Opinion: If an NHS Tax is a step too far, let taxpayers make an optional “NHS Donation”

nhs sign lrgLiberal Democrats have committed to protecting the NHS Budget in the next Parliament. But over the next 6 years, we will need to fill a £30 billion deficit to maintain the level of quality we expect from our NHS. Social care faces a £7 billion shortfall.

There have been recent reports that senior party figures are looking at a hypothecated “NHS Tax”.

Some Conservative and Labour backbenchers have also called for an NHS Tax. Lord Finkelstein suggested “if we are going to deal with the issue of cost, one possibility is to try to create an NHS tax that is hypothecated […] Lots of reputable people believe in it and I think there is a lot to be said for it.”

Labour’s Frank Field MP has called for a 1p increase in National Insurance for the NHS.

Would the public accept this? In July, a Guardian/ICM poll found 48% of voters backed tax-funded NHS spending increases – rising to 61% amongst Lib Dem voters. Last month, a ComRes poll showed 49% were prepared to pay more tax for NHS funding.

But some will worry a hypothecated tax increase may be too unpopular politically.

If so, why not make it optional?  Let taxpayers choose to tick a box on their tax returns (or by informing their employer for PAYE) to donate an extra £25/£50/£100/£200 towards the NHS. The NHS would never know who ticked yes or no. Already, big equipment in local hospitals is often part-funded by charitable donations. In the US, taxpayers can choose to allocate $3 of their tax to political party funds (though that does not add to the total tax paid, which differs to my proposal).

But if we are asking taxpayers to pay more, we also need to be more open about how (and how much) money is currently used by the NHS.

A King’s Fund study found members of the public “welcomed more information about how [much is spent]” and were “surprised by how much is spent overall on the NHS and by the proportion of spending on different services”.

£1 of every £5 of tax goes to the NHS – but the costs needs to be simplified down to an individual level. Simple infographics (such as these) on hospital wards could tell you how much a day or a week’s stay there costs. Personalized NHS care receipts could be issued every 5 years showing how much you’ve used – bringing £110 billion of NHS spend down to a personal level.

We need to better explain what is spent on the NHS and why more is needed. If a hypothecated tax is out of the question, we should make it easier for taxpayers to “opt into” giving more to the NHS if they wish.

* Dr Mohsin Khan is Vice-Chair of Lib Dem Campaign for Racial Equality. He is also a member of the Federal Policy Committee and Vice-Chair of the Lib Dem Health and Care Association.

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23 Comments

  • jedibeeftrix 2nd Sep '14 - 9:33am

    Can we do the same for defence?

  • Tony Dawson 2nd Sep '14 - 10:02am

    Just how much penny-pinching is now being suggested to compensate for the disastrous and useless NHS ‘Reforms’? Add that to what was poured down the drain with the failed NHS

  • Matthew Huntbach 2nd Sep '14 - 11:27am

    We need to be honest. If people want the NHS as it is, they have to pay for it, and that has to be done through taxation. I agree with jedibeeftrix here, I don’t see any particular reason for the NHS to be singled out for a special hypothecated tax any more than anything else.

    If people aren’t willing to pay the tax required to keep a free-at-source NHS, then we can’t have one. It’s not a matter of it being “politically unpopular”, closing down the NHS, or restricting what it will do and who it will do it for would also be massively unpopular politically, but that’s the alternative to increased taxes to pay for it.

    Too much (i.e. almost all) of our political debate involves silly hand-waving over this and other issues where demographic, technological, environmental and other factors are pushing up what the state needs to spend if it is to keep the level of service people expect. On the one hand we have one side (mostly those on the political left and/or those in the opposition) going on and on about how bad it is to make cuts and how we must have good state services, but hardly mentioning how it could be paid for. On the other hand we have the political right who go on and on about how bad tax is, and how we must keep it low to keep “entrepreneurs” and the global wealthy etc sweet, but who don’t talk much about why we need to have tax if we are to have the state services that people say they want, and we have governing parties who seem to want to make out that everything is wonderful and super-duper and won’t admit to the problem of having to make cuts because they are scared to raise taxes – or who think the problem can be solved by sprinkling the magic fairy dust called “private sector know-how” on it. As we have now found out, what the private sector “know how” really was about knowing was how to make a good-sounding deal that turned out to be massively expensive in the long run i.e. the various PFI agreements that I remember New Labour going on about as if it was “free money” and you were an old socialist dinosaur if you objected to them.

    We LibDems were caught out by this good and proper. How easy it was to sign the pledge saying “free university tuition for all”, but by not saying anything in detail about how we would pay for it, we’ve been caught. If we’d been honest and put this pledge alongside a proper account of how it could be paid for, people would, I think, be more accepting of the problem that we can’t get it out of this government because the rest of this government is committed to keeping taxes low. However, because we didn’t mention the balancing cost factor, people have just assumed the big bills it costs to have half the school-leavers in the country go on to three years at university could somehow be paid for out of fresh air, and so are angry at us because we haven’t been able to magic up the payments or perhaps they think we could do so and just decided not to in order to be nasty.

    University education, health care, pensions etc, if they aren’t paid for by tax, they have to be paid for in some other way. If higher taxes are “unpopular politically”, fine, but people need to remember – and be told by honest politicians – that the alternative is that you pay for the same things yourself through some private scheme, which won’t necessarily be cheaper than paying for it through taxes. In the end, it should be down to a democratic decision, but the people of this country need to have both sides of the possibilities explained in full. Instead we have “aren’t we wonderful, we’ve given you these tax cuts?” as if there’s no knock-on effect on what the government has to spend (LibDem national PR people recently), and pledges to do things which cost money as if there’s no knock-on effect on taxes having to be raise (LibDem national PR people in the 2010 general election).

    Then what happens is because the people of the country haven’t heard a balanced argument, they think politicians are all bad because they can’t provide high cost services for low taxes, and so they get angry with democracy itself. But they don’t have much of a clue about what they’d have instead (magic rule by fairies who solve all problems at no cost, perhaps, or The Revolution, or pulling out of the EU will pay for everything – I think the first of these is the most realistic in terms of likelihood of working).

  • David Allen 2nd Sep '14 - 12:43pm

    Nobody likes paying tax. Politicians are therefore under pressure to cut taxes while merrily spending, i.e. to run a permanent deficit. The Coalition has cut some taxes while failing to cut much spending, and hence, despite all the smokescreen rhetoric to the contrary, is happily running a big permanent deficit.

    Once upon a time, politicians diverted the harmful pressure to cut taxes by promising instead to chuck the tax burden at the people who didn’t vote for their own party. Labour soaked the rich, then the Tories got back in and soaked the poor again. We used to think and say that this was terrible class-based politics and that its mindlessness was dragging Britain down.

    Nowadays, far less of it goes on. Labour don’t dare soak the rich, because the rich have an army of lobbyists successfully peddling the untruth that the economy will tank if we do not let the super-rich get richer. So, now we don’t have class war any more, Britain is a better place, right? Well, er, not really. The class war has ended in victory for the rich, the poor have been cowed into a semblance of peace. And the pressure to keep taxes low continues unabated. Worse, now that we can’t dodge that pressure by shifting the tax burden onto people we don’t like, we are under greater pressure to make real cuts.

    Various responses to that pressure have been found, almost all of them meretricious fudges which cause harm. One was the pretence that we could genuinely cut back a vast amount of wasteful spending by the State, which has largely resulted in better-hidden forms of government spending through agencies, consultancies, academies and the like. Earlier, Labour had come up with PFI as a form of semi-disguised borrowing to support an official live-now-pay-later policy. The key feature of the more recent Browne tuition fees mechanism is that universities are now supported by another vast expansion of borrowing, this time ingeniously hidden by transferring the nominal debt off the public accounts and on to the student.

    And now we have the idea of separating out popular recipients of tax moneys, like the NHS, from unpopular recipients. The theory is that we can coax the public somehow or other into paying a bit more for the popular stuff, provided we let everything else go hang. The Treasury don’t like the idea, for the obvious reason that it is basically a “let’s pay less” proposal masquerading as “let’s pay more for health”, and to the Treasury, it’s only the net receipts that matter. Those are falling off a cliff, as multinationals get better at avoidance, the financial crash means less tax from the City, and the rich Tory and Lib Dem donors get better at pulling the strings. So Government, knowing it is failing, must find a scapegoat. The Tories blame Labour, UKIP blame the EU, and the Coalition blames the sick, weak and disabled “scroungers”.

    So as Matthew says, “because the people of the country haven’t heard a balanced argument, they think politicians are all bad because they can’t provide high cost services for low taxes, and so they get angry with democracy itself. But they don’t have much of a clue about what they’d have instead”. Well, back in the day, there was one political party which showed a modicum of honesty, a party which declared that if we wanted decent services, we would need to put “a penny in the pound” on income tax. What happened to those guys, pray?

  • There’s few things people would almost happily pay more tax for. Health is one, education is the other. Proposing tax increases to support either or both seem completely compatible with the people who would vote Lib Dem.

  • Green Voter 2nd Sep '14 - 3:08pm

    What about doing something to reduce waste in the NHS?

    For example, if doctors are prescribing too many antibiotics, this is a waste of money. Do the Lib Dems have a group looking at ways to improve the NHS

  • Richard Dean 2nd Sep '14 - 3:15pm

    I don’t think people are happy to pay tax at all.

    If a voluntary NHS tax is introduced, then we enter an unholy combination of the prisoner’s dilemma and the tragedy of the commons in reverse. Each individual will be better off not paying, since they will get about the same benefits without the same costs. But if every individual operates on this principle, the system will collapse and every individual will lose.

    And if a voluntary NHS tax, then why not a voluntary tax to pay for the benefits system? For defence? For the justice system? Where would this slippery froggy slope end? How small can small government get before being of no use at all to its electorate?

  • Eddie Sammon 2nd Sep '14 - 4:48pm

    This is a good idea and I submitted a similar one to the manifesto group a while ago. However, rather than putting options on tax returns, I would simply set up donor cards that also entitle people to things like free days out, making it a bit of a social thing too. I included similar ideas for defence, which Jedi mentions. It would be good to show people where their money is going.

    Regards

  • Matthew Huntbach 2nd Sep '14 - 5:04pm

    Green Voter

    What about doing something to reduce waste in the NHS?

    For example, if doctors are prescribing too many antibiotics, this is a waste of money.

    Sure, although wait for the howls of anger about people not getting the treatment they think they should have (hasn’t there been a case like this recently in the news …), and about how the restrictions on things which doctors think aren’t worth it are “bureaucracy gone mad”, and for the Daily Mail etc to poke around until they can find someone who dies because they were refused antibiotics (because it was a case that looked like it wasn’t one which needed antibiotics), and so on.

    The idea that there are huge amounts of “waste” in the public sector that can easily be cut have been around for decades now. Might it not be accepted that perhaps after all these years of cuts, just perhaps the obvious waste has been cut? Do you really think there are going to be continual cuts of “waste” that can be made forever to counter the demographic pressures pushing health spending up?

    Unfortunately this sort of line is often used to avoid serious discussion. Something that costs thousands is waved around as “here, that shows money is wasted”, and that’s supposed to shut down consideration of how to fund rising costs in the order of millions. A common saloon bar line, I often heard it when I was a councillor, was “huh huh, cut the allowances given to councillors, huh huh huh”, and that was supposed to shut you up if you tried to talk sense on budgets. But it ignored the reality that only a very tiny proportion of the local government budget went on councillors’ allowances.

    If you’re the Daily Mail or UKIP, or something like that, you can get away with this. Unfortunately, if you’re actually in government, or proposing to be with a serious plan for it, you can’t.

  • Green Voter 2nd Sep '14 - 6:26pm

    I do not believe that waste cuts will match the extra spending required to cope with an aging population. But I do think that money wasted on antibiotics is a bad thing.

    Is there a working group in the Lib Dems looking at all the ways the NHS can be improved?

  • Well, there are duplications of services at nearby trusts (not general services but more specialist functions). And there’s also the possibility of using more collective bargaining with multiple trusts to get bulk discounts (replacing multiple CT scanners at a lower unit cost than each site buying them individually, for example). These ideas have been put forward as good ways to save money and provide more integrated services by the NAO.

    It has also been roundly rejected by politicians as it is contrary to the “every trust should be competing with each other” idea.

  • Stephen Donnelly 2nd Sep '14 - 11:12pm

    The present model for the NHS is unsustainable, and at least Mohsin Khan is applying some new thinking. I fear that we may be contemplating going into the election by arguing that ring fencing the existing budget is sufficient, whilst knowing that it will not be. It is this lack of honesty that worries me most.

  • Ken Palmerton 3rd Sep '14 - 11:54am

    Here we go again.

    To follow blindly on behind the Thatcherite doctrine that “The only monies available to Government comes from taxation or borrowing” is to drag along on Tory coat tails, and continue to ignore our Liberal heritage. Liberals when last in Government in the UK showed that no sovereighn State was compelled to borrow.

    If indeed the NHS requires further funding the State should create that purchasing power itself, interest free, NOT borrow, further damaging the future, or increasing taxation, reducing overall purchasing power.

    As Beveridge told us : ” …This involves the socialisation of demand. Being based upon the premise that it was the duty of the State to ensure that private and public spending together were in every year sufficient to call out all the resourses of the community in men and materials.”

    The NHS is the jewel of Liberal thinking, the electorate will never forgive us if we do not defend it with all the power of our Liberal understanding of monetray possibilities.

    Ken.

  • Andrew Colman 3rd Sep '14 - 11:56am

    The NHS based healthcare system in the UK is about £2000-£3000 cheaper per person per year than the private system in the USA, yet if one read the press, and believed it without thinking as too many do ,, one would think the reverse is true.

    Privatisation will make healthcare more expensive, far more expensive for nearly everyone, could be £10000 extra per family, if costs rise to American.

    Our health service is very efficient , but now we are trying to make it too efficient and damafing the service. What is needed is a substantial increase in tax (I suggest something like £20 Billion Per year ) raised from property taxes, green taxes and scrapping tax breaks (I have seen estimates that tax breaks toal £100 Billion , so £20 Billion should be realistic)_. Yes people will pay more, maybe £300 per head per year (and a large proportion of this will fall on the walthy who use tax breaks and have expensive houses) , but this is a small fraction of what privatisation will cost.

    The Lib Dems need to come up with a costed plan based on this number and ride through the s*** which will come from the Mail etc. I believe the public will eventually see through the media lies and support as as most want an NHS and admire honest politicians in the long term. Given the current opinion polls, Lib Dems have nothing to lose.

  • I think most people who have several hundred pounds a year spare to make optinal donations to their health care, would prefer spending it on private health care insurance that covers their family. It’s not a case of being mean it’s called looking after your family – which is my and many others number one priority. I’m not against increased taxes or helping the less well off, but I’m not going to pay a tax when many others in the same financial situation as me won’t.

  • Jayne Mansfield 3rd Sep '14 - 1:04pm

    I was in favour of the 1p in the onus for education many years ago, but I am now concerned as to what that and the proposal by Dr Khan means in terms of ‘progressive ‘ taxation.

    In the year that I spent shaking charity tins

  • Jayne Mansfield 3rd Sep '14 - 1:06pm

    Before the shaking was seen as begging, it was often those who seemed to have least who we’re more ready to donate for what they saw as a good cause.

  • I just don’t think hypothecation works. It’s one thing to have a key policy and say this will require an extra 1% on the basic rate of income tax, it’s quite another to introduce a separate tax. If it were to be meaningful, then the money would have to be ring – fenced, which distorts spending decisions. So you might have money ring fenced for treating people for lifestyle related diseases, but you can’t spend it on something that might be more effective , such as better cycle routes.

    I also think hypothecation will hinder long term planning, as it is likely to lead to incoherent, populist policies.

    Defence spending tends to be unpopular, so (we don’t spend enough on defence. But new threats can arise very quickly, which is why it is wise to maintain strong defences.

    Since defence projects take a long time to bear fruit, we need to plan long term…which is why I see no viable alternative to a like – for – like trident replacement, unloveable as it may be.

  • And I didn’t want to hijack the thread onto Trident, I am just pointing out that we can’t run government on the basis of the “cute” departments get all the money.

  • JUF
    I don’t think you are high jacking the thread at all.
    The popularity of tee shirts with the slogan NHS NOT TRIDENT (available from CND) says it all.

    I look forward to Mohsin Khan’s Op Ed on how the army, navy and air force would be funded by voluntary contributions from voters who want to see them fully funded.
    Perhaps jumble sales, car boot sales, raffles and people shaking tins on street corners is the modern way to fund the MOD in future. Good luck with that one.

  • Mohsin Khan 25th Sep '14 - 5:56am

    Thanks for all the responses. A few points:

    Matthew Huntbach, you say “If people aren’t willing to pay the tax required to keep a free-at-source NHS, then we can’t have one. It’s not a matter of it being “politically unpopular”, closing down the NHS, or restricting what it will do and who it will do it for would also be massively unpopular politically, but that’s the alternative to increased taxes to pay for it.”
    – Thanks. While I understand the need to explain to the public that there’s no free lunch, and money needs to be found somewhere, including if need be greater taxation, if we’re not going to see that conversation being politically viable in the next five years, then rather than promising the NHS will continue to be the way it is, as you say you either need to say it won’t be so – or you try your best to educate the public on why more money is needed. And then, if you can’t generate extra revenue elsewhere, you try whatever you can to raise more revenue in the interim. You can’t just give up – every year, spending needs to be increase by about 4%.

    As Gareth Wilson points out, given the choice between no tax rises and some tax rises, there are a few things people would pay more tax for. In the short-term, if you’re faced with shortfall of billions and you don’t think it’s feasible to introduce a tax rise or change to spending elsewhere, then you either go without, or you see if some sections of society may be willing to chip in for the “national religion” aka the NHS.

    Green Voter – Waste from the NHS: As Matthew Huntbach notes, it’s easy to call for but efficiency does need time and money invested to work. We’ve already had a £5bn Nicholson efficiency challenge in the current Parliament. There’s only so much you can squeeze out without needing to invest money to save further money – it has to be part of several different measures to tackle the problem.

    Stephen Donnelly – Thanks for the kind words!

  • Mohsin Khan 25th Sep '14 - 6:03am

    Correction:: Nicholson Challenge was for £20bn of savings.

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