Analysis: Tax-funded or privately financed? The political balancing act

Funding of the NHS will take centre stage in the Chancellor's Budget, but the battle for hearts and mind has only just begun

Internal links

Leading article: Health care in Europe shames the NHS; is there really nothing to learn?

Michel and Simone live in a small cluttered house on a steep hill near the Gare du Nord in Paris. Both in their 80s, they sit surrounded by the detritus of their long lives and extol the virtues of the French health system.

That is surprising when you hear that Michel has had his right hip replaced six times, the result of incompetent, negligent care that has left him in pain for much of the past 13 years. The first surgeon he went to, on the recommendation of a friend, had started drinking after a car accident, been thrown out of a private clinic but had promptly bought into another clinic and started practising again.

By the time Michel discovered his surgeon's history it was too late, the operation had been bungled and his hip had become infected. Exercising the free choice of specialist that is the hallmark of continental systems, he went to a second surgeon in another private clinic where he had four further operations – but his hip still did not hold.

When he turned in desperation to a third surgeon, he discovered that the artificial hip the second surgeon had inserted was too short for his needs. Then he learnt the second surgeon had owned the company that manufactured the hip but had never declared the conflict of interest.

Despite the catalogue of disaster, Michel and Simone (not their real names) still think the French system is the best. "If we don't like a doctor and we think he is not doing a good job we can choose another. There is no restriction and no delay. We hear stories of people waiting years in Britain. It is terrible."

Their experience is testimony to the huge value patients put on having choice over who treats them and how they are treated. It is what we, in the NHS, lack. To most Europeans, the right to choose one's doctor is as fundamental as the right to free speech. Yet in France there are no checks on doctors' performance and no monitoring of hospital efficiency, unlike in Britain. There is a plethora of commercial clinics and for patients the position is one of caveat emptor.

Like the rest of the population, Michel and Simone have 70 per cent of their healthcare costs covered by social security. To cover the remaining 30 per cent, they pay their mutuelle, an annual premium equivalent to £1,500 a year that guarantees them a single room should they need to go into hospital.

Michel recently had a knee replaced and, of the £4,600 cost of the operation, he was required to pay just £40 – after social security and his mutuelle had contributed. The hospital where he was treated charged a £30-a-day supplement for a single room – or £40 a day with gourmet food.

Two years ago, France achieved top place in a World Health Organisation league table of health services. The accolade drew delegations from across the world who came to see how it was done. The visitors included Derek Wanless, former chief executive of the NatWest Bank, whose report commissioned by the Government into the future funding of the NHS will set the benchmark for the next 20 years when it is published this week.

Yet health economists now say the WHO's accolade was a catastrophe for France. As one put it: "All possibility of change was instantly dead in the water. What possible merit could there be in reforming the best system in the world?"

In the rush to congratulate the French on their achievement, the flaws were overlooked. Expensive, inefficient and lacking quality controls, it is a system driven by doctors in which spending is rocketing out of control. Employers, who bear a heavy part of the cost, are complaining that their burden is causing a rise in unemployment. Experts from the Organisation for Economic Co-operation and Development predict a crisis in the French social security accounts this autumn.

As the Chancellor, Gordon Brown, prepares to set health spending on a new trajectory, the lesson from France, as from elsewhere, is that no country has the answer to how to provide health care. All countries face different problems. No health service is trouble-free – it is a matter of choosing not the best solution but the least bad problem that we think we can live with.

Of the two broad models of health provision, tax-funded systems as in Britain and Scandinavia are fairer (more equitable) and more efficient while commercial and social insurance-based systems are more responsive and give patients more choice.

Public satisfaction tends to be higher with private and social insurance-funded systems because they put the patients in the driving seat. Yet the trend in Europe is towards tax-funded systems.

So it should be no surprise that yesterday's survey of international health systems published by the Tories failed to reach any clear conclusion on the way forward for Britain. While pointing out the NHS's failings – principally its lack of responsiveness – the report did not suggest any country provided a model for Britain.

Iain Duncan Smith's conclusion, while lame, was at least honest. "This pamphlet summarises the lessons from 20 other countries," the Tory leader wrote in the foreword. "It shows the diversity of ways other countries organise their health care systems. It demonstrates that there are many lessons to learn."

At least one lesson is clear: any survey of European health systems demonstrates how poorly funded the NHS is. As the graphs show, we spend less of our economic wealth and have fewer doctors, nurses and beds than most comparable countries.

Tomorrow's Budget should set Britain on the way to remedying that imbalance – but it will take a decade of sustained investment to train the doctors, build the hospitals and develop services. And at the end of it all, will patients be any more satisfied?

That is the nightmare haunting ministers – that we could spend tens of billions of pounds and make no noticeable difference. Scotland is already spending at the average of the European level on its health service – and satisfaction is not noticeably higher north of the border. There is a battle for hearts and minds still to be fought.

Mr Duncan Smith, whose party has been accused of wanting to dismantle the NHS, said he wanted to see "a system based on need, not ability, to pay, but that need should be defined by patients working with doctors not politicians".

The question is whether Britain can provide a health service that offers the greater choice available under the French model but without imposing an unsustainable financial burden on the country.