Frank Field: The NHS is our last nationalised industry. We should set it free

'Only recent users know how close this vast and bureaucratic organisation is to implosion'

The National Health Service is the one part of the post-war welfare state which the voters cherish whatever its shortcomings, and, because of that, are suspicious of any government's attempts at reform. Yet reform is urgent. To sit as I have done recently in an accident and emergency department for hours on end gives time to reflect how similar what one is experiencing must be to the last days of Gorbachev's Soviet empire. Within a flash at the end of the 1980s, a vast, seemingly permanent superpower had collapsed. Only recent users of the NHS know how close that similarly vast and bureaucratic organisation is to implosion.

The dedication of most NHS staff cannot be questioned, but this is not enough. The extent of the crisis facing the health service is apparent almost wherever you look. It is not simply the apparently never-ending stream of patients through the A & E doors, nor the yelling of drink and drug abusers. Nor is it simply the failure to offer food to patients who are left waiting for a third of the day. Nor is it just a matter that hard truths are hidden from ministers; that no matter how long one waits on a trolley in A & E, the waiting clock does not start ticking until a bed in the hospital has been allocated, should such a bed be available. It is all of these symptoms and more that indicate what has gone wrong and that it is at breaking point.

What is more, they are happening when the NHS has already experienced the biggest increase in its budget in recent times. The financial year 1999 to 2000 saw expenditure rise by 6.6 per cent. Last year the rise reached 7.5 per cent – a cool £3.5bn more of health service funding. Next year the budget falls back to a 5.5 per cent increase and then runs along around this level for a two-year period. Despite some of the hype we hear, the largest increases in NHS funding have been and gone.

It is clear that any further increases in expenditure on health, education and law and order will have to be paid for with new money. When that happens, the debate voters would have liked to have had at the last election on tax levels may then be heard. By 2004 even the most charitable of taxpayers will have to cast judgement on the Government's public service reform programme, particularly in the NHS which, don't forget, voters see as fundamental to the kind of society in which they live. Even so, what they will not be prepared to do at that point is simply to sign over meekly another undated blank cheque for the Government to spend on the NHS.

Effective reform will also be required. While I obviously hope the Government is seen to be delivering on the health service, I do have doubts. However radical the Government believes itself to be on the NHS reform, it is operating within the straitjacket of what is in fact Britain's last nationalised industry. Making sure a hospital is clean is such a basic and vital task that any health secretary issuing instructions to hospitals to clean up their act must wonder whether a centrally directed, top-down approach to reform has much chance of success.

There is an alternative approach to funding and structural reform in the NHS. In the past, the Government has shoved up the tax burden simply by sneaking through major National Insurance increases. My guess is that soon taxpayers will express a demand for two truly radical shifts from the Government before they hand over any extra tax.

First, they will require a guarantee that extra money is earmarked for their NHS. The easiest way of delivering on this front would be to build a sizeable health contribution into the National Insurance system. The Government would merely collect the extra resources and redirect the money into the health service. Initially, this health contribution could go on top of existing NHS contributions paid in taxes.

But even this reform is unlikely to prove adequately attractive to enough taxpayers. The NHS has to be taken away from unelected officials and given back to voters. Hospitals were, of course, owned by local authorities, or were mutually owned, before they were nationalised in 1948. To be able to elect the local health authority would in my judgement see a turnout massively higher than in local elections, and even higher than in many parliamentary elections. Indeed such elections would probably surpass the parliamentary election turnout in many areas, although I concede that is not too difficult a test to pass.

Once hospitals are returned to the voters, a new contract will have been struck. Raising serious money for one's own local hospital will once again be actively and widely pursued. Far from seeing such activity as a disgrace, as Nye Bevan did, it will mark a new era in civic society. Before Bevan created the NHS, on average hospitals raised a quarter of their budgets from voluntary efforts. Such sums would be forthcoming on top of the new insurance-based system once ownership was put where it belongs.

All this would take place in a context where the Government increasingly will be faced with great voter resistance to rises in direct tax contributions, and much indirect taxation such as fuel duties too. This has very serious implications.

To take an example away from healthcare, law and order – or the lack of it – was a big issue on the doorstep in the election. Voters quickly noticed that the planned May Day riots were contained, not by police sitting in expensive new cars, but by the sheer weight of police numbers on the street. Voters now want to see the same police reaction to local disturbances.

Again this will call for not only additional recruitment but extra money as well. Taxpayers are willing to pay that but providing they see the extra police. A different contract will need to be negotiated here, as they will have to be for each major activity the Government undertakes for taxpayers.

The tax debate has changed. Taxpayers are now in the driving seat; all that is required now is for the Government to wake up to that fact. The age when politicians can levy any amount of taxation is rapidly dying. Taxpayers will be prepared to pay more tax only on their terms. Greater ownership of assets and control over their own money will be the new touchstone. The British taxpayer has come of age.

The writer, MP for Birkenhead, was minister for welfare reform 1997-1998