14 February 2017

Is it time for an NHS tax?


Major historical moments are rarely caused by a single event. No single explanation for the result of the Brexit referendum tells the whole truth. Like the Scottish independence referendum of 2014, Brexit was a very personal epiphany. Your reasons for voting Leave – or, indeed, Remain – were not necessarily the same as your neighbour’s. Victory is a broad river with many tributaries.

Nevertheless, some things helped produce a victory for Leave – and one of those was the promise that leaving the EU could free up £350 million that might instead be spent on the NHS each week.

There is no need to take my word for this. Dominic Cummings, the eccentric svengali generally considered the strategic brains behind the Leave campaign, has suggested that without this promise Leave might not have prevailed. It was a kind of tipping point, being a suggestion that was easily understood and, even better, not easily refuted.

That is, the genius lay in the way in which refuting the £350m claim reinforced its central point. Sure, once you accounted for EU spending in the UK, the net cost of EU membership – even narrowly defined in this fashion – was not as high as £350m a week. But even £200m or £250m felt like a hefty chunk of change. This EU caper seems an expensive business, no?

Moreover, in each of the last 30 years the British Social Attitudes Survey – the gold standard of such enterprises – has reported that if there is ever extra money available, most British voters think that money should be spent on the NHS.

As a general rule, half think the NHS the most urgent priority for extra government spending and three quarters think it is one of the two most important areas that should be supported by additional spending.

In this respect, then, the Leave campaign scored twice: not only was the EU more expensive than you thought, but its membership fees starved the NHS of cash that might otherwise be available to spend on the public service voters prize most.

Nor was this the only example of how support for the NHS can be leveraged to boost one particular constitutional preference. In the latter stages of the Scottish independence referendum, the Yes campaign argued that only independence could protect the NHS from being privatised.

This was not, to use the technical term, true since a) the service has not been privatised despite Scotland voting No, and b) since health is a devolved matter, it could not be privatised against the Scottish government’s will anyway. Nevertheless, Better Together strategists believe the claim helped swing late-deciding voters towards independence.

In each instance, the NHS was to be treated as a sacred relic. Taking a different view was almost an act of blasphemy. You mean you don’t believe in the NHS? Gosh. At the very least, you plainly don’t believe in it enough.

As is always the case any time the NHS is discussed, all perspective must be lost. The humdrum reality of a service which delivers a just-about-acceptable service at a just-about-manageable cost is ignored.

Instead, and remarkably, the British people are inclined to hold two contradictory beliefs about the NHS, namely that it is both the envy of the world and in a state of absolute crisis. Neither of these is true, even if many of the problems afflicting the four UK health services are acute and liable to get worse, not better, in the future.

The most recent edition of the British Social Attitudes Survey asked respondents if they believed the NHS faces funding problems. Yes, said 93 per cent of respondents. One in three believed the NHS’s funding problems are “severe”. Despite this, actual levels of dissatisfaction with the service remain relatively low: just 23 per cent of Britons deplore the service they receive.

As a general rule, satisfaction with the NHS increases under a Labour government and falls when the Conservatives are in power. That reflects both the extra spending allocated by the Blair-Brown governments but also, I suspect, a more general sense that Labour can more readily be “trusted” with the NHS than the Tories. The latter still lack “standing” to be given the benefit of the doubt or have their good intentions trusted.

And since, as matters stand, the Conservatives seem set to be in power for the foreseeable future, it is reasonable to assume that, absent some major shift in public opinion, winning public support for the changes needed to sustain the service will be harder than it would be if these reforms were introduced by a Labour ministry.

Be that as it may, something will need to be done. One starting point might be to change the terms of reference within which discussions about the NHS take place.

At every election every party promises more spending – sorry, “investment” – for the NHS, bragging that their promises can be believed while the largesse promised by their opponents is illusory. Elections, and health policy, thus become a kind of auction – and no one is ever encouraged to look at what is actually going to be bought with this “new” money. The cost matters more than the quality.

In like fashion, every month we are treated to another stramash over whether this indicator or that target is being met. How many patients have been seen within four hours of arriving in hospital? How many have seen a cancer specialist within three or four months? These are certainly useful indicators – but they only tell us whether targets have been met, not whether those are the most appropriate targets in the first place.

As for the money, who knows how much it is or what it is spent on? Are government promises of more – £10 billion more in England by 2020 – really all that impressive? Or does this not actually promise flat-lining expenditure at a time of ever-increasing demand? Everyone agrees the NHS will have to be more efficient, but at what point does it become impossible to actually do more with less?

The demand, alas, will not go away. This is a matter of simple actuarial accounting. An increasingly elderly population means health spending, however it is sourced, is going to have to increase. If we accept this we can then begin to have a more sensible conversation as to how this may be funded.

There are no solutions but there are some ways such a conversation can be encouraged. The public, bless them, understand this. Attitudes to the NHS are more nuanced than is sometimes appreciated. For instance, 24 per cent of voters say they support the idea of paying more money to fund the NHS through a defined and separate NHS tax. This seems a small proportion, until you recall that no major party supports such a policy.

Meanwhile, 44 per cent of respondents say that treatments deemed “poor value for money” should be restricted if demand for NHS services exceeds the level of funding available.

That might prove terrible for patients suffering from rare conditions or those who needed super-costly new drugs. But it indicates that a significant percentage of the British public appreciates that some forms of healthcare rationing are more acceptable than others.

Which, of course, they are. Rationing by time has long been a feature of the British health service (and mightily unpopular it is too). That is one way in which the price of the service is calculated. We might wish it otherwise – just as we might think that if we were starting a health service from scratch we would not build something that looked very much like the NHS.

It is what it is, however – and it is too late, as well as too politically toxic, to switch to an insurance-based public-private model of the sort that’s the norm in most other developed countries. (Places where, contrary to what you might think, people of limited means do still receive healthcare.)

So perhaps it is time to separate the cost of the NHS and social care from general taxation. That would reflect the special status the British people grant the service and, happily, make it easier for politicians to be frank with voters – many of whom, I suspect, have no idea how much the NHS currently costs.

As it happens, in 2015-16 National Insurance receipts across the UK amounted to £113 billion. That’s roughly what was spent on the NHS in England. It is, I think, possible to imagine a reformed tax system in which NI is either replaced by a dedicated healthcare tax, or in which an NHS (and social care) tax is organised along similar lines to those currently applicable to national insurance.

Almost everyone in work would pay something directly towards the cost of the NHS; in return, income tax or VAT could be reduced so the overall tax burden did not rise immediately.

The advantages of such a system are considerable – enough to offset the administrative and technical challenges inherent in building a new tax directly hypothecated to healthcare. Voters would gain a better appreciation of the cost of healthcare. and politicians would be forced to match promises with the means by which those promises would be funded.

That would not be enough to ease the burden the NHS faces in years to come. But it would be a means to create the space in which more honest and open and accountable arguments about the NHS could be made.

The downside to such a change might be that it prompts a fresh outbreak of inter-generational conflict. A dedicated health and social care tax paid by those of working age to fund the treatment of retirees risks causing some of the same problems currently evident in the National Insurance system itself.

Nonetheless, the advantages of a dedicated health fund – and the openness with which the funding of health spending could then be debated – are sufficient to make this an avenue worth exploring at the very least.

There is no magic money tree, the fruit of which will transform the NHS without adversely impacting other government-funded services. But that does not mean a better set of arguments about the NHS cannot be had.

It is going to need more money – and, in the end, that means patients are going to have to pay. The question is how much, and by what means.

Alex Massie is a political commentator