Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 340 - 359)



3  340. So you have ruled out social insurance?
  (Mr Brown) He then has to pay a top-up charge, and then has to take out private insurance in a lot of cases to pay for that top-up charge. So the social insurance system that operates in France is a mixture of large premiums for employees and employers based on the social insurance model, plus top-up charges (effectively, that is what happens), plus a large measure of private insurance. I think what happens is that when you look at the individual characteristics of each country you find that in France's case it is administratively expensive, it is not fully equitable because there are large numbers of people who cannot afford to pay their hospital or health bills and who are not covered by this social insurance system and there has to be another form of arrangement devised for them. Equally, France is moving towards a revenue-based system where more money is actually taken through the tax system than through the social insurance system now than previously. So if you are looking at the French model there are certain drawbacks that have to be borne in mind, including large individual expenses that have to be met by people every time they go to the doctor or the hospital.

  341. Can I cite the two basic reasons that Mr Mandelson, and others, were trying to advance in support of a more insurance based approach rather than the one you have chosen. The first is that whatever average you take there is a long way to go from where we are now to that. There is a theory that we need a way of raising revenue that is tied more closely to the NHS in a very feasible way, and the argument is that an insurance based system would do that. The second argument is that the NHS is still a very publicly funded and state controlled system, and that a social insurance system would bring in a greater degree of patient choice. You seem to have rejected those two arguments before this debate that you are keen to encourage has even started.

  Are you sure you do not want to keep an open mind on these matters?
  (Mr Brown) To take your second point first, it is not clear that the social insurance system does necessarily mean a far greater degree of choice. It is not clear and I think that has to be investigated. Every system of health care, including the system in the United States of America, is a third-party payment system; it is where someone else, in the end, pays most of the health charges for the people. Equally, you raise the first point about, essentially, hypothecation. This is a debate, obviously, that will go on in the country, but the idea that we should tie the future of our National Health Service—which has to have sustainable, long-term funding guaranteed year-to-year—to some twist in the economic cycle, or to the fate of one particular tax depending on behaviour changes or changes in the performance of the economy, seems to me not to be the way that most people would want us to proceed.

  342. What would stop you, Chancellor, though, resetting tax rates every few years in order to make sure that that particular tax or insurance charge—whatever—was providing a revenue that we needed to get up to a better standard of health care?
  (Mr Brown) Because if the revenues from one tax fall this year why should the Health Service have to lose money this year? If you want a pure hypothecation model, then the Health Service has to be dependent on something that is also, itself, dependent on the economic cycle. I do not think that that is really what you intend by putting forward your hypothecation model. We have, for example, said that where we raise cigarette taxes we will put the money into the Health Service; we have also said that where we raise fuel taxes in real terms (that is, excise duty on petrol) we will put the money into transport, but that is a long way from saying that the fate of a whole public service should be dependent on the twists and turns of the economic cycle. I do not believe that that is what you would like to see, and I do not think that is what you would want to put forward.

  343. There are other countries in Europe who seem to be able to devise a system that is different from our own but does not have that problem.
  (Mr Brown) If you take France, the reason that France has got more stability in its health care funding is because they have moved more towards tax revenue guaranteeing the extra funding that the health care system needs, and they have not allowed themselves to be wholly dependent on a social insurance model. They have, as a result of the difficulties the health care system faced, moved towards a more revenue based system. As you know perfectly well, six per cent of American national income goes from the public sector into the private health care system. They have had to provide a huge measure of national government funding from general taxation revenues to support what is, essentially, a private health care system in America. Even then, 34 million people in America do not have private health care insurance.

  344. Is not the problem with Wanless that he seems to conclude two things: firstly, that our existing system of financing the NHS is the best possible system out of all those he looked that; secondly, he concludes that out of all the systems he looked at we have the worst possible health service in terms of outcomes? Do you not draw a connection between those two particular characteristics?
  (Mr Brown) Your point about health care outcomes is something that is going to be dealt with in a whole series of different reforms, and the modernisation of the Health Service is very important. Behavioural changes are going to be very important as well in the way people approach preventative health. As far as investment in the Health Service in future years is concerned, I think we all agree—and I am sure there is the makings of an all-party consensus round the table—that over 50 years we have under-invested in the capacity of our national health care system. We have under-invested in the buildings, in the technology and in the staffing, and these are things that I believe we have got to improve over the next few years by putting the Health Service on a stable long-term footing. I do not think pure hypothecation does that, I do not think the other proposals do that, but of course the debate on this is going to continue over the next few months, and if people have very specific proposals that would modernise the Health Service system of funding they should put them forward now.

  345. So you have not ruled out social insurance completely?
  (Mr Brown) I have not seen detailed proposals.

  346. Peter Mandelson can still submit his idea?
  (Mr Brown) Everybody can put forward their proposals, including yourself. No doubt the Liberal Party will want to put its own proposal. I have not seen detailed funding proposals put forward either by any other organisation or any other party that has stood the test of creating a sustainable, long-term improvement in investment in the capacity of the Health Service.

Mr Fallon

  347. Chancellor, have you estimated the additional expenditure involved, in cash terms, to meet the 8 per cent target?
  (Mr Brown) I have said that over the next few years we are moving the health care proportion up to 7.7 per cent by 2003—4 and we will make all our decisions about future years in the spending round. That is what I have said.

  348. There is no estimate yet of the likely cash total?
  (Mr Brown) All these decisions are going to be made in the spending round, but as the Prime Minister has said it is our policy to get up to that 7.9-8.0 per cent figure that has been named over the last two years.

  349. But you have no idea how much it is going to cost yet?
  (Mr Brown) These are decisions that we will make in the spending round about the absolute amount of money we are going to put into health care. I am sure you will not be disappointed.

  350. You read out one of Wanless's conclusions when you presented your Pre-Budget Report that the current method of financing through a general tax is "fair and efficient" but you did not quote the previous paragraph where he suggests more use of charges for non-clinical services. Are charges for non-clinical services also fair and efficient?
  (Mr Brown) What Wanless has said is that he wants to continue to look at this question of non-clinical services, but I may say—so that nobody is in any doubt about this—that on clinical services and charges, which is the main issue about charging for health care, he says "On equity grounds I do not think it right that some individuals should be able to access clinically necessary services through the NHS by paying for them when others whose need is at least as great could not simply because they could not afford to pay." Then he says "Flat rate, out-of-pocket payments are unrelated to income and therefore regressive. They relate access to health care much more directly to ability to pay than either general taxation or social insurance. There is evidence that charges discourage people from seeking treatment at all." So I think it is important to get the balance right in this; he does not favour clinical charges.

  351. No, but for non-clinical services he suggests charges. Do you think those charges are fair and efficient?
  (Mr Brown) Some charges exist at the moment, and nobody has proposed in the course of our Government that we change that. You must remember that when Mr Wanless looks at these things he is looking at things like car parking or computers in hospitals and things like that. This is not clinical charges and I think we should be clear that Wanless went on to say "There is evidence that out-of-pocket payments increase inequalities in access to health care. One in four people in France declared they had been put off seeking care for financial reasons, with women, older people and the unemployed forming a large proportion of those not seeking care. This is clearly inequitable." So he has ruled out medical charges.

  352. That is clinical services and I am asking you about non-clinical services. As you pointed out, there are already charges for single maternity rooms and for car parking. You announced, in the NHS ten-year plan, charges for bedside TVs and 'phones. He suggests more charges. Would you rule out, for example, charges for food?
  (Mr Brown) Hold on. What Wanless has said is that this is an issue he is looking at, he has not given us his final report yet. The examples he has given are computers in hospitals and car parking. I hardly think that these are controversial. Of course, when we did put forward these proposals about what we were doing in the ten-year health plan there was no objection. I think you have got to be very clear what you are saying here, Mr Fallon, and he has ruled out clinical charges.

  353. Are you ruling out, for example, charging for food or laundry?
  (Mr Brown) That is not our proposal and I believe that Wanless is unlikely to recommend that, but we will look at his report.

Mr Ruffley

  354. Chancellor, you describe the 8 per cent as an aim. Is it a guarantee? Are you definitely going to hit the 8 per cent, or is it an aim?
  (Mr Brown) I will return to the words that the Prime Minister used in the House of Commons two weeks ago. "It is our policy to reach that".

  355. Are you interpreting his words as a guarantee?
  (Mr Brown) I am interpreting his words as our policy.

  356. As a guarantee?
  (Mr Brown) It is our policy. I will use his words, and these are the words that he used, and I will repeat them.

  357. Is it a guarantee?
  (Mr Brown) It is our policy.

  358. I will try again with Mr Fallon's question. You must have some indicative numbers for how much it would cost in cash on this year's prices to get to that 8 per cent figure by 2005-06. What is the cash figure that you calculate?
  (Mr Brown) All the decisions on these figures will be published in the Public Spending Review. I do not think you would expect me to anticipate—

  359. I would expect you to have some rough calculations or estimates.
  (Mr Brown) I do not think you would.

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