• 25 May 2018
• Posted in: Healthcare, Planning & Development

A new report published this week calls for higher taxation on British households in order to keep the NHS afloat. The report, produced in collaboration by think-tanks the Health Foundation and the Institute for Fiscal Studies, acknowledges that the NHS has struggled to cope under the tightest monetary constraints placed on the service in its 70-year history; whilst the expense of delivering health and social care continues to rise as a result of demographic change, growing prevalence of patients with chronic illness’ and the rising costs of staffing and drugs.

The report was co-authored by Anita Charlesworth, director of research and economics at the Health Foundation. Anita delivered a keynote address at Open Forum’s NHS Staff: Skills, Retention and Recruitment conference last week in Manchester. Speaking about the challenges facing the NHS and the fiscal discrepancies the service has incurred as a result of the healthcare policy of successive government administrations, Anita said: “After eight years of austerity, the health service will need a sustained injection of funding just to get back on an even-keel, let alone to modernise. The Prime Minister has committed to a long-term funding settlement for the NHS. Spending on the NHS needs to return to the 4% a year real-terms increases seen during the first six decades… There are four million people on waiting lists. It is not a service where the problems can be hidden”.

This ‘long-term funding settlement for the NHS’ is a reference to the story that splashed on the cover of Thursday’s edition of the Spectator; Theresa May plans to increase the NHS’ budget by 3% per year for the remaining four years of the current parliament. This is significant because, by 2022, this proposal would equate to the NHS receiving an additional £350m a week – echoing the would-be policy proposal made by the Vote Leave campaign during the 2016 EU referendum and overruling Chancellor Phillip Hammond’s recommendations that such spending measures would prove difficult to afford.

The Prime Minister’s pledge to increase NHS funding by 3% per-year will no-doubt be welcomed by the health and social care sector. However, as set out in the joint report, modest improvements to services and higher pay to incentivise recruitment and retention of staff requires health spending to grow by 4% year-on-year between now and 2033; with front-loaded increases of 5% a year for the next five years. In-line with these forecasts, health spending would rise from 7.3% of GDP to 9.9% of GDP by 2033. The headline proposal of an additional £2,000 per household being required to keep the NHS afloat is based on the projection that household incomes are expected to rise by £8,500 between now and 2033; as such, a quarter of the expected increase is hypothecated for the NHS. Additionally, a further 0.4% of GDP – equating to £300 per household, will be required to pay for adult social care.      

According to the study, over the past 70 years spending on the NHS has come from reduced expenditure on housing, defence and debt interest; none of these alternatives will be viable in the future. According to Paul Johnson, director of the Institute for Fiscal Studies and a co-author of the report, Britain’s only option is increased taxation: “If we are to have a health and social care system which meets our needs and aspirations, we will have to pay a lot more for it over the next 15 years. This time we won’t be able to rely on cutting spending elsewhere – we will have to pay more in tax. But it is a choice; 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.”

The three primary sources of government revenue are income tax, value added tax and national insurance. The report advises that putting a penny on all of the main rates of income tax would raise £5bn, a penny on VAT would raise £6bn and a penny on each of the main employee, self-employed and employer national insurance rates would generate £10bn.

An all-party group of MPs consisting of Dr Sarah Wollaston (Conservative chair of the health and social care select committee), Liz Kendall (Labour former shadow health minister) and Norman Lamb (former Liberal Democrat care minister) endorsed the recommendations within the report; Liz Kendall l commented: “We call for the government to accept the case for meeting the ambitious scenario which would deliver a modernised NHS. It sets a benchmark against which to judge any announcements from the government about extra funding for the NHS and social care as we approach the 70^th anniversary of great institution.”