Financial impact of independence on the NHS

The impact of independence on NHS Scotland has caused some of the most impassioned debate in the whole campaign - despite it being a devolved issue. Objective analysis is hard to come by, but at least we now have some numbers, helpfully crunched by the respected Institute for Fiscal Studies.

Nicola Sturgeon has said that a 'Yes' to independence would free the Scottish NHS from an agenda of privatisation and public spending cuts. The 'No' campaign focuses on what iScotland’s finances would mean for NHS funding. Gordon Brown has said he wants to 'Nail the NHS lie' of the 'Yes' campaign.

The historical point IFS makes is that Scotland has not given the same priority the health spending as the UK, as this table illustrates.

 

For the future they point to the likelihood of downward Barnett consequentials of UK spending cuts that will make it harder to protect NHS spending. Unless, the Scottish Government is willing to use their existing and new taxation powers - something they appear reluctant to do.

Independence would give greater freedom to spend more, depending on the constraints of a currency union, should one be agreed. The capacity to do this depends on a range of assumptions over oil prices etc that are difficult to quantify. IFS has already set out their view on this, although it is challenged by Yes supporters, such as the Cuthbert's.

IFS conclude that, "in the short term, then, it is hard to see how independence could allow Scotland to spend more on the NHS than would be possible within a Union where it will have significant tax raising powers and considerable say over spending priorities."

They also say the longer-term outlook is more difficult for them to quantify, "a combination of the eventual fall in oil revenues and an ageing population could make for a tougher fiscal outlook for Scotland than the rest of the UK and hence less room for additional spending on things like the NHS." They concede this could be offset by faster economic growth in iScotland, but that is not certain, by any means.

 

 

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Referendum debate deserves better than this scare story

It is perhaps surprising that a devolved issue, the NHS, has become the latest 'battleground' issue in the referendum campaign. The Yes campaign, desperate to move away from the currency issue, are issuing press releases almost daily on the issue. Apparently, only a yes vote will save the NHS.

There appears to be two grounds on which this claim is based.

Firstly, that the English NHS is being privatised and therefore this will be forced on Scots, who have rejected the marketisation of health services. The primary difficulty with this argument is that the NHS is a devolved service, so it's the Scottish Parliament that decides the structure of the NHS. And that's exactly what they have done. Dave Watson's blog on this site reminds us how that happened, not by an SNP administration for whom falling out with Westminster is compulsory, but by Scottish Labour ministers who went in a different direction to that of their UK counterparts.

The minister who we have most to thank for that is Malcolm Chisholm. The MSP respected even by his political opponents and the least likely to follow the party line on anything. His view of the Yes campaign argument is: "This has to be not just the biggest lie of the Referendum campaign but the biggest political lie of all my years in politics."

Somewhat ironically, if there is a threat to the NHS as a public service it comes from the EU and the proposed TTIP treaty with the USA. But of course the Yes campaign will not have us exiting the EU. It would also possibly be churlish to point out that spending on private health care by NHS Scotland has increased by 37% since the SNP came to power.

The second argument is that a privatised English NHS will result in a cut in spending and therefore a consequential cut in Scotland's NHS through the Barnett formula. There are frankly more holes in this argument than a Swiss cheese.

Anyone who has studied market driven health systems knows that transaction costs increase. More money is spent, not on care, but on administration. The SNP trumpet the £1bn efficiency savings target for the English NHS, that they claim means £100m taken from the Scottish budget. They forget to mention that NHS Scotland also has efficiency savings targets, but as in England they get ploughed back into the NHS. The net result is no budget cut and therefore no Barnett consequentials. Even if there was, the consequentials would be for the Scottish budget as a whole, not the NHS in Scotland.

In fact, the opposite has been the case. Because the Tories have largely protected health spending in England, Scotland's budget has not been cut as much as UK budget as a whole. Small comfort, but it does demonstrate that even the Tories recognise that cutting health spending is electoral suicide for them in England. As the Scottish Government explanation for the Scottish health budget increase says, "This is the full amount of the budget consequentials arising from the increase to health in England and delivers on the Scottish Government’s commitment to pass on the resource budget consequentials in full to the health budget in Scotland."

For an objective view on these points you can read the ITV or the BBC analysis, amongst many others. Even Yes leaning academics have pointed to the huge flaws in the argument.

If there is an argument here, it is that the Tories do want to roll back the state with their austerity programme. But that is a political choice that voters across the UK can reject. There is also the small matter of how Scotland's finances might look after independence. A valid debating point, but not specifically about the NHS.

There are many valid arguments for independence and SHA Scotland has covered these in its latest journal. However, the NHS arguments are hugely cynical, the Yes campaign's version of 'Project Fear'. Cynical because most people don't understand how our services are structured and financed, but they do value our NHS. The referendum debate deserves better from those who understand these matters all too well.

 

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