Health

Let's face a few facts about healthcare:

1. Demand will always exceed supply for care that is free at the point of use.
2. Healthcare will always be rationed, whether by price or by state-allocation.
3. No system is fair. If we are state-rationed, middle-earners will not get treatment that they could have bought if they hadn't had to pay for other people's treatment.
4. The rich and the privileged will always be able to buy more care.
5. If people who don't look after themselves don't have to pay for their care, other taxpayers will have to.

The current system is unsustainable

Spending on health has more than doubled in the past decade (from £54 billion to £119bn, an increase of 77% above inflation). It has gone from 5.5% to 8.6% of GDP. And on top of that, the healthcare system has taken on loads of additional liabilities that taxpayers will have to pay for in future, through PFI contracts for hospitals, and the increasing burden of public-sector pensions.

Some things have improved. But some things have got worse (for instance, infections picked up in hospitals). And some apparent improvements are a statistical trick - the result of manipulating the system to hit the targets without making real improvements to people's experiences (such as reducing waiting times by stopping the clock at triage, even if we then wait hours to be treated).

Have we got value for all this extra cost? And can we afford it?

We don't think so.

But if we simply cut the budget without changing the way things work and improving the efficiency, we will reduce the services that can be provided. Sticking with the current system means either continuing with the ever-expanding cost, or cutting services. The system has to change.

Reintroducing price signals

The perpetual challenge of healthcare is to balance two conflicting fundamentals, one democratic and one economic:

The democratic imperative:

Access to healthcare cannot be dependent on ability to pay.

The economic imperative:

Resources will be allocated inefficiently in the absence of price signals.*

Since the foundation of the NHS, we have chosen to ignore the economic imperative in our deference to the democratic imperative. The rampant escalation of costs without a proportionate improvement in services is the result. We must find a way to strike a better balance between both imperatives.

The simple answer - not perfect, but as good as it gets - is to provide people with the means to buy healthcare, rather than providing it free. This restores the essential price signals, whilst continuing to respect the democratic imperative.

This does not remove the inevitable rationing, or make the system perfectly fair. Some people will still not get the treatment they want. But it would make the system more efficient, fairer to taxpayers, and provide more appropriate incentives.

Easy does it

Reform is urgent. We must start as soon as possible. But we start from a particularly bad position. As the Irishman said, "I wouldn't start from here". We should have been saving for the ever-increasing costs we are facing, but instead we find ourselves (as individuals and as a country) weighed down with debt. Consequently, we must progress at a pace and in a manner that the economy can stand. If we draw too much money out of the economy to put away for future healthcare, we will cause more damage to the present economy, and reduce our ability to pay for that future healthcare.

We set out on subsequent pages a programme that we believe would have some rapid benefits, but which would progress at a rate that the economy and participants in the health system could stand.

* That is real price signals, created by a genuine market where values reflect the balance of demand and supply, not fake price signals generated by an "internal market" that only economically-illiterate bureaucrats and politicians would think is a satisfactory substitute.