It would be naive to think a new prescription for health care funding could be the ultimate cure for what ails the Scottish health service. However, when conditions are chronic, a treatment review and a change of approach can bring much needed relief and welcome support. A more targeted injection of additional funding can in some cases mean the difference between life and death.
However, it’s not enough to pump fresh funding into a system if it is haemorrhaging staff and a much needed transfusion of trained healthcare professionals are simply not available. In the case of the SNHS, the establishment of a Central Bank, and having our own currency on Independence will provide the economic conditions for increased well being and improvements in treatment outcomes.
Funding the SNHS today
Currently Scotland is a currency user. We use currency which has been created by the Bank of England on the instruction of the Treasury, the body which deals with requests from the U.K. government to spend currency into existence to implement its policies. In other words, the Bank of England is a currency issuer. The amount we receive, the so called block grant, is determined by the Barnett Formula ( currently under review).
In addition to public funding, other sources of funding come from a combination of private medical insurance and out-of-pocket payments. The latter can include co-payments and direct payments. Co-payments are costs which are shared with the NHS; e.g. for dental treatment. Direct payments include costs for private treatment, social care, and general ophthalmic services.
Despite the widespread belief that National Insurance Contributions (NICs) fund the NHS, this is not the case. NICs have nothing to do with how much of the government budget is allocated to the NHS as per Institute of Fiscal Studies. NICs were in fact created before the NHS was established simply as a means of proving entitlement to unemployment benefit, seeing a doctor, and some pension benefits.
Aneurin Bevan who established the NHS in 1948 wanted the National Health Service to be paid for in full, through government spending. Hence, the NHS is referred to as being provided free at the point of use.
In Scotland, the Health and Social Care Directorate allocates available health funding that covers both operational and capital costs to the 14 regional health boards, using a formula designed by the NHS Scotland Resource Allocation Committee. The health boards in Scotland have responsibility to provide the treatment services to their local populations.
They decide which treatments can be provided and manage the budget for purchasing and delivering of these services. In 2020-2022, £15.4bn were spent on health service operating costs, up from £14.7bn spent in 2020-2021. An increase of 4.6%. This does not include capital costs or other services such as the Ambulance Service and NHS 24.
Unlike NHS England, there is no purchaser-provider split, which ensures that SNHS can plan and fund services. In the most recent Scottish Government Budget, the SNHS has been allocated £19.2bn for 2023-2024. An increase of £1bn on the 2022-2023 allocation.
Funding for the SNHS Post Independence
Post Independence with the establishment of our own Central Bank and currency Scotland will have the same financial levers and fiscal powers at its disposal as the UK Government has today. Scotland will become a currency issuer on Independence and will have the full range of fiscal powers to e.g. control inflation, and use the mechanism of quantitative easing if needed.
Quantitative easing was used by the Bank of England to purchase goods and services during the Covid pandemic and for furlough payments to maintain the economy. A Scottish Central bank could do the same. Perhaps, this fact alone will reassure those that are concerned that Scotland would be unable to cope with crises post Independence. As a currency issuer, we could maintain our economy and strengthen our public services if the need ever arose.
Scotland cannot simply go ahead and create as much currency as the mood takes us though. There are constraints. The goods and services have to be available to purchase. There is also a role for taxation. The government has to spend first before it can tax back. A well implemented and regulated tax system will ensure inflation is kept in check.
A newly elected Scottish government with its own Central Bank and currency will have the power and the wherewithal to invest to strengthen our SNHS. Setting a whole new agenda for change by adopting best practice, ensuring staff are well trained, supported, justly remunerated and valued will be a worthwhile investment.
Areas of investment could include Research & Development; e.g. the production of low cost generic pharmaceutical products including vaccines, medical training which includes IT, Artificial Intelligence & research skills, ensuring medical practice keeps pace with modern technology. Targeted investment will not only benefit Scotland by providing secure employment for our graduates and attracting a highly qualified workforce, it will create a well being economy and a healthier happier population. Investment in our SNHS will facilitate the improvements in patient centred care that doctors have highlighted there is a need for, and a much needed mental health provision of the highest quality can be provided.
If all of this appears fanciful, consider this … A central bank which uses its own currency to invest, creates assets. Whether these assets are infrastructure, property, equipment or highly trained healthcare personnel is immaterial…they are assets which hold considerable value and are the means by which an Independent Scotland and its people can look forward to leading healthier happy lives. Health will be Scotland’s wealth.