Britain's Labour government and the Conservative opposition party this week outlined their radically different approaches to the future funding of the NHS—with the government backing higher spending financed through public funding and the Conservatives favouring a social insurance based scheme.
On the eve of Chancellor Gordon Brown's budget speech on Wednesday, the Conservative leader, Iain Duncan Smith, produced a report supporting a healthcare system funded through social insurance—where employer and employee pay towards a compulsory health insurance plan—rather than a system funded through general taxation.
The policy shift by the Conservatives came as it became clear that the chancellor of the exchequer would make a radical move on NHS funding, announcing extra resources for the service on top of what had already been promised. As the BMJ went to press, it was predicted that the increase in NHS spending could be in the region of an extra £7.9bn ($11.4bn; €12.9bn) a year by the end of this parliament, in 2005-6.
It is Mr Brown's first budget since the 2001 election, and “new Labour” seems to feel that it now has a mandate from the voting public to pursue a policy of increased spending on the NHS.
As the final report on the future of the health service by Derek Wanless, former group chief executive of NatWest Bank, was published this week, Mr Brown looked set to use the budget to bring in more NHS funding by increasing national insurance contributions.
The Conservatives' report, Alternative Prescriptions, looks at the different ways of financing health care around the world. It reaches the conclusion that the United Kingdom's tax based system is unresponsive to people's needs and not outstandingly fair in the way the financial burden is distributed.
In the introduction to the report, Mr Duncan Smith claims that the Wanless report was limited to considering a publicly funded system. “They [the government] closed their minds to the alternatives at the outset,” he said.
Commentators believe that the move towards increasing taxation could be a dangerous one on Mr Brown's part, laying him open to claims that new Labour was moving back towards the old Labour tax and spend scenario—an association which the chancellor and prime minister, Tony Blair, have been desperate to avoid. But this time round, the spending will be tempered by the various regulations and checks on spending that are linked to performance in the NHS, including the controversial star ratings system for NHS trusts and the various national service framework initiatives.
Most economic commentators expected Mr Brown to raise spending on the NHS by increasing national insurance contributions, although some felt the pre-budget leaks might have just offered him the chance to air these ideas and see how the public reacted.
Raising cash through national insurance rather than general taxation carries less potential political flak, although it could be seen as a less fair way of raising additional funds, as those who are better off would escape the worst of the increase.
A 1% increase in national insurance contributions (which currently raises about £60bn) would raise about £600m.
However, Mr Brown looked set to change the national insurance bandings. He was expected to raise the entry threshold for payment of national insurance, so that people who earned less would be better off; currently (2002-3) people start paying once they earn £89 a week (£4628 a year).
He was also expected to raise the level of salary on which standard national insurance contributions (10% of salary) are paid. This is currently set at £590 a week (£30680 a year). 