Health funding model needs radical change
The NHS needs more money. Most people agree with that proposition. The argument is over where it comes from. Since 1948, the NHS has, by and large, been funded from direct taxation. Some charges have been introduced, principally for prescriptions and eye-tests. But essentially, the funding model remains the same as it has for 70 years.
For this reason, whenever politicians seek more money for the NHS, they look to only one source: the general taxpayer. When the economy is booming, as it was under the Blair administration, it is possible to boost spending substantially through extra tax revenues. But since the financial crash and the need to get a grip on the public finances, this has been harder, not least because successive governments have committed to keeping taxes down by controlling spending.
Now, with a demographic crisis caused by an ageing population and rising care costs, ministers are again looking for ways to increase funding significantly beyond the £10 billion extra earmarked by 2020. One idea gaining traction is a 1 per cent addition to national insurance contributions as a top-up levy that would then be ring-fenced, or hypothecated, just for healthcare.
This is the way Gordon Brown raised money for health in 2002. It is attractive to ministers, who fear that even though voters say they are happy for taxes to rise if the money is to be spent on public services, they may not take such a sanguine approach when they are in the privacy of the polling booth. But if it is specifically linked to the NHS then objections are more likely to fall away.
The problem is that hypothecated taxes are almost always raided by the Treasury for some other purpose, as we have seen since the introduction of vehicle excise duty after the First World War, ostensibly to pay for the roads.
Even though we are still running a deficit and the national debt is more than 80 per cent of GDP, the Government has sensed the country is weary of “austerity”. Pay rises have been announced for health workers and spending restraints have been loosened.
But the answer to the NHS’S difficulties cannot be simply to plough on with the same funding model it has had for 70 years. Experience has shown that even doubling its budget neither slakes its appetite for more nor diminishes its capacity to cause political controversy.