Tax breaks for health? Policy update from the 2008 Lib Dem party conference

by Andy Cowper, editor, Health Policy Insight

The Liberal Democrats go into the party conference season as the only major Westminster party trying to sell its members (and by extension, the electorate) a major shift in policy. They are the only party promising to cut taxes overall.

And their able deputy leader and finance spokesman Vincent Cable, in an un-leaked announcement in his speech, has suggested that more may be afoot of a tax cut  even than their existing promise.

In health policy terms, we may be reaching the end of the line on the belief that simply spending more is, in itself, A Good Thing. Causation is not correlation: the NHS’s budget has more than doubled since it stood at £40.2 billion in 1999-2000.

Some of this spending has brought waiting lists down and kept them down. Some of it has produced real improvements in fighting the rise of healthcare-acquired infections. Some of this money has gone in pay inflation for previously very underpaid groups of healthcare professionals. Some has gone on having more staff (the arrival of which has depressed NHS productivity figures). Some of it has been paid to GP practices under the QOF to improve the management and monitoring of patients with long-term conditions (which they should already have been doing anyway, but that’s another story).

The wasted money
But some of the money has been wasted. The NHS and the DH have developed an expensive fetish for management consultants. There have been entirely pointless exercises, such as the NHS University, and the create-it-abolish-it cycle around various arms’ length bodies (most notably, around the patient and public involvement agenda).

The ISTC programme’s ‘take-or-pay’ contracts were a stunning example of bad contract management, as were the wave 1 contracts that the NHS must buy back those facilities where it will not renew the contracts. The management costs of minor modifications to PFI hospitals are wildly disproportionate.

And with inflation running at 4.4%, a tax-cutting message could gain real traction. It all sits on the Lib Dem proposal to introduce some form of locally-raised income tax.

Lamb to the slaughter?
Lib Dem health spokesman Norman Lamb is reported to have told a press conference prior to his speech this morning that, "you have got to find a way to incentivise better health. The scheme has to be practical and has to work in disadvantaged areas too. You could, for instance, have a card which you swipe whenever you take part in regular screenings or when you take part in physical exercise."

Lamb’s proposal is for new local health boards to be set up, which could reduce or return some of people’s taxes if they keep fit and attend health screening. He suggests that poorer people receiving benefits could be eligible for higher levels of benefit if they improve the healthiness of their lifestyle.

Lamb also suggested that this system should seek to learn from the way risk ratings are assessed by healthcare insurers in systems like the USA and South Africa.

Last week, Lib Dem leader Nick Clegg showed some political courage by coming out as the first party leader to back co-payments for cancer drugs.

The likelihood of the Liberal Democrat conference taking on its new leadership over major policy issues at their first annual conference may not be high.

Indeed on Saturday, they voted to have directly-elected local health boards in charge of local NHS services, despite some activists’ suggestions that this should be the role of local authorities: Lamb had argued "Would you feel confident campaigning in some of the Labour rotten boroughs, or some of the mean-spirited Tory shires, telling people that we want their council to take control of their health service?"

However, there are apparent flaws in Lamb’s suggestions, which become more apparent considering a few other points in his conference speech.

The speech - a farewell to arms (length bodies) - and SHAs
Lamb emphasised the importance of local accountability in his speech, repeatedly attacking the Labour Government’s “waste” and “centralising”. He emphasised plans for a “bonfire of the quangos”, attacking the leaders of many of the arms’ length health bodies as “politicians”. The strategic health authorities would be abolished.

Lamb also promised that Liberal Democrats would say “goodbye to the national IT programme, which has wasted and will waste millions. Who would trust this government with a national database of our health records? We need IT, but we will build it from the bottom up as they’ve done in Sweden”.

Lamb emphasised that health boards will have local freedom to commission services from any sector including the private, provided the offer represents value for money: “we reject the central imposition of private providers”.

He added that the Lib Dems want to “move away from the central tariffs of payment by results, which rewards hospitals for unnecessary admissions - our real objective is to avoid unnecessary admissions.

He promised more “patient power, with our ‘patients bill of rights’ with guaranteed admission to care within a certain time, a right to choose appropriate clinicians, and a right to treatment within set times. We’ll also bring in direct payments and individual budgets for patients with long-term conditions and mental health needs – these have worked in social care, and will work in NHS”.

He also suggested extending the direct budgets scheme to maternity services, though a rather good joke about Nick Clegg’s impending fourth child went straight over delegates’ heads.

Lamb also proposed national action on fines and prosecutions for verbal and physical abuse of NHS staff, citing an £80 fine and disorder charge scheme operated between Royal Bolton Hospital NHS Trust and the local police that had cut incident rates and “changed the culture”. He suggested that a £10 fine should be introduced for those who miss NHS appointments without a good reason.

The contradictions
Lamb is a smart man, and will probably be aware of some of the contradictions in these suggestions.

Firstly, the role of the health boards will be so difficult and extensive that they will cost a great deal to set up and to run. The administration of refunding taxes, or setting them for each household according to risk rating, is a job creation scheme of a huge order of magnitude.

There is an argument to be made about an individual’s freedom to be unhealthy extending as far is its impact on equitable and affordable health provision; yet despite quoting John Stuart Mill, Lamb’s speech did not adequately emphasise the links. It’s also very probable that Mill-style logic leads you to a health insurance system. The Lib Dems are not yet proposing this, but the reference to community risk rating was an interesting one.

His suggestion that people might swipe a card to register a session of exercise would entail a new need for a national IT programme, broader even in remit that NHS Connecting For Health, which he intends to abolish.

The cost of administering a £10 fine for missing appointments would be more that £10 per patient. Moreover, to draw from Levitt and Dubner’s Freakonomics, experiments with fines for late collection from children’s nurseries found that the rate of lateness actually increased with the introduction of fines.

Those who miss appointments are disproportionately young (aged 17–40 years), with more psychological problems, and who come from a lower socio-economic class and live in deprived areas, according to George and Rubin (Family Practice Vol. 20, No. 2, 178-184 2003). So if that were to happen in the NHS, which introduced late collection fines that cost more to collect than they raise, it would also be likely to deter people from seeking care. Policy is a complex business, and human resonses are not always simple and linear.

Moving away from the national tariff is already under way with the move to normative pricing. However, the implication of a move towards the territory of competition on price as opposed to quality and outcomes is a dangerous one in healthcare.

The bill of rights / defined entitlements issue has been covered recently, but still needs public debate and will continue to get it.

The Lib Dems are provoking some new thinking around policy. It's a good thing. They also start from a position where they are not under the weight of expectation to form the next government.

However, for the first time in a long time, there is electoral arithmetic that plausibly suggests they could have a hand in deciding who it is. It will be interesting to see how their policy position develops - on health, and more broadly.