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Lord Rea: My Lords, I am sorry to disappoint the noble Viscount. The tenor of my speech will be in a rather different direction to the one he hoped. However, I congratulate the Government on thinking carefully about the future of primary care, which occupied a large part of the White Paper.

An anniversary calls for a wide focus--a macro approach to use the words of my noble friend Lord Winston. However, I shall concentrate on a single familiar old chestnut; that is, the overall funding of the National Health Service. I shall also briefly discuss a hot potato; that is, the private finance initiative.

We have all said, and agree, that the National Health Service is highly valued by the British people, despite delays, waiting lists, inadequate maintenance of buildings and occasional mistakes--usually occurring because health workers are under such high pressure. A mark of this regard for the National Health Service is shown by the low proportion of private healthcare which the population of this country uses as compared with other countries.

The NHS has managed to keep somewhere near its founding principle of providing comprehensive treatment for all regardless of ability to pay, though it is still far from providing fully equal treatment in relation to need. However, I am delighted that the Government are determined to tackle that issue seriously and I am sorry that the Green Paper on public health was not before us this morning; this could have been looked at in more detail.

As other noble Lords have said, the NHS is extremely economical compared with other health services in the developed world, partly because it is funded from central taxation. That cuts out a raft of administrative expenses and allows a degree of budgetary control, which is the envy of many other countries. Payment of doctors by capitation in primary healthcare or salary in hospital practice rather than by item of service--the bugbear of many other health services--is another important reason why costs have not spiralled as much as they have in other countries.

A recent British Medical Association report from its Health Policy and Economic Research Unit, published in October, puts the UK 19th out of the 23 richest countries in the proportion of its GNP spent on health. If we were to come into line with the average expenditure on health in the OECD, our health costs would have to rise by around £7 billion or £8 billion a year. However, a sum as large as that would not be necessary to achieve comparable levels of care because of the higher efficiency of the National Health Service. Even now the standard of clinical care in the National Health Service is as high as anywhere.

But stressful working conditions are taking their toll. The staff of the National Health Service--medical, paramedical and nursing--are all under pressure and many supporting staff are poorly paid, particularly since contracting out was widely applied. A generous increase in funding for the National Health Service of, say, £3 billion to £4 billion annually over and above current funding plans would not be unreasonable as a step

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towards the OECD average. In the long term there is a good argument for the proportion of national income devoted to healthcare to continue to rise, and not only for the three usual reasons--demography, increasing technology and high expectations. As the productivity of industry improves, the proportion of the population in productive work decreases. That has been on-going for the past 25 years or more, accentuated by globalisation. At the same time the number in service occupations or who are unemployed increases.

Welfare-to-work and the new deal for single mothers are admirable projects, but they constitute "supply side economics"--preparing people for work but not creating jobs. The National Health Service is a labour intensive industry--a point made by the noble Baroness, Lady Emerton. There is a limit to improving productivity in the caring business through efficiency savings, though all National Health Service activities must continue to be carefully audited and scrutinised. The new White Paper on assessment, A National Framework for Assessing Performance, is to be welcomed. It was published around two weeks ago. However, I have some detailed criticisms of it about which perhaps I can talk to the noble Baroness quietly at some other time.

To come back to the labour intensive industry outlook, in nearly all healthcare a one-to-one patient to carer relationship is the rule. There is now a pressing need for more hands on deck. There is also a great backlog of maintenance on buildings and a need for many new buildings, so a properly funded National Health Service could indirectly also help to support the construction industry. I realise that that cannot occur while the current spending freeze is in operation, but I am an optimist and feel that the Chancellor of the Exchequer and the Prime Minister may yet undergo at least a partial Keynesian conversion from the monetarist stance to which they seem so wedded at the moment.

An injection of a sizeable sum of additional money into the health service could act as a mini New Deal in Rooseveltian terms. It could create real jobs which would reduce unemployment at the same time as giving the National Health Service a much needed boost. In fact, much of the money would not be lost to the economy since a large slice of it would be recycled, thus creating further employment and also contributing to tax revenue. Already the PSBR is much lower than it was last year, so the funds could be found if the will was there. A spin-off gain would be a reduction in the welfare bill and probably a reduction in crime, much of which is related to unemployment. Crime would fall still further of course if a much more liberal drugs policy were to be followed, but that is another story.

The BMA report that I mentioned details the problems that other methods of funding which have been floated--other than that of direct taxation--would bring, such as various charges or health insurance schemes. I do not have the time to go into the detail of those, though it is an interesting area.

Now we are seeing a new and rather unwelcome method of meeting capital costs for the National Health Service--the private finance initiative. My noble friend knows that I and many others, including the British

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Medical Association, are highly critical of this process. Its main advantage is that it uses capital from outside the National Health Service budget and does not increase the PSBR. That means that in the short term at least it is an attractive proposition. But private capital always requires a shorter pay-back period and higher interest--up to 15 per cent., I gather--than capital raised by government through the financial markets, with the result that future generations will have to shoulder additional costs. As well as this there are high costs and huge delays involved in drawing up PFI contracts, and in all cases so far the number of beds proposed in PFI financed hospitals is considerably lower than those projected by healthcare planners.

In conclusion, I should like to ask my noble friend the following question, of which I have given her notice. Will she look at an alternative scheme to the PFI which was suggested by Professor Harry Keen and colleagues in a letter to the BMJ on 13th December last year? They propose the issuing of National Health Service bonds to finance capital projects instead of the PFI, which they suggest stands for "Profiting from Illness". These bonds would have government backing, and so would be an attractive investment not only for private individuals but for large investors such as pension funds. They would command a much lower rate of return than PFI schemes--paid by the Treasury through the National Health Service but giving a very much better bargain for the taxpayer--and the management of the hospital would remain entirely in National Health Service hands. The authors say:

    "Objections that NHS bonds would contribute to the PSBR and offend against the Maastricht criteria--are questionable. Borrowing for social investment can be excluded from the ratio of general government debt to GDP and the public acquires a capital asset".
That sounds entirely reasonable to me, especially as the PSBR is coming down anyway.

I should be very grateful if my noble friend would give her preliminary comments on this suggestion. It seems such a sensible plan that I hope very much that she can persuade her right honourable friend the Secretary of State to discuss it with the Chancellor of the Exchequer. If Treasury rules cause the taxpayer and the National Health Service to pay more and at the same time cause it to lose control of hospital planning and management, they must surely be bad rules and should be reconsidered--reconsidered, I suggest, as soon as possible--before the National Health Service is saddled with too many PFI millstones around its neck.

6.53 p.m.

Lord Bruce of Donington: My Lords, it does not seem half a century ago since I was sitting roughly in the position at present occupied by the noble Earl, Lord Howe. I should like to take this opportunity to reiterate my admiration for Aneurin Bevan, who was one of the greatest statesmen of this century and, indeed, as the Prime Minister recently indicated, one of its greatest administrators.

Perhaps I may be forgiven for imagining what he would say in this debate this afternoon if he were reconstituted today and sitting on the Government Benches. He would of course well remember my noble

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friend Lady Jeger, who was one of his doughty supporters through the days and nights we sat trying to get the National Health Service Act through, despite opposition which went a little further than the conventional duties of an opposition to oppose. I think also that he would have regarded the speech of my noble friend Lord Davies of Coity as being an effective response to what I thought was a speech from the noble Lord, Lord Jenkin of Roding, that fell rather below his normal standard. However, he would have well appreciated the remarks that fell from the lips of the noble Lords, Lord Colwyn and Lord Butterfield. But, above all, he would have liked to congratulate my noble friend Lord Hunt on what I think he would have acknowledged was a masterly presentation of future government plans in connection with the health service. He would also have expressed his complete confidence in my noble friend Lady Jay of Paddington.

The matter would have ended with those pleasantries and he would have been left to examine in his own mind just what had happened to the basic principles upon which the health service was founded. Noble Lords will recall the original principle that the costs of the National Health Service should be borne out of general taxation. Nye gave a very good reason for that. He said that he did not want the poor to be disadvantaged and he did not want the rich to be advantaged. That seemed to be an amiable, delicate and indeed democratic way of providing for the finances. But that has not happened. What has really happened is that there have been some severe constraints on the expenditure of the National Health Service which have involved a breach of the original principle that it should be based on need rather than means.

Progressively, particularly in the early 1980s and onwards, that principle has been chipped away and people requiring the services of the National Health Service have had to pay out of their own pockets for services that originally were encompassed within the service as a whole. A reason has been given for that and there is a danger, unless we challenge it, that it will pass into folklore. We have been told that, for some reason or other, mainly constriction of funds, a ceiling must be set on expenditure on the National Health Service; in other words, it has to be capped. To some extent it has already been capped by the non-provision of services or their indefinite postponement, sometimes for up to two years. The concept is that our finances are in such a position, even after the allegedly 18 prosperous years of Tory rule, that we cannot afford to do anything else but to cap social services expenditure generally and health service provision in particular.

The assumption is that healthcare will need to be rationed, that something has to give and that expenditure will have to be capped. That is a complete load of nonsense. If we make comparisons with other countries, we are easily able to dispense with that assumption. France disposes of some 7 per cent. of her gross domestic product on her health service. The United Kingdom spends 5.6 per cent. of its gross domestic product. Those figures yields £69.1 billion per annum in the case of France and £41.1 billion in the case of the United

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Kingdom. On a crude basis that means that France spends £28 billion more per annum on her health service than we do on ours. However, there are differences in the gross domestic product levels and slight differences in the populations. If one makes allowances for the differences in gross domestic product it will be found that in France the figure is £51.4 billion per annum as against £41.1 billion in the United Kingdom. On a comparable basis £10 billion more is spent in France.

What accounts for the difference? Surely, it is merely the allocation of funds, because if France can afford total expenditure, which accomplishes so much for the health service, then certainly so should we. The answer is that we have our priorities wrong. There is no reason whatever why expenditure on our health service should not be allowed to rise. There is no need for it to rise to the extent of £10 billion per annum, which is the comparable difference between ourselves and France, but it could be of such a magnitude as to enable the satisfactory operation of the scheme itself. I invite consideration to be given to that. I invite and challenge arguments to the contrary based on the total resources available.

Another thing that I believe Aneurin Bevan would have observed, had he been here--he would have put it in more eloquent terms than I could possibly muster for the occasion--is that the health of the nation and the National Health Service are not merely--I do not use the term "merely" in any derogatory sense--the sole hunting ground or responsibility of the Department of Health itself. It is responsible for the delivery. But the rest of the Government, the departments and Ministers also have their parts to play in order that the policies to be carried out by the Department of Health can be adequately financed.

The Treasury can abandon--at any rate, for the time being, but I hope, permanently--its deflationary policies which result in the creation and maintenance of an unsatisfactory level of unemployment. All those factors, including unemployment, stress at work, fear and insecurity, at present are the lot of millions of our countrymen. They all contribute to extra expenditure on the National Health Service. If the entire Government were to co-operate and attend to those factors which, environmentally or otherwise, affect the demands on the health service, that would lead to a reduction in crime and drug-taking and in people's fears, which give rise to stress diseases of all kinds. All these factors impact on the cost of the health service. Nye would say that the responsibility therefore was for government as a whole.

He would also say that the people are responsible and that there has to be a change of mind among them so that they can be accommodated, by paying attention to duties as well as being looked after themselves. They should co-operate generally in a far more optimistic assessment of life, free from the basic evils of inequality. He would say that that would form the basis of a satisfactory National Health Service. His verdict would be that one has to trust the people. He would say that on today's showing, "Yes, I do trust the people because the people will ultimately force it to happen".

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7.4 p.m.

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