Plans for ‘NHS tax’ killed off by Chancellor

PHILIP Hammond has vetoed plans for a dedicated ‘NHS tax’ to fund a major increase in health spending.

Whitehall sources said last night that the Chancellor had succeeded in killing off the idea of a ring-fenced 1p in the pound rise in National Insurance. This was championed by Health Secretary Jeremy Hunt and would raise about £5billion a year.

The decision has left ministers casting around to find a way to pay for Theresa May’s pledge to give the NHS a ‘significant’ funding increase to mark its 70th anniversary, which is due to be announced this month. Mr Hammond has also argued successfully against awarding the NHS a long-term rise worth 4 per cent a year in real terms, following warnings it would lead to tax increases on families of up to £2,000 a year.

Instead, debate is focusing on a real terms rise of about 3 per cent a year – the equivalent of about £4billion a year for the next few years – although Mr Hammond is still pushing for a lower figure.

One Whitehall insider said: ‘Three per cent increases in real terms would be a lot of money. Four per cent equates to a very, very big number – the implications for the public finances would be pretty unpalatable.’