Kate Andrews
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Almost certainly not. As the Institute for Government notes, back in 2002 when Gordon Brown introduced a 1p increase on both employers’ and employees’ NI to boost NHS spending, money for healthcare still far outpaced the tax rise. As it turns out, the government didn’t like having its hands tied when it came to prioritising where to spend. So in practice, the NI hike didn’t work as a tax linked directly to NHS spending: it was just more money for the overall pot. A stealth tax, that gave the government more resources to spend on whatever it saw fit.
There’s a good reason why the government would want to be able to reprioritise its spending plans on a whim. There’s perhaps no better example than the past 16 months, when Covid demanded a fast rethink of how resources were deployed. This makes it even more likely, however, that this NI tax hike won’t stay hypothecated for long: it’s yet another £6 billion into the Treasury’s coffers, which gets swallowed up by the state. Some of the cash might find its way to the health service, but as a decade’s worth of real-terms funding increases shows, this isn’t going to do much to improve waiting times or make a meaningful dent in the Covid backlog. Former health secretary Jeremy Hunt is selling the idea of a hypothecated tax today to ‘make our cancer survival rates as good as Denmark [and] Australia’ — with almost nothing in the way of evidence to show that it will. (Hunt is comparing the NHS to systems with far more market mechanisms, which even before Covid hit were shown to decrease waiting times and improve patient outcomes).
It’s no surprise that calls for tax rises are made in the name of the NHS. A soft spot for the British public at the best of times, and a lifeline at their worst, millions of people will be growing increasingly worried about the length of time they’re being asked to wait to receive treatment. But a hypothecated tax isn’t the answer, and this government should know better. In just the past few weeks, it has had to deal with the consequences of making ring-fenced spending promises: rolling back the foreign aid budget, facing the very real prospect of finding billions more pounds than expected to pay out on the pensions ‘triple lock’, which due to a statistical anomaly during Covid could see the state pension increase by a staggering 8 per cent.
Who will pay for this non-solution? As NI only applies to earned income, it will be working-age people, the younger generations, asked to shoulder the financial burden of supporting the older generations. Hardly a long-term, sustainable option — and certainly not one that finds a balance between the generations for who must foot our increasingly large bills.
That the government is considering a stealth tax to tackle the serious problems facing health and social care suggests we’re entering desperate times. Ministers aren’t simply running out of areas to tax, but they’re terrified of having a frank conversation with the public about the state of our finances. In truth, the government was going to struggle to meet its spending commitments long before the pandemic hit: now it most certainly can’t without tax rises, growing the economy or trimming back what they initially said was on offer. It appears this Tory government is opting for both the laziest and most painful option.
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