Will the chancellor correct the imbalance of his November 2023 Autumn statement in Wednesday’s budget? Or will it be more of the same? By cutting National Insurance from 12% to 10% the chancellor helped the better off to the detriment of the lowest paid on income support and pensioners both of whom were hardest hit by the cost-of-living crisis and do not pay national insurance and therefore saw no benefit. This will have disastrous consequences for the economy.
Component level responses will not solve whole systems problems.
Widening income inequality and increasing poverty are the great social evils of our time. “Trickle Down” economics and the privatisation of public services has created dozens of millionaires and turned millionaires into billionaires whilst the majority are worse off than they were before the 2009 Banking Crisis. There are now 3.9 million children being brought up in poverty in the UK – 2/3rds of whom have a parent in work. These parents are no more able to increase their income than are older people who have no earning or borrowing power. Children brought up in poverty are less likely to do well at school, more likely to have health problems, making a demand upon the NHS, and have a shorter life expectancy. Perhaps, now is the time to follow the example of Japan where there is a positive and significant relationship between directors’ pay and employees’ average wage. Directors and Chief Executives could still have their million pound salaries provided that they paid those on whose hard work they depend proportionately.
Britain has one of the lowest state pensions in the developed world with three million retired people living in poverty. Many of whom were forced into retirement prior to the abolition of the default retirement age and condemned to spending the rest of their lives in poverty. There is a wealth of evidence on the social determinants of health, which has demonstrated the correlation between income and demand upon the NHS so it is hardly surprising that 4/5th of the expenditure of the NHS is on older people. Lifting all older people out of poverty by increasing the state pension would enhance the quality of life during retirement and reduce demand upon the NHS.
Unless Government does something to reverse current trends no amount of money will enable the NHS to keep pace with demand. The £350m per week for the NHS promised on the red campaign bus during the BREXIT referendum never materialised. The 1.25% precept on National Insurance to fund the 2021 Health and Social Care Act was scrapped. And then the Chancellor further reduced National Insurance by 2%.
The NHS and social care are in crisis and need an immediate financial injection, radical reform, restructuring and cultural change based on a whole systems approach. There are currently 619 statutory bodies all commissioning different aspects of health and social care serving different geographical areas and with different lines of accountability and funding streams. These could be brought together into 120 Unitary Authorities based on the 1974 Local Government or Police Authority areas returning the police and health to local democratic scrutiny under central government direction. There is then a need to take out functional divisions along patient / user pathways by the creation of whole task right sized, multidisciplinary / inter-agency, teams aligned behind outcome with access to all the resources needed to achieve their goals. These teams need to be able to plan, do and evaluate their own work which completes the learning cycle of constant improvement and to ensure that those undertaking the work see the improvement they have brought to peoples’ lives. People may be attracted to a job by the salary but once in post it is job satisfaction and recognition of a job well done which are the motivating factors.
Social Workers need freeing up to practice their skills in using relationship and various therapeutic techniques to resolve problems and reduce the need for state funded continuing care.
Privatisation and the contract culture has put money before people and profit before service. The aim of public services should be to provide the best possible service at the least possible cost to the taxpayer and not to make a profit. Health, social services, the energy companies, water boards, railways and now royal mail are testimony to that.
Perhaps the Chancellor could make a start on Wednesday, if he has money available, by increasing the tax-free personal allowance and raising the income tax threshold in line with inflation in-order to benefit all and more particularly those on income support and pensions whilst increasing funding for health and social care pending a whole systems review, cultural change and re-organisation, with, perhaps, a commitment to reducing income inequality and poverty.
* Chris Perry is a former Director of Social Services for South Glamorgan County Council, a former Director of Age Concern Hampshire, a former Non-Executive Director of the Winchester and Eastleigh Healthcare NHS Trust and a former presenter of an award-winning public affairs programme on Express FM.
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13 Comments
National Insurance impacts on ordinary working people far more than those who have higher earnings. Currently, National Insurance takes 10% of earnings between £242 and £967 per week – that includes even those working part time at minimum wage. Meanwhile those earning over around £50,000 only pay 2% on any extra income above that figure. If a cut is to be made to taxes on incomes, it is more progressive to remove the burden of National Insurance on working people than to cut Income Tax which is levied more fairly.
He doesn’t have any money available, the public realm is falling apart. Anyway you’re bemoaning that the Tories don’t care about poor people. It’s what they do – it’s like blaming the scorpion for stinging the frog.
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Depends on whether Jeremy is going to be honest and ethical or whether there will be “tax cuts” that won’t come into effect until after a GE….
I would like to think, Jeremy will do the right thing for the country and not the party…
In the face of the corruption of our health and social services (not to mention the creeping/rampant privatisation) it’s good to have the over-arching analysis which Chris Perry offers us. Plenty of ground to stand on here. We need a big picture critique to save us from getting lost in the “component” errors and omissions.
After adjusting for inflation, real terms spending (in 2022/23 prices) on the NHS in England alone increased from £144.1bn in 2016/17 to £181.7bn in 2022/23 – a rise of £721m a week – more than double £350m. Helping to pay for that is the over £100bn we have so far saved in contributions to the EU (membership and Covid recovery fund) much of which we would not get back. As of this financial year we are saving the thick-end of £20bn in annual fees — another Brexit Benefit.
Scroll your mouse over the second bar chart in this article…
‘The NHS budget and how it has changed’ [September 2023]:
https://www.kingsfund.org.uk/projects/nhs-in-a-nutshell/nhs-budget
As well as there being 3 million pensioners living in poverty, there are also 3 million pensioners living in households with £1+ million worth of assets.
The least Jeremy Hunt should do on Wednesday is increase the Personal Allowance and NI thresholds by £840 (the 6.7% inflation rate) to £13,410 at a cost of £9.5 billion this year (£11.3bn next). Last year he didn’t increase these by the rate of inflation of 10.1%, so he could instead increase them both by £1260 (10%) to £13,830 at a cost of £14.2 billion this year (£16.9bn next).
He should also increase Universal Credit and legacy benefits by £20 a week, which would more than cover the loss in their income of the £900 cost of living payments of this tax year.
Mary Fulton,
When people talk about cutting Income Tax or National Insurance rates they are normally talking about the rates paid on incomes between £12,571 and £50,270 for Income Tax and between £12,584 and £50,284 for NI.
Jeff,
The figures you quote are for real term Health & Social Care spending. It increased to £204.4 billion for 2021/22 and was reduced to only £181.7 billion for 2022/23 – a reduction of £22.7 billion. If Health & Social Care spending had increased by the average of 3.6% per year from £144.1 billion in 2016/17, it would be at £178.2 billion for 2022/23, which means the increase was really only £5.5 billion on top on the normal average annual increases.
@james. ‘there are also 3 million pensioners living in households with £1+ million worth of assets.’
Your point being?
Thanks for the overview Chris. Improving ownership, responsibility and satisfaction within public and civil services seem to be vital. LibDems have a distictive position on the NHS and care in the community that Ed Davey articulates excellently. Recognition of the need to alleviate poverty is strong too. Let’s work to ensure that voters share LibDems concerns.
Michael BG 5th Mar ’24 – 12:39am:
The figures you quote are for real term Health & Social Care spending.
Correct. All the figures shown in the bar chart have been adjusted for inflation and are expressed in 2022/23 prices so they can be compared directly.
It increased to £204.4 billion for 2021/22…
Incorrect. It was £162.0 billion in 2021/22. There was an additional one-off supplement of £40.4bn to cover the additional costs of Covid-19. That has no effect on the comparison between 2016/2017 and 2022/23.
…and was reduced to only £181.7 billion for 2022/23 – a reduction of £22.7 billion.
It was increased from £162.0 billion in 2021/22 to £181.7 billion for 2022/23 – an increase of £19.7 billion.
If Health & Social Care spending had increased by the average of 3.6% per year from £144.1 billion in 2016/17,…
Incorrect. Remember, all the figures have already been adjusted for inflation. Actual (nominal) spending in 2016/17 was much less than £144.1 billion and has been adjusted upwards by inflation to get the figure of £144.1 billion which is what it would be worth in 2022/23 prices. You have applied a second inflation adjustment to a spending figure which has already been adjusted for inflation.
…which means the increase was really only £5.5 billion on top on the normal average annual increases.
Incorrect. The real increase (for England only) as shown by The King’s Fund is £37.6 billion a year which is £721 million pounds a week as stated in my original comment.
Jeff,
162 + 40.4 = 202.4. £202.4 billion was spent on Health & Social Care in 2021/22 and in 2022/23 £181.7 billion was spent in real terms. This is a reduction of £22.7 billion. Just because £40.4 billion was temporary does not mean that £202.4 billion is less than £181.7 billion.
I am surprised that you don’t know where the 3.6% comes from. As you say it is not inflation. Just under the headline ‘How has spending on the NHS changed over time?” The Kings Fund point out that ‘Since 1955/56, spending on the NHS has increased by an average of 3.6 per cent per year in real terms’ (i.e. excluding inflation). So if the government had increasing spending by 3.6% above inflation every year (the average annual increase above inflation) since 2016/17 the increase on top on the normal average annual increases was really only £5.5 billion as I stated.
@Jeff: According to my calculator, £144.1 Bn in 2016/17 to £181.7 Bn in 2022/23 is an increase of £120M a week. not £721M. And the comparison with the £350M is invalid anyway because you’re comparing a weekly INCREASE in NHS spending with a (known to be false) claimed weekly TOTAL net EU contribution.
BUT
@Michael BG: Using an annual 3.6% increase in inflation-adjusted NHS spending as the baseline that you measure any changes against is a very strange way to measure NHS spending. In the end, if the Government has increased (real) NHS spending then that is an increase, even if it’s less than 3.6% and it seems to me misleading and does no favours to your case to act as if only increases above 3.6% matter.
Likewise, a one-off £40bn extra spend in 2020-21 is temporary. That means that it was there for a one-off situation, with no expectation that it should continue in successive years. @Jeff is therefore completely correct to exclude it from his analysis.
SHAME. The further 2% cut in National Insurance will cost the Government £10.4b with 50% of it going to the fifth richest households. The lowest paid and people on pensions will be worse off because the Government has failed to increase the personal tax free allowance or raise the income tax thresholds in line with inflation.