Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 60 - 79)



  60. I thought you, as an expert, might have answered it. All right, let us have another side of the track. Do you agree with Wanless that, from what you know of the NHS, a 7.4 per cent real terms growth is about the most it is capable of absorbing?
  (Mr Appleby) I suspect it is.

  61. You think that is right?
  (Mr Appleby) Yes. I think I should say, just to add in terms of my earlier answer, that one of the issues that Wanless deals with is, in a sense, describing the Health Service in the future, the sort of Health Service we would like to see. Some of the elements of that include, for example, much shorter waiting times, and of course part of the NHS plan is to reduce waiting times. Wanless takes it as far over the next 20 years as to reduce the waiting times to a maximum of two weeks to get into hospital. At the moment we are looking at a maximum wait of around 15 months. So one of the things that Wanless does is to try to model how much money we need to spend to start to erode waiting times. Unfortunately, it is very difficult from the Wanless Report to understand quite what sort of model they used to try to cost this out, it is a bit opaque in terms of the report. That is why I was a bit uncertain in terms of my first answer. Meeting some of these targets is actually quite difficult to quantify.

  62. Does the King's Fund have a model of its own?
  (Mr Appleby) In terms of waiting times, for example?

  63. In terms of putting money into the NHS and getting output out of it. Do you have some way of judging what you get for the money?
  (Mr Appleby) No, we do not. I have to say that nobody does.

  64. In Wanless, page 84, there is a very interesting paragraph about productivity in the NHS. It is paragraph 5.31, where he has some very telling figures on what happens if the productivity performance of the NHS varies by 1 percentage point up or down. He does project it all the way up to 2022, so we are actually dealing with a pretty wide divergence by the time we get to the end of a 20-year span. That divergence is worth a couple of points on GDP—in today's terms, £30/40 billion. What does the King's Fund think about this central assumption about productivity in the NHS? Do you think it is reasonable? As a rider to that, which way do you think the risk goes? Is there a chance of seeing increased productivity in the NHS, or is there a downside risk that it will be worse than he forecasts?
  (Mr Appleby) I am afraid again this is a very difficult question to answer. You are right to say that about the only sensitivity analysis done in Wanless is around this productivity issue. As you rightly point out, it creates an enormous funnel of uncertainty the further ahead you go. 1 per cent a year cumulated over 20 years translates into a large proportion of GDP and a larger proportion of the NHS budget. You only have to vary those percentages minutely to see some big changes. There is a view that the NHS is a big institution spending a lot of money, there must be some significant productivity gains to be made. It has some examples where productivity has gone the wrong way. In certain specialties—trauma and orthopaedics—we now have more orthopaedic surgeons, but they seem to be doing fewer operations per surgeon. There is probably substantial room to improve productivity substantially, but it is not at the margins, it probably requires some big changes in working practices, some of the things that Wanless suggests himself—for example, nurses taking on more of the role of doctors, more of their jobs and so on. Nurses come cheaper than doctors, of course, and so this leads to increases in productivity and efficiency. So there is one view that you can actually squeeze out some very big changes in productivity in healthcare. On the other hand, there is another view that it is very difficult in practice to do some of these things. Some of the groups you have got to persuade to change the way they work, the institutions and so on, are pretty well entrenched, but they have got their own interests at heart, and it is very difficult.

  65. Overall, are you pessimistic or optimistic about getting productivity improvements in the NHS over the next ten years?
  (Mr Appleby) I think that in terms of the simple assumptions Wanless has made, they are perfectly credible and perfectly achievable.

  66. The assumptions are achievable, you think?
  (Mr Appleby) Yes.

  67. Professor Wilcox, do you have any views on that?
  (Professor Wilcox) Not on Health Service issues, no.

  68. Anybody else?
  (Mr Troup) No.
  (Mr Dilnot) No.

Mr Plaskitt

  69. Could I ask Mr Appleby a few questions about the overall impact of the increase in health spending? How far behind are we really? Are we behind other countries? We know that waiting times are a mess. We know that there are high levels of infection in hospitals. We know there are very specific areas—cancer is often cited—which are high. Let us start with the question of life expectancy, the life expectancy at birth for males and females together in the population—I know they are broken up, because the female figures are worse than the male figures. Taking the life expectancy in Britain compared with other countries, how far behind are we?
  (Mr Appleby) To be honest, I cannot remember the figures. What you find when you look at these broad figures like life expectancy, and another one would be infant mortality used by epidemiologists to get a picture of the nation's health, is that you get quite a different picture. Again, when you split it by males and females you get a very mixed picture. If you look to the graph of life expectancy across the world, the UK, along with a number of other industrial nations, are right at the top, crowding up there. The differences are actually pretty small when you get to that level.

  70. So on the crude life expectancy measure, we seem to be in an area where the differences are pretty small?
  (Mr Appleby) Yes.

  71. Can I ask you another question which is—I am sure you are aware of these figures—that Euro Barometer do an annual survey of opinion of the respective health services throughout Europe. I would be interested to see whether you do. Do you know who comes bottom in that?
  (Mr Appleby) I do not, no. There are a number of organisations and academics who do that sort of thing.

  72. I think you will find that it is Italy. Do you happen to know how many doctors, as a proportion of the population, Italy has compared with Britain?
  (Mr Appleby) Certainly higher than the UK.

  73. It happens to be four times higher. Do you think that it is conceivable that increasing the number of doctors might not, of itself, generate a higher subjective measure of well-being about the Health Service?
  (Mr Appleby) Perhaps dissatisfaction, as you tend to be suggesting from these figures. I did have written down here for my own benefit "Will we all be happier?"

  74. That is a shocking suggestion. What you are suggesting is that we have to get hospital doctors down in order to increase satisfaction. Is that what the King's Fund is suggesting?
  (Mr Appleby) No, I am not, although there are examples around the world where there have been strikes among the medical profession and the mortality rate has actually gone down. I was going to say that for my own benefit I had written down "Will we all be happier and more content in 2007/08 or 2022, once we are spending all this extra money?" By 2007/08 we will be spending around 9.4, 9.5 per cent of GDP on healthcare. That is the sort of level that France is spending and has been spending since 1998. It is also the level that the Canadians are spending. The Canadians are not noticeably happier with their healthcare system than we are. The explanation is not necessarily that the money is wasted, it goes down a black hole, as we heard earlier; it is, in my view, to do with public expectations primarily, but they tend to ratchet up.

Mr Tyrie

  75. Let us talk about black holes for a moment. Can I preface this question by saying that I am not against increases in health spending and I am not against increases in pay for the people in the Health Service. I put that on the record before I ask my next question. What proportion of the total increase do you think will find its way into pay?
  (Mr Appleby) It is very difficult to make a prediction about that. What we have tended to see over the last few years is that last year the NHS got something in the region of a 9 to 10 per cent increase, and of that about 40 per cent went on increased pay and prices in the NHS. I would expect a similar sort of proportion this year and the year after.

  76. Obviously I would expect it to rise. Can I say that we are embarked here on the biggest single increase in public spending, other than for military, other than for purposes of protecting the country, probably ever undertaken in this country, and we now need to think about this. Andrew Dilnot can think of another case, if he wants to come forward with one.
  (Mr Dilnot) I was thinking of the post-war period, with the introduction of the Butler Act on education.

  77. That was in 1944.
  (Mr Dilnot) The Act was in 1944, so that the spending was in the late 1940s and early 1950s.

  78. Since the post-war economy was unwound, can you think of another such increase?
  (Mr Dilnot) No, public spending as a share of GDP grew rapidly effectively from 1948 to 1975.

  79. You have not listened to me. You are challenging me on something I did not say. I am talking about the biggest single increase for a specific issue or a specific policy in spending that I can think of since the war. I acknowledge that there were these big increases just after the war. So I would like to change what I said and make it 50 years, therefore I am nicely covered. Then I can go back to Mr Appleby. We have this massive increase which I feel that the Wanless Report has singularly failed to justify. We all feel there is something wrong within the NHS, but we would all like some more objective messages about what really is wrong—life expectancy falling, the mortality rates not that different across the board. The subjective measures also show people are about as happy in Britain as they are in France, they are rather less happy in Italy, they are rather more happy in Germany, and the Euro Barometer survey has shown that has been consistent over many years. It is also consistent with what a survey has shown when people come out of the St Richard's Hospital in my own constituency, they have a very high satisfaction rate, though one should not draw too many conclusions from anecdotal evidence. If we are transforming policy in this particular area, if we are spending more money on a single issue than we have for over 50 years, I would like some harder evidence that something really is that wrong and needs such dramatic action. I cannot help being drawn to the conclusion that part of the demand for these polices, part of the reason for them, derives from politics rather than from health economics, but I was hoping you were going to disabuse me of that fact, that you would come forward with some hard statistics to show me that there are some reasons as to why that is fundamentally wrong. I will give you another go. What are they?
  (Mr Appleby) There are a number of points. One of the things that we want from the King's Fund is for the Treasury to publish all the data and all the models that Wanless has used in arriving at their figures. As I was saying earlier, it is actually very difficult from the published report and data to work out, as you are hinting at, a justification for these suggested spending paths for the NHS over the next 20 years. So that is the first thing. It is very difficult to comment on these things, because we just do not know. I do not know how they have costed out reducing the waiting times, because that is clearly a big element. I do not know how they have factored in improving quality in general in the NHS, it is not clear from the report. So my plea would be for the Treasury, in a spirit of answering this, to publish the data, publish the models, and I think that would actually start to improve the work behind this. I think Wanless has undertaken a heroic thing here. You could say the whole fundamental issue of how much you should spend on healthcare does not have a right answer, does not have a technically correct, objective answer that is out there somewhere if only we gather enough data and compare ourselves in the correct way with other people. In the end, it is a value judgement, it is a political judgement. What Wanless has tried to do is, in a sense, set the broad parameters as to where that judgement should fall. At least Wanless has not fallen into the trap of going into two or three decimal points in the figures. Throughout the report he states his uncertainty of the figures, his uncertainty of the analysis and so on, but this is the best that can be done. My personal view is that one way out of this dilemma of trying to make some suggestions—because clearly a decision has to be made about how much we spend, and some justification has to be constructed to defend the decision made—is that we can do no worse than compare ourselves with international benchmarks. That is one way of doing it. For instance, we know that there is actually a very strong relationship between how much a country earns in terms of its GDP and how much of its earnings it spends on healthcare. If you plot the healthcare spend against the GDP per head, then you get quite a strong relationship. We can fit the UK on there and we can see, in a sense, how far below that we expect to spend, given how much we earn as a country. That is one way of doing it. That can supply another set of guideline figures, but I am not convinced that—

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