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September 11, 2007

Big Surprise

The architect of Gordon Brown's strategy for increasing the NHS's annual budget by £43bn over the past five years will today deliver a stinging criticism of the inadequate return the investment has yielded, the Guardian can reveal. Sir Derek Wanless, hand picked by Mr Brown to review the NHS in 2002, will say it is not yet on course to deliver the first-class healthcare system that was promised because the benefits of extra spending were eroded by poor productivity...

Bit of a surprise, eh? Pump money into a centralized system and what goes up is pay, not production. Could have used a little supply side reform perhaps, before all that money was pumped in? Even, perhaps, a little less supply side reform before all that money was pumped in? (Don't forget that reform of said supply side can make things worse as well as better.) For we had GP fundholding then, and we have something almost exactly the same now, just that for most of the decade inbetween we didn't have it. What we appear to have now is just about the same as the structure in 1997, just at a higher wage level.

Well done, top marks there to New Labour.

September 11, 2007 in Your Tax Money at Work | Permalink


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[Pump money into a centralized system and what goes up is pay, not production]

you say this as if low pay and its consequences for staffing was not, in 1997, known to be one of the most serious problems of the NHS.

Tim adds: Really? Doctors then in the UK were paid more than doctors in France at the same time. Did they have a shortage of doctors?

Posted by: dsquared | Sep 11, 2007 8:50:52 AM


Where is your evidence that "low pay and its consequence for staffing" was a serious problem before 1997.

Well qualified people were queueing up to train as medics before 1997 - it's just that training places were artificially restricted. Similarly, the Royal Colleges controlled access to various specialisms. The problem was not one of pay ( which was already higher than in the rest of Europe) but of restricted access to the profession.

When it comes to nursing, much of the evidence on nursing shortages is that the shortages tended to occur principally in high living cost areas - because the unions opposed local pay variations. The generous early retirement terms also meant that nurses were often leaving in their early 50s.

Posted by: HJHJ | Sep 11, 2007 9:02:33 AM

Tim - I agree with your diagnosis about how the internal market in the NHS was abolished and then restored.

As best I can tell from media accounts of the progress report on the NHS by Sir Derek Wanless, he makes no mention of these recent assessments of cancer survival rates in the NHS compared with other European countries or our lamentable record of care for stroke victims:

"Cancer survival rates in Britain are among the lowest in Europe, according to the most comprehensive analysis of the issue yet produced."

"The UK has the worst standard of care for stroke victims in western Europe, with thousands of patients dying unnecessarily every year, a senior doctor said today."

How come? If there are valid excuses then let us know about it but don't just ignor the issue and hope we will all forget about it.

Posted by: Bob B | Sep 11, 2007 11:39:51 AM

The NHS's productivity record is better than that of healthcare in the US, so I'm not sure it can be said to be a problem of it being centrally planned.

Posted by: Matthew | Sep 11, 2007 12:35:18 PM

Matthew - I'm probably a good deal older than most around here, I believe.

Going back 50 something years, I can recall esteemed academics - notably Richard Titmuss at the LSE, who was one of the architects of the NHS - writing that the NHS was great because the American healthcare market was so awful. I wouldn't want to dispute that Americans get a very bad deal from their system of healthcare but why not make comparisons with healthcare systems in western Europe?

For the 2006 national assessments in the Euro Health Consumer Index compiled by the Health Consumer Powerhouse, a Swedish think-tank concluded:

"The Euro Health Consumer Index 2006 identifies the most consumer-friendly health care system in the European union, as rated by 27 Index indicators. The 2006 Index includes all the 25 EU public healthcare systems plus Switzerland for reference.

"France emerges as the 2006 winner of the Euro Health Consumer Index, 'with a technically efficient and generously providing healthcare system'. France scores 576 out of 750 maximum points. 2005 years winner, the Netherlands, now takes the silver position, followed by Germany. Estonia and Slovakia gets the highest ranking in the category 'value for money'."

For details of country marking in the index:

Briefs on the healthcare systems of selected countries can be found on the Civitas website:

In a ranking of healthcare systems by the World Health Organization a few years back, France came out top in that too:

The UK came in at 18 and the US at 37.

For comparisons in per capita spending on healthcare at PPP Dollars by OECD countries, see:

UK spending per capita was about equal to the the OECD average.

The US spends more per capita than any other country in the world but among OECD countries only Mexico and Turkey have higher inflant mortality rates, which are widely recognised internationally as a sensitive indicator of average standards of healthcare:

Posted by: Bob B | Sep 11, 2007 1:23:43 PM

"Pump money into a centralized system and what goes up is pay, not production."

But production did go up and standards did improve, as anyone who knew the first thing about what Wanless is actually saying would know. A group which obviously doesn't include you. Another triumph for citizen journalists!

Posted by: Jim | Sep 11, 2007 2:09:06 PM


It isn't central planning that's the problem so much as lack of competition and free markets. The US suffers from producer capture much as the UK does and it also has similar problems where the user doesn't see the cost. The government there spends nearly as much as a percentage of GDP as here.

Here we have expensive medical care (which is rationed as a result). There they have expensive medical care which is unrationed, but consequently costs them a fortune. I wouldn't advocate either system - there are far better options than either, all of them more market-orientated (as in most of Europe and Japan).

Posted by: HJHJ | Sep 11, 2007 3:02:58 PM

I would add that Wanless is now saying that obesity is a huge problem (he's right).

I could have told him that it's largely a pointless exercise spending more money on medical care when by far the biggest factors in health have nothing to do with medical care. Once you have good sanitation and housing and enough to eat (as in most western countries) the critical factor is lifestyle - diet, exercise and not smoking. Medical care can only slightly ameliorate the effects of bad choices in these areas and it certainly can't cure them.

If you want good health, for the most part you shouldn't spend your money on medics! Of course, the vested interests in medicine aren't really going to promote this truth.

Posted by: HJHJ | Sep 11, 2007 3:42:15 PM

Jim - "Another triumph for citizen journalists!"

Perhaps you can help us understand why it is that:

"Cancer survival rates in Britain are among the lowest in Europe, according to the most comprehensive analysis of the issue yet produced."

"The UK has the worst standard of care for stroke victims in western Europe, with thousands of patients dying unnecessarily every year, a senior doctor said today."

When the UK spends per capita on healthcare about the same as the OECD average:

Posted by: Bob B | Sep 11, 2007 3:43:02 PM

Bob - Tim's argument is the failings are due to it being a 'centralised' system, as far as am aware, and HJHJ agrees, the US is not a centrally planned system. Hence the example.

Posted by: Matthew | Sep 11, 2007 3:56:34 PM

Matthew - The strange thing is that *public* spending per capita on healthcare in the US in PPP Dollars is apparently about the same as in Britain.

The big difference is that Americans also spend about as much again per capita privately whereas we spend very little on private healthcare. But I don't think anyone is claiming that the US has a centralised system of healthcare whereas the NHS goes out of its way to boast that it is centrally managed by bragging that it employs 1.2 millions and is the biggest employer in western Europe.

I think there are two aspects to this. Other healthcare systems don't seem to have this thing about boasting of being centrally managed as though that is an immensely desirable feature of healthcare systems. Remember - Frank Dobson had that obsession about avoiding "competition" between hospitals whereas in mainland Europe that is taken as par for the course. In the early 1990s, I used to be able to go to the nearest hospital to where I live but I can't now because I don't live in its catchment area - another Dobson reform.

And we seem also to have a popular obsession with measuring healthcare in terms of inputs rather than outputs, which is rather silly. Perhaps that is not too surprising, however, because when researchers came to focus on 5-year survival rates after cancer diagnosis and treatment and recovery rates from strokes, it turns out that the NHS performs badly in comparison with healthcare systems in other west European countries. What makes that especially sad is that Britain has an outstanding international reputation for the quality of research into cancer care and the Royal Marsden Hospital, which specialises in cancer treatment and care, is regarded as world class. Despite those real achievements, the system obviously fails.

In case anyone is interested, the answer to these PQs on 6 February 2007, seems to be the best source on government spending on the NHS and the spend on administration in the NHS since 1990:

Posted by: Bob B | Sep 11, 2007 5:05:24 PM


Yes, but Tim did also mention supply-side reforms and both the US and UK systems need these. A liberalised supply side and centralised planning really aren't compatible.

Posted by: HJHJ | Sep 11, 2007 5:06:23 PM

The full Wanless progress report: Our Future Secured? can be downloaded here:

Posted by: Bob B | Sep 11, 2007 10:22:54 PM

Bob - Tim's argument is the failings are due to it being a 'centralised' system, as far as am aware, and HJHJ agrees, the US is not a centrally planned system. Hence the example.

It is perfectly possible that a system can fail due to it being centralised, whilst a non-centralised system also fails due to other reasons. That the latter can occur, it does not follow that Tim's statement regarding the failings of the centralised system are untrue.

Posted by: Tim Newman | Sep 11, 2007 11:06:00 PM

Oh sure, but if that's the case it needs a bit more of an example that Tim's sweeping statement. I'll repeat, productivity in the US system is worse than in the UK, and actually - whisper it softly - I'd be surprised if it was much better in the rest of Europe.

Posted by: Matthew | Sep 12, 2007 12:14:13 AM

This in Wednesday's Telegraph by Nick Bosanquet, prof of health policy at Imperial College, on "NHS is headed for the worst of all worlds," is especially worth reading for a detached but informed academic perspective on the issues:

The good professor evidently believes that some peer group countries manage to have better healthcare than we get in Britain while spending a small proportion of their GDP on healthcare.

I grew up - as my generation did - with the carefully cultivated illusion that the NHS is wonderful and "the envy of the world" because the American, market orientated system of healthcare is so terrible. Listen carefully, engage with discussion groups and read widely and you can still get many echoes of that same illusion nowadays.

Until recent years, partly because of pioneering work by Civitas, no comparisons were made with other countries in western Europe. Fortunately, the OECD was also enjoined to start collecting comparative data on healthcare spending and outcomes in member countries so we could start to look over national borders to see how others had dealt with what is after all the same range of problems from the human condition.

I'm open minded about whether, in principle, state-managed, centralised systems could produce better results more cost-effectively than market systems - for other pundits here, there are in principle such optimal market structures as "natural monopolies" so we shouldn't jump to conclusions: consider what has happened with market competition between PC operating systems. However, the accumulating evidence from other countries strongly suggests that decentralised and competitive market systems do work better for healthcare even when the state intervenes, as it does in the case of France, to provide and underwrite a national system of "social insurance" to pay for personal healthcare.

A good starting point is to shatter the early illusion that the NHS is wonderful because the American system is so awful and insist on greater transparency in public debates on policy. The next is to embed a regular habit of making international comparisons among peer group countries across virtually all policy areas - which is what our tax monies going to fund OECD are supposed to enable us to do.

Posted by: Bob B | Sep 12, 2007 8:22:17 AM