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John Mann: Does the hon. Gentleman rule in or rule out the scheme in the United States?
Dr. Murrison: Hon. Members have repeatedly said that no one on either side of the House is interested in the American system. For myself, as a humble Back Bencher, I do not think that the system works particularly well in the United States and it certainly would not work well here. I hope that that gives the hon. Gentleman, for the last time, the answer that he seeks.
Mr. Stephen O'Brien: He does not want to believe it.
Dr. Murrison: I fear my hon. Friend is correct.
John Mann: What alternative does the hon. Gentleman propose?
Dr. Murrison: If I can crave your indulgence, Mr. Deputy Speaker, I shall have to labour the point. I do not know how we should best fund health in this country, but I am prepared to examine alternatives. Rather like Lewis Carroll's Red Queen, the Chancellor has closed his mind without first examining the evidence. I hope that the Opposition continue to examine what is best for the British public so that we get the very best health outcomes. That is the important consideration, not institutions. I say that as someone who worked in the NHS and has every respect for it and its staff. Frankly, my constituents would consider surrendering the nine-minute average GP slot that they get under the current system for 20 minutes in the not-for-profit Californian system run by Kaiser Permanente.
The recent Treasury Committee Budget report makes the pertinent observation:
- "The proposed increases in NICs for employees and the self-employed will deliver a tax increase to those groups that is very similar to a 1 per cent. increase in the rates of income tax. However, unlike increases in income tax, increases in NICs will not affect pensioners and those living off unearned income, who benefit from the insurance provided by the National Health Service, and may be in a position to make a contribution. We think that the Treasury has, as yet, failed to make the case for choosing a method of revenue raising (higher employer and employee national insurance contributions) which excludes well-off pensioners and people living comfortably off unearned income from making a contribution to higher NHS spending."
The public policy campaign group, Reform, listed a series of concerns that it has about the NHS. It points out that the Department of Health estimates that 16 to 20 per cent. of the NHS budget is lost as a result of poor management, fraud, blocked beds, hospital-related infections and other aspects of mismanagement. We need to address that urgently. We know that Scotland spends the EU average on health care, yet public health figures tell us that it enjoys among the worst health care in Europe. In other words, it is not just about money; it is what we do with it. The tax cost of the NHS to the average
family has more than doubled in 10 years, but is that reflected in the improvements in their health care? Probably not.As an aside, as someone who worked in the NHS and who has viewed health care with interest for most of my adult life, most of the extremely positive advances in the past 50 years have not been due to the number of the doctors on which the Government are so fixated. It pains me to say that. I am a doctor and I would love to be able to tell the House that the problems could be solved by recruiting more doctors. Sadly, that is not case. It is far more complicated than that.
The Adam Smith Institute estimates that only 17 per cent. of any new resources for the NHS end up in front-line services, which bears out the findings of the Science and Technology Committee. The Secretary of State for Health described the NHS as
- "the last great nationalised industry".
- "more men over the top"
Let me conclude by citing two of the most prominent medical men in the country. The chairman of the British Medical Association recently said:
- "the NHS in its current state cannot survive without radical change".
- "things are in such a mess, much worse than I would have imagined possible . . . the NHS is in a desperate state."
6.59 pm
Chris Grayling (Epsom and Ewell): May I begin by apologising to the Chair and to Members on both Front Benches for missing the start of the debate? I was at a sitting of the Transport Sub-Committee; clearly, I view attendance at Select Committees as particularly important, especially this week.
I feel strongly that the increase in employers' national insurance contributions introduced in the Budget is foolhardy and will damage a wide range of organisations. It is worth thinking back to the comments made by the Chancellor of the Exchequer two years ago, when he said that a small adjustment downwards in employers' contributions was an employment-creating measure. By definition, his decision to increase employers' contributions this year must be an employment-damaging measure; the two facts inevitably go together.
The impact will be felt, first and foremost, in business. I know that the hon. Member for East Carmarthen and Dinefwr (Adam Price) has argued that the public sector will be the problem, and I will go on to reinforce many of his comments, but it is not only the public sector that will be affected. As a result of this change, small businesses throughout this country, particularly in manufacturing, which has suffered as a result of adverse exchange rates in the past few years, will take on costs that they can ill afford.
Yesterday, at Scotland Office questions, I pointed out that employment in manufacturing in Scotland has fallen to a historically low level, yet the Budget will take £50 million out of Scottish manufacturing companies. That cannot happen without it having an adverse effect on employment. I do not know the comparable figures for Wales—I hope that the hon. Gentleman will forgive me—but I am certain that the Budget will also lead to a loss of tens of millions of pounds for manufacturing companies in Wales and other parts of the country, which they can ill afford at this time.
It is easy for Ministers to talk about small amounts for individual companies. It is true that a small service firm with a turnover of £500,000 a year will end up spending £3,000 or £4,000 a year extra as a result of the measure, but where does that money come from? In most small companies, costs are fixed: salaries have to be paid, the rates have to be paid and the bills for heat and light have to be paid. There is relatively little discretionary spending in any company's budget, and when adjustments have to be made the money comes from such sources as sales and marketing, the training budget or the investment budget—perhaps the company will buy fewer computers that year. No small business can afford to give up those things.
I am sorry that the hon. Member for Bassetlaw (John Mann) is no longer in his place. He mentioned profitability. Whatever the Government have done for profitability, many of our growth companies do not make a profit in their first few years, but they still employ people and so carry the costs of employment. Those businesses in particular will suffer as a result of the change.
The measure will also have a huge impact on our biggest companies, such as Nissan in the north-east, which has been struggling to deal with the high exchange rate and is a substantial employer. For Nissan, being in business in this country is now less viable. The same is true of Corus, which has been forced to make cuts in south Wales, which we all regret. How many more jobs with Corus will be lost as a result of the Budget?
The truth is that businesses both big and small will suffer, but there will be an equally huge impact on our public services, and I want to say a little about how the measure will affect our education system. In the past few days, I have been finding out in a series of written answers exactly what the impact on schools and colleges will be. Can Ministers assure the House that local authorities will be fully funded so that they can address the shortfalls that schools will face as a result of the higher employers' contributions?
Some of the figures that I have been given are frightening. I asked the Department for Education and Skills about the total amount of national insurance contributions paid, directly and indirectly, through its budget. Using the available data, it said, it estimates that the cost of contributions paid by the Department in this financial year will be £3 billion. That means that, next year, with a 10 per cent. increase in the national insurance rate, approximately £300 million extra in employers' contributions will have to be found. That money will come out of education budgets.
If we could be certain that the schools and colleges that will have to pay those bills would be refunded, we might
be reassured, but a further written answer about colleges gave me further cause for anxiety. It said:
- "The additional cost in employers' national insurance contributions in 2003–04 for all English colleges (including sixth form colleges) providing further education is estimated to be about £25 million. This cost will be considered alongside other priorities and pressures in the 2002 spending review."—[Official Report, 29 April 2002; Vol. 384, c. 572W.]
I have figures for primary and secondary schools. The cost of the increase in contributions will be £20,000 for the average secondary school, which is about the same as the cost of a teaching post for a new graduate. The cost will be £4,000 for the average primary school, which is more than most of them have to spend on books and equipment every year. Will that money be refunded to schools through next year's education settlement, or will they find that it has been cheese-pared away and that local authorities have been underfunded for next year's pay settlements? Even Ofsted does not escape. I have a letter from the chief inspector, who says:
- "I estimate that the additional cost in 2003–04 will be about £ ½ million."
There is no logic whatever in taxing our schools and colleges to pay for the NHS, or indeed, as hon. Members have said, in taxing the NHS to pay for the NHS. The Government are taxing hospitals, primary care trusts, social services and, outside the public sector but equally importantly, care homes. The flaw in the amendment to which the hon. Member for East Carmarthen and Dinefwr put his name is that it does not mention care homes. They are privately owned but they depend on a small cadre of staff who are dedicated but not highly paid. They are businesses that often operate close to the margin. They will have to fund this extra tax, and they may well be unable to afford it.
Throughout the country, small and large businesses and, in the public sector, the health service, our schools and colleges, our police forces and our councils will pay extra. It is far from clear that they will all get their money back and that services will not suffer as a result. The measure is ill-thought-out, and it will do far more harm than good. It is far from clear that it will deliver improvements to the health service of the kind that are undoubtedly needed. It is a bad measure and it should be opposed by the House.
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