Johnny Leavesley: Even before the strain of Covid, the NHS simply wasn’t working.

24 Jun

Johnny Leavesley is a businessman and Chairman of the Midlands Industrial Council.

How should we solve the problem that is the essential need of paying for the NHS? Carry on meeting the cost out of general taxation in the hope that, properly funded, it will efficiently meet all our healthcare demands? That has been the politically accepted expedience for decades ,and one which an unthinking consumer of its services might continue to hope for.

The NHS offers universal access to healthcare free of charge. This principle has long been immensely popular, so much so that attempts at reform are treated with suspicion by the media, medics and everyone who does not worry about its cost.

This, however, is gargantuan: £190 billlion – 20 per cent of all government expenditure in the current year, and 10 per cent of GDP. Its free at point of delivery principle is pure socialism – one not unique amongst healthcare systems; but the UK is certainly the only large economy with such an arrangement. The richest society in history, modern America, reviewed its healthcare provision with a commission headed by Hillary Clinton when her husband was president, and decided that it would not be able to afford a socialist, free healthcare model. Quite.

The truth is that no matter how much money any government is willing to spend, the NHS will not be able to satisfy the demands made of it. Our aging, growing, expectant population already has unlimited healthcare demands. This was evident even before the pandemic temporarily shifted its priorities – with pent-up demand for non-Covid ailments piling up. This problem is acute. The NHS covers the whole population, offers a huge range of services for no charge – and therefore has unlimited demand.

It is not possible to provide unlimited healthcare forevermore – we are simply not wealthy enough as a society to pay for it – and so the NHS fails the way all socialist projects fail; by the way it rations its large but limited resources.

Did you notice that in May it dropped its target of four hours to be seen after hospital admissions, to be replaced by a yet to be announced matrix of criteria? Four hours is a time period which, if kept to its limit, would be regarded as unacceptable in any other instance of service provision.

The NHS does not ration its services and resources through pricing because its constitution forbids it. Instead, rationing is imposed duplicitously through waiting times, changing clinical priorities and a hefty bureaucracy that imposes administrative barriers. All this leads to patient frustration, mediocre outcomes and often opaque injustices. The NHS is a paradox of popular mediocrity, merely because it is free at point of delivery.

It is not truly free, of course. A considerable portion of whatever taxes you pay goes towards it. You will pay higher taxes all your working life for the health service to seem free when you call upon it, mainly towards the end of life. In this sense it seems more ethical than how we pay for the care sector because it feels free.

Is it ethical, though, to continue to hide the reality of healthcare rationing behind appallingly lengthy waiting times? Debate too often prioritises sentiment for hardworking healthcare professionals ,and the panacea proposed is always more spending overall. We spend an above average 7.6% per cent of GDP (2019) and have a higher level of spending than 28 of the 37 OEDC nations (2019). The NHS is not underfunded, but does have an out-of-date funding model.

This is a structurally worsening problem, but the average NHS patient – left of centre economically and right of centre culturally – will be sceptical of any proposed reform of the system. People have come to demand and expect efficient public services, though. Leaving the funding model as it is, and increasing the budget yearly in the hope that whatever amount is thrown at it will work, is not going to deliver that.

I do not know all the answers, but suspect that a European-style insurance system will deliver greater efficiencies for a greater number of patients and, through the clarity given by a pricing model for services, be more honest. The safety net given by government to the poorest and most vulnerable can be more generous and would be the main focus of ongoing debate – because, unlike now, the infrastructure of the whole wouldn’t perpetually be in danger of imminent collapse.

Johnny Leavesley: The Chancellor must find the courage to cut taxes and make it easier to hire

9 Sep

Johnny Leavesley is a businessman and Chairman of the Midlands Industrial Council.

Robert Lowe, a now obscure Nineteenth Century Chancellor of the Exchequer,said of his role that he was “intrusted with a certain amount misery which it is his duty to distribute as fairly as he can.”

There is a mighty judgement coming, most likely beginning this autumn: when the recession we know we are in is confirmed by another quarter’s figures; when the unemployment we know will rise is confirmed by the end of furloughing; and perhaps when Rishi Sunak delivers his first budget and begins the reckoning for gargantuan emergency Covid-19 spending.

Whatever proponents of Modern Monetary Theory (MMT) may believe (that the amount of a country’s debt is ultimately immaterial because it has the sovereignty to print more money), debt does have to be repaid eventually, and interest on it has to be paid throughout. (How ironic that those on the Left who espouse MMT as the solution for high welfare spending have so often denigrated the nation state as a sovereign unit).

With our national debt now at over £2 trillion for the first time, and its interest costs at over 100 per cent of GDP, calls are understandably growing for tax rises and spending cuts. These are calls for the return of ‘sound money’ and, logically, for a balanced budget of government expenditure. On the face of it this is Conservative prudence, but would likely be a return to austerity and a lost opportunity.

I am a trading merchant. I manufacture widgets, buy and sell metal, farm land and livestock, develop properties, build houses, and think about cash flow and risk every day. Less frequently I hire and dismiss employees, make investment decisions, and ponder ownership structures. Owning a conglomerate of business interests gives me, I feel, a better sense for the economy than many a statistician relying on dry data. I also talk widely to businesses across the Midlands, which is and has always been the engine room of the UK economy.

This is not scientific, but my sense is that those in the City are still playing the roulette wheels of financial investment happily enough, those who make things are very busy fulfilling pent up demand released by the easing of lockdown, and those in the service sector are at best treading water but more likely are struggling to survive.

Our economy, alas, is now largely service based. Since it is the private sector which will be doing the heavy lifting of creating the taxable wealth that will pay for everything government does – and predominately small and medium-sized (SME) businesses in the service sector – tax rises at this fragile time will be very counterproductive.

If the Chancellor delivers a conventional budget of tax rises and spending cuts sizeable enough to begin to make our national debt affordable, this will constrict growth, possibly even cripple it. This is not a question of selectively raising some taxes to grasp a larger tax take of a declining GDP in the hope that our weak economy can stand it – but whether more taxes will actually reduce tax revenue by dampening activity, and further damage our international investment competitiveness.

Should he be bold enough to substantially reduce taxes, prioritising easing the costs of employing people (cut national insurance) and attracting business investment (cut Corporation Tax, abolish Capital Gains Tax, and expand hugely Enterprise Investment Schemes), this would certainly stimulate economic growth and (quicker than you might think) tangentially increase government tax receipts.

I realise that this may seem to be the call of a fat cat cooing for more cream but it is in my best interests if everyone who earns money benefits from the rising tide of an expanding economy. That is best achieved if working men and women are allowed to keep more of what they earn and have more choice in how to spend it. That is best achieved by tax cuts deep enough to make a difference.

Most urgently, business needs it to be more affordable and easier to employ people. Collectively SMEs employ more people than larger companies and will need flexibility to be able to recruit. This is not determined by regulation so much as by the costs of national insurance. In a recession investors need greater incentives to take on risk.

The unspoken truth is that economic growth in the West has been lamentable for the past 20 years and politicians do not know how to improve productivity. A dawn of new technologies is coming but will not impact widely enough, quickly enough, to meaningfully help level up an unequal society.

The answer is to be brave, cut taxes on those who create the national wealth, and watch the harvest grow.