Funding healthcare

Wealthy countries are all facing higher healthcare spending, but politicians won’t say how they want to fund it in Britain

The Telegraph has reported that Hospital waiting list deaths double in five years, as a record 7.5 million people were waiting for treatment in Britain’s National Health Service: the NHS.  It is a crisis.  A BBC report, The NHS crisis – decades in the making, notes that “the NHS, like every health service in the developed world, is having to cope with an ageing population”.  This puts a steady upward pressure on costs, but Britain had a decade of austerity when funding failed to keep up with demand.  In a decade of neglect, a “government-commissioned paper pinpoints budget squeeze as key reason for service’s loss of capacity”:

“Bed numbers have fallen, while staffing shortages have increased.

The squeeze has driven industrial unrest

Currently around one in 10 NHS posts are vacant, leaving the UK with fewer doctors and nurses than many of its Western European counterparts.”

Underpaid staff have been leaving, increasing the pressure on those who remain.  And the pressure has led to increased absence through sickness.  The government has now promised to resolve these problems, although it has not explained how its proposals will be funded.  The Institute for Fiscal Studies (IFS) has drawn attention to the huge cost implications of the British government’s new NHS long term workforce plan:

“Under a central set of assumptions, the workforce plan implies annual NHS budget increases of around 3.6% per year in real terms (or 70% in total by 2036–37). This would be in line with the long-run average real-terms growth rate in UK health spending (3.6% per year from 1949–50 to 2022–23), but higher than the 2.4% per year seen since 2009–10.”

“In the central case, spending on the NHS in England would be around 2% of GDP higher by 2036–37, relative to 2021–22 (the starting point for the workforce plan).”

Increasing the size of the workforce so rapidly will likely require NHS wages to become more generous in real terms.”

“To give a sense of scale, raising that sort of sum would require increasing the standard rate of VAT from 20% to around 27% by 2036–37 or increasing all income tax rates by around 6 percentage points. Other funding options would of course be available.”

The Conservative Party has been in government since 2010s and, as noted in the previous post on this website, it is ideologically opposed to publicly funded services.  Its strategy has been to quietly strangle the NHS and social services, leading to a Record rise in people using private healthcare amid NHS frustration.  Moving more people into the private sector is one way to fund rising healthcare spending – but allowing everyone else to become frustrated, ahead of an impending election, has become politically risky. 

For many Conservative Party members, the prospect of paying more tax is objectionable.  Kate Andrews wrote in the Telegraph that If the NHS has its way, Britain will no longer be a free country:

“Expansion of the public sector, as is being proposed, would bring the nation to its knees”.

“..It wasn’t so much the details of the “Long Term Workforce Plan” that caught everyone’s attention, but rather the lack of detail around how it might be funded.”

“..To pretend that this can all be funded through the taxpayer – and managed by the state – is pure fantasy. And even if it were possible, it would not be desirable: it is impossible to imagine Britain with a freer, fairer or more prosperous economy, so long as it is increasingly overrun by an outdated, dysfunctional healthcare system.”

Britain’s Health expenditure in relation to GDP is typical of developed economies, according to the OECD.  Kate Andrews wasn’t challenging the projected total healthcare spending, but she didn’t want it all to be funded by the taxpayer.  Her use of the word ‘fairer’ is interesting.  Fairer to whom?  She is an advocate of neoliberalism, which increases ‘freedom’ for the successful few at the expense of most other people. 

Despite her assertion to the contrary, the IFS projection of 2% increase in taxation as a proportion of GDP Is affordable – as shown by OECD Revenue Statistics:

These statistics show that if UK tax were to rise by 2% of GDP, to fund increased healthcare spending, the British would still be paying less than people in 16 EU countries.  There is no economic reason why a health service should not be tax funded.  It is a political choice.  People’s views on it are dependent on their political ideology.

Kate Andrews has alerted Telegraph readers to the government’s lack of openness in saying how healthcare should be funded.  She is an American by birth and is accustomed to lower taxes.  Although she did not use the word, ‘privatisation’ of part of Britain’s health service would reduce the need for tax increases.  It is the solution that she and the Conservative Party favour (and it is dishonest for the government not to admit that).

The Guardian, quoting an IPRR survey, has warned its readers that Private healthcare boom adds to fears of two-tier system in UK:

“those who can afford it are being forced to go private by the consequences of austerity and the pandemic on NHS access and quality, and those without the funds are left to ‘put up or shut up’.”

It remains to be seen whether the Labour Party will openly advocate tax rises to fund a health service that can meet everyone’s needs.  Both political parties seem to be dodging the issue ahead of a General Election, but an open and honest debate is needed. 

One comment

  • Michael Radcliffe

    When the NHS was set up 75 years ago, it was funded by a supplementary payroll tax called National Health Insurance (NHI), paid by those in employment with a contribution from their employers. Post war employment was high and life expectancy low beyond retirement age. At that time the health of the population was poor. Health care was free to all UK citizens, of great benefit to those with children and those in retirement and those out of work. NHI dropped the H to become NI and became part of overall taxation without hypothecation to health care. This was a huge mistake because the benefit of hypothecating the receipts to the costs was lost. The self-employed were later brought into the funding with a National Insurance component of income tax. For ideological reasons the political parties portray all taxes as evil and to get re-elected into power taxes have to be lowered! The health of the nation suffers as a consequence. Your chart illustrates where the UK compares to other advanced economies.
    Life expectancy has risen and the medical advances in health care in terms of scanning for diagnosis, surgical techniques and medication all add to the cost of health care; costs which were not considered 75 years ago. It is clear that a levelling up is necessary to spread the burden of funding beyond just those in employment who pay National Insurance, but to those with unearned income, namely those in retirement who are benefitting the most from a free health service. If the name of the NI tax was changed to Health Insurance and the receipts were hypothecated to the costs, the taxpayer would more easily accept a higher tax if the health service was better managed.
    The strategy of the current government seems to be geared to destroying the NHS. Highly trained medical personnel are walking with their feet to jobs which pay a wage commensurate with their training and experience in the private sector. The dire waiting lists are driving those who can afford the cost, to treatment in the private sector. It is those who cannot afford to pay in the private sector who are suffering, exactly the same as it was 75 years ago when the NHS was set up. So, taxes must be increased and the burden of funding the NHS should fall on those with healthy unearned income to pay for it. Otherwise the health of the population will deteriorate with consequent loss of economic productivity.


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