£36bn tax raid could be first of many, think tank warns

BORIS JOHNSON’S £36billion tax raid will not be enough to plug holes in the NHS and further large increases are likely within three years to make up the shortfall, the Institute for Fiscal Studies has warned.

The new Health and Social Care Levy of an additional 1.25 per centage points on workers and their employers, which has taken taxes to their highest level since the Second World War, is likely to be just the start of efforts to plug a gaping void in the Covid-hit health service, the institute (IFS) said.

In the first detailed analysis since the Prime Minister announced the tax rise earlier this week, analysts said the NHS would face another possible shortfall of £5billion in 2024-25 because the Treasury is likely to have underestimated the long-term impact of the pandemic.

The additional funding is to be used to reduce waiting times, which soared as non-covid healthcare ground to a halt during lockdowns.

Ministers are providing the equivalent of a 3.9 per cent annual increase in NHS funding, the IFS says – the same rate as before the pandemic, suggesting they do not expect any sustained rise in costs to be caused by the pandemic. The IFS said: “The newly announced funding might be insufficient to meet virusrelated pressures in the medium term.”

The insitutue’s Ben Zaranko said the new tax could be ratcheted up: “It seems likely that any future government seeking to raise taxes to fund rising health spending would look first at the new Health and Social Care Levy.

“That might be the path of least resistance, but repeatedly pulling that lever would mean shifting even more of the tax burden towards earnings and towards working-age people.”

Alternatives could include charges on housing or wealth, he said, but income tax, national insurance contributions or VAT would be most likely to go up given the huge amounts needed.

It came as the boss of a major private hospital group said that £1 billion set aside by the Government to tackle waiting lists for elective surgery such as hip replacements will not go far enough. Justin Ash, chief executive of Spire, one of the country’s biggest private hospital operators, said it would take several years to trim waiting lists and that any funding would have to be consistent.

He said: “The last time waiting lists were this high was during the Blair years and it took a decade to get them down to reasonable levels.

“It also depends on how efficiently cash is allocated to trusts and how much they use the independent sector.”

Mr Ash – one-fifth of whose business is NHS work, such as knee and hip replacements – said that the longer patients wait for routine procedures, the greater the risk they would need more expensive care.

He said: “There is a case for saying it is more cost-effective to use the independent sector to get waiting lists down more quickly.”

George Bull, a tax consultant at RSM, said that HMRC could expand the new tax to other types of income.

He said: “You could broaden it to include rental income, capital gains, inheritances. Once the framework is in place, you can increase the base sideways quite easily, so there will be arguments about wealth taxes.”

‘Once the framework is in place you can increase the base sideways quite easily, to wealth taxes for example’