The end state and the NHS

Will it be like Norway, or are we looking at Canada? What about the Jersey model, or should we look further afield towards Ukraine? Mark Dayan explores the range of different options as the UK negotiates its future relationship with the European Union – and what it all means for the NHS.

Blog post

Published: 20/02/2018

With only around seven months left to negotiate the headline terms of our ongoing relationship with the European Union (EU), we may soon actually find out what it looks like. Senior UK ministers are to thrash out their differences at a country house away day on Thursday. And even if they can’t agree a proposal, reports suggest the EU will set out alternatives in March.

Different options are being discussed based on a bewildering range of large and small examples of how the EU relates to other countries: Norway, Canada, Jersey and Ukraine. Each possible model for the “end state” of Brexit, following the two-year transition period expected to begin next year, will create a different environment for the NHS. To see how, we need to quickly recap the main issues at stake for the service.

Perhaps the biggest is staffing. In recent years, health and care services in the UK have relied on migration from the EU under free movement of labour to even come close to keeping up with the rising level of need. In nursing, leaked government estimates suggest extra shortages could reach an extra 20,000 by 2025 if migration is shut off – starting from a 30,000 shortfall. In social care, our own calculations suggest a possible gap of up to 70,000 workers by 2025.

Then there is funding. Brexit campaigners during the referendum implied £350 million a week in extra funding could be directed to the NHS if the UK no longer paid into EU coffers. That won’t happen, but the political claim of the NHS on any money freed up has not been forgotten. Yet Brexit is also expected to slow down the British economy, meaning less tax revenue to fund the health service.

If the UK no longer follows the rules of the single market for its own products, or the rules of the customs union for goods from elsewhere, there will need to be checks and declarations at ports and the border. That would create multiple problems for the Northern Irish NHS and could push up prices for the health service’s supplies across the UK. It could also create a risk that fast-decaying medical products, like radioisotopes and gene therapies, might be lost.

Leaving the EU’s regulatory framework would also mean separate approval and safety processes for medicines and devices. That could mean new drugs are not introduced as quickly, monitoring safety is less easy, and pharmaceutical investment in trials involving NHS doctors and patients is discouraged.

On the other hand, some in the NHS would like to see the back of certain EU rules. Some medical Royal Colleges have expressed concern about the European Working Time Directive’s restrictions on the hours doctors work – although others disagree. NHS England chief Simon Stevens has suggested he would like to look again at the procurement rules, backstopped by EU law, which mean contracts for certain services must be offered out to all comers.

What would the prospects for each of these be under different Brexit “end states”?

The Norway option

European Economic Area states like Norway are in the single market and follow most EU economic rules, including the free movement of labour, but are outside the customs union.

The EU sees this as a viable option for the UK. It would almost certainly cross the British government red line on controlling immigration, and also arguably on the role of the European Court of Justice. But it commands significant support in parliament.

This would answer concerns about no longer having British regulation for health and life sciences aligned with the EU. Medicines and devices could continue to be regulated, approved, inspected and sold across the Channel and the Irish border. Clinical trials and data analysis could still be done on a European scale.

Because free movement of labour would largely continue, the staffing worries presented by Brexit would melt away. We could even keep our EHIC cards.

But because the UK would be outside the customs union, there would still need to be infrastructure at the Irish border. Checks and “rules of origin” requirements would still present barriers to trade – impacting prices and investment.

Rules on procurement, and almost certainly working time, would remain in place.

The Canada option

At the other extreme we could leave all forms and sectors of the single market and customs union, and arrange a trade deal with the EU like their arrangement with Canada. This seems acceptable to the EU. It meets every UK government red line, although a majority in parliament oppose such a hard Brexit.

This would split up the market for medicines and devices, and obstruct cross-border tests of new treatments. It is difficult to see how a hard border could be avoided in Northern Ireland. Extra checks and requirements would apply for trade generally, potentially driving up prices for the NHS and the risk of supply disruptions.

Studies typically suggest this scenario would make the economy between 2% and 6% smaller by 2030 compared to remaining in the EU. If Treasury revenue was held back that much, it would mean tens of billions less in the coffers. That would permanently cancel out the annual saving of £10-14 billion in EU payments.

The NHS and social care could no longer rely on EU staff moving in under free movement of labour to address shortages – although, of course, the UK could still unilaterally allow more people in.

Even under this scenario, the EU’s ambition to keep the UK on a “level playing field” means they may still push for safeguards on procurement. We could probably go our own way on working time.

The Jersey option

This is a compromise set out by researchers at the Centre for European Reform, named after the Channel Island with a similar arrangement. It means staying in the customs union and single market for physical goods, but taking the freedom to diverge from rules and trade policy in services.

The proposal is not wildly popular in Brexiteer circles, but it has backers in Whitehall. The EU is on guard against the UK trying to ‘cherry pick’ the bits of membership it likes – but given the UK’s strengths are in services, the argument from backers of the proposal might be that it is the opposite of cherry picking.

Because we would keep following EU rules for anything that might physically move between territories, this could avoid a hard Irish border. It would also prevent delays or price rises due to trade barriers.

The UK would stay in the EU market for medical devices and medicines. But regulations for data and clinical trials could diverge, which would discourage or disrupt research and also perhaps raise tensions in assessing and monitoring medicines.

Open – at least fairly open – migration would probably continue: a negative for the British government, but welcome for social care and the NHS. The UK would probably still have to pay into EU funds, but not as much as we do now. It would still face a drag on growth, but perhaps not as strong as under a harder Brexit.

Working time and procurement might not obviously be covered. But in such a close relationship, the EU might well seek guarantees that the UK would keep playing by the same rules, especially on public contracts.

The Ukraine option

The EU’s agreements with Georgia, Moldova and especially Ukraine are perhaps the clearest precedent for a halfway house. Ukraine has effective access to much of the single market, in both goods and services, as long as it brings its regulations into line with those of the EU and keeps them there.

This has been suggested by trade experts in the UK, but not reported as being actively considered by the British government. The model comes close to breaching the UK’s red line on the European Court of Justice.

What would it mean for the NHS? Medical devices are covered by Ukraine’s agreement, but the country is not part of the EU’s medicines approval system (although alignment is an ongoing project). The country is not in the customs union: by analogy, border checks would be required in Ireland. It is outside enough elements of the single market that tariffs still apply on some goods. This could push up prices for some goods the NHS needs, risking still higher deficits.

Ukraine has to follow procurement rules, but is not bound on working time. The deal with the EU was accompanied by some liberalisation of migration – as with the Jersey option, a positive from the NHS point of view.

The three-bucket option?

The UK government is widely rumoured to be thinking of proposing a more complex model, laid out in one form by the Institute for Government, which divides regulations into three ‘baskets’ or ‘buckets’. In one bucket would be areas where the UK would be bound to stay in full alignment with EU law. In another we could stay aligned and keep access, or diverge and lose it. In the third, which would perhaps cover things not relating to trade and the economy, we could completely go our own way.

Initial reactions from the EU – in particular France and Germany – appear to be sceptical. The proposal can be seen as not only allowing the UK to cherry pick what it likes, but to cherry pick what it likes, when it likes.

The impact on the NHS is difficult to predict without knowing what goes in which bucket. We might want to stay aligned for medicines and medical devices, but not procurement. But what if the EU, even if it accepted the general concept, had other ideas? The resulting uncertainty would in itself not be welcome for NHS workforce and finance planners, scientists planning trials or companies funding research.

The implications for migration, and ongoing payments to the EU, are similarly unknown, but it seems unlikely that the UK would get this all its own way.

As with the other harder Brexit options, leaving the customs union and even parts of the single market would mean border infrastructure in Northern Ireland.

The bottom line is that the 'bucket option' will not get around the difficult trade-offs involved in choosing between the existing models – and those include difficult trade-offs for the NHS.

Suggested citation

Dayan M (2018) "The end state and the NHS", Nuffield Trust comment.