This week: Torsten Bell, director of the Resolution Foundation
Why he matters: The Resolution Foundation is one of the few think tanks that manages to maintain political neutrality and, therefore, influence across the spectrum. It is chaired by former Tory minister Baron (David) Willetts, while Mr Bell was Ed Miliband’s director of policy. Its stated purpose is to “improve the living standards of those in Britain on low to middle incomes”.
The importance of the NHS to public and political debate is the inspiration for the Bedpan. But why is it so important, to governments and politicians especially?
Torsten Bell, fresh from a visit to Number 10, believes he knows the answer.
“Britain is not aging particularly fast. Our experience is not unusual in terms of these pressures and in fact it’s probably slightly better than lots of other countries. The thing that is unusual about Britain [is that] the NHS [is] smack bang in the middle of our state. These aging pressures are not happening in the background and driving up health costs with no one noticing them, they are route one through our tax and spending system - and that is what is different about our politics.
“There is now this huge thing in the middle of our state. [The NHS accounts for] 40 per cent of government departmental spending - it was 23 per cent in 2000.”
Mr Bell compares the centrality of the NHS in British politics to housing.
Wicked funding problem
“Housing costs grew really fast in the late eighties through the nineties. We’re now spending 25 percent of our income [on housing], it’s gone up by three times. [But] there haven’t been riots on the street. Why? Because housing costs are not funded by tax. We all just deal with it, get on with it, spend our money.”
Another example is social care, which he says politicians having “mistakenly” been attempting to keep out of national politics “for the last 15 years”, so they don’t have to address the wicked funding problem it presents.
And that dominance is only likely to increase according to Mr Bell. “On some estimates the aging population means you need £36bn extra by 2030 just to fund what we get today [from the NHS]. This is not about [funding] all the things we all want - better treatment of social care and proper mental health treatment within the NHS, for example. All of that stuff is on top of that £36bn.”
Although demands are increasing, the options to meet them financially are becoming more and more politically challenging.
Hammond’s lucky break
Mr Bell cites the government’s “lucky break” which saw it announce “the extra money [for the NHS] without a clue about how to pay for it” only to be rescued a surprise uptick in tax revenues. Given the political turmoil now underway, he doubts whether the government would “have been able to announce tax measures to pay for it” if it had needed to.
Since the Second World War, he explains, the long-term trend in spending on health and other aspects of the welfare state was enabled by “ending the empire” and more latterly by “running down all military spend”.
Now - Trident notwithstanding - there is precious little to cut.
Since 2010, spending reductions have widened out to embrace almost all departments apart from health – with allocations falling an average 20 per cent.
“Good luck doing that again,” remarks Mr Bell, who believes the barrel has been scraped.
Neither is the traditional route of increasing the tax burden on the working population likely to work. “You would need a very, very large rise in income tax and/or national insurance” to raise the necessary funds, predicts Mr Bell, adding that those paying would not be “the direct beneficiaries of the extra cost”.
“I worry when politicians talk as if the public are just idiots [and] that [they] just always want more money for the [NHS]. Even now when they are very worried about GP access and A&E waits, they still want to know [it’s] being spent well”
This Gordian knot, he adds, preoccupies politicians because a “party’s relationship with the NHS is a big deal in politics. It’s a particular problem for the Conservatives and in some ways it’s an advantage for Labour”.
However, even if Labour’s record in providing greater funding for the NHS wins favour with most voters, it is not without political dangers.
“I worry when politicians talk as if the public are just idiots [and] that [they] just always want more money for the [NHS]. Even now when they are very worried about GP access and A&E waits, they still want to know [it’s] being spent well.”
In fact, Mr Bell says the public are usually “impressively on the money” when it comes to assessing the impact of the cyclical nature NHS funding.
“After a big era of fat then they worried about waste and after a big era of leanness then they’re worried about it not getting what it needs. And they’re broadly right about that - when areas of public spending see very fast ramp ups in spending, for example, then you definitely increase the chance of waste those years.”
He continues: “In 2012, when NHS funding began to slow, the public didn’t start saying ‘oh, it’s all a disaster’. They’ve come to their view now about being anxious about the NHS because of lived experience.”
Mr Bell, of course, was part of Ed Miliband’s leadership team. Labour’s position has shifted on many issues since then – but not on the NHS, he argues.
“I don’t think the views of this Labour leadership are actually very different from previous leaderships on how central the NHS is and the need to properly fund it.
“The Labour rhetoric on anti-privatisation has always been there,” he claims, and was simply turned down in volume during the Blair years.
Gordon Brown on steroids
“Look at the 2017 manifesto. It’s basically Gordon Brown on steroids, [with some] quite large tax rises…and [a resultant] increase in the size of the state.”
Labour is offering more money, he observes, but it is largely for new things – education fees, childcare, pay rises for public sector staff. It is much less clear that core NHS services, for example, would receive much more cash, if any, than is currently on offer.
The Resolution Foundation director feels public concern – although rising – is still “supressed” by the distraction of Brexit, the promise of more cash and a “long term plan” and – most significantly – because nobody has had to pay any more tax to support it.
This “won’t last”, says Mr Bell, and governments will have to become increasingly creative to keep the NHS sustainable.
That is unlikely to include restricting the NHS offer in any significant way, he suggests, adding that as countries get wealthier their populations want and expect to see more money spent on health.
The Resolution Foundation shares the health secretary’s view that technology might be part of the answer, but its director says the UK’s leaders “need to think harder about ways of raising revenue”
His target would be “wealth”, which he says has increased dramatically from two and half times income in the 1990s to six or seven times today, a ratio that is still growing. “Yet wealth taxation has not moved a jot,” he notes.
The Resolution Foundation has proposed NHS funding demands be met partly by removing the pension age cap, applying national insurance to everyone in work, and examining the way NI is overly generous to those on defined benefit pension schemes.
“Wealth in Britain is largely in houses and pensions and the way in which we tax those isn’t massively fit for purpose. So, for example, there is no justification for largely uncapped tax-free lump sums paid out through pensions.
“That’s a very heavy tax incentive for high earners and it’s very, very expensive. A cap that affected almost nobody would raise very significant sums of money that would help you fund the NHS without having to turn to the working people whose pay has been hammered for the last 10 years.”
Next week: Jeremy Heywood - an appreciation
Coming up: Paul Johnson, director of the Institute of Fiscal Studies
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