Alan Milburn – 2000 Speech on a Modern NHS

Below is the text of the speech made by Alan Milburn, the then Secretary of State for Health, to the LSE Annual Health Lecture on 8 March 2000.

It is a great honour to be here this evening to give the sixth annual LSE Health Lecture. Health secretaries don’t often speak at the London School of Economics. But there are powerful reasons – as I will set out in a moment or two – for seeing a new and closer relationship between the state of our country’s economy and the state of our country’s health.

As a Cabinet Minister who has served in both the Treasury and the Department of Health people sometimes paint me as a gamekeeper turned poacher. This might make clever newspaper copy. But it assumes a dichotomy that I consider to be false. Treasury parsimony versus Health profligacy. It demonstrates a profound misunderstanding of the role of health and health care in the modern economy.

Health care as social investment

The conventional orthodoxy is that health spending is a debit, not a credit – a drain on the economy and a burden on the taxpayer. I want to demonstrate today that in the new global knowledge-based economy it is time to turn that thought on its head. I will argue that health is not only a good in its own right but that good healthcare is an imperative for improved productivity and national economic success. Put a different way, I am arguing that healthcare spending is not just a question of resource distribution, but is also linked to the physical and social organisation of economic production. In other words health care should be regarded not just as current consumption but as social investment. An investment that builds Britain’s economic infrastructure.

But it can only rightly be so if two conditions are fulfilled. One, that it is organised efficiently to deliver the maximum health gain without generating undue economic burdens. And two, that it is organised so that it delivers preventative services and not just sickness services, intervening upstream as well as downstream.

My contention is that the UK’s health service – modernised and reformed – will be better placed than most other systems of health care world wide to fulfil these conditions. In other words, the Government’s modernisation programme for the NHS has positive economic benefits for UK plc.

That is not the traditional view. Indeed, over the past decade or so health care reform in the developed world has been driven by cost containment. In the USA, for example, new managed care systems have begun to make significant inroads into the spiralling costs of the American medical-industrial complex. Yet, despite this, in January this year, President Clinton had to go to Congress for $110 billion funding so that just 5 million uninsured Americans could get health care cover.

Similarly, in Western European countries changes to rigid and, sometimes, bloated welfare systems have been fuelled by intense concern about national competitiveness in a period of rapid globalisation. This is perhaps not surprising given the structural inefficiencies intrinsic, for example, to the French and German social insurance health care financing systems.

In the light of recent noises “stage right” in our country about moving away from a tax-based system, it is worth making the point that the funding system that we have in the UK is, from the perspective of enterprise and competition, arguably, the most efficient way of financing health services. Tax based funding relies on the whole tax base, so it reduces distortions in the economy. By contrast, social insurance tends to fall heavily on the employed and employers. That is why French employers are walking away from it. The Institute of Directors in the UK may wish to take note. Social insurance turns healthcare into a tax on jobs. It has distributive and incentive effects that are hard to offset. It can also make job switching more difficult, reducing labour flexibility.

It’s worth noting too that a tax-based NHS as a model has competitive advantage over its Western European comparators for at least three other reasons. By virtue of its global budgeting, which controls healthcare inflation. By virtue of its low transaction costs, which means resources reach the frontline. And by virtue of its clinically managed care, which is provided by the GP gatekeeper role. Ironically, at the very time that some would urge us to abandon our model in favour of the continental health care model France and Germany are looking to import the very best features of the UK’s health care system.

The truth is that the NHS, in the words of the OECD, is “a remarkably cost effective institution.” That is not to say that there is not variation in performance which needs to be tackled. There is more that we can get out for what we put in – but overall as the Prime Minister has rightly said, we need to invest more of our national income in the NHS.

That is right, because as countries grow more prosperous they choose to invest more in health care. This is a perfectly rational thing to do, aggregating as it does the individual preferences of citizens in advanced industrial economies.

It is of course also right that we only spend what we can afford. Any other route leads to economic ruin. Careful management of the public finances is one of the keys to economic stability. As previous governments have found to their cost, without it we will simply not get the growth, prosperity and employment that the country needs. That is why this Government has constructed a new macroeconomic framework to provide the stable foundations for economic growth. It is also why we seek to reshape public spending, as far as possible, so that it invests in future success rather than mopping up the costs of past failure.

I want to argue today that health expenditure is such an investment for success. Health is, of course, an important goal in its own right – an intrinsic good. Its value is one of the truths that we as a society hold to be self-evident. As Halfdan Mahler, a former Director of the World Health Organisation has said, health isn’t everything – but without it you have got nothing. Good health is the route by which each and every one of us can properly fulfil our true potential. It unlocks life chances, and is a fundamental building block of wellbeing

The link between health and economic success

But such health investment is also of instrumental importance in improving national economic performance. As economic historians such as Fogel and others have concluded, perhaps one third of the per capita growth rate in Britain between 1780 and 1979 was as a result of improved health and nutritional status. And the World Health Organisation has reported that this figure is within the range of estimates produced by similar cross country studies for the last three or four decades.

Just last month, a report in the Journal “Science” by Bloom and Canning noted the striking finding that real income per capita will grow at a third to half (0.3%-0.5%) a year faster in a country where life expectancy is five years longer than in another country which is comparable in all other respects. This is significant, at a time when growth rates over the past few decades have averaged only 2-3%, and when there is every prospect of life expectancy increasing by a further 5 years over future decades. The mechanisms underlying this relationship include the direct impact of health on labour productivity; the incentive that people living longer have to invest in developing their skills; the fact that longer lives and greater savings for retirement can lead to increased investment; and the existence of a healthy and educated workforce as a “magnet” for foreign investment.

Another study by the Pan-American Health Organisation of an emerging economy found that for every one year’s increase in life expectancy there will be an additional 1% increase in GDP 15 years later. And as the importance of human capital grows in advanced economies, health status may have a greater and not a lesser impact on economic output.

This is because, in today’s world it is no longer simply access to financial resources or to physical resources that make or break a country – any more than they make or break a company. In today’s world the raw materials of any country are the skills of its people. Now in the new knowledge-based economy labour is king. Today as never before our key asset is our human resources. Human skills are a precious commodity. They have to be nurtured and maintained.

The contribution of healthcare

In the knowledge economy, there really is a premium on good health. And on good health services. Even the Institute of Directors acknowledged just last month that:

“The efficient provision of healthcare services is of vital importance for business. Sickness is a major cost for business, and, if an employee goes long term sick, this can be very disruptive, especially for small businesses.”

Sickness is a hidden social tax on business, undermining competitiveness and reducing productivity. 47,000 working years for men alone are lost every year due to coronary heart disease, and the total lost to all disease is almost a quarter of a million years each year. That’s not just a health concern – it is an economic concern too. If you changed that sentence to “quarter of a million working years lost to industrial action last year” then business would be banging on Government’s door and demanding urgent action.

The CBI estimates that temporary sickness absence costs business over £10 billion each year. As the IOD noted, these disease-driven inefficiencies in the economy can have particularly acute effects on small and medium sized enterprises. Here smaller pools of employees mean that the temporary loss of indispensible skills can spell disaster.

And not just for the individual firm. There are wider implications for the economy as a whole. Ill health involves a major loss of productivity potential. It imposes costs on taxpayers and it has significant opportunity costs too. Ill health is a significant cause of unemployment and its attendant costs to the benefits bill. 15% of jobless people cite back pain alone as a reason for not working. It accounts for 119 million days of certified incapacity. It also consumes 12 million GP consultations and 800,000 in-patient days of hospital care. It costs the state almost £1/2 billion each year. These figures point to a clear relationship between ill health and labour market exclusion.

Figures released just last week by the Office for National Statistics suggest that 29% of adults in workless households said their health was not good, compared with eight per cent in homes where someone worked. The number of people who are long term sick and disabled wanting a job but not presently looking has doubled in just a decade to almost 750,000.

This level of ill-health causes a loss of productivity and a loss of potential skills that a human resource-led labour market can ill-afford. As we move towards the potential of full employment, that threat to growth becomes more real – there are already labour shortages in specific areas. This threat to growth and low inflation can be at least partly offset by growing the active labour supply. The feasibility of doing this is demonstrated by the fact that when this Government came to office, four and a half million adults lived in households where no-one was working, twice the rate of France and four times the rate of Germany.

Worse still, worklessness is now the principal cause of poverty in Britain today. And the well-versed argument that poverty – principally through peoples’ exclusion from the labour market – is a significant cause of ill health is only one part of the equation. It is true that poorer people are ill more often and die sooner. The other part of the equation, however, is that poor health contributes to poverty, not least because it excludes people from the labour market. Studies of the effect of chronic mental health problems have shown this relationship, and it exists for other conditions too. The route between poverty and ill health then, is not a one way street. It is a two way street.

Poverty finds expression in social division and in social exclusion. It is not just their victims who end up paying the price. We all do. The decent hard-working families who live in fear of crime. The loss we all feel from a declining sense of shared community. The taxpayers who pay the bills of social failure. This is one way that the cycle of ill-health and poverty imposes economic burdens.

There are other ways too. Poverty cascades down the generations. Up to a quarter of all children are persistently in low income families. Babies born to fathers in social class five are more likely to be low birth weight. Low birth weight is a key fact in a child’s subsequent development and opportunity. Poor children are less likely to get qualifications and to stay on at school. Poor health then is linked to low educational attainment, distorting our future competitiveness in the knowledge economy.

The vicious cycle of poverty, social exclusion, educational failure and ill health is mutually reinforcing. It needs to be broken. It can be broken. We know that good education is a route out of social exclusion and into prosperity. The time has come to recognise that health just like education is a route to economic fulfilment and personal fulfilment Just as good education is a route out of social exclusion and into economic prosperity so too is good health. By intervening in the poverty cycle, health services can effect what Giddens calls the “redistribution of possibilities”.

Modernised NHS for a modern economy

What, then, should be the response of the healthcare system? A modernised NHS can rise to these economic challenges by providing new interventions that actively help break the cycle of poverty and ill health, that are preventative as well as curative, and which are fast and convenient.

First then an NHS that works with others to help break the cycle of poverty and ill health as a contribution to expanding the productivity potential of the wider economy. In the first three years of the last decade if all men of working age had had the same death rates as those in the top two social classes there would have been 17,000 fewer deaths each year. Action here is long overdue. The White Paper Our Healthier Nation sets out an ambitious programme not only to improve the health of the nation but to close the health gap between the worst off and the better off. SureStart is one of the key delivery mechanisms – putting extra resources into health and education services in deprived communities, targeted at the first three years of a child’s life. Similar action involving local authorities, voluntary organisations and others to tackle teenage pregnancy, or drug misuse, are other examples of the approach.

But we also need to reverse the inverse care law that has dogged the NHS for fifty years – whereby those with the greatest health need get the least health care. You can see that in the way that those parts of the country that have the worst levels of heart disease often have the worst heart services. Two days ago I said I would break that cycle by targeting new cardiac services into those areas where they were most needed. Health Action Zones are another means to the same end.

Second an NHS that is preventative as well as curative. That means intervening earlier rather than later. Our modernisation programme will help transform the NHS into a springboard for better health, not just a fix-and-mend service when people fall ill. So, for example, this winter the NHS became the first country in the world to introduce the Meningitis C vaccine.

In our new blueprint for saving 20,000 heart disease lives a year we set out how improvements in heart surgery can make a real difference to survival rates. But the new smoking cessation services that we are providing for the first time on the NHS signal how it can stop just acting as a sickness service and start fully working as a health service. We are also expanding access to the most cost-effective treatments such as aspirin, beta-blockers and statins to help prevent the need for heart surgery in the first place.

But all of these preventive activities have to be grounded in knowledge of what works and what does not. That is not always the case at the moment. We cannot afford well intentioned but ineffective programmes. That is why I have tasked the NHS R&D programme to provide a better evidence base for health promotion. Public health activity needs to demonstrate cost-effectiveness just as do other forms of health intervention.

Even more fundamentally, the time has come to take public health out of the ghetto. For too long the overarching label ‘public health’ has served to bundle together functions and occupations in a way that actually marginalises them from the NHS and other health partners. Let me explain what I mean. ‘Public health’ understood as the epidemiological analysis of the patterns and causes of population health and ill-health gets confused with ‘public health’ understood as population-level health promotion, which in turn gets confused with ‘public health’ understood as public health professionals trained in medicine. So by a series of definitional sleights of hand the argument runs that the health of the population should be mainly improved by population-level health promotion and prevention, which in turn is best delivered – or at least overseen and managed – by medical consultants in public health.

The time has come to abandon this lazy thinking and occupational protectionism. To do that we need to distinguish these three meanings of public health. The National Service Frameworks provide a way to do so. Take the Coronary Heart Disease NSF published this week as the model. It starts with an evidence-based analysis of the patterns and causes of heart disease. It then attempts a dispassionate look using the available evidence at the relative contribution to tackling heart disease that can be made by primary prevention, secondary prevention, hospital treatment and care. It seeks to identify the optimal cost-effective mix between them, rather than privileging one level of intervention for its own sake. And then it allocates responsibilities between agencies and professions on an entirely pragmatic basis, not on the basis of historical demarcations.

In short, rather than define the NHS as healthcare delivery, and then assert that the NHS has very little do with health improvement, the time has come to reframe what we mean by the NHS and how it acts. The NHS has to encompass the full spectrum of intervention, and it has to get in to new ‘markets’ too – as a provider of information and lifestyle advice not just a provider of treatment and care.

Which is not to understate the importance of health care treatment. Because the third method by which NHS modernisation can contribute to improved health and economic success is by providing treatment services that are fast and convenient. I believe that the principles of the NHS are right but that its practices have to fundamentally change. People wait too long for treatment. Faster waits for cancer treatment, new fast track chest pain clinics and services that are recast to design delays out of the system are all important. And they are on the way. Last year the NHS treated about 5 million working age adults as in-patients. Around three quarters of these patients waited under six months, but a fifth waited for between six and twelve months; and about one-in-twenty waited more than a year. We need to do further work to model the proportion of conditions that kept people off work or out of the labour market, and the proportion of treatment that succeeded in getting people back to work. But it is clear that faster and more effective treatment services will get people back to work more quickly.

In these three ways – tackling health inequality, plus better prevention, plus faster intervention – the NHS is changing the way it works and what it does. In the process it is becoming better placed not only to meet the needs of individual patients but to meet the needs of the economy too. It is performing an economic function as well as a health function. It is good for patients and it is good for business.

The health of workers

Indeed I think that we need to look to see what more the NHS can do here. An obvious area of potential is the sphere known as occupational health. The growth of the knowledge-based economy and the premium on retaining skilled labour means that employers – whether in the public or private sector – will face higher opportunity costs from sickness absence. They will also have to find new ways of retaining and rewarding their staff. Pay of course will be a key determinant. But people’s career decisions are not simply crude financial calculations. Flexible working patterns will be important too, particularly for parents with young children. And so too will be facilities to maintain good health at work. As it is employees and their representatives are increasingly litigious about health and the workplace – so it is enlightened self-interest for employers to make sure that their own house is in order.

In the past “occupational health” has tended to have a heavy health and safety bent to it. The Health and Safety Commission will shortly publish proposals to modernise occupational health so that it is better suited to the needs of small and medium sized businesses.

The NHS has to make sure that its own house is in order on this issue. Healthcare is one of the biggest knowledge-based sectors of the economy, and we cannot afford to lose highly skilled staff. Quite the reverse. I want to expand the services that the NHS provides to make them faster and better for patients – and that relies on having more doctors, nurses and other health care professionals. Improving quality of working life in the health service is one of the factors that will help us expand staff so that we can expand services That is why I am examining how we can improve occupational health care services for our own employees whether in the primary, community or secondary care sectors.

There are some real beacons of good practice in the NHS. The Walsall Hospitals NHS Trust’s Occupational Health Department for example looks after 6,000 staff at the trust as well as its neighbouring NHS organisations. Managers get pre-employment checks and staff get health checks, advice on health and safety, health information, risk assessment, environmental health advice and stress management. But what is unusual here is that Walsall is also successfully marketing its services to both the public and private sectors, selling its occupational health services to the local university and to 12 small factories. It gets back enough money to break even. The Royal Berkshire and Battle Hospital NHS Trust generates £100,000 a year looking after employees in a number of small businesses and public sector bodies.

These two NHS organisations are making a tangible contribution to business. I am interested in exploring whether there is scope for the NHS more generally to provide similar occupational health services to employers. ‘NHSPlus’ if you like. A service of this sort might be particularly valuable for small and medium-sized firms which lack the size to organise in-house services but where ill health amongst key employees can have devastating consequences.

Back pain and stress management services will be of particular relevance, as shown by the 19 ‘Back in Work’ pilots that are now operating. Sandwell Healthcare NHS Trust, for example, is now working with small and medium sized businesses to provide early assessment and intervention for workplace back pain. Salisbury Healthcare NHS Trust is working with 300 local businesses in partnership with the local Chamber of Commerce.

And let’s be clear about two things. First – providing these new services will potentially be good for the NHS, not a burden. Intervening to prevent and avoid injuries and sickness will have downstream benefits for the NHS in avoided GP appointments, outpatient attendances and hospital treatment. And second – these new services hold out the prospect of net savings to employers, not extra costs. What’s more, as NHS waiting times come down for elective surgery, private employers will increasingly be able to free up the £1 billion-plus they currently spend on employee private health insurance, instead targeting that resource on more effective workforce health interventions of the sort that NHS Plus might provide.

There is then an intimate connection between good health, properly targeted health services and economic performance. So far my argument has focussed on three groups in the population. One – potential workers currently outside the labour market as a result of mutually reinforcing processes of social exclusion. Two – future workers, namely our children, for whom health and educational attainment are the routes to prosperity. And three, existing workers – and their employers – affected by sickness absence.

The health of older people

But there is a fourth group – retired people – that is ex-workers – whose health status also has an impact on economic performance. If we look at the country’s demographic profile there are significant implications for the economy in the next few decades. The number of older people has doubled since 1931. The overall upwards trend is set to continue to about 2030, when the population will stop growing as a result of past falls in birthrates. Increasing numbers of people will survive well beyond the age of 85.

We have to make the investment choices now about what those extra years of life are going to be like. If they are years of ill-health, disability and dependency that has clear economic consequences. It will mean not only that older people cannot contribute economically in their “third age”, but it means high costs for formal care, however it is financed. For those outside formal care, potentially productive labour will be taken out of the economy for informal care of dependent older people.

So investment now to prevent ill-health and to promote fast and effective treatment and rehabilitation may be as important economically as it is socially. There is evidence to suggest that increasing years of life can be relatively healthy, or of only mild-to-moderate disability. But the extent to which that is the case will depend on, amongst other things, on the availability of good health services including active rehabilitation.

The new aim of our care services here is to foster independence for elderly people just as it is to foster independence for working age people. We should no longer accept the so-called ‘dependency ratio’ (that is, the ratio of working age adults to others) as the principal prism through which we view these matters. Perhaps we need a new measure – perhaps we should call it the ‘independency ratio’ – to track the proportion of the post 65 population capable of active life and self care. Developing services to improve this measure is precisely what the Government intends to do. We are committed to a new set of intermediate care services specifically designed around the rehabilitation and recovery needs of elderly people. And for the reasons I have outlined, they will be beneficial both in human and in economic terms.


So to conclude – good health, good healthcare and good economic performance should no longer be seen as parallel universe. They are mutually reinforcing. You can’t have one without the other. It is time to look at the NHS in a new way.

No longer just as a consumer of resource. But instead as a generator of wealth. No longer just as a provider of treatment services. But instead as a promotor of good health. No longer working in isolation. But instead working alongside others to foster independence and create opportunity.

In short the NHS can make a major contribution to improving productivity and expanding the economy.