A major new IPPR report says capital funding should be prioritised rather than switching to an insurance-based system.

Lord Ara Darzi, former health minister, said: ‘The social insurance systems of France, Germany and the Netherlands are regularly invoked as superior alternatives, with little scrutiny on what those systems actually deliver or what it would take to replicate them here. There is no systematic evidence that social health insurance models outperform tax-funded systems.'

The analysis – spanning 22 high-income countries – concludes switching the NHS to a European-style insurance system would not improve performance across measures of capacity, access, quality, efficiency and equity. 

It says tax-funded systems are cheaper for patients with people in the UK spending 2.6% of household income on health costs, compared to 3.5% for those in insurance systems.

In addition, tax-funded systems have lower admin costs with administrative costs consume 2.2% of health spending, compared to 3.5% in insurance systems.

The report says record funding has been focused predominantly on staff, salaries, and other costs that have risen due to inflation. 

Meanwhile, capital investment – including beds, diagnostic equipment, and infrastructure like buildings – remains lower than it was in 2010. Spend on capital was 0.358% of GDP in 2023, down from 0.395% in 2010. Roughly half the average of comparators. 

The report calls on the Government to prioritise capital investment, move care out of hospitals and into the community in order to focus on prevention and public health, and tackle the social care crisis, to reduce preventable admissions and poor post-discharge outcomes.

Director of policy at The NHS Alliance, Dr Layla McCay, said: ‘The NHS is already undergoing far reaching reforms addressing where, when and how care is delivered and its role in keeping people well.

‘It is also in the midst of big changes in the way services are led, organised and held accountable.

‘At the same time it is striving to meet tough performance challenges in the face of a relentless rise in demand and huge financial pressures.

‘The last thing it needs on top of all that is a change in the funding model, which – as the IPPR shows - could come at significant financial cost alongside further upheaval and disruption.'