Tim, I appreciated the graph as I've asked you at least once in the past to say how big you think the funding gap really is (and what increase in the basic rate of income tax, say, would be needed to close it). Upthread I asked you a few questions about the chart that you may have missed:
The projections matter because, depending on which one we believe, we're looking at a funding gap of between 2 and 20 billion (taking Labour's manifesto as the reference). By way of comparison, the total revenue budget is about £720 billion.
Also, if I understand you correctly, ACOs are a way of finessing the bureaucracy associated with the internal markets within the NHS. Does that mean that the last few decades of trying to impose an ideologically market-based model on the inner workings of the NHS have been a costly waste of time?
Apologies that I missed your post.
From memory, the total revenue budget for the NHS across the UK is around £140bn pa (give or take), not £720bn. Perhaps you're talking cumulatively over the period?
A costly waste of time? I'm not sure. We don't have a counterfactual. Also, perhaps a bit like socialism, we never really tried it wholeheartedly - or at least without having to make hefty adaptive changes to it. Those experiments, while not wholly 'ideological' were certainly based on a technocratic view of 'incentives'. The idea had a lot to do with 'public interest' theories of Government in the 70s and people like Donald Light/RAND.
There were several starting points involved. One was that the 'producers' (let's caricature and say 'hospitals' in this case), wilfully or not, systematically distorted the actual cost of anything in their own interests, but at the same time were the only people who actually knew what those costs were. This is a specifically economic manifestation of the 'asymmetry of information' around medicine - broadly that doctors know more about how to do it than the rest of us. What was apparently 'needed' was a different layer of 'commissioners' who would plan and pay for services.
The second starting point was best illustrated; and I seem to remember actually
was illustrated; through comparison with Soviet socio-economics. Unless there is some kind of quasi-market relationship between supply and demand, you tend to end up with immense and wasteful distortions, and an equally immense bureaucracy trying to manage them.
One point, however, about this and the NHS is that markets have exits and failures. If firms can't compete they go out of business. But, while there is a theoretical regime for that in Lansley's Act, we are here to provide a service. We don't, can't and would not want to close a hospital because it is somehow 'unprofitable' -
because we have a duty to provide a service to its population.
A further point about markets (which is why they don't even work at least some of the time in the private sector) is that they require transparency around information and prices. Pursuing this idea of incentivisation, this is why we tried, beginning in the early 2000s, to introduce a 'tariff' regime and create a virtuous circle, whereby the money followed the patient, the patient could choose where they went for their treatment (that's a whole other thread...), and providers would be paid by commissioners of that treatment according to an agreed system of 'prices'; which predictably was
horrendously complicated. Lansley tried to make a clockwork mechanism of this in his Act, which legally requires the NHS to set a tariff and sets out (in quite a detailed way) how they should do it.
The reason why the private providers of NHS treatment (and they are
not a very happy bunch of people right now) can't stand ACOs - to the extent that they commissioned the very same legal opinion that this action is based on - is that they are not just an attempt to 'finesse' this framework; they represent a wholesale rejection of it in practice.
The ACOs represent the NHS and the wonks towards the top of it finally losing patience with these market experiments. The uppermost of those wonks is, of course, Simon Stevens - who was Alan Milburn's special adviser when we were pushing these market experiments as hard as we could in the mid 2000s. It was certainly much easier to indulge in those market theories when we had money coming out of our ears at that time. But as any good wonk, and certainly any good economist knows, when the facts (and the money) change, you'd better be prepared to change your mind.
