Several NHS stories have caught my eye over the past week, and I wanted to bring them together into a blog that emphasises, yet again, that our NHS needs funding, and needs it soon. I have a heightened awareness now, having travelled the length and breadth of North Devon over recent weeks and seen the lack of provision in the communities there, with the nearest hospital for some being an hour away – and the nearest hospital for many non-urgent appointments being two hours away.
The NHS matters to all of us and needs sorting. We as Lib Dems are proposing a 1p rise in income tax to fund health and social care services. A poll announced yesterday in the Mirror shows that 82% of the population would back a 1p rise in National Insurance to fund the NHS. In answer to the question, “Would you be willing to change your vote in favour of a party who pledged additional NHS funding?” 18% of the respondents said ‘definitely’ and 33% said ‘probably’.
We set out our plan to put 1p on income tax in our 2017 manifesto. Our plan includes an eventual restructuring of National Insurance contributions with ring-fenced money for Health and Social Care. It is party policy that the NHS needs funding and taxes will have to be raised to do it. In the ComRes Mirror poll, almost an equal number of Tory (81%) and Labour (86%) voters agree.
This ComRes poll follows on the Institute for Fiscal Studies and Health Foundation joint report released two weeks ago showing that
Just to keep the NHS providing the level of service it does today will require us to increase spending by an average 3.3% a year for the next 15 years – with slightly bigger increases in the short run to address immediate funding problems.
I was asked in hustings last week in North Devon how much we should increase our spending on the NHS in relation to GDP. I didn’t know the answer, but now I do. We currently spend 7.3% of our national income on health, and this would increase to 9.9% by 2033–34 if taxes were raised as the IFS suggests are needed. If you also include increased spending needed for social care, this would in combination be around a 3% rise of GDP from what we currently spend.
At the same time, pressures on social care spending are increasing and, if we continue with something like the current funding arrangements, adult social care spending is likely to have to rise by 3.9% a year over the next 15 years taking an extra 0.4% of national income, relative to today.
Just in comparison, you can find a chart published by the OECD with other countries’ spending on health here. Germany, for example, spent 11.3% of GDP on health in 2016.
With increased pressure on the NHS and social care services from an ageing population, increased demand for chronic care services, and the rising costs of drugs, funding must be found. As a parent with three children, we have used a wide range of NHS services and are very grateful for the expertise offered when we’ve needed it. We all use the NHS, we all rely on the NHS, and people are now willing to have taxes increased to pay for it.
* Kirsten Johnson was the PPC for Oxford East in the 2017 General Election. She is a pianist and composer at www.kirstenjohnsonpiano.com.
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10 Comments
A 1p rise in National insurance is not a good idea. It’s not paid by pensioners who are the most important users of the NHS. A rise in income tax is much fairer.
Kirsten, the joint report notes:
“If we choose to meet these spending pressures, it is hard to see an alternative to raising taxes. A higher deficit is possible in the short run, but not permanently; it is not clear that there are large areas of public spending that could be cut to pay for more health and social care spending, and scope for significant additional charging is limited.
It looks like tax rises of at least 1.6% of national income, and up to 2.6% of national income (£34-56 billion in today’s terms) will be required by the mid 2030s for the NHS, with an additional rise of 0.4% of national income if we were to meet the pressures on social care. This would take the tax burden to historically high levels by UK standards, but not especially high by continental European standards. It is hard to see how tax rises of this scale could be implemented without increases in at least one of income tax, NICs and VAT;.”
The level of increased funding anticipated for health and social care alone is 7 to 10 times the 6 billion estimated to be raised from a 1p income tax rise. That is without considering the increased funding needed for housing, schools, policing, defense, transportation and infrastructure. So the 1p income tax rise is just the start.
Not all taxes are the same. They have different impacts on different sectors of society and on productivity/wealth creation. Mason Gaffney, (an emeritus professor of economics at the University of California) is one of the world’s foremost authorities on the way taxes impose negative effects on the individual, on communities and on the natural environment. He grades taxes according to their variable impact on a nation’s wealth and welfare
Taxes ranked according to their positive effects on production and equity (fairness)
1. Best: Land Value Tax aka Annual Ground Rent
a. at national level
b. at state or provincial level
c. at local levels
2. Pigovian taxes on pollution etc.
3. Severance taxes (on mineral extraction, etc.)
4. General Property Tax
5. Corporation Income Tax
6. Personal Income tax
7. Payroll Tax (National Insurance)
8. Excise taxes and sales taxes, Value Added Tax
To significantly increase funding for public services taxes will need to be raised in the least economically harmful way and with inter-generational equity at the forefront of our minds.
Misread the title as 82 percent increase in taxes to pay for NHS, which is probably nearer the truth than minor fiddles with income tax. Problem is that with Brexit govn revenues are going to fall anyway and if you increase income taxes then you probably throw the country into recession which in turn decreases govn revenues. Spreadsheet Phil’s fiddling whilst Rome burns is about as good as it is going to get unless you want to get really radical by bringing Norman Tebbit out of retirement!
Kirsten’s key points are the NHS matters to all of us and needs sorting and there is a public willingness to pay for it.
Japan has the oldest population in the world and the longest lifespans. They spend a similar proportion of GDP on health as does the UK. The patient accepts responsibility for 30% of medical costs while the government pays the remaining 70%. Payment for personal medical services is offered by a universal health care insurance system that provides relative equality of access, with fees set by a government committee. All residents of Japan are required by the law to have health insurance coverage. People without insurance from employers can participate in a national health insurance programme, administered by local governments. Patients are free to select physicians or facilities of their choice and cannot be denied coverage. Hospitals, by law, must be run as non-profit and be managed by physicians. For-profit corporations are not allowed to own or operate hospitals. Clinics must be owned and operated by physicians.
Medical fees are strictly regulated by the government to keep them affordable. Depending on the family income and the age of the insured, patients are responsible for paying 10%, 20%, or 30% of medical fees, with the government paying the remaining fee. Also, monthly thresholds are set for each household, again depending on income and age, and medical fees exceeding the threshold are waived or reimbursed by the government.
Uninsured patients are responsible for paying 100% of their medical fees, but fees are waived for low-income households receiving a government subsidy. Fees are also waived for homeless people brought to the hospital by ambulance.
Japan has a long-term care insurance scheme, offering social care to those aged 65+ on the basis of needs alone. The system is part-funded by compulsory premiums for all those over the age of 40, and part-funded by national and local taxation. Users are also expected to contribute a 10% co-payment towards the cost of the service. The costs are seen as affordable and the scheme is extremely popular.
The result is that older people in Japan can access a wide range of institutional and community-based services, with few of the barriers to access which exist in England. Interestingly, this requires levels of public spending on social care which are broadly similar to England’s, taking into account disability-related cash payments such as Attendance Allowance.
You can’t keep adding 1p to income tax or NI everytime the NHS is short of money. Imposing extra taxes just depresses the economy and doesn’t necessarily achieve anything other than reducing inflation. VAT receipts will fall for example. After ten years and ten 1p rises where will be be?
Look, if anyone think this is incorrect then let’s work out just what would be correct. It’s much better to get it right to start with than learn that its wrong the hard way.
Does anyone check, when quoting these polls what people think “1p on income tax” actually means? Do they have any idea how much they would have to pay? For the average full-time worker, it means about £170 a year – say £3.30 a week. It’s still not much (as Joe points out, it’s not nearly enough), but it might elicit different answers.
Don’t get me wrong, I’m all in favour of public spending on health and of raising tax to do it (pace Peter Martin – I understand the argument, but broadly speaking over the longer term, if we want to provide more public goods out of state spending we will have to suck more money back to its source if the money is to keep its value; I think you’d agree with that?). But I don’t believe in false, bright-eyed optimism that people are in favour of tax rises if you ask them right; it’s more a matter of what they tell you when you ask them wrong.
JoeB – ‘it is not clear that there are large areas of public spending that could be cut to pay for more health and social care spending’
True enough, but in large part that’s because successive governments have protected the NHS via a ringfence (albeit with efficiency savings) and hammered other things harder than would otherwise have been the case in fiscal consolidation. I will leave the wisdom of protecting things like overseas aid and triple locked pensions to others.
I just never know what to say – we often see these polls that basically say that the public likes to see more services commissioned. Not altogether shocking. The less charitable version of this from the time I worked in the NHS that extra money was like pouring water onto sand. This extra tax likely won’t ‘sort’ anything.
The Japanese system you describe is interesting (noting that Japan has a more stable population than the UK) but that sort of thing never seems to fly here, rightly or wrongly. Indeed it is hard to overlook that the article cites Germany as an example – most Lander in Germany go down the social insurance route and there are often hefty up front charges involved for medical appointments.
There is of course the possibility of reducing some parts of the NHS, but that likely won’t fly either.
But I agree that at least we do need to all move on from the idea that we either have an NHS or we have the US and there are not other models. We just go round in circles otherwise.
Part ii) may be the reduction in NHS employees pensions to help divert spending into health focussed areas – while the NHS is an ideal we all, nearly all, believe in its a shame that there are fat cats within the organisation who don’t demonstrate a belief in healthcare for all and are there for their own pocket only.
When the Government announces that a new jet fighter is to be built, or a new aircraft carrier, we are always told how many jobs the project will create. The question of “how are we going to pay for it?” is rarely asked -except perhaps by a few awkward lefties.
The project is presented as an injection of much needed money into the economy of the possibly deprived area in which the shipyard or aircraft factory is located. And that’s true. It is. The Government spends the money in the shipyard, the workers pay income tax and NI, spend they pay in the shops and pay VAT and all the rest of the other taxes that we know about.
So everyone instinctively sees this and knows the spending is good for the economy generally. The spending is largely self funding. There is no difference in principle between this kind of spending and extra spending on the NHS. It all works the same way. There’s no reason that one will need extra taxation and the other won’t. They may both need some extra taxation or neither may need it. It all depends on what is happening in the economy generally.
So, politically, if you want extra spending on the NHS you need to explain it in the same terms and put the right ‘spin’ on it all!
Peter, not sure it is quite right to say – The question of “how are we going to pay for it?” is rarely asked. Isn’t this why we have two aircraft carriers with no planes on them?
I think you are right, however, in framing the issue of additional real terms funding in the NHS as a political problem. The contrasting experience of Mrs May and the ‘dementia tax’ in the 2017 election versus the Labour party program to hike up corporation tax and income tax on incomes over £80k is going to make all parties cautious in terms of radical new initiatives.
Norman Lamb has long been calling for a cross-party consensus on social care along the lines of the Dilnott commission and integration of social with the NHS.
I think I agree with much of this article headed – “If Beveridge were alive today he might introduce NHS charges” https://www.theguardian.com/healthcare-network/2016/jul/01/beveridge-alive-today-introduce-nhs-charges. The article concludes:
“,,,he might just conclude that to get to a fully integrated health and care system requires a painful trade off. Namely that if English politicians and their electorate are not willing fully to fund a jointly free health and social care system, then some new NHS charges may be needed in return for a better funded but fully integrated health and social care approach. Given his love of insurance, he’d probably seek to devise those charges (for a GP visit or out-patient attendance, or hospital stay, for example) in a way that made them insurable.
He would not be as popular as he was when his original report was launched – queues formed down Kingsway in central London to buy it. But he might decide that was the best way to sort out a bad job. What is certain as certain can be at this distance in time, is that he would see it as an issue that had to be tackled.”