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NHS will continue to flounder until government control of the purse strings is cut

A new report today from the independent think-tank Civitas argues that market-based reform in the NHS is being crushed by central direction and will fail if this pressure continues. The solution is putting money in the hands of patients to take control of their health care and to empower clinicians once more.

The report Why the NHS is the sick man of Europe by James Gubb, Director of the Health Unit at Civitas, draws together a host of recent studies to show NHS performance on efficiency, quality and – most damagingly so far as its ideals are concerned – equity, has flailed badly over the past ten years despite record increases in funding.

As things stand, the trends are becoming irreparable. The undeniable talents of doctors, nurses and health care professionals working in the NHS are being stymied by perverse incentives created by Whitehall. The NHS is now heading for a £1.8 billion surplus for 2007/08 despite patently obvious gaps in funding.

The government’s solution was to launch a ‘once-in-a-generation review’ of the NHS, currently being conducted by Lord Darzi. But it should be considering more radical options: it should be looking to Europe, and particularly the Netherlands, for better ways of providing universal and comprehensive health care.


Health inequalities have widened under the Labour government. Lord Darzi’s interim report documents how the gap in life expectancy between the most and least deprived areas in England is nearly ten years (for men) and has increased in recent times.

To take a snap-shot, premature death rates for coronary heart disease vary from 2.1 deaths per 10,000 of the population in Kensington & Chelsea to 8.5 in Hartlepool. The opportunity to access healthcare is actually worse in areas of greater need. (p.1-2)

Total public spending on the NHS in England is now approaching £100 billion, yet huge funding gaps remain. Despite a real-terms increase of 70% in funding since 2000, the NHS still ‘solves’ the problem of a gap between resources available and treatment required by rationing.

The populist way to do this, couched in terms of ‘rights and responsibilities’, is now to deny treatment to people who lead unhealthy lifestyles – a practice that many PCTs are apparently carrying out for smokers and the obese. Another way is simply closing wards, as Worcestershire Acute Hospitals Trust did in January 2008 due to ‘unrelenting pressure on resources’. (p.3)

The funding gap is due in large measure to spiralling inefficiency: the Audit Commission’s assessment last year concluded that 31 per cent of NHS bodies failed to meet even minimum requirements on use of resources. In fact 27 failed every single test of good management, despite up to 15 per cent of a trust’s income now going on management costs.

NHS productivity, according to the latest estimates by the Office of National Statistics, has fallen by an average of one per cent per annum over the past 10 years. (p.4)


The NHS’s problems are systemic. The determination of the government to cling to the mantra that the centre knows best; to its right to direct resources; to dictate service provision; and, ultimately, to control the purse strings is ripping the heart out of the medical profession.

Chief executives, senior doctors and senior nurses are forced to spend so much time trying to second-guess where the politicians will turn next, what their budgets will be next year, what the rules allow them to do – not to mention the inevitable targets, ‘top-down pressures, diktat and bullying’ that comes from the government and its enforcers in the DH – that they are inevitably prevented from focusing where they want to: on the patient.

To take two examples:

  • Is it any accident that the NHS is now heading for an embarrassing £1.8 billion surplus for 2007/08 – despite obvious funding gaps – when:
    • Patricia Hewitt, then Secretary of State for Health, staked her political life on turning around the deficit of 2005/06;
    • Strategic Health Authorities (SHAs) have top-sliced some £729 million from PCT budgets in this financial year alone; and when
    • PCTs have been left in limbo over the funding they will receive post-2008/09, because the DH is waiting on an ‘independent’ advisory committee to report on how the resource allocation formula is to be re-jigged.
    • PCTs have been reconfigured by the DH just three years after they were established;
  • And is it any accident that the NHS is one of the most investment and innovation-shy health systems in the developed world when:
    • At any moment another 60 or so ‘instructions’ could come tumbling down from the top à la the NHS operating framework for 2008/09;
    • The government has an unnerving habit of coming up with new initiatives, such as the national screening programme for cardiovascular disease, diabetes and kidney disease, without even consulting doctors;
    • The DH employs sinister tactics such as adjusting tariff top-ups to strip hospitals of specialist services it deems are no longer necessary.(p.6)

In this light, the benefits from reforms that have made provision more autonomous and provided for competition will not be realised. Foundation Trusts, the star-ship in this enterprise, are sitting on some £995 million in the absence of ‘greater certainty’.


Reform must be more than tinkering around the edges. The NHS’s ideals of universal and comprehensive health care are admirable, but the delivery mechanism is not.

The same ideals are held throughout Europe, but health systems in countries such as France, Germany, Switzerland and the Netherlands succeed in delivering much higher standards of health care than the NHS for all. The major difference between the NHS and these health systems is that the state is not cast as either the main funder or provider of health care, but effective regulator.

In these countries, health care is not paid for through taxation, but through social insurance. Certain principles apply almost universally:

  • All individuals are obliged to pay into a health insurance plan from a menu of insurers;
  • Insurers are obliged to accept all the applicants that choose them;
  • The government both defines the mandatory minimum package, and pays for/tops up for those on low incomes or with excessive health risks.

In Germany and France this is done through the wage packet; in Switzerland and the Netherlands this is done largely through health premiums (similar to paying for private health insurance in the UK, but with comprehensive subsidies for the poor and sick). Either way, the consumer – the patient – controls the purse strings, not the government and the health service is much more responsive. (p.8)

James Gubb, Director of the Health Unit at Civitas, said:

‘It is time for the NHS to be progressive; to put money in the hands of patients; and, above all, to empower health professionals to do their jobs. While the NHS frantically tries to provide universal health care through a centralised, monopolistic and heavily politicised system, the best European systems achieve this very same ideal from doing exactly the reverse, producing much better outcomes and more equity to boot’.

Notes to authors:

  • i. Civitas is an independent social policy think-tank. The Civitas Health Unit aims to bring fresh thinking to the debate on NHS reform and to consider whether there are better ways to provide quality healthcare for all at an affordable cost. See here.
  • ii. ‘Why the NHS is the sick man of Europe’ by James Gubb is published in Civitas Review, Vol 5 No 1. It is accessible below.


For more information ring:
James Gubb 020 7799 6677 (w) or 07930 243570 (m)

Why the NHS is the sick man of Europe

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