Next month Britain will celebrate seventy years of the National Health Service, though ‘celebrate’ is perhaps a misleading word to use. Most people, it’s true, do celebrate the fact that a health service free at the point of use was created in the first place and that it is still with us. But in its current state, strapped for cash and facing ever-increasing demand for its services, alarm and apprehension are perhaps more apposite terms than celebration. A report by two respected think tanks argues that we have reached the point where we all must face financial reality: if we want the NHS we claim to love so much we are going to have shoulder a much bigger tax burden to pay for it. Are you willing to pay extra taxes to save the NHS? Assuming, that is, you believe it needs “saving”.
The report was compiled by the Institute for Fiscal Studies and the Health Foundation charity and was published by the NHS Confederation. It acknowledges that, despite the evident squeeze on NHS budgets we have seen in recent years, the health service has not done anything like as badly as most other public services. They have seen real and sometimes severe cuts to their funding. But the recent increases in health spending are modest compared with the growth rates over the period since the NHS was founded in 1948. The average annual growth rate in real terms over that period was 3.7%. During the Labour governments post-1997 the annual real increase in spending rose to 6% but the financial crisis put paid to such largesse and since then the growth rate in spending has been between 1% and just over 2% a year. Hence the sense of crisis.
People over 65 are the greatest users of the NHS and over the next fifteen years their numbers will increase by four million. Those over 85 the increase will be one million. During those years the pressure is bound to increase as new treatments and new (expensive) drugs come on the market. So the report concludes that spending on the NHS will need to increase by 3.3% a year just to tread water. But if we want to do something about reducing waiting times, spending more on mental health services and stopping the exodus of vital staff from the NHS, then the increase needs to be more like 4%.
And then there is the problem of social care. There is a growing consensus that social care, currently the responsibility of local authorities which have seen massive cuts in their own funding, can properly be dealt with only if it is integrated with wider health policy. Indeed Jeremy Hunt, when he dug in against Theresa May’s attempt to move him as Health Secretary earlier this year, emerged as the new secretary of state for health and social care. If social care is to be properly funded too, it’s reckoned the combined budgets would need to rise from 8.4% of national income now to 11.4%.
A casual observer might respond to these figures by concluding that since health spending over the whole period since 1948 has managed to increase substantially without an appreciable increase in the tax burden, then surely we can go on pulling the same trick and continue to enjoy higher health spending without having to fork out extra taxes. But that notion is exactly what the report wants to demolish.
Its argument is that this ‘trick’ has been pulled largely by transferring money over the last fifty years from other areas of public spending to the NHS but that this process has come to its inevitable conclusion. In particular it draws attention to how the defence budget, which took up just under 20% of managed public spending in the 1950s, now consumes only 5%. The defenders of defence spending say there is no more room or cuts – even if the money were to go to the NHS. Indeed, the defence secretary, Gavin Williamson, is mounting a very public campaign to have defence spending increased in the context of what is widely perceived as growing threats to our security. And no other area of public spending offers the same opportunity for plunder that defence provided over the last fifty years or so.
The conclusion is obvious. The only way to find the money that our health and social care system needs is by increasing taxation. Paul Johnson, the director of the IFS, put it like this: ‘We are finally coming face to face with one of the biggest choices in a generation … higher taxes and a health and social care system which meets our expectations and improves over time, or taxes at current levels and a more constrained health service delivering less than we have become accustomed to.’
Some people may respond to this choice by saying it’s an easy one to make: tax the rich more. But although the authors of the report (and others) believe there is some scope for increasing tax on wealth and property, there is no chance of raising the sort of revenues needed solely through this means, nor by increasing income tax rates on high earners, who are already contributing a very high proportion of the total income tax take. In short, the money can’t be found except by increasing taxation on all of us.
The report estimates that the proportion of national income taken in tax over the next fifteen years will need to increase somewhere between 1.6% and 2.6%. Or, to put it in household terms, on average households will have to cough up an extra £2,000 a year in tax, for example by a 3p in the pound increase in income tax, national insurance contributions and VAT. This should be seen in the context of the forecast that, on average, household incomes will increase by around £8,500 a year over the same period. But that still means that around a quarter of our increased incomes will need to be taken away in extra tax to pay for a decent health and social care system.
Some argue that to make such increases in taxation politically more palatable, there should be a specific ‘health tax’, the proceeds of which should exclusively be spent on health and social care and that there should be no other funding for the service from general taxation. We’d be more likely to accept increases in such a tax, the argument goes, because we’d know where the money was being spent. But opponents of such a ‘hypothecated’ tax argue that it would be an unstable source of revenue for health funding, leading to feasts and famines in spending. That’s because such a tax would almost certainly be levied on incomes, but incomes vary with the economic cycle and as levels of employment and unemployment fluctuate. Better, they say, to go on funding health through general taxation so that spending can be more protected during recessions.
However the system is organised, it seems inescapable that an increased tax burden for all of us will be necessary to produce a health and social care system of the sort we claim to want. There is, of course, an alternative. Paul Johnson of the IFS described it as the ‘more constrained health service delivering less than we have become accustomed to’. It would see NHS provision become more and more basic, with those who could afford it seeking more of their health care from the private sector and relying on private health insurance or simply their own bank accounts to pay for it. But that would essentially destroy the very nature of the NHS, which was set up specifically to avoid different health provision for the rich and for the poor and to provide everyone with freely available health care whenever they needed it.
Nigel Lawson, the former Tory chancellor, once famously remarked that the NHS was Britain’s national religion. The question now is whether we are prepared to put much more of our cash in the collecting plate or whether we become more agnostic or even lose our faith in the NHS.
Are you prepared to pay much more in taxation for health and social care, or not?
Let us know your views.