The Labour case for an NHS mutual

In the first of an occasional series of Uncut posts that look at the policies and political positioning needed to win the next election, today we are looking at the NHS. Here, Frank Field sets out the policy case for a radical restructuring of how the NHS is funded.  

by Frank Field

A programme of fundamental NHS reform – on financing and ownership – could, paradoxically, convince the electorate of Labour’s financial competence and play a crucial role in rebuilding Labour’s fast collapsing core vote.

Labour has to combine two financially opposing objectives.  About two thirds of the structural budget deficit remains to be eliminated.  So, while cutting at twice the scale of the so-called ‘tough’ Coalition, Labour will face the mother of all NHS crises.  The Coalition’s pledge of maintaining the real value of the £95 billion NHS budget is now hardly a mirage.  Real cuts in the NHS budget have been in progress over most of this Parliament and there is an impressive array of witnesses reporting to this effect.

Differential NHS inflation, a growing aged population that makes disproportionate health and social care demands, and an abundance of advances in ever more expensive medical technology, will take an even greater toll on NHS budgets during the next Parliament.  NHS England estimates a deficit to end all deficits of £30 billion in 2020-21 – very nearly a third of current NHS expenditure.

The electorate senses the NHS is facing mounting difficulties.  They are willing to input additional monies into their NHS.  But, despite the supportive showing the polls for significant increases in NHS contributions, neither Labour nor the Coalition is currently prepared to address the issue.  They present getting through the election without seeking a mandate on NHS finance as what the clever boys do.

But, as events all too often show, the clever boys – and they are still largely boys in every sense of the word – have lost the plot.  Either the NHS is refinanced or, during the next Parliament, it will cease to exist as we have known it.

We can conclude that, as the collapse of the NHS as we have known it will send the electorate into a god almighty spin, there will be a major injection of new funds into the NHS during the next Parliament.  But, if the current cross-party evasion continues, the next government will have no mandate to raise new revenue.  Ever greater cynicism will be the result of what will inevitably be a broken promise. But will the current Tory position hold?

Here could be that point at which the election swings away from us. A nightmare scenario would be for the Tories, out of the blue, so to speak, to offer additional funding by an increase in National Insurance contributions. They will accompany this move by waging a campaign against our irresponsibility of trying to sneak through an election without openly facing the threat that the growing funding shortfall poses for the long-term future of the NHS in the next Parliament. The current National Insurance base is deeply regressive, which could be an additional attraction to the Tories to act, particularly as voters are willing in support of an NI increase on this regressive base, provided it is earmarked for their NHS.

Labour will be left stranded.  Fear of the Tories charging us with financial irresponsibility has seen us adamantly opposing greater NHS funding, even though the electorate knows their service badly needs more cash.  If the Tories break cover they will stand tall in bragging they’re the only party willing to face the NHS funding crisis, and could thereby scoop increased support.  Remember, according to one poll, Labour has only a two point lead over the Tories as the party most trusted with the NHS in the next Parliament!

But there is an alternative and it’s there for Ed Balls to seize. He could get in first to propose an increase in National Insurance contributions, allocated to new funds to the NHS, and gain that voter approval that might otherwise go to the Tories.  But, equally important, we should simultaneously offer a much bolder, radical reform of the NHS – re-configuring the NHS contributory base along progressive lines and transforming NHS ownership into a national mutual membership basis.

Voters are fed up with the growing unfairness in our society with those who have the most continually sweeping up further jackpots.  I have not seen any polls on whether this distaste at the rich grabbing yet more riches has translated itself into a positive vote for a more progressive tax system. I would be surprised if there is not a significant shift of opinion that is waiting to be picked up by an extension of the questions on whether people would be prepared to pay more for their NHS. We know that voters wish to pay more to safeguard their health service. So, here, could be a win-win for Labour; an increase in National Insurance contributions that will be made along progressive lines.

The Tories will go mad at not getting in first and will charge us with all sorts of irresponsibilities.  The louder they shout, the clearer it will be that they have been wrong-footed.  And, paradoxically, it will be by proposing an increase in NHS funding that convinces the electorate, at last, of our financial probity. We will be seen as honestly facing the fact that increased NHS bills have to be paid for with real and not borrowed money. We would gain credit for saying who will pay. And we will gain even more credit if we insist that this payment will be made on progressive lines.

This reform will allow Labour to get onto the front foot on public spending for the first time this parliament.  Being clear on reducing the deficit, which the Tories and Lib Dems have not been, spelling out what this means to actual services whilst simultaneously earmarking a specific increase in revenue paid by contributors to the NHS would, I believe, change the direction of those political undercurrents that often determine who finally wins.

But to launch successfully this initiative on NHS funding will require it to be set in a wider programme of reform. Increased funding must be seen as part, but only part, of a radical programme centring around remaking the electorate’s contract on their ownership of the NHS.

Seizing the initiative on the NHS will ensure the most negative-type campaigning from the Coalition.  ‘You can’t trust Labour to spend all the contributory increase on the NHS’ will be their refrain, and it will be all the worse because it will be true if the current rules continue; they allow the government to decide just how much of the National Insurance increase goes to additional NHS funding. Little more than half of Gordon Brown’s one penny increase in National Insurance contributions for the NHS in 2002 ended up in NHS coffers.

That Labour will misappropriate the increase again in order to fund their other pet schemes will dominate the Tory-controlled airwaves. To counter negative Tory electioneering we again must get in first. And we should do this by proposing a new ownership model for the NHS. The proposal is to create an NHS mutual that would gain all the new funds.  The new National Mutual must be given the guarantee, in law, that it will gain all the additional funds raised by increasing National Insurance contributions.

To entrench this guarantee we should propose that the electorate would own the new mutual, voting a board in along the lines of John Lewis. This National Mutual would take over all the functions of NHS England; it would similarly have the National Institute for Health and Care Excellence (NICE) reporting to it, giving the mutual its first body of functions. A serious dialogue would then open up with us, the contributors, on how new medical advances, the costs of a rapidly aging population, and the advances in medical technology can be financed.

The second function of the new National Mutual would be to use the new injection of money to push through reform. It’s inconceivable that a 1948 health model, which is still largely in place, is the one best structured to meet the current needs of patients.

A third function would be to put forward an insurance-based proposal for financing social care. Social care should become part of the health budget and, over time, contributors would need to build up a right to social care, free of means-testing.

The fourth function of the National Mutual would be to become an agent of progressive revenue- raising. Voters do not see National Insurance contributions as a tax.  A further reform should be to transfer over time the bulk of the current NHS tax based revenue to the new progressive National Insurance base.  The pledge would be that for each tranche of NHS tax revenue, raised on a new progressive National Insurance basis, would be accompanied by equal income tax cuts. The Office for Budget Responsibility would be changed to guarantee that contributions increases are met by tax cuts.

By setting out the case for a new National Mutual, Labour would renew its reputation as trusted custodians of the NHS. It would gain the kudos of being tough enough to face the growing NHS crisis in a fairer way than the Tories, and would have begun a process of enshrining the ownership of the NHS in the hands of the electorate. And it could be seen as a tax-cutting party as well.

Frank Field is MP for Birkenhead

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4 Responses to “The Labour case for an NHS mutual”

  1. LB says:

    It’s all back to the Ponzi scam you’ve been running. You know that the state has a 7,200 bn debt just for pensions. It cannot pay that. It’s increasing at 640 bn a year, which exceeds current taxation. Add on the borrowing etc, and its 300,000 per tax payer. That’s the extent of the debt that the welfare state has accumulated.

    Now for the individual level. What would have happened if they had invested their NI? For a median wage earner and without any of your taxes on pensions, 830K in a fund. That generates 28K a year.

    So you have ripped off the public, and 26.5K a year isn’t rich by over a million.

    Now your solution is that if only we can rip the public off a bit more, its all going to good.

    Meanwhile your fellow MPs can’t tell the difference between debt and deficit, between debt and borrowing.

    Neither can you.

  2. john Reid says:

    well said frank,look forward to the next chapter

  3. Tafia says:

    There is no such thing as an NHS – it is devolved. It is run and administered differently in all four countries of the UK and if London starts interfering with Wales, Scotland or NI it will piss people off big time. In fact, Labour is committed to even greater devolution and has made massive promises to Scotland regarding t’s NHS.

  4. Patrick Nelson says:

    “…contributory base along progressive lines and transforming NHS ownership into a national mutual membership basis” an inspired idea. Better than the current setup by far.

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