I move: "That the Bill be now read a Second Time."
The explanatory memorandum which has been circulated to Deputies with the Bill describes the categories of persons who are liable to pay health contributions. It also describes the services to which they and their dependants are entitled. There is no need for me therefore to reiterate these facts in this debate.
As the House is aware, health contributions were introduced in 1971 as an additional source of revenue for financing health services. The rate of contribution has remained unchanged since that time.
In the same period however the cost of providing health services has risen dramatically. In 1971-72 health expenditure amounted to £86 million. This year it will rise to approximately £166 million on a 12-month basis. This figure represents an increase of £80 million in three years, equivalent to a growth of 93 per cent.
The Exchequer has borne almost all of this increase in health expenditure. Since 1972-73 the proportion of expenditure met from rates has been significantly reduced. The rates contribution has diminished from £36 million in 1972-73, the last budget year of the previous administration, to £13.5 million in the period April-December, 1974. At the same time the revenue from health contributions has remained almost static. The Exchequer therefore has borne an increasing proportion of the rapid rise in health expenditure during the period because of the Government's commitment to phase out health charges on the rates. Overall this has been a desirable development. The fact that the Government are phasing out the rates contribution means that we are abolishing the most regressive element in the health financing system and shifting the balance very quickly in favour of an overall progressive revenue scheme. This is to be welcomed.
I am aware that there was considerable debate in 1971, when the House discussed the proposal to introduce health contributions, and many Deputies questioned whether this was the most equitable way of finding additional revenue. There were valid arguments put forward then for and against the proposed health contributions and I can still see merit in many of them.
It is evident that the provision of limited eligibility services at 15 pence a week and £7 a year has been exceptionally good value and compares very favourably with private health insurance schemes. In addition health contribution means that we are abolishing the most regressive element in the health services, thereby allowing them to develop faster than would have been possible if we had relied exclusively on the Exchequer for funding.
On the other hand however it was argued that health contributions were really another form of taxation and that the flat-rate contribution was regressive since it did not take account of the income of the contributor. When the scheme was introduced in 1971 it was argued that, since the contributions proposed constituted a regressive alternative to taxation, it would be better to rely exclusively on the Exchequer for health services revenue.
As I have said, there is some merit in both sides of this argument. Accordingly I propose to begin shortly a review of the present system of financing our health services. This cannot be done in isolation of course, so I propose to link it with the review of the financing of our social welfare system which has already been announced.
The purpose of this review will be to see whether the present system of financing our health services can be improved. The present flat-rate health contributions scheme will be examined in that context.
The situation at the moment is that, of the total sum of £166 million for the health services in 1974-75, about £120 million represents the cost of hospital and specialist services, maternity and infant care services and the drugs subsidy scheme, which constitutes the services to which persons with limited eligibility are entitled. Of the £120 million it is estimated that about £72 million would represent the cost of services for persons with limited eligibility. But health contributions only amount to £5 million at present.
If this Bill is passed as proposed, health contributions will go up by £3½ million to £8½ million in a full year and will account for only about 10 per cent of the estimated cost next year of providing the limited eligibility classes and their dependants with hospital and specialist services, maternity and infant care services and the drugs subsidy scheme.
So, in fact, the financing of the health services is moving towards a situation where it virtually depends on the Exchequer. I hope that my review will analyse this trend in all its implications and will help us to form final judgments on the future financing of the services.
At this point I should like to point out that two serious anomalies exist at present in the entitlement provisions for our limited eligibility health services. The first is the differing upper income limits for eligibility which exists for differing groups of people. For insured, non-manual workers the upper income limit at present is £2,250 per annum. For non-insured persons, other than farmers, the upper income limit at present is £1,600 a year. This is an anomaly which must be removed as soon as possible so that the upper income limit is the same for both groups.
The second anomaly is the existence of any upper income limit to entitlement to limited eligibility health services. As Deputies are aware, this anomaly is not of my making. It is the policy of this Government to abolish income limits entirely as soon as agreement can be reached with the medical profession. Discussions will begin again on this question when the review body, which I set up, issues its recommendations.
I indicated earlier the rate at which health expenditure has risen since 1971. While, as I mentioned in my Estimates speech, growth in real terms over the range of services has been significant, the fact remains that rising costs have also pushed up expenditure.
The House is aware of the current world economic situation which threatens all economies with a recession of major proportions. The effect of the present downturn in the world economy is evident in our country and the Government's analysis of the situation, and the policy objectives they have set themselves, have been set out in their recent White Paper, entitled A National Partnership.
Over the next two years little real growth can be expected in the OECD group of countries, of which we are one. Obviously this will have serious Exchequer implications, particularly in relation to the growth in tax revenues and, consequently, for the resources available to finance State services.
As I stated in my Estimates speech, this new situation, imposed by external events, will have a direct bearing on the funds available to meet the costs of the existing health services and to finance their expansion.
In these circumstances I view with deep concern the scale of demands which are presently being made on resources which are far less than they would have been in normal world economic conditions.
The White Paper clearly indicated the limits which are now imposed on the growth in real incomes for the entire community. It appealed for moderation in income demands and I reinforce that appeal here today. It pointed out we are affected not alone by world inflation but by world recession as well, and I wish to emphasise those points again because they relate to the purpose of this Bill.
The Bill provides for an increase in health contributions to a level of 26p per week or £12 per annum. As incomes have risen substantially since 1971, when the present rates were established, these increases are not inordinate, but clearly there is a limit to the point to which the contributions can be raised and also to which the Exchequer can be asked to finance the health services.
For these reasons I trust that the cost of the services will not escalate beyond the point where future developments may have to be curtailed.
I trust, too, that the House will take account of the review which I will have undertaken of the principles underlying the Bill, of the factors which have caused me to seek these increases, and of the purposes to which the revenue will be directed.
I therefore commend the Bill to the House.