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Mr. Chris Mole (Ipswich): The debate on national insurance contributions is important, because we must find the right way to raise funds fairly and efficiently for the NHS. It is clear that we should use national insurance, not income tax. The Budget package seeks to take progressive and significant steps on behalf of pensioners, and this is one way in which we can provide resources without calling on pensioners.

Investment clearly works—we have only to look at the cash for change funds that the Government made available from late 2001. In my constituency, that scheme is already delivering reductions in the number of acute hospital beds blocked by delayed transfer of care. The Ipswich hospital in Heath road has seen a reduction from 64 last November to 24 in March.

I would also like to draw attention to the investment of £1.9 million in intermediate care at the Ravenswood development in my constituency, which will help to meet the need of the elderly for the mixture of social and health care that increased resources can deliver.

The Opposition should lay out their proposals for a costed practical alternative. They need to explain to people what their proposals would mean and what they would cost. They must say whether, under their proposals, the health service would be free at the point of usage.

As we have heard, there are many reasons why there is increasing demand for additional health care expenditure. Demographic changes, new technology and rising expectations of the health care system demand that we take a close look at its financial needs. Many illnesses and injuries are now survivable that perhaps 50 years ago, at the inception of the NHS, were not. They can now be treated with some confidence. We are in the middle of a pharmaceutical and biological revolution, with new procedures and new practices. There are new technologies such as minimally invasive surgical procedures, and new drugs with greater efficacy and acceptability. My local primary care trust has confirmed evidence gathered nationally that the amount of medicines, dressings and appliances dispensed in the community has been rising by about 10 per cent. a year over recent years.

To return to the point about demography, the number of people over 65 is expected to increase by nearly one third over the next 20 years. That is why I welcome the element of the Budget that will raise real-terms spending on social care by some 6 per cent. per annum. Much ill health is age related, and that additional social care investment will be important if we want to deliver on the expectations of our health service, which I believe we all do.

If we compare our performance with that of many of our European competitors in areas such as life expectancy, infant mortality, premature mortality and survival rates for cancer and heart disease, we know that we can and must do better. People want us to deliver on improved use of new technology, shorter waiting times and enabling them to spend more time with their GP.

When we look at the Bill, we have to question what the alternatives might be. Clearly, there are alternatives such as charging, private insurance and social insurance. Most countries rely on a mixture of those. The trouble with charging is that, unlike a regular trip to the shops, our individual demands on health care are not predictable. In many instances, consumers of health care will have much

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less information and less expert knowledge than they would have when purchasing other goods and services. There is a risk of professionals setting the price for their service.

Eighty per cent. of patients in France take out supplementary insurance to pay for charges. If that is what the Conservative Opposition are proposing, that really is a stealth tax by any other name. It is important to us all that we do not go down that route, because if people are put off seeing the doctor, they are likely to end up back in the health care system with more severe health problems. Charging makes the sick pay for their sickness, so it is not a good idea.

Private insurance is not an efficient system. Administrative costs are higher. In the United States, administrative costs are about double those in Canada, which has a more general tax-funded system. In those countries, the people who need health care most are the least likely to be able to afford it. The evidence is that the sickest 10 per cent. of the American population spend six to seven times what the average American citizen does on health care. Someone with a private insurance policy that may cover only 80 per cent. of their charges can be faced with additional costs of, for example, $2,000 for hospitalisation during child birth. Many insurance policies exclude primary care and emergency care. I do not think that that sort of approach would drive consumers to change their pattern of consumption, because most of the costs of health care are initiated by the doctors, not the patients.

Let us have a brief look at social insurance, Compulsory contributions paid into and managed by independent, not-for-profit sickness funds are also a stealth tax by any other name. Is that what the Opposition are recommending? Employers end up footing much of the bill, paying on average £60 per week per employee, compared with the £5 or so that employers pay in this country through national insurance, or perhaps a total bill of £10, if we include the company's contribution through general taxation. It is also a system in which costs can fall on companies whose employees are sick. In our system, there is a significant sharing of risk among employers, which helps many small and medium-sized businesses.

We should now look at the national insurance system that the Bill is asking us to put our faith in. It offers a good deal over the lifetime of the individual, allowing us to have a health service more comprehensive than those funded by other systems. It gives us the general practice system, community nurses and other facets of our health service. It covers all of the people all of the time. Some 80 per cent. of the NHS is now funded from general taxation, and funding and costs do not fall on one group only.

We should affirm our support for a system that does not impose higher costs on those predisposed to illness and does not demand that employers bear the main burden of health costs. It is a modern and rational choice, and it is the best insurance policy in the world.

9.26 pm

Mr. Parmjit Dhanda (Gloucester): Before considering the Government's proposals on funding the NHS through national insurance contributions, I thought that it might

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not be a bad idea to have a look at some of the alternatives. Last Wednesday, the hon. Member for Aylesbury (Mr. Lidington) said that the nation could expect his party to examine the experience of other countries and to offer clear and costed proposals when they have completed that period of analysis.

The hon. Gentleman does his own colleagues something of a disservice. I would like to take this opportunity to sketch some of the ideas that his colleagues already have, and about which they have, to some extent, thought long and hard. They are well documented, if one digs a little.

The hon. Gentleman said that it would be necessary to examine the experience of other countries, and that is all well and good. Let us take a slightly closer look at the American model. I understand that the hon. Member for Christchurch (Mr. Chope), on hearing that 14 million Americans are not covered by any health insurance at all, has ditched his American model, and quite rightly so. He ditched the American model in favour of a Swedish one. He said that in 1999, St. George's hospital in Stockholm was sold to the private sector, producing a reduction in costs of between 10 and 15 per cent. He said:

"If health care can be improved in Sweden without taxing spending and wasting, we can do it in this country as well, given the will."

I was somewhat surprised to hear a member of the shadow Cabinet expressing admiration for the public service policy of the one country in the world that is renowned for heavy taxation, but I am pleased that he has such an open mind. However, I do not think that the hon. Gentleman's Swedish model could be employed in this country, for the simple reason that while Sweden has, for the last 30 years, had one of the highest tax and spend policies to provide for its health service, the NHS in the United Kingdom has been chronically underfunded by the Conservative party.

I fear that the shadow Cabinet will have to ditch both their American and Swedish models. But it is quite astonishing how far they are prepared to go find a suitable model for the NHS. Let us turn to Canada, and to the example of the provincial Government of Saskatchewan. Between 1987 and 1989, the current shadow Home Secretary—a former Treasury spokesperson for the Conservative party—worked as an assistant director for N. M. Rothschild and Sons and advised the provincial Government there on a series of privatisation programmes. Most of us are aware of the hon. Gentleman's ideas about the public services, but before we consider the Saskatchewan model, I want to remind the House of some of his constructive contributions to the debate on funding public services in years gone by.

In 1987, in an article entitled "The privatization of education", the hon. Gentleman said:

"You can privatize just about anything."

In 1988, he wrote a thesis entitled—I am not making this up—"Privatising the World". In 1996, he described the privatisation of nuclear power stations as

"intrinsically an entirely bankable proposition."

He probably thinks, therefore, that his party could indeed consider privatising as many of the public services as it can get away with, including the national health service.

The Saskatchewan Government listened to advice from the person who is now the shadow Home Secretary about various privatisation programmes. He was obviously very

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good at his job. His company was reportedly paid $30,000 a month for his services—very good work, for those who can get it. In his view, the Saskatchewan Government had not done a particularly good job of privatising the dental service, but his advice to them was heavily criticised in the state legislative assembly.

The Saskatchewan Hansard of 23 March 1989—I can provide a copy—says of the shadow Home Secretary that he

"will tell them that—and has told them, I understand—that the way they went about privatizing the dental plan was one of the worst examples that he has ever seen. He says: you don't do it that way. You got to be smoother. You got to con the people more. You got to work slower. Privatize some other things first and then work your way to health once you soften people up."

I doubt whether the shadow Home Secretary is very popular in Saskatchewan province. Given the verdict of the Saskatchewan Government, it may be best for the shadow Cabinet to ditch this model, along with the American and Swedish ones—unless they really do want to con the people, privatise some things first and work their way slowly towards health, once they have softened people up.

The shadow Cabinet need to clarify their policies on national insurance contributions and the funding of the national health service, and I am pleased to say that they need look no further than the House of Commons Library. In 1993, the right hon. Member for Chingford and Woodford Green (Mr. Duncan Smith), now the Leader of Her Majesty's Opposition, co-authored a pamphlet entitled "Who Benefits?" Four of the five Conservative Members of Parliament who wrote it are now shadow Ministers.

On page 19, under the heading "Privatising Insurance", the pamphlet states:

"The private sector should be encouraged to take on the role of providing the kind of insurance for which National Insurance Contributions must currently be paid."

It proposes giving rebates to those who can afford to pay for their own health insurance, and to those who can afford to insure themselves privately against unemployment, invalidity and even pregnancy. In return, a Conservative Government as envisaged by the Leader of the Opposition could scale down the national health service massively, because it would be a service only for the poor, the unemployed, the disabled, the elderly and the particularly needy—those who could not pay the premiums in a private health insurance scheme.

The proposals would make healthy and very wealthy people better off, and leave the rest of the country dependent on an underfunded two-tier NHS. However, the pamphlet also suggests that that state of affairs would be only a temporary solution. The Leader of the Opposition had longer term ideas, which the pamphlet puts succinctly:

"Ultimately, the state may provide no insurance of its own."

That is what the right hon. Gentleman put his name to, and I hope that it is helpful to the shadow Cabinet as they try to clarify their position on NI contributions and the NHS.

By contrast, the Government have laid their policy out clearly. The Bill says that they seek to make provision for

"increasing national insurance contributions and for applying the increases towards the cost of the national health service."

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The Bill will do exactly what it says on the tin. The Government will raise NI contributions by 1 per cent. and increase UK health spending to £65.4 billion this year and to £105.6 billion by 2007–08. For the extra penny in the pound paid in NI contributions, my constituents can expect their local health authority to receive more than £430 million in the coming year, which is £206 million more than it received in the last year of the last Conservative Government, so I welcome the Bill. Its aims and means are clear, and it will guarantee an NHS that is free to all at the point of use.

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