Putting in and getting out

Today's story that less is being spent on the NHS in Wales than in England was headlined on the BBC website as:

     'Shock' over Welsh NHS underfunded compared to England

And indeed the political reaction is one of condemnation from opposition politicians and incomprehension from the BBC's reporters. But I think we are in danger of missing a more important point.


If there's one thing that characterized Labour's thirteen years in power it was a huge increase in the amount of money spent on the health service. When they came to power, the health service was on its knees. It badly needed more investment, both in people and facilities.

But Labour's preferred mechanism for building new hospitals was PFI. Doing it this way had the advantage (until the accounting rules were changed) of keeping what would otherwise be public borrowing off the books. But funding new building projects in this way is much more expensive in the long term, not just because the consortia need to make a profit, but because of being tied to high-cost management and maintenance elements.

PFI was the norm in both the English and Welsh National Health Services until relatively recently. And the privatization ethos was even more evident when Wales bought into the idea of creating an internal market in our NHS to faithfully replicate what was being established in England. The existing Health Boards were broken into 22 smaller units precisely so that they could compete with each other over commissioning and providing services.

But both those policies were reversed in Wales. As a result of the One Wales Agreement, the internal market in the Welsh NHS was abandoned; and Welsh Labour—to their credit—had already come round to agreeing with Plaid on how expensive it was in the long term to build hospitals under PFI agreements. But there was a downside to this decision. In the absence of an alternative funding mechanism, the result was that fewer hospitals and clinics were built in Wales; but the ones that were built were financed in the normal way out of the capital investment element of the block grant. The Treasury would have been more than happy to allow Wales to build more hospitals, but only if funded under PFI ... as was still being done in England.


Now why did we make these decisions? Simply because we knew that in the long term it would be much more cost effective not to use PFI. So if we imagine identical new hospitals in Wales and England, the one in Wales will cost our NHS very much less than the one in England ... maybe as little as half over a typical 25 or 30 year PFI contract. Similarly, the reason for abandoning the internal market in the NHS was to cut out waste and unnecessary duplication.


Returning to the story, I don't know how much of the difference in funding between the Welsh and English NHS is down to factors such as this, but it should be quite clear that the intended result of doing what we have is for the Welsh NHS to cost us less than its English counterpart. The whole idea is to get the same outcome for less money (... or a better outcome for the same money). In other words, it is not just a question of over or under-funding compared with England or any other country, but a balance between funding and outcome.

Now perhaps our outcomes in Wales leave a lot to be desired—although it is worth remembering what Betsan Powys said here about the apparent differences in waiting times between Wales and England, and what I said about it in the context of the larger picture here—but we cannot naïvely assume that spending more money is the only way of improving these outcomes. It is not merely a question of how much we spend, but of how wisely we spend it.

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Anonymous said...

This is the same argument as with education - If we spend more than England we are being wasteful - If we spend less we are underfunding things - Heads they win - Tails we lose

The fact is that in some areas we are doing better and others worse but instead of looking at the facts, we let the Daily Mail disctate the story.


Cibwr said...

I have seen this quote that 1/5 of health expenditure is wasted, yet I have seen no breakdown of this or justification. Just a bold statement to that effect. Likewise are we comparing apples with pears? We were spending more per head, I take it we still are, just that the increase per person is less than England? Some of these comparisons are meaningless. We need a press that can actually question and probe rather than just trot out simplistic comparisons.

MH said...

Cibwr, The statement was, "there's £1bn that we're not utilising appropriately" and it was made by Paul Davies of the All Wales Directors of NHS last October. It was reported here and here.

I won't pretend to know exactly what he meant by that, but it is often misquoted as a claim that £1bn is being wasted. But the essence of the criticism was that we were not treating patients in the right place and at the right time:

"Far too many patients end up in the wrong place, either being hospitalized when they shouldn't be, or they stay in hospital too long, or they stay in primary care, and they should be in hospital."

So it looks like he was saying that money is being spent in the NHS that should really be spend on other care or by social services. That would be a very good point to make if you're primarily interested in your budget as a director of the NHS, but in the overall scheme of public spending it's money that would have to come out of another pot if it did not come out of the NHS pot.

Cibwr said...

Thank you for that, a completely different kettle of fish then. A shame then the repeated use of it by those that hate the National Assembly goes unchallenged so often.

having said that, I really despair about Betsan Powys' blog, it seems to be infested by the most unpleasant anti National Assembly, Anti Welsh and in some cases down right lunatic posters. I am not sure its worth saving.

Anonymous said...

.. don't bother reading Betsan Powys's blog. It either depresses me that there are people who want to see Wales devoid of any Welshness or moer often than not, it's kust boring.

There are less comments on Vaughan Roderick's blog but there more balanced even when disagreeing.


Unknown said...

The real problem, as far as I see it, is that although the English NHS has spent its extra funding on more managers to administer the targets that were enforced on the, and we in Wales did not, when cuts are made in England (and they will be, despite all this 'ringfencing' rubbish that we've heard so much about), there will be a proportional cut to the block grant.

So much for rewarding success and efficiency!

Cibwr said...

And it is about a lesser increase in Wales as compared to England, when Wales was already spending more per head than England was...

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