The NHS is a lost cause – Britain needs to cough up for French-style healthcare

Broken NHS
Broken NHS

Waiting lists, poor outcomes, crumbling hospitals – the NHS is in urgent need of treatment.

And there is a growing realisation across the political spectrum that tinkering around the edges won’t rescue Britain’s nationalised healthcare system.

A few extra billions, on top of the £160bn or so NHS England is already spending per year, won’t cure the UK’s healthcare problem.

Whilst it remains a taboo to publicly admit it, most Conservative MPs – and even many Labour ones – will privately acknowledge that a healthcare system funded through general taxation, free at the point of delivery, is no longer fit for purpose.

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And the solution, they discreetly agree, is to move towards a European-style social insurance system.

It is nothing to be scared of, quite the contrary. Looking at healthcare in our European neighbours, outcomes are near universally better, hospitals superior and waiting lists shorter.

But before we all pray that Wes Streeting, the health secretary, finds the courage to wholeheartedly reject Labour’s 80-year-old dogma and start advocating for the one reform that is actually likely to work, let’s pause for a minute.

A Continental-style healthcare model will likely mean that middle earners are again asked to pay yet more, and will be worse off.

It is politically inconceivable that any system introduced in the UK to replace the NHS would be allowed to operate in the way that private health insurance now works.

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Charging different premiums based on a person’s state of health, pre-existing conditions or general fitness, at least for general medical provision, would be off the cards – scrapping the principle of a taxpayer-funded model would be controversial enough, without letting the opponents of reform claim that the unfit, the sick and the fat were being charged unaffordable rates.

The only realistic model would be something similar to that found in France, Germany and many other European countries. Under these systems, a charge somewhat analogous to National Insurance is levied on salaries.

No account is taken of an individual’s state of health – what you contribute is purely based on your income and nearly all are covered.

In Germany, for example, nearly 90pc of the public are covered by statutory health insurance provided by around 100 different Krankenkassen. Contributions are set at 14.6pc of an employee’s gross pay, capping out at a salary of €62,100 (around £52,000) – so the maximum to be paid is just over €9,000 (circa £7,500).

Half is levied on the employer, and half is deducted directly from pay packets – although as with any such scheme, it is in truth a charge on the worker. Employer contributions simply depress potential pay rises.

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Those earning over €73,800 in 2025 can usually opt out of the German statutory scheme and choose private insurance instead, but this is generally more expensive. All European social insurance systems differ in their detail.

France, for example, has widespread supplementary insurance to pay for shortfalls in the mandatory scheme. But their broad principle of levying a charge on employment is common to virtually all.

If a similar social insurance scheme at similar rates to the German one were introduced in the UK, those earning £52,000 or more annually would see around £3,800 deducted directly from their pay packets – with their employers needing to find another £3,800 in costs.

But, you may ask, we already pay National Insurance contributions (NICs) in the UK, so would these insurance schemes not replace them? Would we not at last get something for our money?

It is somewhat academic to argue which exact taxes pay for which part of state activity – we don’t do hypothecated taxation – but ministers have claimed that 20pc of NHS spending comes from NICs.

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Coincidentally, the amount raised in NICs, just under £170bn the current tax year, happens to be similar to the amount spent on the NHS in England.

But, unlike the state pension and contributory benefits, there is no link between paying NICs and entitlement to healthcare. To use the NHS, all that is required is that you are “ordinarily resident” in the UK – what taxes you pay does not come into it.

The UK ran a deficit of £120bn in the last tax year, and it is set to grow. It is surely wishful thinking that any government that found a way of transferring the major part of healthcare spending off its books, would give that money back in tax cuts. And that is especially true of this Labour one.

With a move to social insurance, NICs would perhaps be trimmed by a couple of percentage points for employees, and April’s rise in employer contributions from 13.8pc to 15pc might be reversed.

But that would not come close to making up for the extra that would be deducted from pay packets.

Moving to an insurance based healthcare system would bring with it myriad benefits. In the long term, a reforming government may find it now has the room for substantial tax cuts.

But in all likelihood, at least in the short to medium term, it would make middle earners worse off. With the almost certain hefty employer contributions, it would amount to a tax on jobs beyond anything Rachel Reeves has so far dreamt up.