Jeremy Warner:

Many nations struggle with ageing populations but the crisis in Britain’s NHS is particularly actute

Here we go again. Whatever the National Health Service receives in extra funding, it is never enough. Less than two months ago in the Budget, the NHS was promised another £2.8billion over two years, but already this is being dismissed as woefully inadequate.

We are at a “watershed moment”, NHS Providers, the body that represents hospital chiefs, said this week; without more money and a long-term funding settlement, targets for priority areas such as cancer and mental health will have to be abandoned. It is with good reason that Downing Street fears a healthcare backlash at local elections in May. Scarcely a day passes without another supposed crisis in the NHS. The system is failing and, with so many other urgent calls on the public purse, it seems ever less capable of repair.

Mounting pressure on healthcare budgets is scarcely a uniquely British affair. The same challenge of ageing demographics is faced by all. For the vast majority of people, healthcare costs are inescapably skewed towards the latter years of life. In any pay-asyou-go system of universal healthcare, this makes them, in effect, a transfer from the working-age population to retirees. Net contributions at prime working age fast turn into net takeaways after the age of 65. With increased longevity and declining birth rates, the viability of these arrangements looks increasingly threatened. We have promised too much and are struggling to deliver.

Yet, despite the shared nature of the underlying problem, it is also fair to say that the crisis is particularly acute in the UK. The social insurance model of funding widely applied on the Continent is proving more robust in the face of the pressures than our own entirely tax-funded system, delivering less pinched and cash-starved healthcare with considerably better outcomes and significantly fewer avoidable deaths. The manifest advantages of this model are well set out by Kristian Niemietz, of the Institute of Economic Affairs, in his book Universal Healthcare Without the NHS – people pay more for their healthcare on average, but in return they get a superior, less rationed service with far more choice.

As NHS horror stories mount, so do the calls for creative solutions. The latest to take wing is the idea of so-called “hypothecation” in the tax system – that is carving out a special tax for the purpose of funding the NHS. In recent weeks the concept has won some influential converts, including Nick Macpherson, a former Treasury permanent secretary. His advocacy is seen as particularly significant because the Treasury has traditionally been implacably opposed to all forms of hypothecation.

The idea is not entirely without merit; it would improve transparency, making the public more conscious of where their tax is spent and what they are getting for their money. If deficient spending is at the source of Britain’s problem, this might in turn make it easier to persuade voters they should be taxed more.

But here’s the point: not for nothing was hypothecation always seen as a bad idea. Even in today’s straitened circumstances, it still is, not least because we already have a form of it. It’s called National Insurance. Created in the immediate aftermath of the Second World War, NI was intended as a form of genuine insurance to pay for all welfare – sickness, pensions and unemployment – such that, even today, it maintains the charade of a fund that is theoretically expected to finance these entitlements.

In practice, it is now just another tax. There may be some merit in redesignating NI as a specific health and social care tax, as suggested this week by the former Government minister Nick Boles. NI contributions this financial year are expected to total £131billion, against healthcare spending of £120billion, so it would indeed fix the problem, at least temporarily. Yet as a monopoly producer, the leviathan would soon be back for more and, in the meantime, the Government would have to raise taxes elsewhere to pay for pensions and all the other paraphernalia of the welfare state.

Beyond making citizens feel they are getting something for their money, it doesn’t solve the problem. It also suffers from the same drawback as all forms of hypothecation: a variable revenue stream that might deliver inappropriately high levels of funding when economic conditions are buoyant and starve the system of resources when they are bad.

Unfortunately for us, we have become like an abused partner who cannot tear themselves away; as a nation, we know something is wrong but we can’t admit the truth. Such is our love affair with this failing institution that even the smallest of reforms are shouted down. Politically, it’s virtually impossible to propose the funding shake-up required.

A Royal Commission has been suggested, but you’d never get cross-party support for meaningful reform; for the Left, the NHS is too useful a weapon. And so we beat on, until eventually the system breaks, or indeed, as would occur under Labour, the system breaks the economy itself.