Andrew Haldenby is Director of Reform.

In recent years, the basic idea of Conservative health policy has been to protect the NHS rather than to reform it. That has applied both to the provision of healthcare and to the funding of the service.

Within days of becoming leader of the Conservative Party, David Cameron said that he would never countenance any change to the traditional funding model of the health service based on general taxation. At the last election, the party pledged to block any closures of NHS hospitals, which flew in the face of the core idea that hospital care will be better and safer when it is concentrated on fewer sites.

Underpinning the Tory position has been the emotional defence of the NHS made by the Leader of the Opposition and then the Prime Minister. At the 2006 Conservative Party conference, David Cameron said that while Tony Blair described his priorities in three words, “education education education”, he could do it in three letters: “NHS”.

In 2010-11, Conservative Ministers did propose some change to the NHS (a convoluted reform of the “commissioning” bodies that pay for NHS care on behalf of patients). Unsurprisingly, they found it extremely difficult to explain how they would protect the NHS from change and yet change it at the same time. The commissioning reforms collapsed into a “pause” that was actually a retreat.

The trouble for the Tory position is that the NHS needs radical change, not only to be affordable but also to provide safe and reliable care. The clearest statement of this by a politician so far comes today in a Reform book co-authored by Norman Warner, a reforming Health Minister in the Blair government between 2003 and 2007 (and, last week, Michael Gove’s choice as external commissioner of children’s services in Birmingham).

With regard to NHS provision, Norman Warner and Jack O’Sullivan argue that the extra resources provided by the Blair Government were a “missed opportunity” because “the NHS failed to use the extra money, staff, better equipment and buildings to fundamentally redesign its business model for the future challenges that have now arrived”. Money poured into more operations in traditional hospitals rather than efforts to prevent ill-health springing from poor lifestyles and new ways to care for an ageing population. Those hospitals do not provide safe 24/7 care and cannot all do so in the current model.

Instead, virtually all NHS hospital sites should remain open, but most of those sites would see a root-and-branch redesign of their services either to become specialist centres of care or to contribute to a revitalised general practice working together with other services (“integrated care” in the jargon). An efficiency drive of the kind seen in other public services could release up to £20 billion a year (around 20 per cent of the NHS budget in England) to invest into new facilities. Norman Warner is clearer than Conservative Ministers have been that private companies should be able to care for NHS patients (“it is universal coverage of financial and clinical risks that is the great achievement of the NHS, not monopoly public service provision”).

On funding, the authors warn that it would be entirely wrong, as Sir David Nicholson has recently argued, to provide more funds for the NHS out of general taxation. “The great unspoken truth of British politics”, he finds, “is that the NHS, as it is run and as it is funded, risks causing serious damage to other important public services.” Increasing the NHS budget means cuts to many other social programmes, for children and adults. It risks “whittling away at the intellectual, physical and services infrastructure that underpins our economic capacity, to prop up an ailing and inappropriate sickness system that desperately needs reform.”

Instead, the funding settlement for the NHS from general taxation should be frozen in real terms for the five years of the next Parliament. NHS spending could increase at one per cent in real terms per year above that level, but the extra funds would have to come from new sources, such as new means-testing for elements of NHS care, hypothecated “sin” taxes including sugary foods, higher charges including prescriptions, and perhaps a broader base of inheritance tax so that the burden fell on older taxpayers rather than on the young.

The key idea here is that the traditional NHS funding model, of steady increases in funding from general taxation, has run its course. That system should be tightly limited and a more mixed funding system introduced in its place.

The question for the Conservative Party, and the other major parties, is how to approach the NHS after the next election. The parties may be tempted again to play safe and to avoid the suggestion that the service needs fundamental change. This would be entirely counter-productive. It would do nothing to prevent a steady failure to provide safe, effective, modern health and social care. In two years’ time, it is likely that more than half of NHS hospitals will be in deficit without the kind of changes that the authors propose.

More positively, those willing to make the case for change will find powerful allies. Speaking for Reform in January, Professor Michael Porter the Harvard academic, explained that a thorough-going reform of hospital services can see better outcomes achieved at savings of up to 40 per cent. Also for Reform last week the largest teaching hospitals explained how reorganisation of hospital sites and integration with social care is already happening.

Given what happened with the commissioning changes in 2010-11, the Conservative Party might be forgiven for wanting to leave NHS reform well alone. Norman Warner is suggesting that that is not an option for any party hoping to present a credible public services policy at the next Election.

“Solving the NHS care and cash crisis: routes to health and care renewal”, by Norman Warner and Jack O’Sullivan, is available at