The Government - protection and health - the future?

Well at least the phoney war is over and we have a ‘balanced' parliament and as this piece was written, peering through clouds of volcanic ash, we saw politicians from all three parties closeted in men-only, smoke-free rooms in an unseemly scramble for power.

Let's hope some statesmanship in the national interest emerges, because for politicians it's usually the case that when politics meets policy there is only one winner - and it isn't policy.

To be fair we may get the politicians we deserve, many fear the electorate sometimes seems to fail basic suffrage competency tests. Apparently one voter, on being asked what he thought of the TV debates, replied they were brilliant and he was very apathetic until the power of the debates convinced him to go and vote for the first time - but in the end he left the polling station very disillusioned as none of the candidates was called Brown.

Prolonged austerity

This story may be apochryphal, but my basic thesis is that whatever the colour of this Government, the economic problems it, and we, are facing are so huge, and its room for manoeuvre so tight, that its core theme will inevitably have to be stability and the implementation of prolonged austerity measures upon an unwitting public - at least up until the next election, which many think will now be sooner rather than later.

Once the new Parliament has been sworn in, and settled in, and the new Government gets down to work, the next key date is mid June, when the Government has to present its first budget. For it is then that the measures to deal with the huge financial ball and chain we face will become clear in terms of the increased tax burden required together with swingeing cuts in public services and jobs.

It is important to remember that a third of the new House of Commons are entirely fresh faces - the biggest single change since the War - and this will be a strong driver for transition and change in this parliament. It is also sensible to think political reform will be a big talking point and not just the voting system. Out of the Tories' 307 Westminster MPs, 297 are from English Constituencies (out of a total of 533). So it is worth bearing in mind, when considering where the cuts may be targeted, that, according to the Institute for Fiscal Studies (IFS), in 2008/9 identifiable public spending per capita in England was £7,971, compared with £9,132 in Wales, £9,638 in Scotland and £10,003 in Northern Ireland.

National debt

According to the IFS, National debt has hit £950bn with an annual deficit of £163.4bn and of course in a global economy adverse changes to the economies or markets in Europe and the rest of the world may render our situation even more perilous. During the election the three main parties promised to cut the debt by roughly £71bn a year, via a mixture of tax increases and spending cuts. But in all three cases only 25% of the cuts were specified with the bulk of the difference being made up with unidentified ‘efficiency savings' - but even then there was still a shortfall.

The National Economic Research Institute (NIESR) has recently suggested that fiscal consolidation will need to be quicker and deeper than any of the main parties have proposed. Public sector real wages will have to fall to mirror private sector wages and as well as that broad based taxation, income tax and NI, VAT may also have to rise.

Whatever the rhetoric, as well as cuts in Local Authority budgets, a certain target for urgent attention will be the NHS. Over the past decade the NHS has enjoyed 7% annual growth in real terms and plans to spend £110bn in 2010-11.

The King's Fund recently estimated that the ageing population alone will be likely to cost the health service about £1.1bn to £1.4bn extra a year, while the NHS must receive a real terms increase of 1.1% per annum just to maintain quality. (Interestingly an event which, because of the election, received very little attention in the UK was the 65th anniversary of the end of World War 2 on May 8th.

Presumably the troops came home and promptly got down to doing what homecoming troops do - and that means that in nine months time we will be celebrating the 65th Birthday of the very first baby boomer - and the demographic time-bomb actually goes bang.)

To meet the funding gap between now and 2017 the NHS needs to make savings of around £30bn. This represents productivity improvements of over 5% per year and at best in the NHS over the past decade year-on-year productivity has been flat.

With the NHS being the world's third biggest employer with over 1.3 million staff jobs, if ‘efficiency' savings prove hard to come by, job cuts in significant numbers must be on any agenda which seeks to deliver the short-term savings required. However, this cannot be done without reducing the qualitative and quantitative patient experience, which must mean significant openings and opportunities for alternative funding and provision mechanisms.

However, there is still wealth in the UK to help contribute (to some degree) to fill the gap in working age health care protection. Prof. John Hills of the LSE in his ‘Anatomy of economic inequality in the UK' report earlier this year showed that median household wealth (including net financial assets, property and possessions, houses (net of mortgages), and non-state pensions (occupational and personal) is highest, at £416,000, for those aged between 55-64 (excluding pension wealth the median figure is £243,000).

So there may be opportunities to use some of these funds in a Pensions and Savings context, to narrow the £190bn IP Protection gap - and who knows even some spare to make a down-payment on Long Term care costs. For as publicly funded and provided health and welfare is further eroded, and people are expected to take greater responsibilities for their own lives and outcomes, there must be emerging opportunities for Financial Services to play its part in the recovery by penetrating further down the socio-economic scale and helping more individuals and families better protect their health, incomes, homes, possessions and futures.
exciting times too?

The challenge, as we all struggle to combat this huge structural deficit, will be what we say to this new breed of Politicians and what they say to us. It is to be hoped they will be wise, honest and accountable - and if they are then they deserve our support. We live in exciting times and out of previous recessions, as well as considerable personal misery, came great advances in technology and social change.

In 2008 Rahm Emanuel, President Obama's Chief of Staff, remarked: "We mustn't let a crisis go to waste - it's an opportunity to do important things that you would otherwise avoid". We could make a start on that, and set an example in financial services, by instead of making important what we can measure, let's start thinking about measuring what is important, especially in terms of providing the flexible products and services that match real people's needs and experiences and cohere with what the State is able to provide.

If we are to find ourselves in a war-time economy then perhaps we could do worse than follow Winston Churchill's 1909 dictum, when he advised people: "If I had my way, I would write the word ‘insure' upon the door of every cottage…..because I am convinced, for sacrifices so small, families and estates can be protected against catastrophes which would otherwise smash them up forever".

Peter Barnett is policy adviser in the House of Lords, an Advisory Board member of the Society of Later Life Advisers and Chair of the Continuing Care Conference