gravy train for politicians who had not quite made it to Westminster. Second, there is no appetite for ‘talking shops’ as bodies with minimal powers tend to be called. This was a major problem with the type of regional body proposed by Labour in 2004. However, it is not at all clear that people would have opted for a more powerful body, for the third problem that emerged from the North East is that regions, even in the North East, are not natural communities. For all that there is a ‘Geordie nation’, it is easy to forget that such a label does not apply to the people of Sunderland, Middlesbrough or Durham, and within each region there are often major divisions. Put simply, regions are just too big and too recent a creation for people to feel any emotional affinity to them. So anybody who wants to decentralise within England has to look for alternative natural communities. These must be ones through which people will consent to organise services and with which people will feel some community of interest. They must also be large enough in which to take strategic decisions. Do they exist already? The simple answer is yes: they are counties and cities. Crucially, although county identities are not as strong as they once were, people already understand them as legitimate political entities because they exist in the form of county councils, and the same can also be said of England’s major cities which have their own authorities. The task therefore becomes to prove that they are large enough units to take on strategic health care functions, or that in the cases of very small counties, there is a way of pooling responsibilities with neighbours. Part of the evidence lies in another part of the UK. Northern Ireland manages to take strategic decisions for its share of the NHS with a population of around 1.5 million. That is significantly below the populations of the current ten strategic health authorities and more in line with the size of many of the twenty-eight strategic health authorities that existed in England between 2002 and 2006. The NHS in Northern Ireland is also the part of the NHS with integrated decision-making on, and provision of, health and personal social services. Does it work? Mortality rates per 100,000 of the population (standardised for age) are about 2.4 per cent higher than for the United Kingdom as a whole. However, the direction of this figure is downwards, and at a faster rate than for the rest of the UK. Between 1996 and 2001, for example, overall mortality in Northern Ireland fell by nearly 14 per cent, which was faster than for the whole United Kingdom, at 9 per cent. ((Angela Jordan et al, Health Systems in Transition: the Northern Ireland Report (World Health Organisation, Copenhagen, 2006), pp. 1, 6.)) However, further evidence of such a scale of decision-making can be found from another country: Denmark.
Danish lessonsIn the early part of this century there was a vogue for examining public services in other parts of Europe – and indeed outside Europe – in order to see what can be learnt. The think-tank Civitas has carried out extensive research on health care. Conservative spokesmen were dispatched to the continent, prompting wry smiles from those who had grown used to the Conservatives being at best wary of the supposedly pro-state solutions of the French, Germans and, not least, the Scandinavians. Liberal Democrats took part in this exploration too, first on education, and then on health. Within the party, some of this research had an impact on policy. The Dutch model of funding schools, set out in a pamphlet by myself and Nick Clegg, found its way into the party’s policy in 2002. ((Nick Clegg and Richard Grayson, Learning from Europe: Lessons in Education (Centre for European Reform, London, 2002), pp. 19–21; Quality, Innovation, Choice, p. 57.)) Meanwhile, the Centre for Reform’s work on comparative systems of health funding offered strong arguments against health insurance schemes at a time when the party was looking at all options and ended up not choosing insurance. ((Nicholas Bromley, Universal Access, Individual Choice: International Lessons for the NHS (Centre for Reform, London, 2002).)) However, the party skirted round the need for radical devolution. That was despite the fact that Denmark, the country with the most radically devolved health system in Europe, was cited as a model of good practice. The 2002 public services paper said, ‘Although Denmark has a population of just 5.3 million, its popular and tax-funded health service is run by its 14 counties and two cities. Denmark spends modestly more than we do as a proportion of national income – about 1.2 per cent – but has the highest satisfaction ratings in Europe.’ ((Quality, Innovation, Choice, p. 21.)) Having failed to follow this approach through in 2001–02, it is now time that the Liberal Democrats revisited the Danish model as one that could be transplanted to the NHS in England. The Danish system is now even more appropriate for England than it was in 2002. At that point, as the policy paper said, it was run by fourteen counties and two cities (Copenhagen and Frederiksberg). These bodies were responsible for both GPs and hospitals and they funded them mainly from county taxes, used primarily for health. Below the counties were local authorities (273 of them) which had responsibility for matters such as school health care. At a national level, the government played a hands-off regulatory role, for example on parents’ rights. ((Ministry of Health and the Interior [Denmark], Health Care in Denmark (Ministry of Health and the Interior, Copenhagen, 1997, revised August 2002), pp. 8–10 and 15–17.)) However, even though the Danish public were very satisfied with health care at that point, there was a sense that the system was not as efficient as it could be. Moreover, in a relatively small area, there were difficulties in coordinating between a large number of decentralised authorities. ((Ministry of the Interior and Health [Denmark], The Local Government Reform – In Brief (Ministry of the Interior and Health, Copenhagen, 2005), p. 7.)) Even the counties were often very small compared to England. The smallest, Bornholm, had a population of 43,245 in 2006. The largest, Aarhus, at 661,370, was smaller than most English counties. Several were smaller than all English counties except Herefordshire, the Isle of Wight and Rutland. As a result, the Liberal Minister of the Interior and Health, Lars Løkke Rasmussen, pushed a series of proposals through the parliament, the Folketing, in 2005. These measures, a total of fifty acts under a broad ‘Agreement on Structural Reform’, abolished the counties (including the two city authorities) and replaced them with five regions, ranging in population from about 600,000 to 1.6 million, thus making them analogous in size to English counties rather than regions. The 273 municipalities were replaced with 98 on revised boundaries. ((The Local Government Reform – In Brief, pp. 53–56.)) The powers of the new levels of government, which came into being on 1 January 2007, are now as follows:
- Preventive treatment, and non-hospital care and rehabilitation,including that at home; and
- Treatment of alcohol and drug abuse.
- Psychiatry; and
- General practitioners, specialists and reimbursement for medication. ((Note that this category is described as ‘health insurance’ in the English translation of the Danish documents. However, this is misleading as the ‘insurance’ is simply funded by taxation, and is not a form of insurance as understood in the UK.))
- Planning for specialist treatment; and
- Follow-up on quality, efficiency and IT usage.
If each municipality were to finance its own expenditure, the service level and tax burden of the municipalities would … vary considerably. The purpose of the equalisation system is to ensure that the same service level involves the same tax percentage regardless of the income of the inhabitants and any demographic factors … [T]he grant and equalisation system means that money is transferred from the rich municipalities to the less affluent ones. ((Ibid., pp. 36–37.))However, the system also allows local flexibility in funding should more funds be needed and rewards attention to preventive measures. That makes the Danish funding system compatible not only with the principles of a National Health Service, but also with the Liberal Democrat commitments to localism.