Government Spending

Britain: Sparing Health Care from Budget Cuts


As it prepares to unveil the details of the biggest peacetime budget cut in U.K. history, Prime Minister David Cameron's government has been debating whether to save aircraft carriers, benefits for stay-at-home moms, and other big-ticket items. The task has been made especially hard because of a promise Cameron made to voters four years ago. The Conservative leader, seeking to broaden his party's appeal after three successive election defeats, pledged that he would increase funding to the country's National Health Service every year if elected. At the time, the vow did not seem like a potential political liability: The country was in its 15th straight year of growth, and funding the NHS, which gives free medical care to all U.K. residents, seemed an easy promise to keep.

Now, with a target of balancing the books by 2015 amid a fragile economic recovery, honoring the vow to protect the government's second-largest expenditure—£122 billion ($192 billion) this year—means other departments will face bigger cuts when the budget is unveiled on Oct. 20. "The spending plans set out in the emergency budget imply a 14 percent cut in spending by central government by 2014-15," says Carl Emmerson, acting director of the Institute for Fiscal Studies, an independent think tank. "Once the coalition government's commitments to increase spending on overseas aid and the NHS are taken into account, the average cut elsewhere rises to a much deeper 25 percent." (A category that includes pensions and disability and unemployment benefits is the biggest government expenditure.)

Talking to reporters on Oct. 11, Cameron acknowledged the strain. "The conversations we're having within the spending review process are difficult, and we've got very difficult decisions to make," he said. Conservative lawmakers, including former Chancellor of the Exchequer Nigel Lawson, have urged Cameron to ditch the pledge to spare the NHS. Liberal Democrat Vince Cable, now Business Secretary in the coalition government, argued against the pledge before the election.

Still, according to Philip Cowley, a political scientist at the University of Nottingham and co-author of the book, The British General Election of 2010, the NHS promise may have been what got Cameron the top job. "The NHS is a totemic issue for the British people," he says. "It wasn't an accident that the Conservatives chose to open their election campaign by reminding people of their commitment, and it worked. Labour couldn't throw anything at them over health." Ditching that promise and actually cutting the NHS budget would alienate some who voted Conservative. It could also increase dissension in the Liberal Democratic Party, the Tories' partner in government, to dangerous levels.

According to the King's Fund health think tank, even Cameron's plan to increase NHS spending by the bare minimum will feel like a cut, as baby boomers get older and demand ever more expensive treatments. The danger for Cameron, then, is that voters will think he has broken his promise.

On Oct. 4, Cameron got his first taste of the pain to come, when his government announced plans to save £1 billion by denying affluent parents a monthly payment they previously qualified for. After a day of outrage, the Prime Minister hinted he might look for a way to compensate some of the losers through tax breaks. He has a mere £82 billion in more cuts to go.

The bottom line: Cameron's pledge not to cut the NHS budget helped get the Tories elected. Keeping that pledge makes budget-cutting harder.

Hutton is a reporter for Bloomberg News in London.
Penny is a reporter for Bloomberg News.

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