CHAPTER FIVE

Socialist response to the Hayes Report: Chapter Five

 

NEW LABOUR IN POWER:  DID THINGS GET ANY BETTER?

 

 

Introduction

 

In the 1950s and 1960s a reluctant Tory Party tolerated the NHS at best whilst always nibbling at its edges.   The 1970s saw Callaghan's Labour government making cutbacks in the NHS at the behest of the International Monetary Fund. 

 

The Thatcher years brought financial stringency, serious consideration of outright and open privatisation alongside piecemeal and covert privatisation and finally, the misnamed "NHS Reforms".  John Major's regime continued with what were, in reality, counter-reforms, to the opposition of just about everyone.  His unpopular Government was finally swept from power in May 1997 and were replaced by Tony Blair and New Labour.

 

New Labour's theme tune during the 1997 election was the D-ream song "Things Can Only Get Better".  The choice of this song was apt - Tony Blair's approach was timid and promised little, instead focusing on the record of John Major in order to win a majority.

 

After the election there was little enthusiasm for the new regime, rather a hope that things just might improve and overwhelming relief that the hated Tories were at last gone.  Now that New Labour have been returned to power for a second time the question can fairly be asked - did things get any better?  And, importantly, did New Labour in power deliver anything that a Tory administration would not have delivered?

 

Initially New Labour stuck to the Conservative’s spending plans and spending on education and health was screwed down between 1997 and 1999.  It began to rise from the year 2000 but the extra finance now pledged will make little difference as huge sums are required just to make up the accumulated shortfall from years of under-spending, especially the decades long lack of investment in new schools and hospitals, and much of the extra money is to be handed to the private sector.  (New Labour have of course made a point of announcing the same spending increases several times over.  The headlines looked impressive until their game was rumbled).  And, of course, in the last analysis, Gordon Brown can only deliver on his promises if the economy stays on course.  He has not, despite his boasting, abolished the cycle of boom and bust.  A new recession means that all bets are off and we may never see much of what Gordon Brown has pledged.

 

Increasing Inequality and Collapsing Infrastructure

 

One "contribution" of New Labour to health has been to preside over a widening gap between rich and poor.  Overall, after-tax incomes have risen less under this government than under six of the last seven governments since 1964 (the exception is the first Thatcher term from 1979 to 1983, a time of deep recession.  The developing recession may well squeeze average incomes in the same way as in the 1980-82 recession).

 

New Labour are proud that the rich are getting richer.  They accept the “trickle –down” theory, that all will ultimately benefit.  Between 1978 and 1998 the richest one fifth of the population have seen their share of post-tax national income rise from 36% to 45%.  The incomes of the chief executives of the 100 largest companies average  £717,000.  In 1983 there were 7,000 millionaires in Britain.  Now there are 77,000.

 

There is little evidence of any trickle-down.  Poverty remains endemic in Tony Blair's Britain.  The biggest concentration of poverty is in Liverpool.  In the central L16 postcode area 65.8% of households earn less than  £10,000 a year.  In Vauxhall, Liverpool, the average annual household income is only  £9,000.  A few miles away in Heeswall, the Wirral, the comparable figure is  £46,000.

 

Under New Labour some benefits have been increased but not to the extent that would be required to lift people out of poverty.  In addition the government ignores the effects of the social fund in their calculations on poverty.  In February 2000 709,000 claimants had an average of £9.42 deducted from their benefits  per week to repay loans taken out to buy essentials.  They were thus in reality reduced to an existence below the official poverty line but were considered to be above it by the government. 

 

Overall there are half a million more people living in poverty now than there were in 1997.  According to the Child Poverty Action Group (CPAG) the first two years of New Labour were "dire for poor children" and the cut in lone parent benefits was "arguably the first real-term cut in the level of social assistance paid to any group of claimants since social assistance was introduced in 1948".

 

By 1998-1999 there had been no decrease in the proportion of children living in poverty (still about one third).  The government now claims that they have lifted 1.5 million children out of poverty.  Independent experts estimate that the true number is actually 500,000 (Financial Times, 12/4/02).  The new recession will see the number of children in poverty rising again as unemployment begins to rise.

 

New Labour spends less of Britain’s Gross Domestic Product on public services that John Major’s government (in the years 1997 – 2001 39.2%, 38.4%, 37.6% and 38.2% respectively compared to 43.6%, 43.2%, 42.6% and 41% in the years 1993-1997).

 

Britain's infrastructure is collapsing.  Nowhere can this be seen more clearly than on the railways.  It is clear that the private sector can deliver profits but that it cannot deliver good public services or safety. A massive programme of public spending is required but New Labour is not delivering.  In the late 1960's net public sector investment reached 7.5% of gross domestic product (GDP).  Under John Major capital spending was 1.6%, 1.5%, 1.4% and 0.7% of GDP in the four years 1993 –1997.  Under Tony Blair spending fell to 0.6%, 0.7%, 0.5% and 0.6% of GDP in the years 1997 –2001.  In real terms public investment is a tenth of the level of thirty years ago.  As a share of GDP it is a twentieth.  Public investment in Britain is less than in Germany (1.8% of GDP), Italy (2.2%), the US (2.8%), France (2.8%) and Japan (7.9%).  Net capital spending last year was  £3.2 billion.  This is only 60% of 1996 -1997 levels and less than a quarter of the 1992-1993 level. 

 

New Labours' Record on the NHS

 

In July 2000 New Labour announced their "National Plan" for the NHS with great fanfare.  Funding has been increased in incremental stages but the figures are not as promising as they sound and there are real dangers to the future of the NHS contained within the plan.  In April 2002 the government announced an increase in health spending of £40 billion over the next five years. This amounts to a 7.4% year on year increase above inflation and would take total spending from £65.4 billion in 2002 – 2003 to £105.6 billion in 2002 – 2008.  NI’s share of the increase amounts to £7 billion.    By 2007 – 2008 the Euro average will be 10.7%.

 

The increase in health spending is not significantly larger than increases in the past, as has been claimed.  In the five years 1971-1976, spending rose by 6.4% a year in real terms.  Spending rose by almost as much again in the early 1990s as the Tories pump-primed their "reforms".  (Then the extra finance was swallowed up by red tape as the service to patients deteriorated).  And it should not be forgotten that health spending in New Labour‘s first term rose by less than the average under John Major and subsequent increases have first to overcome this accumulated shortfall. 

 

Tony Blair's stated aim is to increase Britain's health spending to the current European average of 8% within a few years.  The increases announced will not achieve this as even if the spending pledges are met there is a shortfall of £26 billion.  In any case average spending in Europe will actually be 10.72% of GDP by 2006.  The NHS would require another £45 billion annually to meet this target (BMJ 2002: 324;502).   Still less will Blair be able to bring spending up to the average of the richer G7 countries.

 

And of course all bets will be off when a new recession occurs.  At present Gordon Brown plans to increase overall government spending by 3.3% a year.  The Institute of Fiscal Studies estimates that Browns plans have a £7.4 billion hole in the first place (assuming an unambitious annual economic growth rate of 2.75% annually over the next five years),  The problem for Brown is that he will not achieve even this economic growth.  The economy has grown by only 1.6% in 2002, and will struggle to achieve 2% in 2003, on the most optimistic scenario.  It is quite possible, or even probable, that an actual recession will develop.  Brown admits that he faces a budget shortfall of £16 billion in 2002 and £20 billion in 2003 and that he will need to borrow £20 billion to keep his spending plans on track.

 

Others are less genuine than Brown and some economists are predicting shortfalls of up to £40 billion annually over the next four years. 

 

The reason for the squeeze on the public coffers is the sharp fall in tax receipts as the economy slows.  In October 2002 the Inland Revenue were raising 13% less than a year earlier.  Corporation tax fell by a massive 27% over the same period.  So far healthy consumer spending has prevented an even worse deterioration in government income but this will not last for much longer.

 

Brown hopes that the world economy will pick up in 2003, that the UK economy will avoid outright recession, and that tax receipts will pick up in the medium term.  The problem for him however is the evidence that the healthy tax receipts of the late 1990s were a one-off phenomenon related to the stock market bubble.

 

In the circumstances that are now unfolding Brown will not be able to deliver on his promises for public spending in general, or for the NHS in particular.  He plans to borrow more in the short-term and hopes that he will be able to repay these loans in the next few years.  A more prolonged slow-down in the economy, by far and away the most likely prospect, will mean that increased borrowing now will store up problems for the future.

 

Brown has already increased indirect taxation.  When New Labour came to power the tax burden totalled just under 35% of GDP, now it is around 37%.  In the spring of 2003 national insurance contributions will rise by 1% for both employers and employees.  Even then the total tax burden will remain below the 39% of GDP it reached in the early years of the Thatcher government.

 

Despite his protestations to the contrary Brown is clearly contemplating further tax rises.  Rises that hit business will be resolutely opposed by the capitalist class.  Rises that hit ordinary workers will be difficult for New Labour to impose given its weakened position now that the unions have now moved into action.  In addition, increasing taxes at a time of economic slow-down or outright recession, is very dangerous for Browns’ overall strategy.  Such a move would tip the economy further into recession, and for this reason, will only be reluctantly taken by Brown.

 

Thus there are three alternatives open to Brown.  Increased borrowing, increased taxation, or cuts in services and spending plans.  Given the difficulties outlined above, Brown will inevitably fail to deliver on his promises of increased spending, and introduce cuts in the NHS and the education sector.           

 

New Labour have given the private sector a massive boost by guaranteeing that operations repeatedly cancelled in the NHS will take place in private hospitals.  In the year to November 2001 64,000 such operations took place.  The private sector will have made a profit on each and every one.  Tony Blair has also announced that he will open 7,000 new hospital beds. Most of these are to be "intermediate care" beds, allowing patients to convalesce between a stay on an acute ward and going home.  What Blair didn't reveal is that the majority, if not all, of these beds will be provided by the private sector. 

 

From October 2001 the NHS has met the cost of nursing care for nursing home residents, but charges will be levied for personal care (e.g. meals or having a bath).  Intermediate care will be provided by the private sector under the same rules.  This means that it is possible that there may be charges for hospital admission for the first time ever.  Patients may pay when they go into hospital and the private sector will profit.  The NHS will cease to be a universal, comprehensive service, free at the point of delivery.  Bairbre De Brun has not indicated that she intends to introduce similar measures locally but equally has she not said that she will not do so.

 

Most recently New Labour has announced plans to establish “Foundation Hospitals”.  These elite establishments will attract increased funding, and will be allowed to borrow money and to set their own pay rates.  This will lead rapidly towards the development of a two-tier health service.    

 

New Labour has announced plans to expand the numbers of doctors, nurses and other health staff.   By the end of their first term in office, however, little had been achieved on this count.  There were 22,000 vacancies for nurses and 1214 GP posts were unfilled, mostly in deprived urban areas.  In 1997 there were also hundreds of vacant physiotherapy and social work posts and 510 dentists jobs were unfilled.  Even if their plans come to fruition we will still be a long way short of other countries.  Germany has 341 doctors per 100,000 population, France 303, Sweden 280 but the UK only 175.  Britain has fewer nurses per head of the population than the South of Ireland, Germany, New Zealand, the US, France or Italy (Britain has the least at 5 per 1000, the South the most at 15 per 1000).   The NHS has 0.6 GPs per 1000 population, France has 1.5.  Nurse training places fell by 26% in the first half of the 1990s.    

 

Conclusion

 

New Labour has not saved the NHS, nor has it reduced poverty or inequality to any significant extent.   Under Tony Blair, the problems of the health service have deepened.  The New Labour solution is increased privatisation and the closure of smaller hospitals.  Alan Milburn, the current Health Secretary,  has announced his intention to encourage major international private companies – such as Kaiser Permante and United Health Care from the US, Germedica from Germany and Capso from Sweden – to invest in Britain.  “I expect to see a growing number of these new providers in place, beginning later this year.  Like NHS use of existing private sector providers, this is not a temporary measure”.  According to Milburn:  “The new providers will become a permanent feature of the NHS landscape” (Guardian, 25/5/02).  “Foundation Hospitals” are to be given so much commercial freedom that they will practically opt out of the NHS.  

 

New Labour are destroying the NHS as a national, co-ordinated, public service.  They cannot deliver on their promises of increased funding.  What is the alternative to the approach of New Labour and how can we mobilise to defend and extend the NHS?  We will consider these issues in Chapter Six.

 

Chapter 6