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.

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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.

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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.

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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.