“The NHS is the closest thing the English have to a religion.”

Nigel Lawson

Tory leadership contender Rishi Sunak says that the massive NHS backlog is a national emergency, as more than 6.6 million people in England are waiting for hospital treatment. We also heard last week that the number of people opting to pay for private treatment has increased by 39% compared to the same period before the pandemic.

Meanwhile, HM Treasury public expenditure analysis shows that, in 2021-22, the total cost of health and social care was £265.7 billion, or nearly 25% of total expenditure; and that it is only projected to reduce by c. £25 billion by 2024-25 (by which time the pandemic will hopefully be well behind us). If the original intention was that National Insurance should cover pensions, health and social care, it is now only accounting for less than a third of those costs.

The fact is that the Attlee-based welfare state designed for public health is well past its use-by date, and has been responsible for most of the soaring increase in UK public debt over the past 70 years. It is a socialist design/problem that Conservatives have felt obliged to adopt with slogans like ‘the NHS is safe in our hands’, but in truth it has become an electoral bribe which has impoverished the country.

That 39% increase in people paying for private treatment proves that, when push comes to shove, people will pay for health: but, of course, it is the wrong people who have been put in that position. Rather, there should be a structured basis of ‘those who can pay, should pay’ — with mandatory individual health insurance, leaving a much-reduced NHS budget to provide targeted help for those who genuinely cannot afford to pay.

So in this commentary we return to a theme which we first introduced in June 2018 - arguing for a solution based on a mix of general taxation and that mandatory individual health insurance.

The two leadership contenders are both majoring on economics, and that's understandable. It's what concerns the British public most, and we must find a solution to the challenge of huge public debt and soaring inflation (the latter caused by Putin's War of course, not by this Government).

Before we focus on that economic challenge, it's worth pointing out that other issues do merit focus as well — particularly the international situation. There's quite a difference here between Sunak’s and Truss’s experience in this respect. Rishi has no track record here, compared to Liz's extensive background in International Trade and at the Foreign Office, following on from her years as Chief Secretary to the Treasury.

But both of them appreciate the economic challenge. Rishi wants to continue with the status quo for public spending, and to maintain higher taxes until the deficit (not the debt) is brought under control. He thinks this will keep the lid on inflation.

Liz wants to cut out the announced increases in Corporation Tax and National Insurance. The former will certainly encourage business and entrepreneurs to stay in the United Kingdom and to deliver growth, and the latter will take some of the pressure off low-income families without contributing much to inflation.

But, for both of them, the elephant in the room remains the NHS, and its gargantuan cost.

In 2018, we estimated that the annual cost of health and social care when spread across each adult was c. £2,400 (on the basis that all children would be treated ‘free of cost’). That figure has now doubled to c. £4,800 per adult.

Our proposal then was that all those in receipt of benefits should not contribute any mandatory individual health insurance; that non-taxpayers should contribute £480 pa; standard rate taxpayers £720 pa, high rate taxpayers £1,680 pa; and top rate taxpayers £2,400 pa. Due to the doubling of overall cost over these past four years, these contributions should all be doubled in today's circumstances. Meanwhile, a programme of health training for those reaching retirement would help considerably in keeping these costs under control, since senior citizens incur such a high proportion of health spending.

Compared to the energy price cap overhead which hits low-income families much harder, this is not an unduly burdensome proposal for them — and it could be phased in for non-tax and standard rate taxpayers.

It would, however, turn the monster of our universal benefit health budget into a targeted support structure for the least well-off, and it would continue to be ‘free at the point of use’. It would also encourage a ‘customer’ culture of service in place of the current ‘patient fodder’ approach, and encourage choice rather than ‘one size fits all’.

From the economic perspective, our proposal would clear the way for a real focus on getting Britain back to business, while at the same time bringing our public finances back under control. It will take political courage, after seventy years addiction to the socialist and heavily intermediated concept of universal welfare, but the cost will fall on those with the broadest shoulders who stand to gain most from that economic growth (and will continue to do so after we succeed in bringing in a more egalitarian form of capitalism).

It's time to start moving away from the late 1940s, and this progressive structure of mandatory individual health insurance is the way forward.

Gavin Oldham OBE

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