NHS tax is floated by Liberal Democrats to fill £30bn hole
The policy could form one point of future agreement for a coalition with Labour.
An NHS tax is being examined by the Liberal Democrats as a solution to the current crisis in funding for the health system. The plan is regarded by senior figures within the party as a necessary step towards filling a forecasted £30bn black hole in the NHS’s finances over the next five years.
With senior figures within Labour in favour of such a move, an NHS tax is likely to be high on a list of areas on which both parties could agree should there be coalition negotiations in 2015.
The government has ringfenced the health service budget from cuts and raised funding in line with inflation, but has largely relied on efficiency savings to pay for a growing demand for its services. Yet a recent report from the healthcare thinktank the Kings Fund found that a quarter of trusts are already in deficit as population growth outstrips the NHS’s ability to supply care. The main ways of reducing costs – holding down salaries, reducing the prices paid to hospitals and cutting management costs – are now close to being exhausted, the Kings Fund report claims.
A former coalition health minister, Paul Burstow, is just one senior Lib Dem who believes a hypothecated tax to be the best way to secure the NHS’s future. The current Liberal Democrat health minister, Norman Lamb, is also understood to be sympathetic.
In an essay to be published in September by the Social Market Foundation as part of a coming report on the future of the NHS, Burstow, who was health minister between 2010 and 2012, writes that further efficiency savings should be made but that a real-terms increase in funding is urgently required. Burstow writes: “By 2021, the NHS will be looking at a £30bn black hole. Social care is on track for a £7bn shortfall.
“They are being crushed under the inexorable pressures of rising demand, technological change, new medicines, non-communicable disease, an ageing population and public finances still in intensive care – we’re standing at a cliff edge, staring at the waves crashing on the rocks below.”
He adds: “We need to revisit an old Liberal Democrat policy: hypothecation. A health and care contribution paid for by earmarking national insurance deserves serious study. A progressive, predictable, buoyant source of revenues from national insurance ticks a lot of boxes.”
It is understood that the education minister, David Laws, who is in charge of drawing up the Lib Dem manifesto, is examining the proposal.
Earlier last week it emerged that Lord Finkelstein, a Tory peer, is in favour of an NHS tax. He told a thinktank audience that the Tories needed to “confront” the issue of how to maintain an NHS free at the point of use. He said: “In my view that political solution cannot involve suggesting to people that we abolish the NHS … But 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. The idea of showing people explicitly what the cost of [the] NHS is seems to be quite attractive.”
The veteran Labour MP Frank Field has been lobbying his party on the issue. Field believes the NHS will “cease to exist in any recognisable form” by the end of the decade unless major reforms are introduced to secure its future funding by introducing a 1p increase in national insurance contributions.
It is understood that the idea is not supported by the shadow health secretary, Andy Burnham, who backs a tax on inheritances.
- The Observer,