Expert View: The political tug of war that pulled the NHS apart

The whole system is leaking cash, and we must turn off the tap

It takes more than a pink tie to make a prime minister. Gordon Brown's pre-prime ministerial posturing this week stuck in the gullet. If the Chancellor is going to be "on approval" for the next 12 months, I suppose at least we can flesh out the main elements in his credo - such as health policy.

Six years ago, almost to the day, a bizarre struggle broke out between the two most senior ministers of Her Majesty's Government. As part of this conflict, the Prime Minister appeared on breakfast TV and sought to bolster his "real Labour" credentials by suddenly promising a 2 per cent shift in GDP in favour of health.

No 11's initial response was hostile. But the Chancellor, realising that he was potentially being outmanoeuvred, then did a complete U-turn. Suddenly, 2 per cent was barely enough. In the ensuing bidding war for the heart of the Labour Party, the UK ended up with one of the most dramatic peacetime government initiatives in history.

We spent £44.6bn on the NHS in 2000; we are set to spend closer to £90bn in 2008. In the past few years it has absorbed nearly 40 per cent of the Government's discretionary budget, and if we carry on spending at this rate, by 2008 all increases in government spending will be absorbed by this one priority.

Where has all this money - your money - gone? Yes, in some ways there are visible signs of improvement, such as shorter waiting lists (though some doubt the validity of the statistics).

But overall, it is rather difficult to see the dramatic flourishing of the NHS that this doubling of expenditure would imply. The sad, indeed tragic, truth is that by the Government's own admission 73 per cent of this shower of bounty has gone into so-called "cost pressures".

Chief among these has been the wage inflation among healthcare professionals. A couple of weeks ago at a march in Berlin, German doctors carried placards that read: "England, we are on our way". Who can blame them? Our doctors are now the best paid in Europe, having had a 30 per cent pay rise in the past three years alone. The average GP now earns 45 per cent more than his German counterpart (and nearly nine times his equivalent in Poland).

At least having the best-paid doctors (and nurses) in Europe might give us hope for a high-quality service, but why hand out largesse to drugs companies? A recently leaked government study found that the UK pays nearly 20 per cent more for branded drugs than nearly every other country in Europe.

This is why, despite the cash raining down from the Treasury (and this is where the bizarre becomes ridiculous), nearly a quarter of NHS trusts are on the verge of deficit, and overall the service is in the red by some £620m a year.

Where on Earth do we go from here? In the first place, quite simply, we need to put the brakes on all this spending, and fast. The Treasury hawks are now talking about limiting doctors' pay rises to just 1 per cent this year, but this must be only one of many measures. Until the structural reforms the Government talks about are actually achieved, the whole NHS system is leaking cash, and we must turn off the tap.

This is not to deny structural reform is important - whatever form that might take. If the Government really believes in greater private sector investment - well, it's got a long way to go, given the tiny proportion of the vast NHS monolith that faces anything like real levels of competition or market forces. If it doesn't want to take that route, or finds it beyond the tolerance levels of the old-left backbencher, then it should at least pick off some of the lower-hanging reform fruits. The NHS accounting system is pure vintage Sovietica.

When historians come to write the story of the NHS under the Blair Government, they may well conclude that there is no other episode in history that better demonstrates the financially destructive forces that can be unleashed by the personal conflict between two individuals. Safe in their hands?

Christopher.walker@tiscali.co.uk