Address in Reply to Her Majesty's Most Gracious Speech

Part of the debate – in the House of Lords at 7:50 pm on 19 November 2002.

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Photo of Lord Blackwell Lord Blackwell Conservative 7:50, 19 November 2002

My Lords, it is a privilege to follow the noble Lord, Lord Chan. Like him, I shall focus my initial remarks on the Government's programme for health, but I will add a few comments on pensions. Like some of my colleagues on these Benches, I welcome the Government's belated conversion to the notion of independent fund-holding hospitals. Like others, I detect stronger support for it on these Benches than on the Government's own Back Benches.

Against the forensic analysis of statistics set out by my noble friend Lady Noakes, my criticism is that the Government have not gone far enough and do not intend to go quickly enough in pressing forward in this new direction. However, I welcome the recognition that I think I detect from the Government, at last, that running a health service of 1.5 million people as a nationalised state monopoly simply does not work. The noble Baroness, Lady Pitkeathley, talked about the founding principles of the NHS. In 1945, Nye Bevan said that the objectives of the health service were to provide the medical profession with the best and most modern apparatus in medicine, enabling them freely to use it to the benefit of the people of this country. He said:

"Every doctor must be free to use that apparatus without interference from secular organisations".

The trouble with running the NHS as a nationalised industry, as it has been run for the past 40 years, is that, like every other nationalised industry, it promotes a culture of managing upwards to meet the targets and directives set from above rather than responding at local level to people's needs. The plethora of central initiatives and central controls acts as a block on local initiatives. If we are ever to get efficiency and better patient care in the NHS, just as we learned that we could not run telephone systems or steel industries as a nationalised industry, we must return to the pre-1948 structure of the health service based on local independent voluntary and charitable organisations. Fortunately, the Government have already started to do that. These organisations would be run by professionals for the benefit of patients in the way that Nye Bevan set out in his vision.

We will need to see the legislation to understand whether the Minister's promise of fully independent hospitals is lived up to in practice. I have my suspicions, but I am hopeful. We will wish to ensure, so far as we can, that the legislation provides for that. Since the Government are now on to a good thing, I encourage them to set out a timetable to go much further—a timetable to enable more hospitals to benefit from the status of being fully independent voluntary and charitable trusts.

That, of itself, is only part of the answer. Reform of the supply side alone is not enough, when we continue to have a state monopoly of healthcare purchasing—a monopsony, in effect. So long as there is a single purchaser of healthcare, purchasing will still be used to enforce centralised targets, priorities and initiatives. The truth is that supply rationed by bureaucracy always disadvantages the weakest members of the community. Whether it is a Soviet state trying to supply housing or the borough of Hackney trying to provide social services, it is the weakest who always fall victim to state bureaucracy. That happens because it is those who are most articulate and most capable of finding their way through the system who can get treatment out of a rationed bureaucracy. The least articulate and the least able have the least power. The Minister is shaking her head, but there is a raft of relevant statistics, which I will quote to her on another occasion. The NHS Executive itself has published a report to show that someone in social class 5 is far more likely to wait for more than three months for treatment in the NHS than someone in social class 1. It is a huge advantage to be articulate and able to work one's way around state bureaucracy.

PCTs may help. For some of the reasons set out by the noble Lord, Lord Chan, I suspect that they will not provide the whole answer. The only way to provide the level of effectiveness that the NHS needs, alongside freeing up the supply side, is to create real customer power, or patient power. I am not talking about dismantling the NHS and replacing it with private insurance; I am simply talking about recreating the NHS in the image that Nye Bevan envisaged. This would be done by allowing patients to take their part of the NHS budget—an NHS credit, if you like—and apply it in a way that would give them power and choice over the kind of healthcare they receive. Rather than have an NHS monopsony, patients could use their NHS credit in one of various independent healthcare management organisations that would then contract with the hospitals and primary-care agencies, competing to provide the best healthcare possible.

Until we grasp that nettle and remove all vestiges of centralised state monopoly out of the health service, we will unfortunately continue with such inefficiencies as those my noble friend regaled us with. I recognise that such a change cannot be brought about overnight. But now that the Government have started on this path of reform, I encourage them to think about going the whole hog and addressing the idea as part of their plans.

Beyond what I said about health, my one criticism of the Government is that the biggest social welfare issue that this country faces is dealt with wholly inadequately in any of the Government's plans so far. I recognise that a Green Paper is promised soon, but I detected a note of complacency in how the Minister addressed the issue in her opening remarks.

We have an ageing population. More and more of the population will become dependent on retirement funds. In 15, 20 or 30 years' time, the funding required for that will not exist; we are grossly underfunded. The Government's own estimates of the liabilities to pay for the future basic state pension add up to more than £1,000 billion, which should be declared on their balance sheet. To that we must add the extra cost to taxpayers of paying the second state pension that we heard about. It has good aims, but it will result in additional cost to taxpayers. I fear that even with the state second pension, there will not be enough coming out of the state purse to meet the expectations of many people when they retire.

Let us be clear. We are talking primarily about people in the lower half of the income distribution who will face these problems, because they do not have enough savings. As my noble friend Lord Fowler said earlier, we are in danger of creating two nations, because those in the lower half of the income distribution often do not have their own savings to supplement what they can expect from the state. There are a number of reasons for that. First, in many cases they cannot afford to put much aside. Secondly, as the Minister has recognised, for many of them, at least recently, it may not have been economically sensible to put money aside. If they got best advice from a financial adviser they would be told that it was not sensible for them to save, because any funds that they accumulated would be knocked off their minimum income guarantee and they would be worse off. I note the Minister's reassuring words about the impact of the state pension credit. I recognise that that may help to ameliorate the problem. However, I doubt that it will be enough to make it truly worthwhile for people who do not have very much to save enough to make a difference.

A further problem is the cost of compliance. For the insurance and pension companies it has not been economic to try to sell products to the lower income group. Although stakeholder schemes were aimed at the poorest part of the income distribution, they have failed to achieve what was intended because it is not economic to distribute products on a small scale to small savers.

If we do not tackle all those problems, I fear that we shall have a ballooning legacy of costs for the next generation that is not addressed by any of the Government's proposals. I do not suggest that I can offer solutions to all those problems tonight, but I have two brief suggestions that the Government might like to pick up in their Green Paper, if it is not too late. My first suggestion, which has been made in other quarters, is the notion of a top-up for people on low incomes who make pension contributions. For every £1 that they put away, the state could put an additional £1 in their pension bucket. That would seize the imagination and would enable people to see that they were getting a real accumulation of money that they would not get if they did not save for themselves. Secondly, allied to that proposal, we should allow people to move that part of the state pension fund that is attributed to them into their personal pension pot. To do that, the Government would simply crystallise the liability that they currently have for that state pension, issue debt to the individual to be put into their pension pot and, over time, allow the individual to invest that in other assets where they might get a higher return. Over and above that, it would be a real incentive to the individual to see that they had a bucket of money to which they were adding rather than starting from scratch.

Those are two ideas to put into the Green Paper considerations. Something bold and imaginative will be needed to avoid facing a real pension crisis for future generations.