)
This is the first in a series of guest blogs that we’ll be publishing in the run-up to the launch of the final report from the Commission on the Future of Health and Social Care in England.
Each blog will focus on one of the possible options for funding future health and social care considered in the commission’s interim report. Here, Nick Pearce of IPPR discusses how a dedicated NHS tax might work.
The commission will make its final recommendations on 4 September.
This is a guest blog post. The views expressed are the author’s own and do not necessarily represent the views of The King’s Fund.
The NHS is facing a serious funding gap if demand continues to increase and budgets remain frozen – up to £30 billion by 2021 according to NHS England. The independent Commission on the Future of Health and Social Care in England, set up by The King’s Fund, is a timely contribution to determining how to address the financial challenge.
As our population ages and increasing numbers of people have multiple long-term chronic conditions, pressure on our services increases. This government has more or less maintained the NHS budget in real terms, but this contrasts with the historical 4 per cent annual increases that until now have made the NHS able to respond to growing demand.
If we are to avoid a financial crisis in health in the next few years, the NHS needs a cash injection to accelerate innovation and reform.
Health consistently comes out top in people’s priorities for extra government spending. But it is unrealistic to think extra funding could be found by cutting other Whitehall budgets more deeply – the ring-fencing of NHS funding has already meant disproportionately large cuts to unprotected departments.
A dedicated NHS tax or National Insurance increase would boost NHS revenue while not affecting other departments’ budgets. The public may be sceptical about tax increases in general, but is likely to be more supportive of those used to finance the NHS. A one percentage point increase in one of the National Insurance rates, ring-fenced for the NHS, would raise £4 billion and could be popular.
The government would, of course, need to be transparent that this funding was additional, not just filling gaps created elsewhere. It would also need to show that the new funding was having a measurable effect and not simply disappearing without trace into the NHS budget.
Other approaches also need to be considered, as the commission’s interim report set out.
For instance, we should look for more productivity gains in the way services are delivered. However, the NHS has already had to make fairly substantial efficiency savings over the past few years and there may be limited scope to do much more in the short term while maintaining quality of care. Also, not all of these savings will be cashable.
There is also the potential to reduce the predicted pressure on NHS spending by reducing demand for services, or at least stemming the increase. In health care this is surely an uncontroversial aim – we all want people to stay healthier for longer, which will in turn lead to lower demand on services. However, many of the possible solutions – integrating budgets and services, providing whole-person care, making greater use of community-based settings, encouraging healthier lifestyles, supporting patients to have greater control and so on – may take time to have a major financial impact.
Crucially, some of the measures to increase productivity and reduce demand would benefit from an upfront investment in cash. Using the invest-to-save principle, an NHS tax could be the catalyst that’s needed.
An NHS tax or increased National Insurance contribution would not generate the full £30 billion but it would be a significant contribution towards it. It could have a near-immediate effect in kick-starting a programme of innovation and reform to redesign health and social care services to better meet patient needs and reduce demand over time.
An NHS tax could play a significant – and immediate – role in reducing the funding gap while maintaining quality of care and keeping the NHS free at the point of need.
Nick Pearce is Director of IPPR. He rejoined the institute in September 2010 after two years as Head of the Policy Unit at No 10. An author and regular commentator on public policy in broadcast and print media, Nick writes on a wide range of issues, from social justice, public service reform and identity politics to the future of social democracy.
This is a guest blog post. The views expressed are the author’s own and do not necessarily represent the views of The King’s Fund.