SOCIAL SERVICE COSTS
By SIR RONALD DAVISON
THE economic machine of Great Britain is out of gear, both externally in world markets and at home. The crisis is upon us and many unpleasant things are about to happen, yet neither the Government nor Opposition leaders show any signs of coping with it adequately. Labour, in its industrial capacity, still refuses to accept the plain necessity of making wages more pro- ductive and (not or) of sacrificing temporarily some part of our higher post-war standards of living. On the contrary, we are getting more demands for subsidised consumption at home and for still further increase of expenditure on the prodigious new Social Security services, and all this in the face of the demonstrable fact that along such easy lines we cannot possibly succeed, that the days are definitely over when we held half the world in fee and that, unless we accept the need for solvency and set our teeth to attain it, we are only speeding up our own destruction.
These are strong words but, in my view, they, or something still stronger, are the indispensable preamble to any useful or realistic discussion of our economic crisis at the present time. Until they are generally understood and the sense of urgency is accepted, what hope is there of finding the politicians in this ultra-democratic State who will dare to do their duty and stand fast for the retrench- ments and other stern policies that alone will save the situation ?
But the wider field as a whole is a many-sided and unwieldy question. It is more than sufficient here to try to deal with our vast social expenditure today and some of the economies that could be effected. I am convinced that, among other very unpleasant sacrifices, we shall at once have to set about saving several hundred millions on the Social Services.
Nothing, of course, could be more distasteful. Like many of my contemporaries I have been working for something like this great Beveridge Plan for forty years, and I still stand by its principles. But we have to recognise that, under present administration, the Beveridge schemes, plus others, are proving so overwhelmingly costly that the State cannot possibly afford them. Excluding food subsidies, our social budget of some £800 million in 1948/49 was quite four times the pre-war figure and still increasing. This year the National Health Service alone will cost between £350 and Lilco million on present plans, and in a few years the Pensions Bill alone will mount to ism million per annum. This is fantastic, and my fear is lest, in a real crash, we might lose either all our gains or at any rate much more of those gains than is necessary. Better, surely, to study now and urgently how best we could prune the food subsidies (L5oo million), expanded education (£224 million and the raised leaving age), the National Insurance State contribution (k135 million) and, particularly, the National Health expenses. The Government might thus forestall the crisis or mitigate its effects, and we might save the basis and structure of the new services in order to develop them again, say in five years' time. Meanwhile, we shall have to mark time or even retrace a few of our recent steps towards the ideal. The Welfare State is a contradiction in terms if it means at the same time a Bankrupt State.
I put the food subsidies first, but shall say only this about them, that we ought to have begun to cut them down in 1947 or 1948 by easy stages, while, at the same time, effectively freezing wages. To halve the subsidies at the rate of cuts of 5 per cent. per month will take about a year ; we could not safely move faster and a charge of £225 million would still remain. The unanswerable argument for such a course is that it will be less painful and easier to work than cutting wage-rates. Other large reductions will have to be in the fields of Education, National Insurance and Health, but I do not believe that the necessary cuts in these services will ever be self- imposed by their respective Ministries, if the matter is simply referred to them by the Cabinet appealing for economy. Only the Treasury could direct this economic Dunkirk or do the painful jobs thoroughly and quickly and impartially enough—and then only if they have an exceptional Chancellor to back them up, such as Sir Stafford Cripps or Sir John Anderson or even an emergency alliance of both' these strong-minded honest men, untrammelled by their back-benchers.
The service of Education might be able to bear a cut of £50 million in a full year. National Insurance, which is piling up a profit of over Do° million per annum, could bear a temporary halving of the State Subsidy ..(£135 million at present). But it is, of course, the National Health Service that is the new and conspicuous source of spending on the home front. Remember that the original official estimate for94-, R /
49 was under £150 million. Then note some of the figures in the Civil Estimates for 1949/50:— Estimated Costs of N.H.S. (England,-Wales and Scotland) 1949/50.
Total ... . . ... L352 million Costs of Hospitals, etc. ... ... £194 million Of this total of £352 million, hospitals and specialists and related services account for not Jess than £194 million, though the facilities for such treatment are still far from adequate. Why not, therefore, adopt an amendment which would be good in itself and save between ,C3o and £40 million ? Why not abandon the lavish offer of free bed and board, keeping only the free medical services ? Why not make a charge for other kinds of " free " material provision, such as drugs and appliances, spectacles and dentures ? These latter items now account for nearly L6o million per year, although most people, in Government circles as well as outside, have thought all along that there was something crazy about these unnecessary and costly features of the N.H.S. The financial controls and budgeting machinery of the Service also need prompt attention. To assume a standard weekly charge of two guineas per week for "hotel expenses" (Beveridge's words) would still be quite consistent with the free medical services. Abatements of that charge and assessments accord- ing to need by experienced almoners would be a basic feature of this plan.
Be it noted that Beveridge, in his historic report, never contem-
plated free "hotel expenses," but talked of payment either direct or by contributory methods. " It may be expedient," he wrote, " to make a charge, if only to avoid making it profitable to the patient to stay on in hospital when he could go home." The bearing of this remark on today's need for a more rapid turnover of beds needs no emphasis. The good moral effect of a charge would, I believe, speed up treatment and reduce the queue. To that extent it would do much more good than the new special tax threatened vaguely by the Chancellor of the Exchequer. It would also, surely, be more logical than the new regulations cutting down the National Insur- ance benefits of hospital patients after eight weeks' stay. None the less these amended regulations have a special interest in proving that no one in authority feels happy about a system of sick benefits (26s. single and 42s. married per week) normally intended to meet a man's maintenance expenses—expenses of which he is promptly relieved in hospital by the N.H.S. throwing in free bed and board. Actually the payment of cash benefits under insurance rights should have nothing to do with this question. Normally the cash bene- ficiaries should pay hotel expenses like everybody else. Many house- holds throughout the land, receiving no benefits at all, could still pay a modest weekly tariff for their patient throughout his (or her) stay in hospital, whereas some others could not pay a penny even though they were receiving benefit.
If, therefore, the N.H.S. authorities were instructed to re-institute the practices prevailing before 1948 of charging for most forms of " provision in kind,"•and allowing for 25 per cent. abatements, a total saving of £37 million should result from " hotel expenses," together with an even larger saving of £47 million on drugs and appliances. £84 million is not a negligible sum.
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