While the Tories would like to see the NHS destroyed and replaced by a US-style insurance-based system (all those lovely profits just waiting to be extracted) and, aided by the Lib Dems, they have done everything they can to facilitate this (GP commissioning, sub-contracting and partial privatisations), the current crisis in the NHS has a single cause: the 2006 financial crisis. In order to save capitalism, the government had to save the banks, or, more precisely, the speculative capital invested in banks, and to do this they:
- froze the level of funding for the NHS (ignoring increasing demand);
- froze the pay of NHS staff and worsened the terms of employment of junior doctors (ignoring the need to recruit and retain staff); and
- slashed funding for local government social services for frail and elderly patients (ignoring the need for such services if patients are to be discharged from hospital).
The current crisis in the NHS is the consequence. But it is not the only one. The bank bailout and the way it was financed depressed economic growth for at least a decade, increased inequality by underwriting the earnings of the financial elite and destroyed social services beyond those supporting patients discharged from hospital. Furthermore, it yielded no return on the government’s investment in the banks – like Lloyds Bank, they are returning to 100% private ownership and yielding not even a notional profit to the government.
Despite the cost of this bailout, the government has failed to ensure that the banks won’t ask to be bailed out again. Yet the risk of losing our money transmission services and that individual depositors could call on the government guarantee could again allow banks to blackmail governments into bailing them out when their speculative activities collapse. The report by John Vickers in 2013 looked at the “too big to fail” argument but failed to call for a complete separation of simple banking activities – money transmission services and lending against deposits – and the banks’ speculative activity. Vickers, a neo-classical economist with, as his track record as a former Director General of the Office of Fair Trading demonstrated, a misplaced faith in more competition as the remedy for every economic problem, accepted that (his words) “some risk of failure” had to be tolerated and opted for ring fencing and a capital reserves regime. Notwithstanding monitoring by the Financial Conduct Authority, this “risk of failure” is real and will materialise when the banks’ speculative activity next comes off the rails, as it surely will.
But at least we will know what to do next time. Saving capitalism won’t be the priority. We will insist that the government truly nationalises the banks without compensation, not give them what were, in effect, interest free loans until their share prices recover. They must then remain in the public sector to be run in the interests of working people on whose labour their existence depends. These interests will include not pauperising the NHS; they don’t include saving capitalism.